10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)
þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended February 28, 2011
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission File No. 1-13859

American Greetings Corporation

(Exact name of registrant as specified in its charter)

Ohio (State or other jurisdiction of incorporation or organization)	34-0065325 (I.R.S. Employer Identification No.)
One American Road, Cleveland, Ohio (Address of principal executive offices)	44144 (Zip Code)

Registrant’s telephone number, including area code: (216) 252-7300

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Name of Each Exchange on Which Registered
Class A Common Shares, Par Value $1.00	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Class B Common Shares, Par Value $1.00

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  YES þ     NO o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  YES o     NO þ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES þ     NO o

Indicate by a check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  YES þ     NO o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act)  YES o     NO þ

State the aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, August 27, 2010 — $729,061,401 (affiliates, for this purpose, have been deemed to be directors, executive officers and certain significant shareholders).

Number of shares outstanding as of April 27, 2011:
CLASS A COMMON— 37,482,554
CLASS B COMMON— 2,937,927
DOCUMENTS INCORPORATED BY REFERENCE

Portions of the American Greetings Corporation Definitive Proxy Statement for the Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days after the close of the registrant’s fiscal year (incorporated into Part III).

AMERICAN GREETINGS CORPORATION
INDEX

			Page
			Number
PART I
	Item 1.	Business		1
	Item 1A.	Risk Factors		5
	Item 1B.	Unresolved Staff Comments		15
	Item 2.	Properties		16
	Item 3.	Legal Proceedings		17
	Item 4.	Reserved		18
PART II
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		20
	Item 6.	Selected Financial Data		23
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		24
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		44
	Item 8.	Financial Statements and Supplementary Data		45
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure		91
	Item 9A.	Controls and Procedures		91
	Item 9B.	Other Information		93
PART III
	Item 10.	Directors, Executive Officers, and Corporate Governance		93
	Item 11.	Executive Compensation		93
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		93
	Item 13.	Certain Relationships and Related Transactions, and Director Independence		94
	Item 14.	Principal Accounting Fees and Services		94
PART IV
	Item 15.	Exhibits, Financial Statement Schedules		94
SIGNATURES				103
EX-10.9
EX-10.10
EX-10.11
EX-10.21
EX-10.30
EX-10.32
EX-10.57
EX-10.58
EX-21
EX-23
EX-31.1
EX-31.2
EX-32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

PART I

Unless otherwise indicated or the context otherwise requires, the “Corporation,” “we,” “our,” “us” and “American Greetings” are used in this report to refer to the businesses of American Greetings Corporation and its consolidated subsidiaries.

Item 1.      Business

OVERVIEW

Founded in 1906, American Greetings operates predominantly in a single industry: the design, manufacture and sale of everyday and seasonal greeting cards and other social expression products. Greeting cards, gift wrap, party goods, stationery and giftware are manufactured or sold by us in North America, including the United States, Canada and Mexico, and throughout the world, primarily in the United Kingdom, Australia and New Zealand. In addition, our subsidiary, AG Interactive, Inc., distributes social expression products, including electronic greetings, physical greeting cards incorporating consumer photos, and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices. Design licensing is done primarily by our subsidiary AGC, LLC, and character licensing is done primarily by our subsidiaries, Those Characters From Cleveland, Inc. and Cloudco, Inc. Our A.G. Industries, Inc. (doing business as AGI In-Store) subsidiary manufactures custom display fixtures for our products and products of others.

Our fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2011 refers to the year ended February 28, 2011.

PRODUCTS

American Greetings creates, manufactures and/or distributes social expression products including greeting cards, gift wrap, party goods, giftware and stationery as well as custom display fixtures. Our major domestic greeting card brands are American Greetings, Recycled Paper Greetings, Papyrus, Carlton Cards, Gibson, Tender Thoughts and Just For You. Our other domestic products include AGI In-Store display fixtures, as well as other paper product offerings such as Designware party goods and Plus Mark gift wrap and boxed cards. Electronic greetings and other digital content, services and products are available through our subsidiary, AG Interactive, Inc. Our major Internet brands are AmericanGreetings.com, BlueMountain.com, Egreetings.com, Kiwee.com, Cardstore.com and Webshots.com. Through its Webshots site, our AG Interactive business also operates an online photo sharing space and through its Cardstore.com site, our AG Interactive business provides consumers the ability to purchase physical greeting cards, including custom cards that incorporate their own photos and sentiments. Until April 2011, we also operated PhotoWorks.com through which we provided customers the ability to use their own photos to create a variety of physical products in addition to greeting cards, including calendars, on-line photo albums and photo books. As we considered our strategy around these photo-personalized physical products, we decided to de-emphasize photo prints and other miscellaneous photo-personalized physical products. As a result we wound down our PhotoWorks website. We also create and license our intellectual properties, such as the “Care Bears” and “Strawberry Shortcake” characters. Information concerning sales by major product classifications is included in Part II, Item 7.

BUSINESS SEGMENTS

At February 28, 2011, we operated in four business segments: North American Social Expression Products, International Social Expression Products, AG Interactive and non-reportable operating segments. For information regarding the various business segments comprising our business, see the discussion included in Part II, Item 7 and in Note 16 to the Consolidated Financial Statements included in Part II, Item 8.

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CONCENTRATION OF CREDIT RISKS

Net sales to our five largest customers, which include mass merchandisers and national drug store chains, accounted for approximately 42%, 39% and 36% of total revenue in 2011, 2010 and 2009, respectively. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 15%, 14% and 15% of total revenue in 2011, 2010 and 2009, respectively. Net sales to Target Corporation accounted for approximately 14% and 13% of total revenue in 2011 and 2010, respectively, but less than 10% of total revenue in 2009. No other customer accounted for 10% or more of our consolidated total revenue. Approximately 54%, 51% and 54% of the North American Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, was attributable to its top five customers. Approximately 44%, 45% and 39% of the International Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, was attributable to its top three customers.

CONSUMERS

We believe that women purchase the majority of all greeting cards sold and that the median age of our consumers is approximately 46. We also believe that approximately 85% of American households purchase greeting cards each year, the average number of greeting card occasions for which cards are purchased each year is approximately seven, and consumers purchase approximately 15 greeting cards per year.

COMPETITION

The greeting card and gift wrap industries are intensely competitive. Competitive factors include quality, design, customer service and terms, which may include payments and other concessions to retail customers under long-term agreements. These agreements are discussed in greater detail below. There are an estimated 3,000 greeting card publishers in the United States, ranging from small family-run organizations to major corporations. With the expansion of the Internet as a distribution channel for greeting cards, together with the growing use of technology by consumers to create personalized greetings cards with digital photographs and other personalized content, we are also seeing increased competition from greeting card publishers as well as a wide range of personal publishing businesses distributing greeting cards and other social expression products directly to the individual consumer through the Internet. In general, however, the greeting card business is extremely concentrated. We believe that we are one of only two main suppliers offering a full line of social expression products. Our principal competitor is Hallmark Cards, Inc. Based upon our general familiarity with the greeting card and gift wrap industries and limited information as to our competitors, we believe that we are the second-largest company in the industry and the largest publicly owned greeting card company.

PRODUCTION AND DISTRIBUTION

In 2011, our channels of distribution continued to be primarily through mass retail, which is comprised of mass merchandisers, discount retailers, chain drug stores and supermarkets. Other major channels of distribution included card and gift retail stores, department stores, military post exchanges, variety stores and combo stores (stores combining food, general merchandise and drug items). From time to time, we also sell our products to independent, third-party distributors. Our AG Interactive segment provides social expression content, including electronic and physical greeting cards, through the Internet and wireless platforms.

Many of our products are manufactured at common production facilities and marketed by a common sales force. Our manufacturing operations involve complex processes including printing, die cutting, hot stamping and embossing. We employ modern printing techniques which allow us to perform short runs and multi-color printing, have a quick changeover and utilize direct-to-plate technology, which minimizes time to market. Our products are manufactured globally, primarily at facilities located in North America and the United Kingdom. We also source products from domestic and foreign third party suppliers. Beginning on or about March 2010, we discontinued manufacturing party goods and now purchase our party goods from a third party vendor. The physical products provided through our AG Interactive segment are provided primarily by third party vendors. Additionally, information by geographic area is included in Note 16 to the Consolidated Financial Statements included in Part II, Item 8.

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Production of our products is generally on a level basis throughout the year, with the exception of gift wrap for which production generally peaks in advance of the Christmas season. Everyday inventories (such as birthday and anniversary related products) remain relatively constant throughout the year, while seasonal inventories peak in advance of each major holiday season, including Christmas, Valentine’s Day, Easter, Mother’s Day, Father’s Day and Graduation. Payments for seasonal shipments are generally received during the month in which the major holiday occurs, or shortly thereafter. Extended payment terms may also be offered in response to competitive situations with individual customers. Payments for both everyday and seasonal sales from customers that are on a scan-based trading (“SBT”) model are received generally within 10 to 15 days of the product being sold by those customers at their retail locations. As of February 28, 2011, three of our five largest customers in 2011 conduct business with us under an SBT model. The core of this business model rests with American Greetings owning the product delivered to its retail customers until the product is sold by the retailer to the ultimate consumer, at which time we record the sale. American Greetings and many of its competitors sell seasonal greeting cards and other seasonal products with the right of return. Sales of other products are generally sold without the right of return. Sales credits for these products are issued at our discretion for damaged, obsolete and outdated products. Information regarding the return of product is included in Note 1 to the Consolidated Financial Statements included in Part II, Item 8.

During the year, we experienced no material difficulties in obtaining raw materials from our suppliers.

INTELLECTUAL PROPERTY RIGHTS

We have a number of trademarks, service marks, trade secrets, copyrights, inventions, patents, and other intellectual property, which are used in connection with our products and services. Our designs, artwork, musical compositions, photographs and editorial verse are protected by copyright. In addition, we seek to register our trademarks in the United States and elsewhere. We routinely seek protection of our inventions by filing patent applications for which patents may be granted. We also obtain license agreements for the use of intellectual property owned or controlled by others. Although the licensing of intellectual property produces additional revenue, we do not believe that our operations are dependent upon any individual invention, trademark, service mark, copyright, patent or other intellectual property license. Collectively, our intellectual property is an important asset to us. As a result, we follow an aggressive policy of protecting our rights in our intellectual property and intellectual property licenses.

EMPLOYEES

At February 28, 2011, we employed approximately 7,400 full-time employees and approximately 17,400 part-time employees which, when jointly considered, equate to approximately 16,100 full-time equivalent employees. Approximately 1,200 of our employees are unionized and covered by collective bargaining agreements.

The following table sets forth by location the unions representing our employees, together with the expiration date, if any, of the applicable governing collective bargaining agreement. We believe that labor relations at each location in which we operate have generally been satisfactory.

Union	Location	Contract Expiration Date
AMICUS GPMS	Leeds, England	N/A
Australian Municipal, Administrative, Clerical & Services Union	South Victoria, Australia	February 28, 2014
International Brotherhood of Teamsters	Bardstown, Kentucky	March 23, 2014
International Brotherhood of Teamsters	Cleveland, Ohio	March 31, 2013
Workers United	Greeneville, Tennessee	October 19, 2011

SUPPLY AGREEMENTS

In the normal course of business, we enter into agreements with certain customers for the supply of greeting cards and related products. We view the use of such agreements as advantageous in developing and maintaining business with our retail customers. Under these agreements, the customer may receive from American Greetings a combination of cash payments, credits, discounts, allowances and other incentive

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considerations to be earned by the customer as product is purchased from us over the stated term of the agreement or the minimum purchase volume commitment. The agreements are negotiated individually to meet competitive situations and, therefore, while some aspects of the agreements may be similar, important contractual terms vary. The agreements may or may not specify American Greetings as the sole supplier of social expression products to the customer. In the event an agreement is not completed, in most instances, we have a claim for unearned advances under the agreement.

Although risk is inherent in the granting of advances, we subject such customers to our normal credit review. We maintain an allowance for deferred costs based on estimates developed by using standard quantitative measures incorporating historical write-offs. In instances where we are aware of a particular customer’s inability to meet its performance obligation, we record a specific allowance to reduce the deferred cost asset to our estimate of its value based upon expected recovery. These agreements are accounted for as deferred costs. Losses attributed to these specific events have historically not been material. See Note 10 to the Consolidated Financial Statements in Part II, Item 8, and the discussion under the “Deferred Costs” heading in the “Critical Accounting Policies” in Part II, Item 7 for further information and discussion of deferred costs.

ENVIRONMENTAL AND GOVERNMENTAL REGULATIONS

Our business is subject to numerous foreign and domestic environmental laws and regulations maintained to protect the environment. These environmental laws and regulations apply to chemical usage, air emissions, wastewater and storm water discharges and other releases into the environment as well as the generation, handling, storage, transportation, treatment and disposal of waste materials, including hazardous waste. Although we believe that we are in substantial compliance with all applicable laws and regulations, because legal requirements frequently change and are subject to interpretation, these laws and regulations may give rise to claims, uncertainties or possible loss contingencies for future environmental remediation liabilities and costs. We have implemented various programs designed to protect the environment and comply with applicable environmental laws and regulations. The costs associated with these compliance and remediation efforts have not and are not expected to have a material adverse effect on our financial condition, cash flows or operating results. In addition, the impact of increasingly stringent environmental laws and regulations, regulatory enforcement activities, the discovery of unknown conditions and third party claims for damages to the environment, real property or persons could also result in additional liabilities and costs in the future.

The legal environment of the Internet is evolving rapidly in the United States and elsewhere. The manner in which existing laws and regulations will be applied to the Internet in general, and how they will relate to our business in particular, is unclear in many cases. Accordingly, we often cannot be certain how existing laws will apply in the online context, including with respect to such topics as privacy, defamation, pricing, credit card fraud, advertising, taxation, sweepstakes, promotions, content regulation, net neutrality, quality of products and services and intellectual property ownership and infringement. In particular, legal issues relating to the liability of providers of online services for activities of their users are currently unsettled both within the United States and abroad.

Numerous laws have been adopted at the national and state level in the United States that could have an impact on our business. These laws include the following:

•   The CAN-SPAM Act of 2003 and similar laws adopted by a number of states. These laws are intended to regulate unsolicited commercial e-mails, create criminal penalties for unmarked sexually-oriented material and e-mails containing fraudulent headers and control other abusive online marketing practices.

•   The Communications Decency Act, which gives statutory protection to online service providers who distribute third-party content.

•   The Digital Millennium Copyright Act, which is intended to reduce the liability of online service providers for listing or linking to third-party websites that include materials that infringe copyrights or other rights of others.

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•   The Children’s Online Privacy Protection Act and the Prosecutorial Remedies and Other Tools to End Exploitation of Children Today Act of 2003, which are intended to restrict the distribution of certain materials deemed harmful to children and impose additional restrictions on the ability of online services to collect user information from minors. In addition, the Protection of Children From Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances.

•   Statutes adopted in the State of California require online services to report certain breaches of the security of personal data, and to report to California consumers when their personal data might be disclosed to direct marketers.

To resolve some of the remaining legal uncertainty, we expect new U.S. and foreign laws and regulations to be adopted over time that will be directly or indirectly applicable to the Internet and to our activities. Any existing or new legislation applicable to us could expose us to government investigations or audits, prosecution for violations of applicable laws and/or substantial liability, including penalties, damages, significant attorneys’ fees, expenses necessary to comply with such laws and regulations or the need to modify our business practices.

We post on our websites our privacy policies and practices concerning the use and disclosure of user data. Any failure by us to comply with our posted privacy policies, Federal Trade Commission requirements or other privacy-related laws and regulations could result in proceedings that could potentially harm our business, results of operations and financial condition. In this regard, there are a large number of federal and state legislative proposals before the United States Congress and various state legislative bodies regarding privacy issues related to our business. It is not possible to predict whether or when such legislation may be adopted, and certain proposals, such as required use of disclaimers or explicit opt-in mechanisms, if adopted, could harm our business through a decrease in user registrations and revenues.

AVAILABLE INFORMATION

We make available, free of charge, on or through the Investors section of our www.corporate.americangreetings.com Web site, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and, if applicable, amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission (“SEC”). Copies of our filings with the SEC also can be obtained at the SEC’s Internet site, www.sec.gov. Information contained on our Web site shall not be deemed incorporated into, or be part of, this report.

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters of the Board’s Audit Committee, Compensation and Management Development Committee, and Nominating and Governance Committee are available on or through the Investors section of our www.corporate.americangreetings.com Web site.

Item 1A.      Risk Factors

You should carefully consider each of the risks and uncertainties we describe below and all other information in this report. The risks and uncertainties we describe below are not the only ones we face. Additional risks and uncertainties of which we are currently unaware or that we currently believe to be immaterial may also adversely affect our business, financial condition, cash flows or results of operations. Additional information on risk factors is included in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

There are factors outside of our control that may decrease the demand for our products and services, which may adversely affect our performance.

Our success depends on the sustained demand for our products. Many factors affect the level of consumer spending on our products, including, among other things, general business conditions, interest rates, the availability of consumer credit, taxation, weather, fuel prices and consumer confidence in future economic

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conditions, all of which are beyond our control. Beginning in fiscal 2009, economic conditions deteriorated significantly in the United States, and worldwide, and, while the economy has improved, unemployment remains at historically high levels. During periods of economic decline, when discretionary income is lower, consumers or potential consumers could delay, reduce or forego their purchases of our products and services, which reduces our sales. In addition, during such periods, advertising revenue in our AG Interactive businesses decline, as advertisers reduce their advertising budgets. A prolonged economic downturn or slow economic recovery may also lead to restructuring actions and associated expenses.

Providing new and compelling products is critical to our future profitability and cash flow.

One of our key business strategies has been to gain profitable market share through product leadership, providing relevant, compelling and a superior product offering. As a result, the need to continuously update and refresh our product offerings is an ongoing, evolving process requiring expenditures and investments that will continue to impact net sales, earnings and cash flows over future periods. At times, the amount and timing of such expenditures and investments depends on the success of a product offering as well as the schedules of our retail partners. We cannot assure you that this strategy will either increase our revenue or profitability. In addition, even if our strategy is successful, our profitability may be adversely affected if consumer demand for lower priced, value cards continues to expand, thereby eroding our average selling prices. Our strategy may also have flaws and may not be successful. For example, we may not be able to anticipate or respond in a timely manner to changing customer demands and preferences for greeting cards. If we misjudge the market, we may significantly sell or overstock unpopular products and be forced to grant significant credits, accept significant returns or write-off a significant amount of inventory, which would have a negative impact on our results of operations and cash flow. Conversely, shortages of popular items could materially and adversely impact our results of operations and financial condition.

We rely on a few customers for a significant portion of our sales.

A few of our customers are material to our business and operations. Net sales to our five largest customers, which include mass merchandisers and chain drug stores, accounted for approximately 42%, 39% and 36% of total revenue for fiscal years 2011, 2010 and 2009, respectively. Approximately 54%, 51% and 54% of the North American Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, was attributable to its top five customers, and approximately 44%, 45% and 39% of the International Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, was attributable to its top three customers. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 15%, 14% and 15% of total revenue in 2011, 2010 and 2009, respectively, and net sales to Target Corporation accounted for approximately 14% and 13% of total revenue in 2011 and 2010, respectively. There can be no assurance that our large customers will continue to purchase our products in the same quantities that they have in the past. The loss of sales to one of our large customers could materially and adversely affect our business, results of operations, cash flows, and financial condition.

Difficulties in integrating acquisitions could adversely affect our business and we may not achieve the cost savings and increased revenues anticipated as a result of these acquisitions.

We continue to regularly evaluate potential acquisition opportunities to support and strengthen our business. We cannot be sure that we will be able to locate suitable acquisition candidates, acquire candidates on acceptable terms or integrate acquired businesses successfully. Future acquisitions could cause us to take on additional compliance obligations as well as experience dilution and incur debt, contingent liabilities, increased interest expense, restructuring charges and amortization expenses related to intangible assets, which may materially and adversely affect our business, results of operations and financial condition.

Integrating future businesses that we may acquire involves significant challenges. In particular, the coordination of geographically dispersed organizations with differences in corporate cultures and management philosophies may increase the difficulties of integration. The integration of these acquired businesses has and will continue to require the dedication of significant management resources, which may temporarily distract management’s attention from our day-to-day operations. The process of integrating operations may also cause

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an interruption of, or loss of momentum in, the activities of one or more of our businesses and the loss of key personnel. Employee uncertainty and distraction during the integration process may also disrupt our business. Our strategy is, in part, predicated on our ability to realize cost savings and to increase revenues through the acquisition of businesses that add to the breadth and depth of our products and services. Achieving these cost savings and revenue increases is dependent upon a number of factors, many of which are beyond our control. In particular, we may not be able to realize the benefits of anticipated integration of sales forces, asset rationalization, systems integration, and more comprehensive product and service offerings.

If Schurman Fine Papers is unable to operate its retail stores successfully, it could have a material adverse effect on us.

On April 17, 2009, we sold our Retail Operations segment, including all 341 of our card and gift retail store assets, to Schurman Fine Papers (“Schurman”), which now operates stores under the American Greetings, Carlton Cards and Papyrus brands. Although we do not control Schurman, because Schurman is licensing the “Papyrus,” “American Greetings” and “Carlton Cards” names from us for its retail stores, actions taken by Schurman may be seen by the public as actions taken by us, which, in turn, could adversely affect our reputation or brands. In addition, the failure of Schurman to operate its retail stores profitably could have a material adverse effect on us, our reputation and our brands, and could materially and adversely affect our business, financial condition, and results of operations, because, under the terms of the transaction:

•   we remain subject to certain of the Retail Operations store leases on a contingent basis through our subleasing of stores to Schurman (as described in Note 13 to the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report, as of February 28, 2011, Schurman’s aggregate commitments to us under these subleases was approximately $36 million);

•   we are the predominant supplier of greetings cards and other social expression products to the retail stores operated by Schurman; and

•   we have provided credit support to Schurman, including a guaranty of up to $12 million in favor of the lenders under Schurman’s senior revolving credit facility, and up to $10 million of subordinated financing under a loan agreement with Schurman, each as described in Note 2 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report.

As a result, if Schurman is unable to operate its retail stores profitably, we may incur significant costs if (1) Schurman is unable to pay for product that it has purchased from us, (2) Schurman is unable to pay rent and other amounts due with respect to the retail store leases that we have subleased to it, (3) we become obligated under our guaranty of its indebtedness, or (4) Schurman is unable to repay amounts that it may borrow from us from time to time under our loan agreement with Schurman. Accordingly, we may decide in the future to provide Schurman with additional financial or operational support to assist Schurman successfully operate its stores. Providing such support, however, could result in it being determined that we have a “controlling financial interest” in Schurman under the Financial Accounting Standards Board’s standards pertaining to the consolidation of a variable interest entity. For information regarding the consolidation of variable interest entities, see Note 1 to the Consolidated Financial Statements included in Part II, Item 8. If it is determined that we have a controlling financial interest in Schurman, we will be required to consolidate Schurman’s operations into our results, which could materially affect our reported results of operations and financial position as we would be required to include a portion of Schurman’s income or losses and assets and liabilities into our financial statements.

Our business, results of operations and financial condition may be adversely affected by retail consolidations.

With continued retail trade consolidations, we are increasingly dependent upon a reduced number of key retailers whose bargaining strength is growing. We may be negatively affected by changes in the policies of our retail customers, such as inventory de-stocking, limitations on access to display space, scan-based trading and other conditions. Increased consolidations in the retail industry could result in other changes that could damage our business, such as a loss of customers, decreases in volume, less favorable contractual terms and

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the growth of discount chains. In addition, as the bargaining strength of our retail customers grows, we may be required to grant greater credits, discounts, allowances and other incentive considerations to these customers. We may not be able to recover the costs of these incentives if the customer does not purchase a sufficient amount of products during the term of its agreement with us, which could materially and adversely affect our business, results of operations and financial condition.

Bankruptcy of key customers could give rise to an inability to pay us and increase our exposure to losses from bad debts.

Many of our largest customers are mass-market retailers. The mass-market retail channel has experienced significant shifts in market share among competitors in recent years. In addition, the retail industry in general has experienced significant declines due to the worldwide downturn in the economy and decreasing consumer demand. As a result, retailers have experienced liquidity problems and some have been forced to file for bankruptcy protection. There is a risk that certain of our key customers will not pay us, or that payment may be delayed because of bankruptcy or other factors beyond our control, which could increase our exposure to losses from bad debts and may require us to write-off deferred cost assets. Additionally, our business, results of operations and financial condition could be materially and adversely affected if certain of these mass-market retailers were to cease doing business as a result of bankruptcy, or significantly reduce the number of stores they operate.

We rely on foreign sources of production and face a variety of risks associated with doing business in foreign markets.

We rely to a significant extent on foreign manufacturers and suppliers for various products we distribute to customers. In addition, many of our domestic suppliers purchase a portion of their products from foreign sources. We generally do not have long-term supply contracts and some of our imports are subject to existing or potential duties, tariffs or quotas. In addition, a portion of our current operations are conducted and located abroad. The success of our sales to, and operations in, foreign markets depends on numerous factors, many of which are beyond our control, including economic conditions in the foreign countries in which we sell our products. We also face a variety of other risks generally associated with doing business in foreign markets and importing merchandise from abroad, such as:

•   political instability, civil unrest and labor shortages;

•   imposition of new legislation and customs’ regulations relating to imports that may limit the quantity and/or increase the cost of goods which may be imported into the United States from countries in a particular region;

•   lack of effective product quality control procedures by foreign manufacturers and suppliers;

•   currency and foreign exchange risks; and

•   potential delays or disruptions in transportation as well as potential border delays or disruptions.

Also, new regulatory initiatives may be implemented that have an impact on the trading status of certain countries and may include antidumping and countervailing duties or other trade-related sanctions, which could increase the cost of products purchased from suppliers in such countries.

Additionally, as a large, multinational corporation, we are subject to a host of governmental regulations throughout the world, including antitrust and tax requirements, anti-boycott regulations, import/export customs regulations and other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Failure to comply with any such legal requirements could subject us to criminal or monetary liabilities and other sanctions, which could harm our business, results of operations and financial condition.

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We have foreign currency translation and transaction risks that may materially and adversely affect our operating results.

The financial position and results of operations of our international subsidiaries are initially recorded in various foreign currencies and then translated into U.S. dollars at the applicable exchange rate for inclusion in our financial statements. The strengthening of the U.S. dollar against these foreign currencies ordinarily has a negative impact on our reported sales and operating income (and conversely, the weakening of the U.S. dollar against these foreign currencies has a positive impact). For the year ended February 28, 2011, foreign currency translation favorably affected revenues by $10.0 million and favorably affected segment operating income by $5.0 million compared to the year ended February 28, 2010. Certain transactions, particularly in foreign locations, are denominated in other than that location’s local currency. Changes in the exchange rates between the two currencies from the original transaction date to the settlement date will result in a currency transaction gain or loss that directly impacts our reported earnings. For the year ended February 28, 2011, the impact of currency movements on these transactions unfavorably affected operating income by $0.2 million. The volatility of currency exchange rates may materially and adversely affect our results of operations.

The greeting card and gift wrap industries are extremely competitive, and our business, results of operations and financial condition will suffer if we are unable to compete effectively.

We operate in highly competitive industries. There are an estimated 3,000 greeting card publishers in the United States ranging from small, family-run organizations to major corporations. With the expansion of the Internet as a distribution channel for greeting cards, together with the growing use of technology by consumers to create personalized greetings cards with digital photographs and other personalized content, we are also seeing increased competition from greeting card publishers as well as a wide range of personal publishing businesses distributing greeting cards and other social expression products directly to the individual consumer through the Internet. In general, however, the greeting card business is extremely concentrated. We believe that we are one of only two main suppliers offering a full line of social expression products. Our main competitor, Hallmark Cards, Inc., may have substantially greater financial, technical or marketing resources, a greater customer base, stronger name recognition and a lower cost of funds than we do. This competitor may also have longstanding relationships with certain large customers to which it may offer products that we do not provide, putting us at a competitive disadvantage. As a result, this competitor as well as other competitors that may be smaller than us, may be able to:

•   adapt to changes in customer requirements or consumer preferences more quickly;

•   take advantage of acquisitions and other opportunities more readily;

•   devote greater resources to the marketing and sale of its products, including sales directly to consumers through the Internet; and

•   adopt more aggressive pricing policies.

There can be no assurance that we will be able to continue to compete successfully in this market or against such competition. If we are unable to introduce new and innovative products that are attractive to our customers and ultimate consumers, or if we are unable to allocate sufficient resources to effectively market and advertise our products to achieve widespread market acceptance, we may not be able to compete effectively, our sales may be adversely affected, we may be required to take certain financial charges, including goodwill impairments, and our results of operations and financial condition could otherwise be adversely affected.

We are subject to a number of restrictive covenants under our borrowing arrangements, which could affect our flexibility to fund ongoing operations, uses of capital and strategic initiatives, and, if we are unable to maintain compliance with such covenants, could lead to significant challenges in meeting our liquidity requirements.

The terms of our borrowing arrangements contain a number of restrictive covenants, including customary operating restrictions that limit our ability to engage in such activities as borrowing and making investments,

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capital expenditures and distributions on our capital stock, and engaging in mergers, acquisitions and asset sales. We are also subject to customary financial covenants, including a leverage ratio and an interest coverage ratio. These covenants restrict the amount of our borrowings, reducing our flexibility to fund ongoing operations and strategic initiatives. These borrowing arrangements are described in more detail in “Liquidity and Capital Resources” under Item 7 and in Note 11 to the Consolidated Financial Statements under Part II, Item 8 of this Annual Report. Compliance with some of these covenants is based on financial measures derived from our operating results. If economic conditions deteriorate, we may experience material adverse impacts to our business and operating results, such as through reduced customer demand and inflation. A decline in our business could make us unable to maintain compliance with these financial covenants, in which case we may be restricted in how we manage our business and deploy capital, including by limiting our ability to make acquisitions and dispositions, pay dividends and repurchase our stock. In addition, if we are unable to maintain compliance with our financial covenants or otherwise breach the covenants that we are subject to under our borrowing arrangements, our lenders could demand immediate payment of amounts outstanding and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all. In addition, our credit agreement is secured by substantially all of our domestic assets, including the stock of certain of our subsidiaries. If we cannot repay all amounts that we have borrowed under our credit agreement, our lenders could proceed against our assets.

Pending litigation could have a material, adverse effect on our business, financial condition, liquidity, results of operations, and cash flows.

As described in “Item 3. Legal Proceedings,” from time to time we are engaged in lawsuits which may require significant management time and attention and legal expense, and may result in an unfavorable outcome, which could have a material, adverse effect on our business, financial condition, liquidity, results of operations, and cash flows. Current estimates of loss regarding pending litigation are based on information that is then available to us and may not reflect any particular final outcome. The results of rulings, judgments or settlements of pending litigation may result in financial liability that is materially higher than what management has estimated at this time. We make no assurances that we will not be subject to liability with respect to current or future litigation. We maintain various forms of insurance coverage. However, substantial rulings, judgments or settlements could exceed the amount of insurance coverage, or could be excluded under the terms of an existing insurance policy.

The amount of various taxes we pay is subject to ongoing compliance requirements and audits by federal, state and foreign tax authorities.

Our estimate of the potential outcome of uncertain tax issues is subject to our assessment of relevant risks, facts, and circumstances existing at that time. We use these assessments to determine the adequacy of our provision for income taxes and other tax-related accounts. Our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate and/or our financial results.

We have deferred tax assets that we may not be able to use under certain circumstances.

If we are unable to generate sufficient future taxable income in certain jurisdictions, or if there is a significant change in the time period within which the underlying temporary differences become taxable or deductible, we could be required to increase our valuation allowances against our deferred tax assets. This would result in an increase in our effective tax rate and would have an adverse effect on our future operating results. In addition, changes in statutory tax rates may change our deferred tax assets or liability balances, with either favorable or unfavorable impact on our effective tax rate. Our deferred tax assets may also be impacted by new legislation or regulation.

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We may not be able to acquire or maintain advantageous content licenses from third parties to produce products.

To provide an assortment of relevant, compelling and superior product offerings, an important part of our business involves obtaining licenses to produce products based on various popular brands, celebrities, character properties, designs, content, and other material owned by third parties. In the event that we are not able to acquire or maintain advantageous licenses, we may not be able to meet changing customer demands and preferences for greetings cards and our other products, which could materially and adversely affect our business, results of operations and financial condition.

We may not realize the full benefit of the material we license from third parties if the licensed material has less market appeal than expected or if sales revenue from the licensed products is not sufficient to earn out the minimum guaranteed royalties.

The agreements under which we license popular brands, celebrities, character properties, design, content and other material owned by third parties usually require that we pay an advance and/or provide a minimum royalty guarantee that may be substantial. In some cases, these advances or minimums may be greater than what we will be able to recoup in profits from actual sales, which could result in write-offs of such amounts that would adversely affect our results of operations. In addition, we may acquire or renew licenses requiring minimum guarantee payments that may result in us paying higher effective royalties, if the overall benefit of obtaining the license outweighs the risk of potentially losing, not renewing or otherwise not obtaining a valuable license. When obtaining a license, we realize there is no guarantee that a particular licensed property will make a successful greeting card or other product in the eye of the ultimate consumer. Furthermore, there can be no assurance that a successful licensed property will continue to be successful or maintain a high level of sales in the future.

Our inability to protect or defend our intellectual property rights could reduce the value of our products and brands.

We believe that our trademarks, copyrights, trade secrets, patents and other intellectual property rights are important to our brands, success and competitive position. We rely on trademark, copyright, trade secrets, and patent laws in the United States and similar laws in other jurisdictions and on confidentiality and other types of agreements with some employees, vendors, consultants and others to protect our intellectual property rights. Despite these measures, if we are unable to successfully file for, register or otherwise enforce our rights or if these rights are infringed, invalidated, challenged, circumvented, or misappropriated, our business could be materially and adversely affected. Also, we are, and may in the future be, subject to intellectual property rights claims in the United States or foreign countries, which could limit our ability to use certain intellectual property, products or brands in the future. Defending any such claims, even claims without merit, could be time-consuming, result in costly settlements, litigation or restrictions on our business and damage our reputation.

Rapidly changing trends in the children’s entertainment market could adversely affect our business.

A portion of our business and results of operations depends upon the appeal of our licensed character properties, which are used to create various toy and entertainment items for children. Consumer preferences, particularly among children, are continuously changing. The children’s entertainment industry experiences significant, sudden and often unpredictable shifts in demand caused by changes in the preferences of children to more “on trend” entertainment properties. Moreover, the life cycle for individual youth entertainment products tends to be short. Therefore, our ability to maintain our current market share and increase our market share in the future depends on our ability to satisfy consumer preferences by enhancing existing entertainment properties and developing new entertainment properties. If we are not able to successfully meet these challenges in a timely and cost-effective manner, demand for our collection of entertainment properties could decrease and our business, results of operations and financial condition may be materially and adversely affected. In addition, we may incur significant costs developing entertainment properties that may not generate future revenues at the levels that we anticipated, which could in turn create fluctuations in our reported results

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based on when those costs are expensed and could otherwise materially and adversely affect our results of operations and financial condition.

Our results of operations fluctuate on a seasonal basis.

The social expression industry is a seasonal business, with sales generally being higher in the second half of our fiscal year due to the concentration of major holidays during that period. Consequently, our overall results of operations in the future may fluctuate substantially based on seasonal demand for our products. Such variations in demand could have a material adverse effect on the timing of cash flow and therefore our ability to meet our obligations with respect to our debt and other financial commitments. Seasonal fluctuations also affect our inventory levels, since we usually order and manufacture merchandise in advance of peak selling periods and sometimes before new trends are confirmed by customer orders or consumer purchases. We must carry significant amounts of inventory, especially before the holiday season selling period. If we are not successful in selling the inventory during the holiday period, we may have to sell the inventory at significantly reduced prices, or we may not be able to sell the inventory at all.

Increases in raw material and energy costs may materially raise our costs and materially impact our profitability.

Paper is a significant expense in the production of our greeting cards. Significant increases in paper prices, which have been volatile in past years, or increased costs of other raw materials or energy, such as fuel, may result in declining margins and operating results if market conditions prevent us from passing these increased costs on to our customers through timely price increases on our greeting cards and other social expression products.

The loss of key members of our senior management and creative teams could adversely affect our business.

Our success and continued growth depend largely on the efforts and abilities of our current senior management team as well as upon a number of key members of our creative staff, who have been instrumental in our success thus far, and upon our ability to attract and retain other highly capable and creative individuals. The loss of some of our senior executives or key members of our creative staff, or an inability to attract or retain other key individuals, could materially and adversely affect us. We seek to compensate our key executives, as well as other employees, through competitive salaries, stock ownership, bonus plans, or other incentives, but we can make no assurance that these programs will enable us to retain key employees or hire new employees.

If we fail to extend or renegotiate our primary collective bargaining contracts with our labor unions as they expire from time to time, or if our unionized employees were to engage in a strike, or other work stoppage, our business and results of operations could be materially adversely affected.

We are party to collective bargaining contracts with our labor unions, which represent a significant number of our employees. In particular, approximately 1,200 of our employees are unionized and are covered by collective bargaining agreements. Although we believe our relations with our employees are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work related stoppage, we could incur higher ongoing labor costs or experience a significant disruption of operations, which could have a material adverse effect on our business.

Employee benefit costs constitute a significant element of our annual expenses, and funding these costs could adversely affect our financial condition.

Employee benefit costs are a significant element of our cost structure. Certain expenses, particularly postretirement costs under defined benefit pension plans and healthcare costs for employees and retirees, may increase significantly at a rate that is difficult to forecast and may adversely affect our financial results, financial condition or cash flows. In addition, the newly enacted federal healthcare legislation is expected to

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increase our employer-sponsored medical plan costs, some of which increases could be significant. Declines in global capital markets may cause reductions in the value of our pension plan assets. Such circumstances could have an adverse effect on future pension expense and funding requirements. Further information regarding our retirement benefits is presented in Note 12 to the Consolidated Financial Statements included in Part II, Item 8.

Various environmental regulations and risks applicable to a manufacturer and/or distributor of consumer products may require us to take actions, which will adversely affect our results of operations.

Our business is subject to numerous federal, state, provincial, local and foreign laws and regulations, including regulations with respect to chemical usage, air emissions, wastewater and storm water discharges and other releases into the environment as well as the generation, handling, storage, transportation, treatment and disposal of waste materials, including hazardous materials. Although we believe that we are in substantial compliance with all applicable laws and regulations, because legal requirements frequently change and are subject to interpretation, we are unable to predict the ultimate cost of compliance with these requirements, which may be significant, or the effect on our operations as these laws and regulations may give rise to claims, uncertainties or possible loss contingencies for future environmental remediation liabilities and costs. We cannot be certain that existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations, will not have a material and adverse effect on our business, results of operations and financial condition. The impact of environmental laws and regulations, regulatory enforcement activities, the discovery of unknown conditions, and third party claims for damages to the environment, real property or persons could result in additional liabilities and costs in the future.

We may be subject to product liability claims and our products could be subject to voluntary or involuntary recalls and other actions.

We are subject to numerous federal, state, provincial and foreign laws and regulations governing product safety including, but not limited to, those regulations enforced by the Consumer Product Safety Commission. A failure to comply with such laws and regulations, or concerns about product safety may lead to a recall of selected products. We have experienced, and in the future may experience, recalls and defects or errors in products after their production and sale to customers. Such recalls and defects or errors could result in the rejection of our products by our retail customers and consumers, damage to our reputation, lost sales, diverted development resources and increased customer service and support costs, any of which could harm our business. Individuals could sustain injuries from our products, and we may be subject to claims or lawsuits resulting from such injuries. Governmental agencies could pursue us and issue civil fines and/or criminal penalties for a failure to comply with product safety regulations. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. Additionally, we may be unable to obtain adequate liability insurance in the future. Recalls, post-manufacture repairs of our products, product liability claims, absence or cost of insurance and administrative costs associated with recalls could harm our reputation, increase costs or reduce sales.

Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by us to comply with these regulations could harm our business and results of operations.

We are subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future laws and regulations may impede the growth of the Internet or other online services. These regulations and laws may cover taxation, restrictions on imports and exports, customs, tariffs, user privacy, data protection, pricing, content, copyrights, distribution, electronic contracts and other communications, consumer protection, the provision of online payment services, broadband residential Internet access and the characteristics and quality of products and services. It is not clear how existing laws governing issues such as property use and ownership, sales and other taxes, fraud, libel and personal privacy apply to the Internet and e-commerce as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. Those laws that do reference the Internet are only beginning to be interpreted by the courts and their applicability

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and reach are therefore uncertain. For example, the Digital Millennium Copyright Act, or DMCA, is intended, in part, to limit the liability of eligible online service providers for including (or for listing or linking to third-party websites that include) materials that infringe copyrights or other rights of others. Portions of the Communications Decency Act, or CDA, are intended to provide statutory protections to online service providers who distribute third-party content. We rely on the protections provided by both the DMCA and CDA in conducting our AG Interactive business. Any changes in these laws or judicial interpretations narrowing their protections will subject us to greater risk of liability and may increase our costs of compliance with these regulations or limit our ability to operate certain lines of business. The Children’s Online Privacy Protection Act is intended to impose additional restrictions on the ability of online service providers to collect user information from minors. In addition, the Protection of Children From Sexual Predators Act of 1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances. The costs of compliance with these regulations may increase in the future as a result of changes in the regulations or the interpretation of them. Further, any failures on our part to comply with these regulations may subject us to significant liabilities. Those current and future laws and regulations or unfavorable resolution of these issues may substantially harm our business and results of operations.

Information technology infrastructure failures could significantly affect our business.

We depend heavily on our information technology (“IT”) infrastructure in order to achieve our business objectives. Portions of our IT infrastructure are old and difficult to maintain. We could experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important IT application, or an intentional disruption of our IT systems. In addition, our IT systems could suffer damage or interruption from human error, fire, flood, power loss, telecommunications failure, break-ins, terrorist attacks, acts of war and similar events. The disruptions caused by any such events could impede our ability to record or process orders, manufacture and ship in a timely manner, properly store consumer images, or otherwise carry on our business in the ordinary course. Any such event could cause us to lose customers or revenue, damage our reputation, and could require us to incur significant expense to eliminate these problems and address related security concerns.

Over the next five to seven years, we expect to allocate resources, including capital, to refresh our IT systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures all intended to drive efficiencies within the business and add new capabilities. Such an implementation is expensive and carries substantial operational risk, including loss of data or information, unanticipated increases in costs, disruption of operations or business interruption. Further, we may not be successful implementing new systems or any new system may not perform as expected. This could have a material adverse effect on our business.

Acts of nature could result in an increase in the cost of raw materials; other catastrophic events, including earthquakes, could interrupt critical functions and otherwise adversely affect our business and results of operations.

Acts of nature could result in an increase in the cost of raw materials or a shortage of raw materials, which could influence the cost of goods supplied to us. Additionally, we have significant operations, including our largest manufacturing facility, near a major earthquake fault line in Arkansas. A catastrophic event, such as an earthquake, fire, tornado, or other natural or man-made disaster, could disrupt our operations and impair production or distribution of our products, damage inventory, interrupt critical functions or otherwise affect our business negatively, harming our results of operations.

Members of the Weiss family and related entities, whose interests may differ from those of other shareholders, own a substantial portion of our common shares.

Our authorized capital stock consists of Class A common shares and Class B common shares. The economic rights of each class of common shares are identical, but the voting rights differ. Class A common shares are entitled to one vote per share and Class B common shares are entitled to ten votes per share. There is no public trading market for the Class B common shares, which are held by members of the extended family of

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American Greetings’ founder, officers and directors of American Greetings and their extended family members, family trusts, institutional investors and certain other persons. As of April 27, 2011, Morry Weiss, the Chairman of the Board of Directors, Zev Weiss, the Chief Executive Officer, Jeffrey Weiss, the President and Chief Operating Officer, and Erwin Weiss, the Senior Vice President, Enterprise Resource Planning, together with other members of the Weiss family and certain trusts and foundations established by the Weiss family beneficially owned approximately 93% in the aggregate of our outstanding Class B common shares (approximately 91%, excluding restricted stock units that vest, and stock options that are presently exercisable or exercisable, within 60 days of April 27, 2011), which, together with Class A common shares beneficially owned by them, represents approximately 48% of the voting power of our outstanding capital stock (approximately 40%, excluding restricted stock units that vest, and stock options that are presently exercisable or exercisable, within 60 days of April 27, 2011). Accordingly, these members of the Weiss family, together with the trusts and foundations established by them, would be able to significantly influence the outcome of shareholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our Articles of Incorporation or Code of Regulations, and the approval of mergers and other significant corporate transactions, and their interests may not be aligned with your interests. The existence of these levels of ownership concentrated in a few persons makes it less likely that any other shareholder will be able to affect our management or strategic direction. These factors may also have the effect of delaying or preventing a change in our management or voting control or its acquisition by a third party.

Our charter documents and Ohio law may inhibit a takeover and limit our growth opportunities, which could adversely affect the market price of our common shares.

Certain provisions of Ohio law and our charter documents, together or separately, could have the effect of discouraging, or making it more difficult for, a third party to acquire or attempt to acquire control of American Greetings and limit the price that certain investors might be willing to pay in the future for our common shares. For example, our charter documents establish a classified board of directors, serving staggered three-year terms, allow the removal of directors only for cause, and establish certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings. In addition, while shareholders have the right to cumulative voting in the election of directors, Class B common shares have ten votes per share which limits the ability of holders of Class A common shares to elect a director by exercising cumulative voting rights.

Item 1B.      Unresolved Staff Comments

None.

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Item 2.      Properties

As of February 28, 2011, we owned or leased approximately 9.5 million square feet of plant, warehouse and office space throughout the world, of which approximately 470,000 square feet is leased space. We believe our manufacturing and distribution facilities are well maintained and are suitable and adequate, and have sufficient productive capacity to meet our current needs.

The following table summarizes, as of February 28, 2011, our principal plants and materially important physical properties and identifies as of such date the respective segments that use the properties described. In addition to the following, although we sold our Retail Operations segment in April 2009, we remain subject to certain of the Retail Operations store leases on a contingent basis through our subleasing of stores to Schurman Fine Papers, which operates these retail stores throughout North America. See Note 13 to the Consolidated Financial Statements included in Part II, Item 8.

* — Indicates calendar year

	Approximate Square				Expiration
	Feet				Date of
	Occupied				Material
Location	Owned		Leased		Leases*		Principal Activity
Cleveland, (1)(3)(4) Ohio		1,700,000					World Headquarters: General offices of North American Greeting Card Division; Plus Mark LLC; AG Interactive, Inc.; and AGC, LLC; creation and design of greeting cards, gift wrap, party goods, stationery and giftware; marketing of electronic greetings
Bardstown, (1) Kentucky		413,500					Cutting, folding, finishing and packaging of greeting cards
Danville, (1) Kentucky		1,374,000					Distribution of everyday products including greeting cards
Osceola, (1) Arkansas		2,552,000					Cutting, folding, finishing and packaging of greeting cards and warehousing; distribution of seasonal products
Ripley, (1) Tennessee		165,000					Greeting card printing (lithography)
Kalamazoo, (1)(5) Michigan		602,500					Formerly manufacture and distribution of party goods
Forest City, (4) North Carolina		498,000					General offices of A.G. Industries, Inc.; manufacture of display fixtures and other custom display fixtures by A.G. Industries, Inc.
Forest City, (4) North Carolina				140,000		2012	Warehousing for A.G. Industries, Inc.
Greeneville, (1) Tennessee		1,044,000					Printing and packaging of seasonal greeting cards and wrapping items and order filling and shipping for Plus Mark LLC.
Chicago, (1) Illinois				45,000		2018	Administrative offices of Papyrus-Recycled Greetings, Inc.
Fairfield, (1) California				34,000		2014	General offices of Papyrus-Recycled Greetings, Inc.
Mississauga, (1) Ontario, Canada				38,000		2018	General offices of Carlton Cards Limited (Canada)
Clayton, (2) Australia				208,000		2011	General offices of John Sands companies
Dewsbury, (2) England (Two Locations)		441,500					General offices of UK Greetings Ltd. and manufacture and distribution of greeting cards and related products
Gibson House (2) Telford, England		55,000					General offices of UK Greetings Ltd.
Corby, England (2)		85,000					Distribution of greeting cards and related products

1	North American Social Expression Products
2	International Social Expression Products
3	AG Interactive
4	Non-reportable
5	In connection with our sale of certain assets, equipment and processes used in the manufacture and distribution of party goods, during fiscal 2011, this facility was wound-down and is currently an asset held for sale. See Note 14 to the Consolidated Financial Statements included in Part II, Item 8.

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Item 3.      Legal Proceedings

Electrical Workers Pension Fund, Local 103, I.B.E.W. Litigation. As previously disclosed, on March 20, 2009, a shareholder derivative complaint was filed in the Court of Common Pleas of Cuyahoga County, Ohio, by the Electrical Workers Pension Fund, Local 103, I.B.E.W., against certain of our current and former officers and directors (the “Individual Defendants”) and names American Greetings Corporation as a nominal defendant. The suit alleges that the Individual Defendants breached their fiduciary duties to American Greetings Corporation by, among other things, backdating stock options granted to our officers and directors, accepting backdated options and causing American Greetings Corporation to file false and misleading financial statements. The suit seeks an unspecified amount of damages from the Individual Defendants and modifications to our corporate governance policies. The parties recently participated in mediation and have reached an agreement in principle on the general terms of settlement, which contemplates a payment to plaintiff’s counsel as well as certain modifications to our corporate governance policies, none of which we believe are material. Upon finalizing the terms of the settlement, the settlement will be subject to preliminary and final approval of the Court of Common Pleas of Cuyahoga County, Ohio.

Cookie Jar/MoonScoop Litigation. As previously disclosed, on May 6, 2009, American Greetings Corporation and its subsidiary, Those Characters From Cleveland, Inc. (“TCFC”), filed an action in the Cuyahoga County (Ohio) Court of Common Pleas against Cookie Jar Entertainment Inc. (“Cookie Jar”) and its affiliates, Cookie Jar Entertainment (USA) Inc. (formerly known as DIC Entertainment Corporation) (“DIC”), and Cookie Jar Entertainment Holdings (USA) Inc. (formerly known as DIC Entertainment Holdings, Inc.) relating to the July 20, 2008 Binding Letter Agreement between American Greetings Corporation and Cookie Jar (the “Cookie Jar Agreement”) for the sale of the Strawberry Shortcake and Care Bears properties (the “Properties”). On May 7, 2009, Cookie Jar removed the case to the United States District Court for the Northern District of Ohio. Simultaneously, Cookie Jar filed an action against American Greetings Corporation, TCFC, Mike Young Productions, LLC (“Mike Young Productions”) and MoonScoop SAS (“MoonScoop”) in the Supreme Court of the State of New York, County of New York. Mike Young Productions and MoonScoop were named as defendants in the action in connection with the binding term sheet between American Greetings Corporation and MoonScoop dated March 24, 2009 (the “MoonScoop Binding Agreement”), providing for the sale to MoonScoop of the Properties.

On May 7, 2010, the legal proceedings involving American Greetings Corporation, TCFC, Cookie Jar and DIC were settled, without a payment to any of the parties. As part of the settlement, on May 7, 2010, the Cookie Jar Agreement was amended to, among other things, terminate American Greetings Corporation’s obligation to sell to Cookie Jar, and Cookie Jar’s obligation to purchase, the Properties. As part of the settlement, Cookie Jar Entertainment (USA) Inc. will continue to represent the Strawberry Shortcake property on behalf of American Greetings Corporation, and will become an international agent for the Care Bears property. On May 19, 2010, the Northern District of Ohio court granted the parties’ joint motion to dismiss all claims and counterclaims without prejudice.

On August 11, 2009, MoonScoop filed an action against American Greetings Corporation and TCFC in the United States District Court for the Northern District of Ohio, alleging breach of contract and promissory estoppel relating to the MoonScoop Binding Agreement. On MoonScoop’s request, the court agreed to consolidate this lawsuit with the first Ohio lawsuit (described above) for all pretrial purposes. The parties filed motions for summary judgment on various claims. On April 27, 2010, the court granted American Greetings Corporation’s motion for summary judgment on MoonScoop’s breach of contract and promissory estoppel claims, dismissing these claims with prejudice. On the same day, the court also ruled that American Greetings Corporation must indemnify MoonScoop against Cookie Jar’s claims in this lawsuit. On May 21, 2010, MoonScoop appealed the court’s summary judgment ruling. On June 4, 2010, American Greetings Corporation and TCFC appealed the court’s ruling that it must indemnify MoonScoop against the cross claims asserted against it. We believe that the allegations in the lawsuit against American Greetings Corporation and TCFC are without merit and intend to continue to defend the actions vigorously. We currently do not believe that the impact of the lawsuit against American Greetings Corporation and TCFC, if any, will have a material adverse effect on our financial position, liquidity or results of operations.

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In addition to the foregoing, we are involved in certain legal proceedings arising in the ordinary course of business. We, however, do not believe that any of the other litigation in which we are currently engaged, either individually or in the aggregate, will have a material adverse effect on our business, consolidated financial position or results of operations.

Item 4.      Reserved

Executive Officers of the Registrant

The following table sets forth our executive officers, their ages as of April 29, 2011, and their positions and offices:

Name	Age		Current Position and Office
Morry Weiss		70	Chairman
Zev Weiss		44	Chief Executive Officer
Jeffrey Weiss		47	President and Chief Operating Officer
John W. Beeder		51	Senior Vice President, Executive Sales and Marketing Officer
Michael L. Goulder		51	Senior Vice President, Executive Supply Chain Officer
Thomas H. Johnston		63	Senior Vice President, Creative/Merchandising
Catherine M. Kilbane		48	Senior Vice President, General Counsel and Secretary
Brian T. McGrath		60	Senior Vice President, Human Resources
Douglas W. Rommel		55	Senior Vice President, Chief Information Officer
Stephen J. Smith		47	Senior Vice President and Chief Financial Officer
Erwin Weiss		62	Senior Vice President, Enterprise Resource Planning
Joseph B. Cipollone		52	Vice President, Chief Accounting Officer

•   Morry Weiss and Erwin Weiss are brothers. Jeffrey Weiss and Zev Weiss are the sons of Morry Weiss. The Board of Directors annually elects all executive officers; however, executive officers are subject to removal, with or without cause, at any time; provided, however, that the removal of an executive officer would be subject to the terms of their respective employment agreements, if any.

•   Morry Weiss has held various positions with the Corporation since joining in 1961, including most recently Chief Executive Officer of the Corporation from October 1987 until June 2003. Mr. Morry Weiss has been Chairman since February 1992.

•   Zev Weiss has held various positions with the Corporation since joining in 1992, including most recently Executive Vice President from December 2001 until June 2003 when he was named Chief Executive Officer.

•   Jeffrey Weiss has held various positions with the Corporation since joining in 1988, including most recently Executive Vice President, North American Greeting Card Division of the Corporation from March 2000 until June 2003 when he was named President and Chief Operating Officer.

•   John W. Beeder held various positions with Hallmark Cards, Inc. from 1983 to 2006, most recently as Senior Vice President and General Manager — Greeting Cards from 2002 to 2006. Thereafter, Mr. Beeder served as the President and Chief Operating Officer of Handleman Corporation (international music distribution company) in 2006, and the Managing Partner and Chief Operating Officer of Compact Clinicals (medical publishing company) in 2007. He became Senior Vice President, Executive Sales and Marketing Officer of the Corporation in April 2008.

•   Michael L. Goulder was a Vice President in the management consulting firm of Booz Allen Hamilton from October 1998 until September 2002. He became a Senior Vice President of the Corporation in November 2002 and is currently the Senior Vice President, Executive Supply Chain Officer.

•   Thomas H. Johnston was Managing Director of Gruppo, Levey & Co., an investment banking firm focused on the direct marketing and specialty retail industries, from November 2001 until May 2004,

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when he became Senior Vice President and President of Carlton Cards Retail, a position he held until May 2009, shortly after the sale of the Corporation’s Retail Operations segment in April 2009. Mr. Johnston became Senior Vice President, Creative/Merchandising in December 2004.

•   Catherine M. Kilbane was a partner with the law firm of Baker & Hostetler LLP until becoming Senior Vice President, General Counsel and Secretary in October 2003.

•   Brian T. McGrath has held various positions with the Corporation since joining in 1989, including most recently Vice President, Human Resources from November 1998 until July 2006, when he became Senior Vice President, Human Resources.

•   Douglas W. Rommel has held various positions with the Corporation since joining in 1978, including most recently Vice President, Information Services from November 2001 until March 2010, when he became Senior Vice President, Chief Information Officer.

•   Stephen J. Smith was Vice President and Treasurer of General Cable Corporation, a wire and cable company, from 1999 until 2002. He became Vice President, Treasurer and Investor Relations of the Corporation in April 2003, and became Senior Vice President and Chief Financial Officer in November 2006.

•   Erwin Weiss has held various positions with the Corporation since joining in 1977, including most recently Senior Vice President, Program Realization from June 2001 to June 2003, and Senior Vice President, Specialty Business from June 2003 until becoming Senior Vice President, Enterprise Resource Planning in February 2007.

•   Joseph B. Cipollone has held various positions with the Corporation since joining in 1991, including most recently Executive Director, International Finance from December 1997 until becoming Vice President and Corporate Controller in April 2001 and Vice President and Chief Accounting Officer in October 2010.

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PART II

Item 5.      Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(a) Market Information.  Our Class A common shares are listed on the New York Stock Exchange under the symbol AM. The high and low sales prices, as reported in the New York Stock Exchange listing, for the years ended February 28, 2011 and 2010, were as follows:

	2011				2010
	High		Low		High		Low
1st Quarter	$	26.21	$	19.09	$	8.85	$	3.24
2nd Quarter		23.36		17.89		16.13		6.33
3rd Quarter		21.64		18.02		24.10		13.20
4th Quarter		23.89		19.86		25.58		17.05

There is no public market for our Class B common shares. Pursuant to our Amended and Restated Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to American Greetings for purchase at the most recent closing price for our Class A common shares. If we do not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer. It is the Corporation’s general policy to repurchase Class B common shares, in accordance with the terms set forth in our Amended and Restated Articles of Incorporation, whenever they are offered by a holder, unless such repurchase is not otherwise permitted under agreements to which the Corporation is a party.

Wells Fargo, St. Paul, Minnesota, is our registrar and transfer agent.

Shareholders. At February 28, 2011, there were approximately 11,300 holders of Class A common shares and 132 holders of Class B common shares of record and individual participants in security position listings.

Dividends.  The following table sets forth the dividends declared by us in 2011 and 2010.

Dividends per share declared in	2011		2010
1st Quarter	$	0.14	$	*
2nd Quarter		0.14		0.12
3rd Quarter		0.14		0.12
4th Quarter		0.14		0.12
Total	$	0.56	$	0.36

On March 21, 2011, we raised our quarterly dividend by 1 cent, from 14 cents per share to 15 cents per share. Although we expect to continue paying dividends, payment of future dividends will be determined by the Board of Directors in light of appropriate business conditions. In addition, our borrowing arrangements, including our senior secured credit facility and our 7.375% Notes due 2016 restrict our ability to pay shareholder dividends. Our borrowing arrangements also contain certain other restrictive covenants that are customary for similar credit arrangements. For example, our credit facility contains covenants relating to financial reporting and notification, compliance with laws, preservation of existence, maintenance of books and records, use of proceeds, maintenance of properties and insurance, and limitations on liens, dispositions, issuance of debt, investments, repurchases of capital stock, acquisitions and transactions with affiliates. There are also financial covenants that require us to maintain a maximum leverage ratio (consolidated indebtedness minus unrestricted cash over consolidated EBITDA) and a minimum interest coverage ratio (consolidated EBITDA over consolidated interest expense). These restrictions are subject to customary baskets and financial covenant tests. For a further description of the limitations imposed by our borrowing arrangements, see the discussion in Part II, Item 7, under the heading “Liquidity and Capital Resources,” and Note 11 to the Consolidated Financial Statements included in Part II, Item 8.

* We generally pay dividends on a quarterly basis. During the fourth quarter of fiscal 2009, however, two dividends were declared, but only one dividend of $0.12 per share was paid in the fourth quarter. The other $0.12 per share dividend was paid in the first quarter of fiscal 2010.

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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG
AMERICAN GREETINGS CORPORATION, THE S&P 400 INDEX AND PEER GROUP INDEX

Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in our Class A common shares with the cumulative total return of hypothetical investments in the S&P 400 Index, and the Peer Group described below based on the respective market price of each investment at February 28, 2006, February 28, 2007, February 29, 2008, February 27, 2009, February 26, 2010 and February 28, 2011, the last trading days of our fiscal years over the past five years.

	2/06		2/07		2/08		2/09		2/10		2/11
American Greetings		$100		$113		$93		$19		$103		$120
S & P 400		$100		$110		$104		$61		$101		$134
Peer Group*		$100		$116		$110		$76		$132		$183

Source: Bloomberg L.P.

*Peer Group
Blyth Inc. (BTH)	Fossil Inc. (FOSL)	McCormick & Co.-Non Vtg Shrs (MKC)
Central Garden & Pet Co. (CENT)	Jo-Ann Stores Inc. (JAS)	Scotts Miracle-Gro Co. (The) - CL A (SMG)
CSS Industries Inc. (CSS)	Lancaster Colony Corp. (LANC)	Tupperware Brands Corp. (TUP)

The Peer Group Index takes into account companies selling cyclical nondurable consumer goods with the following attributes, among others, that are similar to those of American Greetings: customer demographics, sales, market capitalizations and distribution channels.

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Securities Authorized for Issuance Under Equity Compensation Plans.  Please refer to the information set forth under the heading “Equity Compensation Plan Information” included in Item 12 of this Annual Report on Form 10-K.

(b) Not applicable.

(c) The following table provides information with respect to our purchases of our common shares made during the three months ended February 28, 2011.

									Maximum
							Total		Number
							Number of Shares		(or Approximate
							Purchased as		Dollar Value) of Shares
					Average		Part of Publicly		that May Yet Be
	Total Number of				Price Paid		Announced Plans or		Purchased Under
Period	Shares Purchased				per Share		Programs		the Plans or Programs
December 2010		Class A -	-			-		-	$	46,578,874	(2)
		Class B -	-			-		-
January 2011		Class A -	-			-		-	$	46,578,874	(2)
		Class B -	3,701	(1)	$	22.12		-
February 2011		Class A -	-			-		-	$	46,578,874	(2)
		Class B -	-			-		-
Total		Class A -	-			-		-
		Class B -	3,701	(1)		-		-

(1)

There is no public market for our Class B common shares. Pursuant to our Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. If the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer. It is the Corporation’s general policy to repurchase Class B common shares, in accordance with the terms set forth in our Amended and Restated Articles of Incorporation, whenever they are offered by a holder, unless such repurchase is not otherwise permitted under agreements to which the Corporation is a party. All of the shares were repurchased by American Greetings for cash pursuant to this right of first refusal.

(2)

On January 13, 2009, American Greetings announced that its Board of Directors authorized a program to repurchase up to $75 million of its Class A common shares. There is no set expiration date for this repurchase program. No repurchases were made in the current quarter under this program.

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Item 6.      Selected Financial Data

Thousands of dollars except share and per share amounts

	2011			2010(1)			2009			2008			2007(2)
Summary of Operations
Net sales	$	1,560,213		$	1,598,292		$	1,646,399		$	1,730,784		$	1,744,798
Total revenue		1,592,568			1,635,858			1,690,738			1,776,451			1,794,290
Goodwill and other intangible asset impairments		-			-			290,166			-			2,196
Interest expense		25,389			26,311			22,854			20,006			34,986
Income (loss) from continuing operations		87,018			81,574			(227,759)			83,320			39,938
(Loss) income from discontinued operations, net of tax		-			-			-			(317)			2,440
Net income (loss)		87,018			81,574			(227,759)			83,003			42,378
Earnings (loss) per share:
Income (loss) from continuing operations		2.18			2.07			(4.89)			1.54			0.69
(Loss) income from discontinued operations, net of tax		-			-			-			(0.01)			0.04
Earnings (loss) per share		2.18			2.07			(4.89)			1.53			0.73
Earnings (loss) per share — assuming dilution		2.11			2.03			(4.89)			1.52			0.71
Cash dividends declared per share		0.56			0.36			0.60			0.40			0.32
Fiscal year end market price per share		21.65			19.07			3.73			18.82			23.38
Average number of shares outstanding		39,982,784			39,467,811			46,543,780			54,236,961			57,951,952
Financial Position
Inventories		179,730			163,956			194,945			207,629			174,426
Working capital		358,379			310,704			229,817			245,654			434,041
Total assets		1,532,402			1,529,651			1,448,049			1,809,133			1,784,748
Property, plant and equipment additions		36,346			26,550			55,733			56,623			41,716
Long-term debt		232,688			328,723			389,473			220,618			223,915
Shareholders’ equity(3)		748,911			636,064			529,189			943,411			1,012,574
Shareholders’ equity per share		18.53			16.11			13.05			19.35			18.37
Net return on average shareholders’ equity from continuing operations		12.6	%		14.0	%		(30.9)	%		8.5	%		3.6	%

(1)	During 2010, the Corporation incurred a loss of $29.3 million on the disposition of the Retail Operations segment. The Corporation also recorded a gain of $34.2 million related to the party goods transaction and a charge of approximately $15.8 million for asset impairments and severance associated with a facility closure. Also in 2010, the Corporation recognized a cost of $18.2 million in connection with the shutdown of its distribution operations in Mexico. See Notes 2 and 3 to the Corporation’s 2011 financial statements.
(2)	During 2007, as a result of retailer consolidation, wherein multiple long-term supply agreements were terminated and a new agreement was negotiated with a new legal entity with substantially different terms and sales commitments, a gain of $20.0 million was recorded. Also, in 2007, the Corporation sold substantially all of the assets associated with its candle product lines and recorded a loss of approximately $16.0 million.
(3)	The Corporation adopted accounting guidance for convertible debt instruments in 2010. This guidance requires an issuer of certain convertible instruments that may be settled in cash or other assets on conversion to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate. The impact on shareholders’ equity of retrospectively applying this guidance related to the Corporation’s 7.00% convertible subordinated notes issued in 2002 and settled in 2007 would have been $35 million for 2007. The convertible subordinated notes were not outstanding in the four years ended February 28, 2011.

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Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the audited consolidated financial statements. This discussion and analysis, and other statements made in this Report, contain forward-looking statements. See “Factors That May Affect Future Results” at the end of this discussion and analysis for a discussion of the uncertainties, risks and assumptions associated with these statements.

OVERVIEW

Founded in 1906, we are the world’s largest publicly owned creator, manufacturer and distributor of social expression products. Headquartered in Cleveland, Ohio, as of February 28, 2011, we employ approximately 16,100 associates around the world and are home to one of the world’s largest creative studios.

Our major domestic greeting card brands are American Greetings, Recycled Paper Greetings, Papyrus, Carlton Cards, Gibson, Tender Thoughts and Just For You. Our other domestic products include DesignWare party goods, Plus Mark gift wrap and boxed cards, and AGI In-Store display fixtures. We also create and license our intellectual properties such as the Care Bears and Strawberry Shortcake characters. The Internet and wireless business unit, AG Interactive, is a leading provider of electronic greetings and other content for the digital marketplace. Our major Internet and wireless brands are AmericanGreetings.com, BlueMountain.com, Egreetings.com, Kiwee.com, Cardstore.com and WebShots.com.

Our international operations include wholly-owned subsidiaries in the United Kingdom (“U.K.”), Canada, Australia and New Zealand as well as licensees in approximately 70 other countries. During 2010, we shut down our subsidiary in Mexico and now supply the Mexican market through a third party distributor.

During 2011, our sales and operating results continued to be impacted by the strategic actions taken over the past couple of years related to our strategy of product leadership and focusing our resources on growing our core competencies within greeting cards. These actions, all of which occurred prior to 2011, included the acquisition of Recycled Paper Greetings (“RPG”), the acquisition of the Papyrus trademark and wholesale division of Schurman Fine Papers (“Schurman”), and the change in our operating model in Mexico and the party goods transaction with Amscan. In addition, we divested our Retail Operations segment, shut down our Mexican operations and closed our party goods operation in Michigan. The integration and shutdown activities associated with these strategic changes to our portfolio of businesses are now substantially complete and we are beginning to realize the associated cost savings and synergies. To further this strategy on an international dimension, in March 2011 we acquired Watermark, a greeting card company in the United Kingdom. The acquisition of Watermark adds another unique style and tone to our greeting card brand portfolio.

Total revenue for 2011 was $1.59 billion, down $43 million from the prior year. The decreased revenue was primarily driven by lower sales of party goods as a result of the prior year transaction and the divestiture of the Retail Operations segment. All other revenue factors offset each other, with favorable foreign exchange impacts, higher sales in the fixtures business and improved seasonal card sales offset by lower royalty revenue, lower sales of both everyday cards and other accessory products, and the impact of a scan-based trading implementation.

Operating income for 2011 was $174.7 million compared to $139.1 million in 2010. A significant amount of the year-over-year variance of $35.6 million was the result of the strategic actions described above and other charges that reduced the prior year’s operating income.

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Operating income in 2010 included the following items:

Loss on divestiture of our Retail Operations segment	$	(29.2	)
Changes to distribution model in Mexico		(18.2	)
Settlement of a lawsuit		(24.0	)
Severance expense		(9.4	)
Net benefit related to party goods transaction		21.2
LIFO liquidation		13.0
Income associated with certain corporate-owned life insurance programs		7.0
Gain on liquidation of operation in France		3.3
Total 2010 impact	$	(36.3	)

Operating income in 2011 was unfavorably impacted by integration costs of approximately $10 million, severance costs of approximately $7 million and lower revenues. Favorably impacting the current year were cost savings and synergies from the integrations, improvements driven by a higher mix of card versus non-card products and lower manufacturing and distribution costs driven by efficiency and cost reduction initiatives.

Our operating income for the year, and during the fourth quarter in particular, was impacted by changes to certain customer agreements in the value channel that are expected to provide expanded distribution. As discussed in our Form 10-Q for the third quarter ended November 26, 2010, we expected to incur incremental costs of approximately $7 million to $11 million during the fourth quarter, prior to generating the incremental revenue that is expected through this expanded distribution. During the fourth quarter, these costs totaled approximately $9 million, including fixture costs, field sales expenses and retailer allowances, as well as approximately $5 million associated with the implementation of a new SBT arrangement in one of those retailers.

Our effective tax rate for 2011 was 44.2%. The higher than statutory tax rate was primarily driven by the effective settlement of ten years of domestic tax audits which increased our estimated tax assessment and associated interest reserves by approximately $7 million. In addition, tax expense was impacted by the unfavorable settlements of audits in a foreign jurisdiction, the release of insurance reserves that generated taxable income, as well as the recognition of the deferred tax effects of the reduced deductibility of postretirement prescription drug coverage due to the recently enacted U.S. Patient Protection and Affordable Care Act.

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RESULTS OF OPERATIONS

Comparison of the years ended February 28, 2011 and 2010

In 2011, net income was $87.0 million, or $2.11 per diluted share, compared to $81.6 million, or $2.03 per diluted share, in 2010.

Our results for 2011 and 2010 are summarized below:

				% Total						% Total
(Dollars in thousands)	2011			Revenue			2010			Revenue
Net sales	$	1,560,213			98.0	%	$	1,598,292			97.7	%
Other revenue		32,355			2.0	%		37,566			2.3	%
Total revenue		1,592,568			100.0	%		1,635,858			100.0	%
Material, labor and other production costs		682,368			42.8	%		713,075			43.6	%
Selling, distribution and marketing expenses		478,227			30.0	%		507,960			31.0	%
Administrative and general expenses		260,476			16.4	%		276,031			16.9	%
Other operating income — net		(3,205	)		(0.2	)%		(310	)		(0.0	)%
Operating income		174,702			11.0	%		139,102			8.5	%
Interest expense		25,389			1.6	%		26,311			1.6	%
Interest income		(853	)		(0.0	)%		(1,676	)		(0.1	)%
Other non-operating income — net		(5,841	)		(0.4	)%		(6,487	)		(0.4	)%
Income before income tax expense		156,007			9.8	%		120,954			7.4	%
Income tax expense		68,989			4.3	%		39,380			2.4	%
Net income	$	87,018			5.5	%	$	81,574			5.0	%

Revenue Overview

During 2011, consolidated net sales were $1.56 billion, down from $1.60 billion in the prior year. This 2.4%, or approximately $38 million, decline was primarily the result of decreased net sales in our North American Social Expression Products segment and our Retail Operations segment of approximately $53 million and $12 million, respectively. These decreases were partially offset by higher net sales in our fixtures business and in our International Social Expression Products segment of approximately $11 million and $7 million, respectively. Foreign currency translation also favorably impacted net sales by approximately $10 million.

Net sales in our North American Social Expression Products segment decreased approximately $53 million. This decrease is attributable to lower sales of party goods of approximately $31 million, gift packaging and other non-card products of approximately $13 million, and everyday cards of approximately $8 million. Net sales of party goods decreased due to the transaction completed in the prior year fourth quarter. SBT implementations unfavorably impacted net sales by approximately $6 million. These decreases were partially offset by improved seasonal card sales of approximately $5 million.

Net sales in our Retail Operations segment decreased approximately $12 million due to the sale of our retail store assets in April 2009. There were no net sales in our Retail Operations segment during the twelve months ended February 28, 2011.

The increase in our International Social Expression Products segment’s net sales of approximately $7 million was driven by our U.K. operations where boxed cards associated with our Christmas program and favorable overall card sales.

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The contribution of each major product category as a percentage of net sales for the past two fiscal years was as follows:

	2011			2010
Everyday greeting cards		48	%		48	%
Seasonal greeting cards		24	%		23	%
Gift packaging		14	%		14	%
All other products*		14	%		15	%

* The “all other products” classification includes, among other things, giftware, party goods, stationery, custom display fixtures, stickers, online greeting cards and other digital products.

Other revenue, primarily royalty revenue from our Strawberry Shortcake and Care Bears properties, decreased $5.2 million from $37.6 million during 2010 to $32.4 million in 2011.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for 2011 and 2010 are summarized below:

	Increase (Decrease) From the Prior Year
	Everyday Cards						Seasonal Cards						Total Greeting Cards
	2011			2010			2011			2010			2011			2010
Unit volume		(2.2	)%		7.2	%		(1.8	)%		6.7	%		(2.1	)%		7.0	%
Selling prices		1.0	%		1.4	%		2.3	%		(1.6	)%		1.4	%		0.4	%
Overall increase / (decrease)		(1.2	)%		8.7	%		0.4	%		5.0	%		(0.7	)%		7.5	%

During 2011, combined everyday and seasonal greeting card sales less returns declined 0.7%, compared to the prior year, driven by a decrease in everyday card sales less returns of 1.2%. The overall decrease was driven by our North American Social Expression Products segment, where increases in our seasonal card sales less returns are more than offset by decreases of everyday card sales less returns.

Everyday card sales less returns were down 1.2%, compared to the prior year, as a result of decreases in unit volume of 2.2% more than offsetting increases in selling prices of 1.0%. The selling price improvement was largely driven by our prior year acquisitions, which more than offset the impact of the continued shift to a higher mix of value line cards.

Seasonal card sales less returns increased 0.4%, with improved selling prices of 2.3% partially offset by a decline in unit volume of 1.8%. The increase in selling prices was primarily a result of our prior year acquisitions within our North American Social Expression Products segment, which more than offset the impact of the continued shift to a higher mix of value line cards. Based on current trends in the market, we expect the general shift to a higher mix of value line cards will continue in the foreseeable future for both everyday and seasonal cards.

Expense Overview

Material, labor and other production costs (“MLOPC”) for 2011 were $682.4 million, a decrease of approximately $31 million from $713.1 million during 2010. As a percentage of total revenue, these costs were 42.8% in the current year compared to 43.6% in 2010. About 70% of the lower expense was due to the elimination of operating costs as a result of the divestiture of the retail store operations ($5 million), the wind down of our Mexican operations ($8 million) and the shutdown of party goods operations ($8 million). In addition, inventory levels increased during the current year fourth quarter related to the anticipated expanded distribution in the dollar channel, causing an overall increase in inventory levels compared to the prior year. As a result, an additional amount of certain production and product related costs were absorbed into ending inventory, providing a benefit to MLOPC expense. During the prior year, inventory decreased during the year, causing less absorption of these production and product related costs, increasing MLOPC expense in the prior year. The net impact of these changing inventory levels and related absorption rates was a net year-over-year

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MLOPC reduction of approximately $16 million. Partially offsetting these favorable items was an increase in product content costs ($6 million) and increased scrap and shrink expenses ($5 million). The prior year included impairment and severance charges related to the closure of the Kalamazoo, Michigan facility ($16 million) and the benefit of a favorable LIFO liquidation ($13 million) adjustment.

Selling, distribution and marketing expenses (“SDM”) for 2011 were $478.2 million, decreasing $29.8 million from $508.0 million in the prior year. The decrease in the current year was partially due to the elimination of operating costs due to the disposition of our retail stores ($13 million) and the wind down of our Mexican operations ($4 million), which both occurred in the prior year. Lower supply chain costs, specifically field sales and service operations costs ($18 million) and freight and distribution costs ($5 million) were the result of RPG and the Papyrus trademark and wholesale division of Schurman (collectively, “Papyrus-Recycled Greetings” or “PRG”) integration savings and a reduction in units shipped during the current year. These reductions were partially offset by increases in merchandiser expense ($3 million) and marketing, product management and product innovation costs ($4 million). Foreign currency translation ($3 million) was also unfavorable compared to the prior year.

Administrative and general expenses were $260.5 million in 2011, a decrease from $276.0 million during 2010. The decrease of $15.5 million in the current year is largely due to a prior year legal claim settlement ($24 million). Reductions in expense related to our pension and postretirement benefit plans ($6 million), as well as variable compensation expense ($7 million) also contributed to the decreased expense during the current year. Partially offsetting these favorable variances was increased stock compensation expense ($7 million) and continued PRG integration costs ($6 million). In addition, the prior year included a benefit related to corporate-owned life insurance ($7 million), which did not recur in the current year.

Other operating (income) expense — net was $3.2 million during the current year compared to $0.3 million in the prior year. The prior year included a loss on the sale of our retail stores to Schurman ($28 million) and a gain as a result of the party goods transaction ($34 million). The prior year also included a net loss on the recognition of cumulative foreign currency translation adjustments ($9 million) related to the shutdown of our distribution facility in Mexico and the liquidation of an operation in France.

Interest expense was $25.4 million during the current year, down from $26.3 million in 2010. The decrease of $0.9 million is primarily attributable to interest savings resulting from the $99.3 million repayment of our term loan, previously outstanding under our senior secured credit facility, as well as reduced borrowings under this facility in the current year.

Other non-operating income was $5.8 million during 2011 compared to $6.5 million during 2010. The decrease in the current year is primarily due to a swing from foreign exchange gain in the prior year to a loss in the current year, partially offset by $3.5 million of gains on the disposal of assets, primarily land and buildings in Mexico and Australia.

The effective tax rate was 44.2% and 32.6% during 2011 and 2010, respectively. The higher than statutory tax rate in 2011 was primarily driven by the effective settlement of ten years of domestic tax audits which increased our estimated tax assessment and associated interest reserves by approximately $7 million. The impact of unfavorable settlements of audits in a foreign jurisdiction, the release of insurance reserves that generated taxable income, as well as the recognition of the deferred tax effects of the reduced deductibility of postretirement prescription drug coverage due to the recently enacted U.S. Patient Protection and Affordable Care Act also contributed to the higher than statutory rate in 2011. The lower than statutory rate during 2010 is primarily a result of favorable impacts of the wind down of our Mexican operations, settlements with taxing authorities in foreign jurisdictions, and the benefit of certain tax free proceeds from corporate-owned life insurance.

Segment Results

Our operations are organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. Our North American Social Expression Products and our International Social Expression Products segments primarily design, manufacture and sell greeting cards and

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other related products through various channels of distribution, with mass retailers as the primary channel. As permitted under Accounting Standards Codification (“ASC”) Topic 280 (“ASC280”), “Segment Reporting,” certain operating divisions have been aggregated into both the North American Social Expression Products and International Social Expression Products segments. The aggregated operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. The AG Interactive segment distributes social expression products, including electronic greetings, personalized printable greeting cards and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices.

We review segment results, including the evaluation of management performance, using consistent exchange rates between years to eliminate the impact of foreign currency fluctuations from operating performance. The 2011 segment results below are presented using our planned foreign exchange rates, which were set at the beginning of the year. For a consistent presentation, 2010 segment results have been recast to reflect the 2011 foreign exchange rates. Refer to Note 16, “Business Segment Information,” to the Consolidated Financial Statements for further information and a reconciliation of total segment revenue to consolidated “Total revenue” and total segment earnings (loss) to consolidated “Income before income tax expense.”

North American Social Expression Products Segment

(Dollars in thousands)	2011		2010		% Change
Total revenue	$	1,173,599	$	1,226,520		(4.3	)%
Segment earnings		210,154		232,614		(9.7	)%

Total revenue of our North American Social Expression Products segment, excluding the impact of foreign exchange and intersegment items, decreased $52.9 million compared to 2010. Decreased sales of party goods due to the transaction completed in the prior year fourth quarter reduced total revenue by approximately $31 million during 2011. Also contributing to the decline was a decrease in gift packaging and other non-card products of approximately $13 million and a decrease in everyday card sales of approximately $8 million. SBT implementations unfavorably impacted net sales by approximately $6 million. These decreases were partially offset by improved seasonal card sales of approximately $5 million.

Segment earnings, excluding the impact of foreign exchange and intersegment items, decreased $22.5 million in 2011 compared to the prior year. This decrease was primarily driven by the gross margin impact of lower sales volume of approximately $32 million due to the party goods transaction in the prior year fourth quarter and lower sales of gift packaging and other non-card products compared to the prior year. In addition, the prior year included a gain of approximately $34 million as a result of the party goods transaction, and a favorable LIFO liquidation adjustment of approximately $13 million, both of which did not recur in the current year. Incremental integration costs of approximately $6 million associated with our PRG acquisition, and increases in marketing, product management and product innovation costs of approximately $8 million also had an unfavorable impact on earnings. Partially offsetting these unfavorable items were reduced supply chain costs, specifically field sales and service operations, of approximately $18 million as a result of savings achieved through PRG integration efforts and a reduction in units shipped. In addition, inventory levels increased during the current year fourth quarter related to the anticipated expanded distribution in the dollar channel, causing an overall increase in inventory levels compared to the prior year. As a result, an additional amount of certain production and product related costs were absorbed into ending inventory, providing a benefit to MLOPC expense. During the prior year, inventory decreased during the year, causing less absorption of these production and product related costs, increasing MLOPC expense in the prior year. The net impact of these changing inventory levels and related absorption rates was a net year-over-year MLOPC reduction of approximately $16 million. The prior year included impairment and severance charges related to the closure of the Kalamazoo, Michigan facility of approximately $16 million, which did not recur in 2011. The elimination of operating costs due to the wind down of our Mexican operations during the prior year third quarter also favorably impacted segment earnings by approximately $22 million.

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International Social Expression Products Segment

(Dollars in thousands)	2011		2010		% Change
Total revenue	$	256,507	$	250,026		2.6	%
Segment earnings		19,536		16,693		17.0	%

Total revenue of our International Social Expression Products segment, excluding the impact of foreign exchange, increased $6.5 million, or 2.6%, compared to the prior year. The increase in the current year was primarily driven by an increase in boxed cards associated with our Christmas program and favorable overall card sales.

Segment earnings, excluding the impact of foreign exchange, increased $2.8 million, or 17.0%, from the prior year to $19.5 million in the current year. This increase was attributable to higher sales, a gain on the sale of a building, reduced inventory scrap expense and reduced freight and distribution expense, partially offset by higher product costs and bad debt expense.

Retail Operations Segment

(Dollars in thousands)	2011		2010			% Change
Total revenue	$	-	$	11,727			(100	)%
Segment loss		-		(34,830	)		100	%

In April 2009, we sold our retail store assets to Schurman. As a result, there was no activity in the Retail Operations segment during 2011. The prior year results included the loss on disposition of the segment of approximately $28 million.

AG Interactive Segment

(Dollars in thousands)	2011		2010		% Change
Total revenue	$	78,407	$	80,320		(2.4	)%
Segment earnings		14,103		11,319		24.6	%

Total revenue of our AG Interactive segment, excluding the impact of foreign exchange, was $78.4 million compared to $80.3 million in the prior year. During the current year, we experienced lower e-commerce revenue in our digital photography product group of approximately $1.9 million. Higher revenue from advertising and new product introductions was offset by lower subscription revenue in our online product group. At February 28, 2011, AG Interactive had approximately 3.8 million online paid subscriptions versus 3.9 million at February 28, 2010.

Segment earnings, excluding the impact of foreign exchange, increased $2.8 million during 2011 compared to the prior year. The increase in 2011 compared to the prior year was driven by the continued decrease in overhead expenses and technology costs that is being driven by ongoing efficiency and cost reduction initiatives. In addition, marketing expenses were down in the current year compared to the prior year. The prior year included a benefit of approximately $3 million related to the currency translation adjustment of equity that was recognized in conjunction with the liquidation of an operation in France.

Unallocated Items

Centrally incurred and managed costs, excluding the impact of foreign exchange, totaled $106.3 million and $116.5 million in 2011 and 2010, respectively, and are not allocated back to the operating segments. The unallocated items included interest expense for centrally incurred debt of $25.4 million and $26.3 million in 2011 and 2010, respectively, and domestic profit-sharing expense of $9.8 million and $9.3 million in 2011 and 2010, respectively. Unallocated items also included stock-based compensation expense of $13.0 million and $5.8 million in 2011 and 2010, respectively. In 2010, unallocated items included the settlement of a lawsuit totaling $24.0 million. In addition, unallocated items included costs associated with corporate operations including the senior management, corporate finance, legal and human resource functions, as well as insurance programs. These costs totaled $58.1 million and $51.1 million in 2011 and 2010, respectively.

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Comparison of the years ended February 28, 2010 and 2009

In 2010, net income was $81.6 million, or $2.03 per diluted share, compared to a net loss of $227.8 million, or $4.89 per diluted share, in 2009.

Our results for 2010 and 2009 are summarized below:

				% Total						% Total
(Dollars in thousands)	2010			Revenue			2009			Revenue
Net sales	$	1,598,292			97.7	%	$	1,646,399			97.4	%
Other revenue		37,566			2.3	%		44,339			2.6	%
Total revenue		1,635,858			100.0	%		1,690,738			100.0	%
Material, labor and other production costs		713,075			43.6	%		809,956			47.9	%
Selling, distribution and marketing expenses		507,960			31.0	%		618,899			36.6	%
Administrative and general expenses		276,031			16.9	%		226,317			13.4	%
Goodwill and other intangible assets impairment		-			0.0	%		290,166			17.2	%
Other operating income — net		(310	)		(0.0	)%		(1,396	)		(0.1	)%
Operating income (loss)		139,102			8.5	%		(253,204	)		(15.0	)%
Interest expense		26,311			1.6	%		22,854			1.4	%
Interest income		(1,676	)		(0.1	)%		(3,282	)		(0.2	)%
Other non-operating (income) expense — net		(6,487	)		(0.4	)%		2,157			0.1	%
Income (loss) before income tax expense (benefit)		120,954			7.4	%		(274,933	)		(16.3	)%
Income tax expense (benefit)		39,380			2.4	%		(47,174	)		(2.8	)%
Net income (loss)	$	81,574			5.0	%	$	(227,759	)		(13.5	)%

Revenue Overview

Consolidated net sales in 2010 were $1.60 billion, compared to $1.65 billion in the prior year. This 2.9%, or approximately $48 million, decrease was primarily the result of lower net sales in our Retail Operations segment of approximately $158 million, unfavorable foreign currency translation of approximately $32 million and a decrease in net sales in our AG Interactive segment of approximately $3 million. These decreases were partially offset by higher net sales in our North American Social Expression Products segment of approximately $140 million and increased net sales in our International Social Expression Products segment of approximately $4 million due to improved sales of gifting and other non-card products.

Net sales of our North American Social Expression Products segment increased approximately $140 million compared to the prior year. Greeting cards improved approximately $169 million, due to the acquisition of PRG, which added approximately $129 million, as well as growth in our legacy greeting card business of approximately $26 million and the impact of lower deferred cost reserves of approximately $14 million. This increase was partially offset by lower accessories sales of approximately $24 million, including gift packaging, calendars and party goods, as well as lower sales of approximately $5 million in Mexico as we began winding down our operations there in the third quarter of 2010.

Net sales of our Retail Operations segment decreased approximately $158 million due to the sale of this business in April 2009. Approximately $12 million of sales is included in 2010 compared to approximately $170 million of sales in the prior year.

Net sales of our AG Interactive segment decreased approximately $3 million compared to 2009. The decrease is due primarily to lower e-commerce revenue in our digital photography product group and lower advertising revenue in our online product group, as market conditions continue to be challenging, partially offset by increased subscription revenue in our online product group.

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The contribution of each major product category as a percentage of net sales for the past two fiscal years was as follows:

	2010		2009
Everyday greeting cards		48%		43%
Seasonal greeting cards		23%		22%
Gift packaging		14%		14%
All other products*		15%		21%

* The “all other products” classification includes, among other things, giftware, party goods, stationery, custom display fixtures, stickers, online greeting cards and other digital products.

Other revenue, primarily royalty revenue from our Strawberry Shortcake and Care Bears properties, decreased $6.7 million from $44.3 million during 2009 to $37.6 million in 2010.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for 2010 and 2009 are summarized below:

	Increase (Decrease) From the Prior Year
	Everyday Cards						Seasonal Cards						Total Greeting Cards
	2010			2009			2010			2009			2010			2009
Unit volume		7.2	%		1.7	%		6.7	%		3.4	%		7.0	%		2.2	%
Selling prices		1.4	%		(1.5	)%		(1.6	)%		(5.3	)%		0.4	%		(2.7	)%
Overall increase / (decrease)		8.7	%		0.2	%		5.0	%		(2.1	)%		7.5	%		(0.5	%)

During 2010, combined everyday and seasonal greeting card sales less returns improved 7.5%, compared to the prior year, with increases coming from both everyday and seasonal cards. The overall increase was driven by the PRG acquisition.

Everyday card sales less returns were up 8.7%, compared to the prior year, as a result of increases in both unit volume and selling prices of 7.2% and 1.4%, respectively. The increase in unit volume was the result of the PRG acquisition. Increased selling prices were driven primarily by our North American Social Expression Products segment where higher priced technology and Papyrus cards are continuing to improve average prices despite the growing volume of value line cards.

Seasonal card sales less returns increased 5.0% compared to the prior year as a result of increases in unit volume of 6.7%. This increase in unit volume was driven by the acquisition of PRG as well as improvements in the Easter, Christmas and Father’s Day seasonal programs. The decrease in selling prices of 1.6% related primarily to the continued mix shift towards value priced cards across most seasonal programs and a more balanced offering of technology cards.

Expense Overview

MLOPC Expenses for 2010 were $713.1 million, a decrease from $810.0 million in 2009. As a percentage of total revenue, these costs were 43.6% in 2010 compared to 47.9% in 2009. The decrease of $96.9 million is driven by our continued focus on the efficiency of our operations, including tightened control of costs, reductions in supply chain, scrap, and distribution costs due to an improved balance of card unit shipments with card unit net sales, a favorable change in the product mix, and a favorable foreign currency translation impact of approximately $16 million. The favorable product mix of approximately $27 million is primarily due to a sales shift towards lower cost card products versus non-card products. This shift to a higher mix of greeting cards was due to the acquisition of PRG as well as increased net sales within our legacy greeting card business, as well as lower sales of gift packaging, calendars and party goods products. The disposition of the Retail Operations segment, which sold many non-card gifting products, also contributed to the favorable mix. The lower costs are also attributable to decreased scrap and shrink ($23 million) and the LIFO liquidation ($13 million) that we experienced during 2010 as a result of improved inventory management. The remaining

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decrease of approximately $17 million is attributable to lower product input costs, realization of other cost savings initiatives put in place during the fourth quarter of 2009 and a favorable volume variance. Included in 2009 were costs ($5 million) associated with the conversion to our new Canadian line of cards and expenses ($16 million) associated with our production of film-based entertainment, both of which did not recur in 2010. Partially offsetting these decreases were impairment and severance charges related to the closure of the Kalamazoo, Michigan facility ($16 million) and inventory charges associated with the wind down of our Mexico distribution facility ($4 million) during 2010.

SDM expenses were $508.0 million in 2010, decreasing from $618.9 million in 2009. The decrease of $110.9 million is due to lower spending ($97 million) and favorable foreign currency translation ($14 million). The decreased spending is a result of the elimination of the costs to operate our retail stores ($98 million) due to the disposition of those stores during the first quarter of 2010, reduced supply chain costs ($36 million), specifically freight and distribution costs, due to a decrease in units shipped, as well as less expenses in our licensing business ($11 million). The lower expenses in our licensing business are attributable to the benefits from 2009 overhead reductions and less agency fees in line with the decrease in royalty revenue in 2010. These favorable variances were substantially offset by ongoing SDM expenses ($48 million) from our PRG acquisition.

Administrative and general expenses were $276.0 million in 2010, an increase from $226.3 million in 2009. The $49.7 million increase is due to increased spending ($53 million) offset by favorable foreign currency translation impacts ($3 million). The increase in spending is primarily driven by variable compensation expense ($47 million) which includes bonus, profit-sharing contributions, and 401(k) matching contributions and the settlement of a legal claim ($24 million). The fiscal year 2009 included a nominal amount of variable compensation expenses, as we did not meet the 2009 operating results required to make these variable compensation payments. These increases were partially offset by a corporate-owned life insurance benefit ($10 million) due to higher than average death benefit income reported by our third party administrators, lower bad debt expense ($4 million) and savings from prior year cost reduction initiatives.

During 2009, goodwill and other intangible assets impairment charges of $290.2 million were recorded. In the third quarter of 2009, indicators emerged during the period that led us to conclude that an impairment test was required prior to the annual test. As a result, impairment was recorded for a reporting unit in the International Social Expression Products segment, located in the U.K., and in our AG Interactive segment. The goodwill impairment charge recorded in the U.K. was $82.1 million, which represented all of the goodwill for this reporting unit. The goodwill and intangible assets impairment charge for the AG Interactive segment was $160.1 million, which included all of the goodwill for AG Interactive. An additional impairment analysis was performed at the end of the fourth quarter of 2009 as a result of the continued significant deterioration of the global economic environment and the decline in the price of our common shares. Based on that analysis, we recorded goodwill charges of $47.9 million, which included all the goodwill for our North American Greeting Card Division (“NAGCD”). NAGCD is part of our North American Social Expression Products segment.

Interest expense was $26.3 million in 2010, compared to $22.9 million in 2009. The increase of $3.4 million is attributable to increased borrowings on the new 7.375% notes and the $100 million term loan facility that were issued and drawn down, respectively, during the fourth quarter of 2009. These increases were partially offset by decreased borrowings on our revolving credit facility.

Other operating income — net was $0.3 million in 2010 compared to $1.4 million in 2009. 2010 includes a loss of approximately $28 million on the sale of our retail stores to Schurman and a net loss of approximately $8.6 million on the recognition of cumulative foreign currency translation adjustments related to the shutdown of our distribution facility in Mexico and the liquidation of an operation in France. These losses were partially offset by a gain of approximately $34 million associated with the party goods transaction.

Other non-operating (income) expense — net was income of $6.5 million during 2010 compared to expense of $2.2 million in 2009. The $8.7 million increase in income is due primarily to a swing from foreign exchange loss in 2009 to a gain in 2010.

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The effective tax rate was 32.6% and 17.2% during 2010 and 2009, respectively. The lower than statutory rate in 2010 is primarily a result of the favorable effect of the wind down of our operations in Mexico, settlements with taxing authorities in foreign jurisdictions and the benefit of certain tax free proceeds from corporate-owned life insurance. The lower effective tax rate in 2009 is primarily related to the goodwill impairment and its impact on the pretax loss in that period as only a portion of the charge was deductible for tax purposes.

Segment Results

Our operations are organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. Our North American Social Expression Products and our International Social Expression Products segments primarily design, manufacture and sell greeting cards and other related products through various channels of distribution, with mass retailers as the primary channel. As permitted under ASC 280 certain operating divisions have been aggregated into both the North American Social Expression Products and International Social Expression Products segments. The aggregated operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. The AG Interactive segment distributes social expression products, including electronic greetings, personalized printable greeting cards and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices. The AG Interactive segment also offers online photo sharing and a platform to provide consumers the ability to use their own photos to create unique, high quality physical products, including greeting cards, calendars, photo albums and photo books.

We review segment results, including the evaluation of management performance, using consistent exchange rates between years to eliminate the impact of foreign currency fluctuations from operating performance. The segment results of prior years have been recast to reflect the 2011 foreign exchange rates for a consistent presentation. Refer to Note 16, “Business Segment Information,” to the Consolidated Financial Statements for further information and a reconciliation of total segment revenue to consolidated “Total revenue” and total segment earnings (loss) to consolidated “Income (loss) before income tax expense (benefit).”

North American Social Expression Products Segment

(Dollars in thousands)	2010		2009		% Change
Total revenue	$	1,226,520	$	1,086,398		12.9	%
Segment earnings		232,614		67,412		245.1	%

Total revenue of our North American Social Expression Products segment, excluding the impact of foreign exchange and intersegment items, increased $140.1 million during 2010 compared to 2009. The majority of the revenue improvement is attributable to higher sales of greetings cards, from the acquisition of PRG, which added approximately $129 million, as well as growth in our legacy greeting card business, which increased by approximately $26 million and the impact of lower deferred cost reserves of approximately $14 million. The increased revenue from greeting cards was partially offset by lower sales in our gift packaging, calendar and party goods product lines of approximately $24 million. Additionally, fiscal 2010 included the impact of lower revenue from our operations in Mexico of approximately $5 million as we moved to a third party distribution business model during the third quarter.

Segment earnings, excluding the impact of foreign exchange and intersegment items, increased $165.2 million in the current year compared to 2009. Higher net sales combined with improvements in product mix, lower input costs and other cost savings initiatives provided benefits of approximately $35 million. An improved balance of card unit shipments compared to card unit net sales reduced supply chain, scrap and distribution costs by approximately $63 million. The gain on the sale of certain assets, equipment and processes of the DesignWare party goods product lines in conjunction with the party goods transaction resulted in a gain of approximately $34 million. Segment earnings were also favorably impacted by a reduction of certain deferred cost reserves of approximately $14 million. The LIFO liquidation resulting from better inventory management of approximately $13 million and approximately $7 million in savings recognized from reductions in non-income tax expenses positively impacted earnings. Also contributing to the current year favorability was the

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prior year goodwill impairment charge of $48 million, which unfavorably impacted the 2009 earnings. Partially offsetting these improvements were the impairment and severance charges of approximately $16 million recorded in connection with the closing of the Kalamazoo, Michigan facility, increased variable compensation expense of approximately $17 million and approximately $18 million associated with the shutdown of the distribution facility in Mexico.

International Social Expression Products Segment

(Dollars in thousands)	2010		2009			% Change
Total revenue	$	250,026	$	245,331			1.9	%
Segment earnings (loss)		16,693		(68,545	)		-

Total revenue of our International Social Expression Products segment, excluding the impact of foreign exchange, increased $4.7 million, or 1.9% during 2010, compared to the prior year. The revenue improvement is primarily attributable to improved sales of non-card products as a result of new product introductions.

Segment earnings, excluding the impact of foreign exchange, increased $85.2 million from a loss of $68.5 million in 2009 to earnings of $16.7 million during the current year. The increase is primarily the result of the goodwill impairment charge of approximately $59 million (approximately $82 million reported above less approximately $23 million of foreign currency based on the consistent exchange rates utilized for segment reporting purposes) that was recorded during the third quarter of 2009. The remaining increase is attributable to the cost reduction initiatives implemented during 2009, higher sales in 2010, customer sales mix and charges taken in the prior year as a result of the bankruptcy of a major customer.

Retail Operations Segment

(Dollars in thousands)	2010			2009			% Change
Total revenue	$	11,727		$	170,066			(93.1	)%
Segment loss		(34,830	)		(19,727	)		(76.6	)%

In April 2009, we sold our retail store assets to Schurman. As a result, 2010 included results for the portion of the period that we operated the stores as well as the loss on disposition.

Total revenue, excluding the impact of foreign exchange, in our Retail Operations segment decreased $158.3 million for 2010, compared to the prior year period due to the disposition.

Segment earnings, excluding the impact of foreign exchange, was a loss of $34.8 million in 2010, compared to a loss of $19.7 million during 2009. The segment loss in 2010 included a $28 million loss on the disposition and approximately $1 million of severance expense as a result of the disposition of the stores.

AG Interactive Segment

(Dollars in thousands)	2010		2009			% Change
Total revenue	$	80,320	$	82,623			(2.8	)%
Segment earnings (loss)		11,319		(159,670	)		-

Total revenue of our AG Interactive segment for 2010, excluding the impact of foreign exchange, was $80.3 million compared to $82.6 million in the prior year. The lower revenue is due primarily to lower e-commerce revenue in our digital photography product group and lower advertising revenue in our online product group, as market conditions continue to be challenging, partially offset by increased subscription revenue in our online product group. At the end of 2010, AG Interactive had approximately 3.9 million online paid subscriptions versus 4.1 million at the prior year-end.

Segment earnings, excluding the impact of foreign exchange, were $11.3 million in 2010 compared to a loss of $159.7 million during the prior year. The increase of $171.0 million compared to the prior year is primarily attributable to the goodwill and intangible asset impairments of approximately $153 million (approximately $160 million reported above less approximately $7 million of foreign currency based on the consistent

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exchange rates utilized for segment reporting purposes). Fiscal 2010 included a benefit of approximately $3 million related to the currency translation adjustment of equity that was recognized in conjunction with the liquidation of an operation in France. Also contributing to the improvement in 2010 were benefits of cost reduction efforts taken towards the end of the prior fiscal year and less intangible asset amortization expense as a result of the intangible asset impairment recorded during the prior year.

Unallocated Items

Centrally incurred and managed costs, excluding the impact of foreign exchange, totaled $116.5 million and $80.2 million in 2010 and 2009, respectively, and are not allocated back to the operating segments. The unallocated items included interest expense for centrally incurred debt of $26.3 million and $22.9 million in 2010 and 2009, respectively, and domestic profit-sharing expense of $9.3 million in 2010. We did not incur profit-sharing expense during 2009 based on the operating results in the year. Unallocated items also included stock-based compensation expense of $5.8 million and $4.4 million in 2010 and 2009, respectively. In 2010, unallocated items included the settlement of a lawsuit totaling $24.0 million, all of which was paid as of February 28, 2010. In addition, unallocated items included costs associated with corporate operations including the senior management, corporate finance, legal and human resource functions, as well as insurance programs. These costs totaled $51.1 million and $52.9 million in 2010 and 2009, respectively.

Liquidity and Capital Resources

Operating Activities

During the year, cash flow from operating activities provided cash of $179.8 million compared to $197.5 million in 2010, a decrease of $17.7 million. Cash flow from operating activities for 2010 compared to 2009 resulted in an increase of $124.5 million from $73.0 million in 2009.

Other non-cash charges were $3.7 million during 2011 compared to $12.4 million in 2010 and $3.8 million in 2009. The decrease from prior year is primarily due to an $8.6 million loss on foreign currency translation adjustments that were reclassified to earnings upon liquidation of our operations in Mexico and France.

Accounts receivable was a source of cash of $15.3 million in 2011 compared to a use of cash of $56.1 million in 2010 and a use of cash of $6.5 million in 2009. As a percentage of the prior twelve months’ net sales, net accounts receivable was 7.7% at February 28, 2011 compared to 8.5% at February 28, 2010. The improvement in cash flow in the current year was the result of a higher accounts receivable balance at February 28, 2010 as compared to February 28, 2009. As disclosed with our results for the year ended February 28, 2010, the increased balance was partially due to higher sales in the fourth quarter and the timing of collections from certain customers compared to the prior year. These amounts were collected during the twelve months ended February 28, 2011, thus resulting in a source of cash.

Inventories were a use of cash of $13.1 million in 2011 compared to sources of cash of $14.9 million in 2010 and $2.9 million in 2009. The use of cash in 2011 is primarily due to an inventory build during the fourth quarter related to expanded distribution expected within the dollar channel during the upcoming year. The source of cash in 2010 is attributable to the North American Social Expression Products segment, which lowered inventory levels for all product categories.

Other current assets were a use of cash of $1.9 million during 2011, compared to sources of cash of $16.9 million during 2010 and $17.3 million in 2009. The decrease in the current year is primarily due to a large cash generation in 2010, which was attributable to the use of trust assets to fund active medical claim expenses. The activity in 2009 is primarily attributable to a $90 million receivable recorded as part of the termination of several long-term supply agreements in fiscal 2007. Approximately $60 million of this receivable was collected in the fourth quarter of 2007 and the balance was received in 2008 and 2009.

Deferred costs — net generally represents payments under agreements with retailers net of the related amortization of those payments. During 2011, 2010 and 2009, amortization exceeded payments by $14.3 million, $18.4 million and $27.6 million, respectively.

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Accounts payable and other liabilities used $31.0 million of cash in 2011 compared to $0.6 million of cash in 2010 and $68.2 million of cash in 2009. The change was largely attributable to the difference in variable compensation payments in the year ended February 28, 2011 compared to the year ended February 28, 2010. The current year includes the payment of variable compensation from the year ended February 28, 2010 where we exceeded our established compensation targets, thus a large use of cash in the current year period. The prior year included minimal compensation payments related to the Corporation’s performance in the year ended February 28, 2009, as compensations targets were not met.

Investing Activities

Cash provided by investing activities was $8.2 million during 2011 compared to cash used by investing activities of $40.0 million during 2010 and $137.3 million during 2009. The source of cash during 2011 included $25.2 million received for the sale of certain assets, equipment and processes of the DesignWare party goods product lines, which occurred in the prior year fourth quarter. This cash was held in escrow at February 28, 2010. The current year also included a $5.7 million return of capital related to our investment in AAH Holdings Corporation, the parent company of Amscan. In addition, we received approximately $12 million related to the sale of the land and buildings associated with the closure of our Mexico facility and a manufacturing facility within the International Expressions Product segment during the current year.

Capital expenditures totaled $36.3 million, $26.6 million and $55.7 million in 2011, 2010 and 2009, respectively. We currently expect 2012 capital expenditures to total in the range of $45 million to $50 million.

The use of cash during 2010 was primarily related to cash payments for business acquisitions and capital expenditures. During fiscal 2010, we acquired the Papyrus brand and its related wholesale business division from Schurman. At the same time, we sold the assets of our Retail Operations segment to Schurman and acquired an equity interest in Schurman. Cash paid, net of cash acquired, was $14.0 million. Also, in fiscal 2010, we paid $5.3 million of acquisition costs related to RPG, which we acquired in the fourth quarter of 2009. Partially offsetting these uses of cash were proceeds of $4.7 million from the sale of our calendar and candy product lines and $1.1 million from the sale of fixed assets.

The use of cash during 2009 was primarily related to investments in debt securities, business acquisitions and capital expenditures. During the second quarter of 2009, we paid $44.2 million to acquire, at a substantial discount, first lien debt securities of RPG. During the fourth quarter of 2009, we acquired all of the issued and outstanding capital stock of RPG for a combination of cash, long-term debt and the contribution of the debt securities that we acquired during the second quarter of 2009. The cash paid as a result of this transaction, net of cash acquired, was $22.3 million. We also issued approximately $55 million of long-term debt (with a fair market value of approximately $28 million) and relinquished the RPG first lien debt securities (with a fair market value of approximately $41 million), which we had previously purchased for $44.2 million. Also, in 2009, we purchased a card publisher and franchised distributor of greeting cards in the U.K. for $15.6 million.

Financing Activities

Financing activities used $117.2 million of cash during 2011 compared to using $86.5 million of cash in 2010 and providing $23.0 million of cash in 2009. The use of cash in the current year relates primarily to the repayment of the term loan under our senior secured credit facility in the amount of $99.3 million as well as share repurchases and dividend payments. During 2011, we paid $13.5 million to repurchase approximately 0.5 million Class B common shares in accordance with our Amended and Restated Articles of Incorporation and paid dividends of $22.4 million.

In 2010, the cash used related primarily to net repayments of long-term debt borrowings of $62.4 million as well as share repurchases and dividend payments. During 2010, $5.8 million was paid to repurchase approximately 1.5 million Class A common shares under our repurchase program and $6.0 million was paid to repurchase approximately 0.3 million Class B common shares in accordance with our Amended and Restated Articles of Incorporation. We paid dividends totaling $19.0 million during 2010.

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In 2009, the cash provided by financing activities related primarily to additional long-term debt borrowings of $141.5 million partially offset by share repurchases and long-term debt repayments. During 2009, $73.8 million was paid to repurchase approximately 7.9 million shares under our Class A common share repurchase programs and $0.2 million was paid to repurchase approximately 10,000 Class B common shares in accordance with our Amended and Restated Articles of Incorporation. During the second quarter of 2009, $22.5 million was paid upon exercise of the put option on our 6.10% senior notes. We paid dividends totaling $22.6 million during 2009.

Our receipt of the exercise price on stock options provided $16.6 million, $6.6 million and $0.5 million in 2011, 2010 and 2009, respectively.

Credit Sources

Substantial credit sources are available to us. In total, we had available sources of approximately $430 million at February 28, 2011. This included our $350 million senior secured credit facility and our $80 million accounts receivable securitization facility. Borrowings under the accounts receivable securitization facility are limited based on our eligible receivables outstanding. At February 28, 2011, we had no borrowings outstanding under the accounts receivable securitization facility or the revolving credit facility. We had, in the aggregate, $44.7 million outstanding under letters of credit, which reduces the total credit availability thereunder as of February 28, 2011.

On June 11, 2010, we amended and restated our senior secured credit facility by entering into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”). Pursuant to the terms of the Amended and Restated Credit Agreement, we may continue to borrow, repay and re-borrow up to $350 million under the revolving credit facility, with the ability to increase the size of the facility to up to $400 million, subject to customary conditions. The Amended and Restated Credit Agreement also continues to provide for a $25 million sub-limit for the issuance of swing line loans and a $100 million sub-limit for the issuance of letters of credit.

The obligations under the Amended and Restated Credit Agreement are guaranteed by our material domestic subsidiaries and are secured by substantially all of our personal property and our material domestic subsidiaries, including a pledge of all of the capital stock in substantially all of our domestic subsidiaries and 65% of the capital stock of our material first tier international subsidiaries. The Amended and Restated Credit Agreement, including revolving loans thereunder, will mature on June 11, 2015. In connection with the Amended and Restated Credit Agreement, the term loan under the original credit facility was terminated and we repaid the full $99 million outstanding under the term loan using cash on hand. The proceeds of the borrowings under the Amended and Restated Credit Agreement may be used to provide working capital and for other general corporate purposes.

Revolving loans that are denominated in U.S. dollars will bear interest at either the U.S. base rate or the London Inter-Bank Offer Rate (“LIBOR”), at our election, plus a margin determined according to our leverage ratio. Swing line loans will bear interest at a quoted rate agreed upon by us and the swing line lender. In addition to interest, we are required to pay commitment fees on the unused portion of the revolving credit facility. The commitment fee rate is initially 0.50% per annum and is subject to adjustment thereafter based on our leverage ratio.

The Amended and Restated Credit Agreement contains certain restrictive covenants that are customary for similar credit arrangements, including covenants relating to limitations on liens, dispositions, issuance of debt, investments, payment of dividends, repurchases of capital stock, acquisitions and transactions with affiliates. There are also financial performance covenants that require us to maintain a maximum leverage ratio and a minimum interest coverage ratio. The Amended and Restated Credit Agreement also requires us to make certain mandatory prepayments of outstanding indebtedness using the net cash proceeds received from certain dispositions, events of loss and additional indebtedness that we incur.

We are also party to an amended and restated receivables purchase agreement. The agreement has available financing of up to $80 million. The maturity date of the agreement is September 21, 2012, however, the

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agreement will terminate upon termination of the liquidity commitments obtained by the purchaser groups from third party liquidity providers.

Such commitments may be made available to the purchaser groups for 364-day periods only (initial 364-day period began on September 23, 2009), and there can be no assurances that the third party liquidity providers will renew or extend their commitments under the receivables purchase agreement. If that is the case, the receivables purchase agreement will terminate and we will not receive the benefit of the entire three-year term of the agreement. On September 22, 2010, the liquidity commitments were renewed for an additional 364-day period.

The interest rate under the accounts receivable securitization facility is based on (i) commercial paper interest rates, (ii) LIBOR rates plus an applicable margin or (iii) a rate that is the higher of the prime rate as announced by the applicable purchaser financial institution or the federal funds rate plus 0.50%. AGC Funding pays an annual commitment fee of 60 basis points on the unfunded portion of the accounts receivable securitization facility, together with customary administrative fees on outstanding letters of credit that have been issued and on outstanding amounts funded under the facility.

The amended and restated receivables purchase agreement contains representations, warranties, covenants and indemnities customary for facilities of this type, including our obligation to maintain the same consolidated leverage ratio as it is required to maintain under its secured credit facility.

On May 24, 2006, we issued $200 million of 7.375% senior unsecured notes, due on June 1, 2016 (the “Original Senior Notes”). The proceeds from this issuance were used for the repurchase of our 6.10% senior notes due on August 1, 2028 that were tendered in the tender offer and consent solicitation that was completed on May 25, 2006.

On February 24, 2009, we issued $22 million of additional 7.375% senior unsecured notes described above (“Additional Senior Notes”) and $32.7 million of new 7.375% unsecured notes due on June 1, 2016 (“New Notes”, together with the Original Senior Notes, and the Additional Senior Notes, the “Notes”) in conjunction with the acquisition of RPG. The original issue discount from the issuance of these notes of $26.2 million was recorded as a reduction of the underlying debt issuances and is being amortized over the life of the debt using the effective interest method. Including the original issue discount, the New Notes and the Additional Senior Notes have an effective annualized interest rate of approximately 20.3%. Except as described below, the terms of the New Notes and the Additional Senior Notes are the same.

The Notes will mature on June 1, 2016 and bear interest at a fixed rate of 7.375% per annum, commencing June 1, 2009. The Notes constitute general, unsecured obligations of the Corporation. The Notes rank equally with our other senior unsecured indebtedness and senior in right of payment to all of our obligations that are, by their terms, expressly subordinated in right of payment to the Notes, as applicable. The Original Senior Notes and the Additional Senior Notes are effectively subordinated to all of our secured indebtedness, including borrowings under our credit agreement, to the extent of the value of the assets securing such indebtedness. The New Notes are contractually subordinated to amounts outstanding under the credit agreement, and are effectively subordinated to any other secured indebtedness that we may issue from time to time to the extent of the value of the assets securing such indebtedness.

The Notes generally contain comparable covenants as described above for our credit agreement. The New Notes, however, also provide that if we incur more than an additional $10 million of indebtedness (other than indebtedness under the credit agreement or certain other permitted indebtedness), such indebtedness must be (a) pari passu in right of payment to the New Notes and expressly subordinated in right of payment to the credit agreement at least to the same extent as the New Notes, or (b) expressly subordinated in right of payment to the New Notes. Alternatively, we can redeem the New Notes in whole, but not in part, at a purchase price equal to 100% of the principal amount thereof plus accrued but unpaid interest, if any, or have the subordination provisions removed from the New Notes.

At February 28, 2011, we were in compliance with our financial covenants under the borrowing agreements described above.

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The total fair value of the Corporation’s publicly traded debt, based on quoted market prices, was $237.5 (at a carrying value of $232.7) and $224.7 (at a carrying value of $230.5) at February 28, 2011 and 2010, respectively. As of February 28, 2011, there were no balances outstanding under our revolving credit facility or receivables purchase agreements. The total fair value of our non-publicly traded debt, term loan and revolving credit facility, based on comparable publicly traded debt prices, was $99.3 million (at a carrying value of $99.3 million) at February 28, 2010.

Throughout fiscal 2012, we will continue to consider all options for capital deployment including growth options, capital expenditures, the opportunity to repurchase our own shares, reducing debt or, as appropriate, preserving cash. Consistent with this ongoing objective, in March 2011 we announced that in fiscal 2012 we expect that we will begin to invest in the development of a world headquarters in the Northeast Ohio area. While the state of Ohio has committed to a number of tax credits, loans and other incentives to encourage us to remain in Ohio, we expect to spend tens of millions of dollars of our own funds on the project, the majority of which are expected to be incurred after fiscal 2012. In addition, as announced in January 2009, our Board of Directors has authorized the repurchase of up to $75 million of Class A common shares ($46.6 million remaining at February 28, 2011), that may be made through open market purchases or privately negotiated transactions as market conditions warrant, at prices we deem appropriate, and subject to applicable legal requirements and other factors. There is no set expiration date for this program. We also may, from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise, including strategically repurchasing our 7.375% senior unsecured notes due in 2016. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

Over the next five to seven years we expect to allocate resources, including capital, to refresh our information technology systems by modernizing our systems, redesigning and deploying new processes, and evolving new organization structures all intended to drive efficiencies within the business and add new capabilities. Due to the long-term nature of this project, together with the fact that we are in the early stages of this project, currently we cannot reasonably estimate amounts that we will spend over the life of this project; however, amounts could be material in any given fiscal year and over the life of the project. During fiscal 2012, we currently estimate that we will spend $13 million plus or minus 25%, including both expense and capital, on these system projects. In addition, as described in Notes 1 and 11 to the Consolidated Financial Statements included in Part I of this report, in connection with our sale of certain of the assets of our Retail Operations segment to Schurman, we remain subject to a number of Schurman’s retail store leases on a contingent basis through our subleases, and have provided Schurman credit support, including a $12 million guaranty of amounts that may from time to time be owed by Schurman to the lenders under its senior revolving credit facility, as well as the ability to borrow from us up to $10 million under a loan agreement we have with Schurman.

Our future operating cash flow and borrowing availability under our credit agreement and our accounts receivable securitization facility are expected to meet currently anticipated funding requirements. The seasonal nature of our business results in peak working capital requirements that may be financed through short-term borrowings when cash on hand is insufficient.

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Contractual Obligations

The following table presents our contractual obligations and commitments to make future payments as of February 28, 2011:

	Payment Due by Period as of February 28, 2011
(In thousands)	2012		2013		2014		2015		2016		Thereafter		Total
Long-term debt	$	-	$	-	$	-	$	-	$	-	$	254,867	$	254,867
Operating leases (1)		16,195		11,599		8,075		6,143		4,831		10,525		57,368
Commitments under customer agreements		64,116		38,334		31,234		6,733		-		-		140,417
Commitments under royalty agreements		9,181		10,208		3,510		3,400		9,472		2,300		38,071
Interest payments		21,139		20,921		20,649		20,649		19,320		4,833		107,511
Severance		6,423		1,159		420		-		-		-		8,002
Commitments under purchase agreements		4,500		4,500		4,500		4,500		-		-		18,000
	$	121,554	$	86,721	$	68,388	$	41,425	$	33,623	$	272,525	$	624,236

(1) Approximately $36.1 million of the operating lease commitments in the table above relate to retail stores acquired by Schurman that are being subleased to Schurman. The failure of Schurman to operate the retail stores successfully could have a material adverse effect on the Corporation, because if Schurman is not able to comply with its obligations under the subleases, the Corporation remains contractually obligated, as primary lessee, under those leases.

The interest payments in the above table are determined assuming the same level of debt outstanding in the future years as at February 28, 2011 for the revolving credit facility at the current average interest rates for those facilities.

In addition to the contracts noted in the table, we issue purchase orders for products, materials and supplies used in the ordinary course of business. These purchase orders typically do not include long-term volume commitments, are based on pricing terms previously negotiated with vendors and are generally cancelable with the appropriate notice prior to receipt of the materials or supplies. Accordingly, the foregoing table excludes open purchase orders for such products, materials and supplies as of February 28, 2011.

Although we do not anticipate that contributions will be required in 2012 to the defined benefit pension plan that we assumed in connection with our acquisition of Gibson Greetings, Inc. in 2001, we may make contributions in excess of the legally required minimum contribution level. Refer to Note 12 to the Consolidated Financial Statements. We do anticipate that contributions will be required beginning in fiscal 2014, but those amounts have not been determined as of February 28, 2011.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements require us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. Refer to Note 1 to the Consolidated Financial Statements. The following paragraphs include a discussion of the critical areas that required a higher degree of judgment or are considered complex.

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a customer’s inability to meet its financial obligations, a specific allowance for bad debts against amounts due is recorded to reduce the receivable to the amount we reasonably expect will be

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collected. In addition, we recognize allowances for bad debts based on estimates developed by using standard quantitative measures incorporating historical write-offs. The establishment of allowances requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Although we consider these balances adequate and proper, changes in economic conditions in the retail markets in which we operate could have a material effect on the required allowance balances.

Sales Returns

We provide for estimated returns for products sold with the right of return, primarily seasonal cards and certain other seasonal products, in the same period as the related revenues are recorded. These estimates are based upon historical sales returns, the amount of current year sales and other known factors. Estimated return rates utilized for establishing estimated returns reserves have approximated actual returns experience. However, actual returns may differ significantly, either favorably or unfavorably, from these estimates if factors such as the historical data we used to calculate these estimates do not properly reflect future returns or as a result of changes in economic conditions of the customer and/or its market. We regularly monitor our actual performance to estimated rates and the adjustments attributable to any changes have historically not been material.

Deferred Costs

In the normal course of our business, we enter into agreements with certain customers for the supply of greeting cards and related products. We view such agreements as advantageous in developing and maintaining business with our retail customers. The customer may receive a combination of cash payments, credits, discounts, allowances and other incentives to be earned as product is purchased from us over the stated term of the agreement or minimum purchase volume commitment. These agreements are negotiated individually to meet competitive situations and therefore, while some aspects of the agreements may be similar, important contractual terms may vary. In addition, the agreements may or may not specify us as the sole supplier of social expression products to the customer.

Although risk is inherent in the granting of advances, we subject such customers to our normal credit review. We maintain an allowance for deferred costs based on estimates developed by using standard quantitative measures incorporating historical write-offs. In instances where we are aware of a particular customer’s inability to meet its performance obligation, we record a specific allowance to reduce the deferred cost asset to an estimate of its future value based upon expected recoverability. Losses attributed to these specific events have historically not been material. The aggregate average remaining life of our contract base is 6.7 years.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method. In accordance with ASC Topic 350 (“ASC 350”), “Intangibles — Goodwill and Other,” goodwill and certain intangible assets are presumed to have indefinite useful lives and are thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise. We complete the annual goodwill impairment test during the fourth quarter. To test for goodwill impairment, we are required to estimate the fair market value of each of our reporting units. While we may use a variety of methods to estimate fair value for impairment testing, our primary methods are discounted cash flows and a market based analysis. We estimate future cash flows and allocations of certain assets using estimates for future growth rates and our judgment regarding the applicable discount rates. Changes to our judgments and estimates could result in a significantly different estimate of the fair market value of the reporting units, which could result in an impairment of goodwill.

Deferred Income Taxes

Deferred income taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax bases of assets and liabilities and operating loss and tax credit carryforwards. In assessing the realizability of deferred tax assets, we assess whether it is more likely than not

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that a portion or all of the deferred tax assets will not be realized. We consider the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. The assumptions used in this assessment are consistent with our internal planning. A valuation allowance is recorded against those deferred tax assets determined to not be realizable based on our assessment. The amount of net deferred tax assets considered realizable could be increased or decreased in the future if our assessment of future taxable income or tax planning strategies change.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2009-17 (“ASU 2009-17”), (Consolidations Topic 810), “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities (“VIE”).” ASU 2009-17 requires an ongoing reassessment of determining whether a variable interest gives a company a controlling financial interest in a VIE. It also requires an entity to qualitatively, rather than quantitatively, determine whether a company is the primary beneficiary of a VIE. Under the new standard, the primary beneficiary of a VIE is a party that has the controlling financial interest in the VIE and has both the power to direct the activities that most significantly impact the VIE’s economic success and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. ASU 2009-17 is effective for interim and annual reporting periods beginning after November 15, 2009. Our adoption of this standard on March 1, 2010 did not have a material effect on our financial statements.

In January 2010, the FASB issued ASU No. 2010-06 (“ASU 2010-06”), “Improving Disclosures about Fair Value Measurements.” ASU 2010-06 provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosures,” that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements in addition to the presentation of purchases, sales, issuances, and settlements for Level 3 fair value measurements. ASU 2010-06 also provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation, and inputs and valuation techniques. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements of Level 3 fair value measurements, which becomes effective for interim and annual periods beginning after December 15, 2010. On March 1, 2010, we adopted this standard, except for the requirement to separately disclose purchases, sales, issuances, and settlements in the Level 3 rollforward. Our adoption of this standard did not have a material effect on our financial statements. Also, we do not expect that the adoption of the enhanced disclosures for Level 3 fair value measurements will have a material effect on our financial statements.

Factors That May Affect Future Results

Certain statements in this report may constitute forward-looking statements within the meaning of the Federal securities laws. These statements can be identified by the fact that they do not relate strictly to historic or current facts. They use such words as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. These forward-looking statements are based on currently available information, but are subject to a variety of uncertainties, unknown risks and other factors concerning our operations and business environment, which are difficult to predict and may be beyond our control. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements, and that could adversely affect our future financial performance, include, but are not limited to, the following:

•   a weak retail environment and general economic conditions;

•   competitive terms of sale offered to customers;

•   Schurman’s ability to successfully operate its retail operations and satisfy its obligations to us;

•   retail consolidations, acquisitions and bankruptcies, including the possibility of resulting adverse changes to retail contract terms;

•   the ability to achieve the desired benefits associated with our cost reduction efforts;

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•   the timing and impact of converting customers to a scan-based trading model;

•   our ability to successfully implement, or achieve the desired benefits associated with, any information systems refresh we may implement;

•   the timing and impact of investments in new retail or product strategies as well as new product introductions and achieving the desired benefits from those investments;

•   consumer acceptance of products as priced and marketed;

•   the impact of technology, including social media, on core product sales;

•   escalation in the cost of providing employee health care;

•   the ability to achieve the desired accretive effect from any share repurchase programs;

•   the ability to comply with our debt covenants;

•   fluctuations in the value of currencies in major areas where we operate, including the U.S. Dollar, Euro, U.K. Pound Sterling and Canadian Dollar; and

•   the outcome of any legal claims known or unknown.

Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, and the ability to adapt to rapidly changing social media and the digital photo sharing space.

The risks and uncertainties identified above are not the only risks we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial also may adversely affect us. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on our business, financial condition and results of operations. For further information concerning the risks we face and issues that could materially affect our financial performance related to forward-looking statements, refer to the “Risk Factors” section included in Part I, Item 1A of this Annual Report on Form 10-K.

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk

Derivative Financial Instruments – We had no derivative financial instruments as of February 28, 2011.

Interest Rate Exposure – We manage interest rate exposure through a mix of fixed and floating rate debt. Currently, the majority of our debt is carried at fixed interest rates. Therefore, our overall interest rate exposure risk is minimal. Based on our interest rate exposure on our non-fixed rate debt as of and during the year ended February 28, 2011, a hypothetical 10% movement in interest rates would not have had a material impact on interest expense. Under the terms of our current credit agreement, we have the ability to borrow significantly more floating rate debt, which, if incurred could have a material impact on interest expense in a fluctuating interest rate environment.

Foreign Currency Exposure – Our international operations expose us to translation risk when the local currency financial statements are translated into U.S. dollars. As currency exchange rates fluctuate, translation of the statements of operations of international subsidiaries to U.S. dollars could affect comparability of results between years. Approximately 24%, 23% and 27% of our 2011, 2010 and 2009 total revenue from continuing operations, respectively, were generated from operations outside the United States. Operations in Australia, New Zealand, Canada, Mexico, the European Union and the U.K. are denominated in currencies other than U.S. dollars. No assurance can be given that future results will not be affected by significant changes in foreign currency exchange rates.

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Item 8.      Financial Statements and Supplementary Data

	Page
Index to Consolidated Financial Statements and Supplementary Financial Data	Number
Report of Independent Registered Public Accounting Firm		46
Consolidated Statement of Operations — Years ended February 28, 2011, 2010 and 2009		47
Consolidated Statement of Financial Position — February 28, 2011 and 2010		48
Consolidated Statement of Cash Flows — Years ended February 28, 2011, 2010 and 2009		49
Consolidated Statement of Shareholders’ Equity — Years ended February 28, 2011, 2010 and 2009		50
Notes to Consolidated Financial Statements — Years ended February 28, 2011, 2010 and 2009		51
Supplementary Financial Data:
Quarterly Results of Operations (Unaudited)		90

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

American Greetings Corporation

We have audited the accompanying consolidated statement of financial position of American Greetings Corporation as of February 28, 2011 and February 28, 2010, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended February 28, 2011. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Greetings Corporation at February 28, 2011 and February 28, 2010, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 28, 2011, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, in 2010 the Corporation changed its method of accounting for business combinations.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), American Greetings Corporation’s internal control over financial reporting as of February 28, 2011, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 29, 2011 expressed an unqualified opinion thereon.

/s/  Ernst & Young LLP

Cleveland, Ohio

April 29, 2011

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CONSOLIDATED STATEMENT OF OPERATIONS

Years ended February 28, 2011, 2010 and 2009

Thousands of dollars except share and per share amounts

	2011			2010			2009
Net sales	$	1,560,213		$	1,598,292		$	1,646,399
Other revenue		32,355			37,566			44,339
Total revenue		1,592,568			1,635,858			1,690,738
Material, labor and other production costs		682,368			713,075			809,956
Selling, distribution and marketing expenses		478,227			507,960			618,899
Administrative and general expenses		260,476			276,031			226,317
Goodwill and other intangible asset impairments		–			–			290,166
Other operating income – net		(3,205	)		(310	)		(1,396	)
Operating income (loss)		174,702			139,102			(253,204	)
Interest expense		25,389			26,311			22,854
Interest income		(853	)		(1,676	)		(3,282	)
Other non-operating (income) expense- net		(5,841	)		(6,487	)		2,157
Income (loss) before income tax expense (benefit)		156,007			120,954			(274,933	)
Income tax expense (benefit)		68,989			39,380			(47,174	)
Net income (loss)	$	87,018		$	81,574		$	(227,759	)
Earnings (loss) per share – basic	$	2.18		$	2.07		$	(4.89	)
Earnings (loss) per share – assuming dilution	$	2.11		$	2.03		$	(4.89	)
Average number of shares outstanding		39,982,784			39,467,811			46,543,780
Average number of shares outstanding – assuming dilution		41,244,903			40,159,651			46,543,780
Dividends declared per share	$	0.56		$	0.36		$	0.60

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

February 28, 2011 and 2010

Thousands of dollars except share and per share amounts

	2011			2010
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	215,838		$	137,949
Trade accounts receivable, net		119,779			135,758
Inventories		179,730			163,956
Deferred and refundable income taxes		50,051			78,433
Assets held for sale		7,154			15,147
Prepaid expenses and other		128,372			148,048
Total current assets		700,924			679,291
GOODWILL		28,903			31,106
OTHER ASSETS		436,137			428,161
DEFERRED AND REFUNDABLE INCOME TAXES		124,789			148,210
PROPERTY, PLANT AND EQUIPMENT – NET		241,649			242,883
	$	1,532,402		$	1,529,651
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Debt due within one year	$	—		$	1,000
Accounts payable		87,105			95,434
Accrued liabilities		69,824			78,245
Accrued compensation and benefits		72,379			85,092
Income taxes payable		10,951			13,901
Other current liabilities		102,286			94,915
Total current liabilities		342,545			368,587
LONG-TERM DEBT		232,688			328,723
OTHER LIABILITIES		176,522			168,098
DEFERRED INCOME TAXES AND NONCURRENT
INCOME TAXES PAYABLE		31,736			28,179
SHAREHOLDERS’ EQUITY
Common shares – par value $1 per share:
Class A – 82,181,659 shares issued less 44,711,736 treasury shares in 2011 and – 80,884,505 shares issued less 44,627,298 treasury shares in 2010		37,470			36,257
Class B – 6,066,092 shares issued less 3,128,841 treasury shares in 2011 and 6,066,092 shares issued less 2,843,069 treasury shares in 2010		2,937			3,223
Capital in excess of par value		492,048			461,076
Treasury stock		(952,206	)		(946,724	)
Accumulated other comprehensive loss		(2,346	)		(29,815	)
Retained earnings		1,171,008			1,112,047
Total shareholders’ equity		748,911			636,064
	$	1,532,402		$	1,529,651

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

Years ended February 28, 2011, 2010 and 2009

Thousands of dollars

	2011			2010			2009
OPERATING ACTIVITIES:
Net income (loss)	$	87,018		$	81,574		$	(227,759	)
Adjustments to reconcile net income (loss) to cash flows from operating activities:
Goodwill and other intangible asset impairments		–			–			290,166
Stock-based compensation		13,017			5,870			4,506
Net gain on dispositions		(254	)		(6,507	)		–
Net (gain) loss on disposal of fixed assets		(3,463	)		59			1,215
Depreciation and intangible assets amortization		41,048			45,165			50,016
Deferred income taxes		28,642			25,268			(29,438	)
Fixed asset impairments		119			13,005			5,465
Other non-cash charges		3,663			12,419			3,764
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable		15,296			(56,105	)		(6,504	)
Inventories		(13,097	)		14,923			2,877
Other current assets		(1,922	)		16,936			17,309
Income taxes		19,947			18,863			(5,934	)
Deferred costs – net		14,262			18,405			27,596
Accounts payable and other liabilities		(31,015	)		(633	)		(68,154	)
Other – net		6,538			8,248			7,915
Total Cash Flows From Operating Activities		179,799			197,490			73,040
INVESTING ACTIVITIES:
Property, plant and equipment additions		(36,346	)		(26,550	)		(55,733	)
Cash payments for business acquisitions, net of cash acquired		(500	)		(19,300	)		(37,882	)
Proceeds from sale of fixed assets		14,242			1,124			433
Proceeds from escrow related to party goods transaction		25,151			–			–
Other – net		5,663			4,713			(44,153	)
Total Cash Flows From Investing Activities		8,210			(40,013	)		(137,335	)
FINANCING ACTIVITIES:
Net (decrease) increase in long-term debt		(98,250	)		(62,350	)		118,991
Net decrease in short-term debt		(1,000	)		–			–
Sale of stock under benefit plans		16,620			6,557			525
Excess tax benefit from share-based payment awards		4,512			148			–
Purchase of treasury shares		(13,521	)		(11,848	)		(73,983	)
Dividends to shareholders		(22,354	)		(19,049	)		(22,566	)
Debt issuance costs		(3,199	)		–			–
Total Cash Flows From Financing Activities		(117,192	)		(86,542	)		22,967
EFFECT OF EXCHANGE RATE CHANGES ON CASH		7,072			6,798			(21,956	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		77,889			77,733			(63,284	)
Cash and Cash Equivalents at Beginning of Year		137,949			60,216			123,500
Cash and Cash Equivalents at End of Year	$	215,838		$	137,949		$	60,216

See notes to consolidated financial statements.

49

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Years ended February 28, 2011, 2010 and 2009

Thousands of dollars except per share amounts

													Accumulated
							Capital in						Other
	Common Shares						Excess of			Treasury			Comprehensive			Retained
	Class A			Class B			Par Value			Stock			Income (Loss)			Earnings			Total
BALANCE MARCH 1, 2008	$	45,324		$	3,434		$	445,696		$	(872,949	)	$	21,244		$	1,300,662		$	943,411
Net loss		–			–			–			–			–			(227,759	)		(227,759	)
Other comprehensive loss:
Foreign currency translation adjustment		–			–			–			–			(80,845	)		–			(80,845	)
Pension and postretirement adjustments recognized in accordance with ASC 715 (net of tax of $6,839)		–			–			–			–			(7,674	)		–			(7,674	)
Unrealized loss on available-for-sale securities (net of tax of $0)		–			–			–			–			(3	)		–			(3	)
Comprehensive loss																				(316,281	)
Cash dividends – $0.60 per share		–			–			–			–			–			(27,491	)		(27,491	)
Sale of shares under benefit plans, including tax benefits		26			–			384			–			–			–			410
Purchase of treasury shares		(8,311	)		(10	)		–			(67,158	)		–			–			(75,479	)
Stock compensation expense		–			–			4,369			–			–			–			4,369
Stock grants and other		4			75			(1,364	)		2,021			–			(486	)		250
BALANCE FEBRUARY 28, 2009		37,043			3,499			449,085			(938,086	)		(67,278	)		1,044,926			529,189
Net income		–			–			–			–			–			81,574			81,574
Other comprehensive income:
Foreign currency translation adjustment		–			–			–			–			22,467			–			22,467
Reclassification of currency translation adjustment for amounts recognized in income (net of tax of $0)		–			–			–			–			8,627			–			8,627
Pension and postretirement adjustments recognized in accordance with ASC 715 (net of tax of $5,837)		–			–			–			–			6,366			–			6,366
Unrealized gain on available-for-sale securities (net of tax of $0)		–			–			–			–			3			–			3
Comprehensive income																				119,037
Cash dividends – $0.36 per share		–			–			–			–			–			(14,124	)		(14,124	)
Sale of shares under benefit plans, including tax benefits		336			–			6,172			–			–			–			6,508
Purchase of treasury shares		(1,125	)		(292	)		–			(9,111	)		–			–			(10,528	)
Stock compensation expense		–			–			5,819			–			–			–			5,819
Stock grants and other		3			16			–			473			–			(329	)		163
BALANCE FEBRUARY 28, 2010		36,257			3,223			461,076			(946,724	)		(29,815	)		1,112,047			636,064
Net income		–			–			–			–			–			87,018			87,018
Other comprehensive income:
Foreign currency translation adjustment		–			–			–			–			15,165			–			15,165
Pension and postretirement adjustments recognized in accordance with ASC 715 (net of tax of $8,083)		–			–			–			–			12,303			–			12,303
Unrealized gain on available-for-sale securities (net of tax of $0)		–			–			–			–			1			–			1
Comprehensive income																				114,487
Cash dividends – $0.56 per share		–			–			–			–			–			(22,354	)		(22,354	)
Sale of shares under benefit plans, including tax benefits		1,213			257			17,951			7,366			–			(5,652	)		21,135
Purchase of treasury shares		–			(547	)		–			(12,974	)		–			–			(13,521	)
Stock compensation expense		–			–			13,017			–			–			–			13,017
Stock grants and other		–			4			4			126			–			(51	)		83
BALANCE FEBRUARY 28, 2011	$	37,470		$	2,937		$	492,048		$	(952,206	)	$	(2,346	)	$	1,171,008		$	748,911

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended February 28, 2011, 2010 and 2009

Thousands of dollars except per share amounts

NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES

Consolidation: The consolidated financial statements include the accounts of American Greetings Corporation and its subsidiaries (“American Greetings” or the “Corporation”). All significant intercompany accounts and transactions are eliminated. The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2011 refers to the year ended February 28, 2011.

The Corporation’s investments in less than majority-owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method except when they qualify as variable interest entities (“VIE”) and the Corporation is the primary beneficiary, in which case the investments are consolidated in accordance with Accounting Standards Codification (“ASC”) Topic 810, “Consolidation.” Investments that do not meet the above criteria are accounted for under the cost method.

The Corporation holds an approximately 15% equity interest in Schurman Fine Papers (“Schurman”), which is a VIE as defined in ASC Topic 810, “Consolidation.” Schurman owns and operates approximately 430 specialty card and gift retail stores in the United States and Canada. The stores are primarily located in malls and strip shopping centers. During the current period, the Corporation assessed the variable interests in Schurman and determined that a third party holder of variable interests has the controlling financial interest in the VIE and thus, the third party, not the Corporation, is the primary beneficiary. In completing this assessment, the Corporation identified the activities that it considers most significant to the future economic success of the VIE and determined that it does not have the power to direct those activities. As such, Schurman is not consolidated in the Corporation’s results. The Corporation’s maximum exposure to loss as it relates to Schurman as of February 28, 2011 includes:

•  the investment in the equity of Schurman of $1,935;

•  the Liquidity Guaranty of Schurman’s indebtedness of $12,000 and the Bridge Guaranty of Schurman’s indebtedness of $12,000, see Note 11 for further information;

•  normal course of business trade accounts receivable due from Schurman, the balance of which fluctuates throughout the year due to the seasonal nature of the business;

•  the operating leases currently subleased to Schurman, the aggregate lease payments for the remaining life of which was $35,985 and $50,854 as of February 28, 2011 and 2010, respectively.

The Corporation and Schurman are also party to a Subordinated Credit Facility that provides Schurman with up to $10,000 of subordinated financing for an initial term of nineteen months, subject to up to three automatic one-year renewal periods (or partial-year, in the case of the last renewal), unless either party provides the appropriate written notice prior to the expiration of the applicable term. Schurman can only borrow under the facility if it does not have other sources of financing available, and borrowings under the Subordinated Credit Facility may only be used for specified purposes. Borrowings under the Subordinated Credit Facility are subordinate to borrowings under the Senior Credit Facility, and the Subordinated Credit Facility includes affirmative and negative covenants and events of default customary for such financings. In addition, availability under the Subordinated Credit Facility is limited as long as the Bridge Guaranty is in place to the difference between $10,000 and the current maximum amount of the Bridge Guaranty. Because the Bridge Guaranty remained at $12,000 as of February 28, 2011, there were no loans outstanding, or available under the Subordinated Credit Facility, as of February 28, 2011.

In accordance with its terms, on April 1, 2011, the Bridge Guaranty was terminated. As a result of the termination of the Bridge Guaranty, beginning on April 2, 2011, Schurman may now borrow up to $10,000 under the Subordinated Credit Facility. Because the Liquidity Guaranty described above remains in place but Schurman is now able to borrow under the Subordinated Credit Facility, the Corporation’s net exposure under

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guaranties and available financing to Schurman decreased by $2,000 due to the termination of the Bridge Guaranty.

In addition to the investment in the equity of Schurman, the Corporation holds an investment in the common stock of AAH Holdings Corporation (“AAH”). These two investments, totaling $12,546, are accounted for under the cost method. The Corporation is not aware of any events or changes in circumstances that had occurred during 2011 that the Corporation believes are reasonably likely to have had a significant adverse effect on the carrying amount of these investments. See Note 2 for further information.

Reclassifications: Certain amounts in the prior year financial statements have been reclassified to conform to the 2011 presentation.

Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On an ongoing basis, management reviews its estimates, including those related to sales returns, allowance for doubtful accounts, customer allowances and discounts, recoverability of intangibles and other long-lived assets, deferred tax asset valuation allowances, deferred costs and various other allowances and accruals, based on currently available information. Changes in facts and circumstances may alter such estimates and affect the results of operations and the financial position in future periods.

Cash Equivalents: The Corporation considers all highly liquid instruments purchased with an original maturity of less than three months to be cash equivalents.

Allowance for Doubtful Accounts: The Corporation evaluates the collectibility of its accounts receivable based on a combination of factors. In circumstances where the Corporation is aware of a customer’s inability to meet its financial obligations, a specific allowance for bad debts against amounts due is recorded to reduce the receivable to the amount the Corporation reasonably expects will be collected. In addition, the Corporation recognizes allowances for bad debts based on estimates developed by using standard quantitative measures incorporating historical write-offs. See Note 6 for further information.

Customer Allowances and Discounts: The Corporation offers certain of its customers allowances and discounts including cooperative advertising, rebates, marketing allowances and various other allowances and discounts. These amounts are recorded as reductions of gross accounts receivable or included in accrued liabilities and are recognized as reductions of net sales when earned. These amounts are earned by the customer as product is purchased from the Corporation and are recorded based on the terms of individual customer contracts. See Note 6 for further information.

Concentration of Credit Risks: The Corporation sells primarily to customers in the retail trade, including those in the mass merchandise, drug store, discount retailer, supermarket and other channels of distribution. These customers are located throughout the United States, Canada, the United Kingdom, Australia, New Zealand and Mexico. Net sales to the Corporation’s five largest customers accounted for approximately 42%, 39% and 36% of total revenue in 2011, 2010 and 2009, respectively. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 15%, 14% and 15% of total revenue in 2011, 2010 and 2009, respectively. Net sales to Target Corporation accounted for approximately 14% and 13% of total revenue in 2011 and 2010, respectively, and less than 10% in 2009.

The Corporation conducts business based on periodic evaluations of its customers’ financial condition and generally does not require collateral to secure their obligation to the Corporation. While the competitiveness of the retail industry presents an inherent uncertainty, the Corporation does not believe a significant risk of loss exists from a concentration of credit.

Inventories: Finished products, work in process and raw materials inventories are carried at the lower of cost or market. The last-in, first-out (“LIFO”) cost method is used for certain domestic inventories, which approximate 80% of the total pre-LIFO consolidated inventories at February 28, 2011 and 2010, respectively. International inventories and the remaining domestic inventories principally use the first-in, first-out (“FIFO”) method except for display material and factory supplies which are carried at average cost. The Corporation

52

allocates fixed production overhead to inventory based on the normal capacity of the production facilities. Abnormal amounts of idle facility expense, freight, handling costs and wasted material are treated as a current period expense. See Note 7 for further information.

Deferred Costs: In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. The Corporation classifies the total contractual amount of the incentive consideration committed to the customer but not yet earned as a deferred cost asset at the inception of an agreement, or any future amendments. Deferred costs estimated to be earned by the customer and charged to operations during the next twelve months are classified as “Prepaid expenses and other” on the Consolidated Statement of Financial Position and the remaining amounts to be charged beyond the next twelve months are classified as “Other assets.” Such costs are capitalized as assets reflecting the probable future economic benefits obtained as a result of the transactions. Future economic benefit is further defined as cash inflow to the Corporation. The Corporation, by incurring these costs, is ensuring the probability of future cash flows through sales to customers. The amortization of such deferred costs over the stated term of the agreement or the minimum purchase volume commitment properly matches the cost of obtaining business over the periods to be benefited. The Corporation maintains an allowance for deferred costs based on estimates developed using standard quantitative measures incorporating historical write-offs. In instances where the Corporation is aware of a particular customer’s inability to meet its performance obligation, a specific allowance is recorded to reduce the deferred cost asset to an estimate of its future value based upon expected recoverability. See Note 10 for further discussion.

Deferred Film Production Costs: The Corporation is engaged in the production of film-based entertainment, which is generally exploited in the DVD, theatrical release or broadcast format. This entertainment is related to Strawberry Shortcake, Care Bears and other properties developed by the Corporation and is used to support the Corporation’s merchandise licensing strategy.

Film production costs are accounted for pursuant to ASC Topic 926 (“ASC 926”), “Entertainment – Films,” and are stated at the lower of cost or net realizable value based on anticipated total revenue (ultimate revenue). Film production costs are generally capitalized. These costs are then recognized ratably based on the ratio of the current period’s revenue to estimated remaining ultimate revenues. Ultimate revenues are calculated in accordance with ASC 926 and require estimates and the exercise of judgment. Accordingly, these estimates are periodically updated to include the actual results achieved or new information as to anticipated revenue performance of each title.

Production expense totaled $4,736 and $4,360 in 2011 and 2010, respectively, with no significant amounts related to changes in ultimate revenue estimates. These production costs are included in “Material, labor and other production costs” on the Consolidated Statement of Operations. Amortization of production costs totaling $3,380, $2,209 and $10,513 in 2011, 2010 and 2009, respectively, are included in “Other – net” on the Consolidated Statement of Cash Flows. The balance of deferred film production costs was $9,246 and $11,479 at February 28, 2011 and 2010, respectively, and are included in “Other assets” on the Consolidated Statement of Financial Position. The Corporation expects to recognize amortization of approximately $2,000 of production costs during the next twelve months.

Investment in Life Insurance: The Corporation’s investment in corporate-owned life insurance policies is recorded in “Other assets” net of policy loans and related interest payable on the Consolidated Statement of Financial Position. The net balance was $21,760 and $18,330 as of February 28, 2011 and 2010, respectively. The net life insurance expense, including interest expense, is included in “Administrative and general expenses” on the Consolidated Statement of Operations. The related interest expense, which approximates amounts paid, was $12,122, $12,207 and $11,101 in 2011, 2010 and 2009, respectively.

Goodwill and Other Intangible Assets: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations and is not amortized in accordance with ASC Topic 350 (“ASC 350”), “Intangibles – Goodwill and Other.” This topic addresses the amortization of intangible assets with defined lives and the impairment testing and recognition for goodwill and indefinite-lived intangible assets. The Corporation is required to evaluate the carrying value of its goodwill and indefinite-lived intangible assets for potential impairment on an annual basis or more frequently if indicators arise.

53

While the Corporation may use a variety of methods to estimate fair value for impairment testing, its primary methods are discounted cash flows and a market based analysis. The required annual impairment tests are completed during the fourth quarter. Intangible assets with defined lives are amortized over their estimated lives. See Note 9 for further discussion.

Property and Depreciation: Property, plant and equipment are carried at cost. Depreciation and amortization of buildings, equipment and fixtures are computed principally by the straight-line method over the useful lives of the various assets. The cost of buildings is depreciated over 40 years; computer hardware and software over 3 to 7 years; machinery and equipment over 3 to 15 years; and furniture and fixtures over 8 to 20 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated life of the leasehold improvement. Property, plant and equipment are reviewed for impairment in accordance with ASC Topic 360 (“ASC 360”), “Property, Plant and Equipment.” ASC 360 also provides a single accounting model for the disposal of long-lived assets. In accordance with ASC 360, assets held for sale are stated at the lower of their fair values less cost to sell or carrying amounts and depreciation is no longer recognized. See Note 8 for further information.

Operating Leases: Rent expense for operating leases, which may have escalating rentals over the term of the lease, is recorded on a straight-line basis over the initial lease term. The initial lease term includes the “build-out” period of leases, where no rent payments are typically due under the terms of the lease. The difference between rent expense and rent paid is recorded as deferred rent. Construction allowances received from landlords are recorded as a deferred rent credit and amortized to rent expense over the initial term of the lease. The Corporation records lease rent expense net of any related sublease income. See Note 13 for further information.

Pension and Other Postretirement Benefits: The Corporation has several defined benefit pension plans and a defined benefit health care plan that provides postretirement medical benefits to full-time United States employees who meet certain requirements. In accordance with ASC Topic 715 (“ASC 715”), “Compensation-Retirement Benefits,” the Corporation recognizes the plans’ funded status in its statement of financial position, measures the plans’ assets and obligations as of the end of its fiscal year and recognizes the changes in a defined benefit postretirement plan’s funded status in comprehensive income in the year in which the changes occur. See Note 12 for further information.

Revenue Recognition: Sales are recognized when title and the risk of loss have been transferred to the customer.

Seasonal cards and certain other seasonal products are generally sold with the right of return on unsold merchandise. The Corporation provides for estimated returns of these products when those sales are recognized. These estimates are based on historical sales returns, the amount of current year sales and other known factors. Accrual rates utilized for establishing estimated returns reserves have approximated actual returns experience.

Products sold without a right of return may be subject to sales credit issued at the Corporation’s discretion for damaged, obsolete and outdated products. The Corporation maintains an estimated reserve for these sales credits based on historical information.

For retailers with a scan-based trading (“SBT”) arrangement, the Corporation owns the product delivered to its retail customers until the product is sold by the retailer to the ultimate consumer, at which time the Corporation recognizes revenue for both everyday and seasonal products. When a SBT arrangement with a retailer is finalized, the Corporation reverses previous sales transactions based on retailer inventory turn rates and the estimated timing of the store conversions. Legal ownership of the inventory at the retailer’s stores reverts back to the Corporation at the time of the conversion and the amount of sales reversal is finalized based on the actual inventory at the time of conversion.

Prior to April 17, 2009, sales at the Corporation owned retail locations were recognized upon the sale of product to the consumer.

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Subscription revenue, primarily for the AG Interactive segment, represents fees paid by customers for access to particular services for the term of the subscription. Subscription revenue is generally billed in advance and is recognized ratably over the subscription periods.

The Corporation has agreements for licensing the Care Bears and Strawberry Shortcake characters and other intellectual property. These license agreements provide for royalty revenue to the Corporation based on a percentage of net sales and are subject to certain guaranteed minimum royalties. These license agreements may include the receipt of upfront advances, which are recorded as deferred revenue and earned during the period of the agreement. Certain of these agreements are managed by outside agents. All payments flow through the agents prior to being remitted to the Corporation. Typically, the Corporation receives quarterly payments from the agents. Royalty revenue is generally recognized upon receipt and recorded in “Other revenue.” Expenses associated with the servicing of these agreements are summarized as follows:

	2011		2010		2009
Material, labor and other production costs	$	11,806	$	9,410	$	24,615
Selling, distribution and marketing expenses		14,046		17,970		29,146
Administrative and general expenses		1,697		2,050		2,421
	$	27,549	$	29,430	$	56,182

Deferred revenue, included in “Other current liabilities” and “Other liabilities” on the Consolidated Statement of Financial Position, totaled $39,396 and $40,156 at February 28, 2011 and 2010, respectively. The amounts relate primarily to subscription revenue in the Corporation’s AG Interactive segment and the licensing activities included in non-reportable segments.

Sales Taxes: Sales taxes are not included in net sales as the Corporation is a conduit for collecting and remitting taxes to the appropriate taxing authorities.

Translation of Foreign Currencies: Asset and liability accounts are translated into United States dollars using exchange rates in effect at the date of the Consolidated Statement of Financial Position; revenue and expense accounts are translated at average exchange rates during the related period. Translation adjustments are reflected as a component of shareholders’ equity within other comprehensive income. Upon sale, or upon complete or substantially complete liquidation of an investment in a foreign entity, that component of shareholders’ equity is reclassified as part of the gain or loss on sale or liquidation of the investment. Gains and losses resulting from foreign currency transactions, including intercompany transactions that are not considered permanent investments, are included in other non-operating expense (income) as incurred.

Shipping and Handling Fees: The Corporation classifies shipping and handling fees as part of “Selling, distribution and marketing expenses.” Shipping and handling costs were $119,391, $119,989 and $130,271 in 2011, 2010 and 2009, respectively.

Advertising Expenses: Advertising costs are expensed as incurred. Advertising expenses were $17,434, $16,985 and $19,784 in 2011, 2010 and 2009, respectively.

Income Taxes: Income tax expense includes both current and deferred taxes. Current tax expense represents the amount of income taxes paid or payable (or refundable) for the year, including interest and penalties. Deferred income taxes, net of appropriate valuation allowances, are recognized for the estimated future tax effects attributable to tax carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts realized for income tax purposes. The effect of a change to the deferred tax assets or liabilities as a result of new tax law, including tax rate changes, is recognized in the period that the tax law is enacted. Valuation allowances are recorded against deferred tax assets when it is more likely than not that such assets will not be realized. When an uncertain tax position meets the more likely than not recognition threshold, the position is measured to determine the amount of benefit to recognize in the financial statements. See Note 17 for further discussion.

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Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2009-17 (“ASU 2009-17”), (Consolidations Topic 810), “Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” ASU 2009-17 requires an ongoing reassessment of determining whether a variable interest gives a company a controlling financial interest in a VIE. It also requires an entity to qualitatively, rather than quantitatively, determine whether a company is the primary beneficiary of a VIE. Under the new standard, the primary beneficiary of a VIE is a party that has the controlling financial interest in the VIE and has both the power to direct the activities that most significantly impact the VIE’s economic success and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. ASU 2009-17 is effective for interim and annual reporting periods beginning after November 15, 2009. The Corporation’s adoption of this standard on March 1, 2010 did not have a material effect on its financial statements. See Note 2 for further information.

In January 2010, the FASB issued ASU No. 2010-06 (“ASU 2010-06”), “Improving Disclosures about Fair Value Measurements.” ASU 2010-06 provides amendments to ASC Topic 820, “Fair Value Measurements and Disclosures,” that require separate disclosure of significant transfers in and out of Level 1 and Level 2 fair value measurements in addition to the presentation of purchases, sales, issuances, and settlements for Level 3 fair value measurements. ASU 2010-06 also provides amendments to subtopic 820-10 that clarify existing disclosures about the level of disaggregation, and inputs and valuation techniques. The new disclosure requirements are effective for interim and annual periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements of Level 3 fair value measurements, which becomes effective for interim and annual periods beginning after December 15, 2010. On March 1, 2010, the Corporation adopted this standard, except for the requirement to separately disclose purchases, sales, issuances, and settlements in the Level 3 rollforward, which becomes effective in 2012. The Corporation’s adoption of this standard did not have a material effect on its financial statements. Also, the Corporation does not expect that the adoption of the enhanced disclosures for Level 3 fair value measurements will have a material effect on its financial statements. See Note 14 for further information.

NOTE 2 – ACQUISITIONS AND DISPOSITIONS

Papyrus Brand & Wholesale Business Acquisition / Retail Operations Disposition

Continuing the strategy of focusing on growing its core greeting card business, on April 17, 2009, the Corporation sold all rights, title and interest in certain of the assets of the Corporation’s Retail Operations segment to Schurman for $6,000 in cash and Schurman’s assumption of certain liabilities related to the Retail Operations segment. The Corporation sold all 341 of its card and gift retail store assets to Schurman, which operates stores under the American Greetings, Carlton Cards and Papyrus brands. Under the terms of the transaction, the Corporation remains subject to certain of its store leases on a contingent basis by subleasing the stores to Schurman. See Note 13 for further information. Pursuant to the terms of the agreement, the Corporation also purchased from Schurman its Papyrus trademark and its wholesale business division, which supplies Papyrus brand greeting cards primarily to leading specialty, mass merchandise, grocery and drug store channels, in exchange for $18,065 in cash and the Corporation’s assumption of certain liabilities related to Schurman’s wholesale business. In addition, the Corporation agreed to provide Schurman limited credit support through the provision of a limited guaranty (“Liquidity Guaranty”) and a limited bridge guaranty (“Bridge Guaranty”) in favor of the lenders under Schurman’s senior revolving credit facility (the “Senior Credit Facility”). See Note 11 for further information. The Corporation also purchased shares representing approximately 15% of the issued and outstanding equity interests in Schurman for $1,935, which is included in “Other assets” on the Consolidated Statement of Financial Position. The net cash paid of $14,000 related to this transaction, which has been accounted for in accordance with ASC 805, is included in “Cash payments for business acquisitions, net of cash acquired” on the Consolidated Statement of Cash Flows.

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The purchase accounting for this acquisition was completed during the fourth quarter of 2010. The fair value of the consideration given has been allocated to the assets acquired and the liabilities assumed based upon their fair values at the date of acquisition. The following represents the final purchase price allocation:

Purchase price (in millions):
Cash paid	$	20.0
Fair value of Retail Operations		6.0
Cash acquired		(6.0	)
	$	20.0
Allocation (in millions):
Current assets	$	9.9
Property, plant and equipment		0.1
Other assets		5.4
Intangible assets		4.7
Goodwill		0.8
Liabilities assumed		(0.9	)
	$	20.0

The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition was not deemed material.

Recycled Paper Greetings Acquisition

During the second quarter of 2009, the Corporation paid $44,153 to acquire, at a substantial discount, the first lien debt securities of Recycled Paper Greetings, Inc., now known as Papyrus-Recycled Greetings, Inc. The principal amount of the securities was $67,100. The cash paid for this investment is included in “Other-net” investing activities on the Consolidated Statement of Cash Flows. This investment was written down to fair market value during the fourth quarter of 2009. A loss of $2,740 was recorded as a result.

During the fourth quarter of 2009, the Corporation acquired all of the issued and outstanding capital stock of RPG Holdings, Inc. and its subsidiary, Recycled Paper Greetings, Inc. (together “RPG”). RPG is a Chicago-based creator and designer of humorous and alternative greeting cards. RPG’s cards are distributed primarily through mass merchandise retailers, drug stores and specialty retail stores. The acquisition was completed pursuant to a petition and pre-packaged plan of reorganization filed on January 2, 2009, by RPG under the U.S. Bankruptcy Code and an agreement dated December 30, 2008, between the Corporation and RPG.

On February 24, 2009, the Corporation acquired all of the issued and outstanding capital stock of RPG in exchange for: (a) approximately $17,700 in cash, which includes $4,500 of U.S. Bankruptcy Court approved professional fees and other amounts owed by RPG that were paid by the Corporation; (b) the $67,100 in principal amount of first lien debt securities held by American Greetings; (c) approximately $22,000 in aggregate principal amount of American Greetings’ 7.375% senior notes due June 1, 2016, issued under American Greetings’ existing senior notes indenture; and (d) approximately $32,700 in aggregate principal amount of American Greetings’ 7.375% notes due June 1, 2016, issued under American Greetings’ new indenture. Also in connection with the acquisition, approximately $6,500 of debtor-in-possession financing (the “DIP”) owed by RPG to American Greetings under the debtor-in-possession credit agreement put in place in the fourth quarter of 2009 was extinguished. The Corporation also incurred approximately $4,000 in transaction costs associated with this acquisition.

The purchase accounting for the RPG acquisition was completed during the third quarter of 2010. The fair value of the consideration given has been allocated to the assets acquired and the liabilities assumed based

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upon their fair values at the date of the acquisition. The following represents the final purchase price allocation:

Purchase price (in millions):
Cash paid in 2009	$	22.9
Cash paid in 2010		5.3
Fair market value of first lien debt securities		41.4
Fair market value of long-term debt issued		28.4
Cash acquired		(0.6	)
	$	97.4
Allocation (in millions):
Current assets	$	17.6
Property, plant and equipment		1.5
Other assets (including deferred tax assets)		24.2
Intangible assets		36.4
Goodwill		28.2
Liabilities assumed		(10.5	)
	$	97.4

Included in the liabilities assumed in the table above is $4,258 of accrued severance based on a management-approved detailed integration plan including the shutdown of RPG’s manufacturing and distribution facility as well as the elimination of certain redundant back office operations. The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition.

At the date of acquisition, there were two components of tax-deductible goodwill specifically related to the operations of RPG. The first component of tax-deductible goodwill of approximately $28,170 is related to goodwill for financial reporting purposes, and this asset will generate deferred income taxes in the future as the asset is amortized for income tax purposes. The second component of tax-deductible goodwill of approximately $89,806 is the amount of tax deductible goodwill in excess of goodwill for financial reporting purposes. In accordance with ASC 740, the tax benefits associated with this excess will be applied to first reduce the amount of goodwill, and then other intangible assets for financial reporting purposes in the future, if and when such tax benefits are realized for income tax purposes. See Note 9 for additional information.

Card Connection Acquisition

In March 2008, the Corporation acquired a card publisher and franchised distributor of greeting cards in the United Kingdom (“U.K.”). Cash paid, net of cash acquired, was approximately $15,600 and is reflected in investing activities on the Consolidated Statement of Cash Flows. In connection with this acquisition, intangible assets and goodwill of $5,800 and $6,100, respectively, were recorded. Approximately $8,400 of current assets and fixed assets were recorded and liabilities of approximately $4,700 were assumed. The purchase agreement provided for a contingent payment of up to 2 million U.K. Pounds Sterling to be paid based on the company’s operating results over an accumulated three-year period from the date of acquisition. The right to receive the contingent payment has subsequently been terminated with no additional payment required by the Corporation. The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition was not deemed material.

Carlton Mexico Shutdown

On September 3, 2009, the Corporation made the determination to wind down the operations of Carlton México, S.A. de C.V. (“Carlton Mexico”), its subsidiary that distributes and merchandises greeting cards, gift wrap and related products for retail customers throughout Mexico. Going forward, the Corporation will

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continue to make products available to its Mexican customers by selling to a third party distributor. The wind down resulted in the closure of Carlton Mexico’s facility in Mexico City, Mexico, and the elimination of approximately 170 positions.

In connection with the closure of this facility, the North American Social Expression Products segment recorded charges of $6,935, including asset impairments, severance charges and other shut-down costs. Additionally, during 2010, in accordance with ASC 830, “Foreign Currency Matters,” the Corporation recognized foreign currency translation adjustments totaling $11,300 in “Other operating income – net” on the Consolidated Statement of Operations. This amount represents foreign currency adjustments attributable to Carlton Mexico that, prior to the liquidation, had been accumulated in the foreign currency translation adjustment component of equity.

Party Goods Transaction

On December 21, 2009, the Corporation entered into an Asset Purchase Agreement under which it sold certain assets, equipment and processes used in the manufacture and distribution of party goods to Amscan Holdings, Inc. (“Amscan”) for a purchase price of $24,880 (the “Party Goods Transaction”). Amscan is a leading designer, manufacturer and distributor of party goods, and owns or franchises party good stores throughout the United States. Amscan and certain of its subsidiaries have historically purchased party goods, greeting cards and other social expression products from the Corporation. Under the terms of the Party Goods Transaction, the Corporation will no longer manufacture party goods, but will purchase party goods from Amscan. As a result of the Party Goods Transaction, on December 22, 2009, the Corporation announced its intention to wind down and close its party goods manufacturing and distribution facility in Kalamazoo, Michigan (“Kalamazoo facility”). The phase-out of manufacturing at the Kalamazoo facility, which commenced in early March 2010, was completed by May 2010 and the distribution activities at the Kalamazoo facility concluded as of December 2010.

In connection with the Party Goods Transaction, the Corporation also entered into various other agreements with Amscan and/or its affiliates, including a supply and distribution agreement dated December 21, 2009, with a purchase commitment of $22,500 equally spread over five years. During 2011, the Corporation purchased party goods of $6,435 under this agreement. As a result of entering into the supply and distribution agreement and agreeing that Amscan will no longer be required to purchase party goods from the Corporation, the Corporation also received a warrant valued at $16,274 to purchase 740.74 shares of the common stock of AAH, Amscan’s ultimate parent corporation at one cent per share. On December 2, 2010, the Corporation received a cash distribution from AAH totaling $6,963, which was in part a return of capital that reduced the investment by $5,663 to $10,611. On February 10, 2011, the Corporation exercised the warrant and now owns 740.74 shares of AAH. The investment in AAH is included in “Other assets” on the Consolidated Statement of Financial Position.

Through this relationship, each company will sell both DesignWare and Amscan branded party goods. The Corporation will purchase its party goods products from Amscan and will continue to distribute party goods to various channels, including to its mass merchandise, drug, grocery and specialty retail customers. Amscan will have exclusive rights to manufacture and distribute party goods into various channels, including the party store channel.

During the fourth quarter of 2010, the Corporation recorded a gain on the Party Goods Transaction of $34,178, which is included in “Other operating income – net” on the Consolidated Statement of Operations. See Note 3 for further information. In addition, the Corporation recorded $13,005 of asset impairment charges related to the Kalamazoo facility closure and incurred $2,798 in employee termination costs.

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During 2010, the above transactions and activities generated significant gains, losses and expenses and are reflected on the Consolidated Statement of Operations as follows:

	Party Goods			Mexico		Retail
(In millions)	Transaction			Shutdown		Disposition		Total
Net sales	$	–		$	0.7	$	–	$	0.7
Material, labor and other production costs		15.6			4.4		1.0		21.0
Selling, distribution and marketing expenses		0.2			1.0		–		1.2
Administrative and general expenses		–			0.6		–		0.6
Other operating (income) expense – net		(34.2	)		11.5		28.2		5.5
	$	(18.4	)	$	18.2	$	29.2	$	29.0

These gains, losses and expenses are reflected in the Corporation’s reportable segments as follows:

(In millions)
North American Social Expression Products	$	(0.2	)
Retail Operations		29.2
	$	29.0

NOTE 3 – OTHER INCOME AND EXPENSE

	2011			2010			2009
Loss on disposition of retail stores	$	–		$	28,333		$	–
Gain on disposition of calendar product lines		–			(547	)		–
Gain on disposition of candy product lines		–			(115	)		–
Gain on disposition of party goods product lines		(254	)		(34,178	)		–
Loss on recognition of foreign currency translation adjustments		–			8,627			–
Miscellaneous		(2,951	)		(2,430	)		(1,396	)
Other operating income – net	$	(3,205	)	$	(310	)	$	(1,396	)

In April 2009, the Corporation sold the rights, title and interest in certain of the assets of its retail store operations to Schurman and recognized a loss on disposition of $28,333. See Note 2 for further information.

The Corporation sold its calendar product lines in July 2009 and its candy product lines in October 2009, which resulted in gains totaling $547 and $115, respectively. Proceeds received from the sales of the calendar and candy product lines of $3,063 and $1,650, respectively, are included in “Other-net” investing activities on the Consolidated Statement of Cash Flows.

Pursuant to the Party Goods Transaction, in December 2009, the Corporation sold certain assets, equipment and processes of the party goods product lines and recorded a gain of $34,178. An additional gain of $254 was recorded in 2011 as amounts previously estimated were finalized. Cash proceeds of $24,880, which were held in escrow and recorded as a receivable at February 28, 2010, were received in 2011 and are included in “Proceeds from escrow related to party goods transaction” on the Consolidated Statement of Cash Flows. See Note 2 for further information.

During the fourth quarter of 2010, it was determined that the wind down of Carlton Mexico was substantially complete. In accordance with ASC 830, the currency translation adjustments were removed from the foreign currency translation adjustment component of equity and a loss was recognized totaling $11,300. The Corporation also recorded a loss totaling $601 and a gain of $3,274 for foreign currency translation adjustments realized in relation to two other entities determined to be liquidated in accordance with ASC 830.

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	2011			2010			2009
Foreign exchange loss (gain)	$	224		$	(4,746	)	$	483
Rental income		(1,232	)		(1,194	)		(1,432	)
(Gain) loss on asset disposal		(3,463	)		59			1,215
Miscellaneous		(1,370	)		(606	)		1,891
Other non-operating (income) expense – net	$	(5,841	)	$	(6,487	)	$	2,157

The Corporation sold the land and building associated with its Mexican operation within the North American Social Expression Products segment in August 2010 and a manufacturing facility within the International Social Expression Products segment in January 2011, and recorded gains upon disposal of approximately $1,000 and $2,819, respectively. Both assets were previously included in “Assets held for sale” at net book values on the Consolidated Statement of Financial Position as of February 28, 2010. The cash proceeds received from the sale of the Mexican assets and the manufacturing facility of $2,000 and $9,952, respectively, are included in “Proceeds from sale of fixed assets” on the Consolidated Statement of Cash Flows.

“Miscellaneous” includes, among other things, income/loss from debt and equity securities. In 2011, miscellaneous included $1,300 of dividend income related to the Corporation’s investment in AAH. In 2009, miscellaneous included a loss of $2,740 related to the Corporation’s investment in the first lien debt securities of RPG prior to the acquisition of the capital stock of RPG in February 2009. See Note 2 for further information.

NOTE 4 – EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of earnings (loss) per share and earnings (loss) per share-assuming dilution:

	2011		2010		2009
Numerator (thousands):
Net income (loss)	$	87,018	$	81,574	$	(227,759	)
Denominator (thousands):
Weighted average shares outstanding		39,983		39,468		46,544
Effect of dilutive securities:
Stock options and other		1,262		692		–
Weighted average shares outstanding – assuming dilution		41,245		40,160		46,544
Earnings (loss) per share	$	2.18	$	2.07	$	(4.89	)
Earnings (loss) per share — assuming dilution	$	2.11	$	2.03	$	(4.89	)

Approximately 3.1 million and 5.7 million stock options, in 2011 and 2010, respectively, were excluded from the computation of earnings per share-assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the respective years. For 2009, all options outstanding (totaling approximately 6.7 million) were excluded from the computation of earnings per share-assuming dilution, as the effect would have been antidilutive due to the net loss in the period. Had the Corporation reported income for the year, approximately 6.0 million stock options outstanding during the period would have been excluded from the computation of earnings per share-assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the year.

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NOTE 5 – ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The balance of accumulated other comprehensive income consisted of the following components:

	February 28, 2011			February 28, 2010
Foreign currency translation adjustments	$	26,021		$	10,856
Pension and postretirement benefits adjustments, net of tax (See Note 12)		(28,369	)		(40,672	)
Unrealized investment gain, net of tax		2			1
	$	(2,346	)	$	(29,815	)

NOTE 6 – CUSTOMER ALLOWANCES AND DISCOUNTS

Trade accounts receivable are reported net of certain allowances and discounts. The most significant of these are as follows:

	February 28, 2011		February 28, 2010
Allowance for seasonal sales returns	$	34,058	$	36,443
Allowance for outdated products		8,264		10,438
Allowance for doubtful accounts		5,374		2,963
Allowance for cooperative advertising and marketing funds		25,631		24,061
Allowance for rebates		24,920		29,338
	$	98,247	$	103,243

Certain customer allowances and discounts are settled in cash. These accounts, primarily rebates, which are classified as “Accrued liabilities” on the Consolidated Statement of Financial Position, totaled $11,913 and $15,326 as of February 28, 2011 and 2010, respectively.

NOTE 7 – INVENTORIES

	February 28, 2011		February 28, 2010
Raw materials	$	21,248	$	18,609
Work in process		6,476		6,622
Finished products		212,056		194,283
		239,780		219,514
Less LIFO reserve		78,358		75,491
		161,422		144,023
Display material and factory supplies		18,308		19,933
	$	179,730	$	163,956

There were no material LIFO liquidations in 2011 and 2009. During 2010, inventory quantities declined resulting in the liquidation of LIFO inventory layers carried at lower costs compared with current year purchases. The income statement effect of such liquidation on material, labor and other production costs was approximately $13,000. Inventory held on location for retailers with SBT arrangements, which is included in finished products, totaled approximately $42,000 and $38,000 as of February 28, 2011 and 2010, respectively.

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NOTE 8 – PROPERTY, PLANT AND EQUIPMENT

	February 28, 2011		February 28, 2010
Land	$	10,552	$	10,147
Buildings		176,879		175,086
Equipment and fixtures		662,121		651,012
		849,552		836,245
Less accumulated depreciation		607,903		593,362
	$	241,649	$	242,883

During 2011, the Corporation disposed of approximately $27,000 of property, plant and equipment that included accumulated depreciation of approximately $24,000. During 2010, the Corporation disposed of approximately $118,000 with accumulated depreciation of approximately $102,000, including the fixed assets that were part of the Retail Operations segment and the party goods product lines, which were sold during 2010.

During the fourth quarter of 2010, primarily due to the sale of the party goods product lines, impairment charges of $12,206 were recorded in “Material, labor and other production costs” on the Consolidated Statement of Operations.

Depreciation expense totaled $36,465, $39,640 and $42,843 in 2011, 2010 and 2009, respectively.

NOTE 9 – GOODWILL AND OTHER INTANGIBLE ASSETS

In accordance with ASC 350, the Corporation is required to evaluate the carrying value of its goodwill for potential impairment on an annual basis or an interim basis if there are indicators of potential impairment. During 2011 and 2010, the Corporation completed the required annual impairment test of goodwill in the fourth quarter and based on the results of the testing, no impairment charges were recorded.

During the third quarter of 2009, indicators emerged within the AG Interactive segment and one reporting unit located in the United Kingdom within the International Social Expression Products segment (the “UK Reporting Unit”) that led the Corporation’s management to conclude that a goodwill impairment test was required to be performed during the third quarter. Within the AG Interactive segment, there were three primary indicators: (1) a substantial decline in advertising revenues; (2) the e-commerce businesses not growing as anticipated; and (3) the Corporation’s belief that the segment’s current long-term cash flow forecasts may be unattainable based on the lengthening and deepening economic deterioration. The following three primary indicators emerged within the UK Reporting Unit: (1) the recent bankruptcy of a major customer; (2) a major customer implementing buying freezes, including on the Corporation’s everyday products; and (3) the Corporation’s belief that current long-term cash flow forecasts may be unattainable based on the lengthening and deepening economic deterioration.

Under ASC 350, the test for, and measurement of, impairment of goodwill consists of two steps. In the first step, the initial test for potential impairment, the Corporation compares the fair value of each reporting unit to its carrying amount. Fair values were determined using a combination of an income approach and a market based approach which were validated by a market capitalization reconciliation. Based on this evaluation, it was determined that the fair values of the AG Interactive segment and UK Reporting Unit were less than their carrying values, thus indicating potential impairment. In the second step, the measurement of the impairment, the Corporation hypothetically applies purchase accounting to the reporting units using the fair values from the first step. As a result, the Corporation recorded goodwill charges of $150,208, which included all the goodwill for the AG Interactive segment, and $82,110, which included all of the goodwill for the UK Reporting Unit. The amounts recorded in the third quarter were estimates. The AG Interactive segment impairment was adjusted down by $655 in the fourth quarter due to final purchase accounting adjustments for a final impairment total of $149,553. The required annual impairment test of goodwill was completed as of the beginning of the fourth quarter of 2009 and based on the results of the testing, no additional impairment charges were recorded.

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However, based on the continued significant deterioration of the global economic environment during the fourth quarter of 2009 and the closing share price of the Corporation’s Class A common shares at February 28, 2009, that resulted in the Corporation’s fair value of equity being below the carrying value of equity, an additional interim impairment analysis was performed at the end of the fourth quarter following the same steps as described above. Based on this analysis, it was determined that the fair values of the North American Greeting Card Division (“NAGCD”) and the Corporation’s fixtures business, which are both also the reporting units for ASC 350 purposes, were less than their carrying values. As a result, the Corporation recorded goodwill impairment charges of $47,850, which included all the goodwill for NAGCD, and $82, which included all the goodwill for the Corporation’s fixtures business. NAGCD is included in the North American Social Expression Products segment and the fixtures business is included in non-reportable segments.

A summary of the changes in the carrying amount of the Corporation’s goodwill during the years ended February 28, 2011 and 2010 by segment, is as follows:

				International
	North American			Social
	Social Expression			Expression
	Products			Products		Total
Balance at February 28, 2009	$	22,465		$	4,406	$	26,871
Acquisition related		6,510			–		6,510
Adjustment related to income taxes		(2,501	)		–		(2,501	)
Currency translation		–			226		226
Balance at February 28, 2010		26,474			4,632		31,106
Adjustment related to income taxes		(2,509	)		–		(2,509	)
Currency translation		–			306		306
Balance at February 28, 2011	$	23,965		$	4,938	$	28,903

The above adjustment related to income taxes for 2011 is a $2,509 reduction related to second component goodwill, as defined by ASC 740, which results in a reduction of goodwill for financial reporting purposes when amortized for tax purposes. See Note 2 for further discussion.

At February 28, 2011 and 2010, intangible assets, net of accumulated amortization, were $43,049 and $45,828, respectively. The following table presents information about these intangible assets, which are included in “Other assets” on the Consolidated Statement of Financial Position:

	February 28, 2011							February 28, 2010
	Gross					Net		Gross					Net
	Carrying		Accumulated			Carrying		Carrying		Accumulated			Carrying
	Amount		Amortization			Amount		Amount		Amortization			Amount
Intangible assets with indefinite useful lives:
Tradenames	$	6,200	$	–		$	6,200	$	6,200	$	–		$	6,200
Subtotal		6,200		–			6,200		6,200		–			6,200
Intangible assets with finite useful lives:
Patents		4,616		(3,558	)		1,058		4,194		(3,417	)		777
Trademarks		10,901		(9,097	)		1,804		10,071		(8,496	)		1,575
Artist relationships		19,230		(3,201	)		16,029		19,180		(1,598	)		17,582
Customer relationships		24,886		(11,672	)		13,214		24,669		(10,544	)		14,125
Other		18,586		(13,842	)		4,744		17,633		(12,064	)		5,569
Subtotal		78,219		(41,370	)		36,849		75,747		(36,119	)		39,628
Total	$	84,419	$	(41,370	)	$	43,049	$	81,947	$	(36,119	)	$	45,828

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The Corporation completed the required annual impairment test of indefinite-lived intangible assets in the fourth quarter of 2011 and 2010 and based on the results of the testing, no impairment charges were recorded for continuing operations.

In conjunction with the goodwill impairment analysis performed in the third quarter of 2009 for the AG Interactive segment and the UK Reporting Unit discussed above, intangible assets were also tested for impairment in accordance with ASC 360. Based on this testing, the Corporation recorded an impairment charge of $10,571 in the AG Interactive segment. The impairment charge was determined using a discounted cash flows analysis and related primarily to customer relationships, developed technology and trademarks.

Amortization expense for intangible assets totaled $4,583, $5,533 and $7,173 in 2011, 2010 and 2009, respectively. Estimated annual amortization expense for the next five years will approximate $4,748 in 2012, $4,681 in 2013, $4,007 in 2014, $3,121 in 2015 and $2,845 in 2016.

NOTE 10 – DEFERRED COSTS

In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. Under these agreements, the customer may receive from the Corporation a combination of cash payments, credits, discounts, allowances and other incentive considerations to be earned by the customer as product is purchased from the Corporation over the stated term of the agreement or the minimum purchase volume commitment. In the event an agreement is not completed because a minimum purchase volume commitment is not met, in most instances, the Corporation has a claim for unearned advances under the agreement. The agreements may or may not specify the Corporation as the sole supplier of social expression products to the customer.

A portion of the total consideration may not be paid by the Corporation at the time the agreement is consummated. All future payment commitments are classified as liabilities at inception until paid. The payments that are expected to be made in the next twelve months are classified as “Other current liabilities” on the Consolidated Statement of Financial Position and the remaining payment commitments beyond the next twelve months are classified as “Other liabilities.” The Corporation maintains an allowance for deferred costs related to supply agreements of $10,700 and $12,400 at February 28, 2011 and 2010, respectively. This allowance is included in “Other assets” on the Consolidated Statement of Financial Position.

Deferred costs and future payment commitments were as follows:

	February 28, 2011			February 28, 2010
Prepaid expenses and other	$	88,352		$	82,914
Other assets		327,311			310,555
Deferred cost assets		415,663			393,469
Other current liabilities		(64,116	)		(53,701	)
Other liabilities		(76,301	)		(51,803	)
Deferred cost liabilities		(140,417	)		(105,504	)
Net deferred costs	$	275,246		$	287,965

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A summary of the changes in the carrying amount of the Corporation’s net deferred costs during the years ended February 28, 2011, 2010 and 2009 is as follows:

Balance at February 29, 2008	$	338,124
Payments		105,952
Amortization		(133,548	)
Currency translation and other		(7,521	)
Balance at February 28, 2009		303,007
Payments		84,345
Amortization		(102,750	)
Currency translation and other		3,363
Balance at February 28, 2010		287,965
Payments		83,919
Amortization		(98,181	)
Currency translation and other		1,543
Balance at February 28, 2011	$	275,246

NOTE 11 – LONG AND SHORT-TERM DEBT

7.375% Notes

On May 24, 2006, the Corporation issued $200,000 of 7.375% senior unsecured notes, due on June 1, 2016 (the “Original Senior Notes”). The proceeds from this issuance were used to repurchase a portion of the Corporation’s 6.10% senior notes, due on August 1, 2028, of which $277,310 were tendered in the Corporation’s tender offer and consent solicitation, that was completed on May 25, 2006.

On February 24, 2009, the Corporation issued $22,000 of additional 7.375% senior unsecured notes described above (“Additional Senior Notes”) and $32,686 of new 7.375% unsecured notes due on June 1, 2016 (“New Notes”, together with the Original Senior Notes, and the Additional Senior Notes, the “Notes”) in conjunction with the acquisition of RPG. The original issue discount from the issuance of these notes of $26,249 was recorded as a reduction of the underlying debt issuances and is being amortized over the life of the debt using the effective interest method. Including the original issue discount, the New Notes and the Additional Senior Notes have an effective annualized interest rate of approximately 20.3%. See Note 2 for further information on the acquisition of RPG. Except as described below, the terms of the New Notes and the Additional Senior Notes are the same.

The Notes will mature on June 1, 2016 and bear interest at a fixed rate of 7.375% per annum, commencing June 1, 2009. The Notes constitute general, unsecured obligations of the Corporation. The Notes rank equally with the Corporation’s other senior unsecured indebtedness and senior in right of payment to all of the Corporation’s obligations that are, by their terms, expressly subordinated in right of payment to the Notes, as applicable. The Original Senior Notes and the Additional Senior Notes are effectively subordinated to all of the Corporation’s secured indebtedness, including borrowings under its revolving credit facility described below, to the extent of the value of the assets securing such indebtedness. The New Notes are contractually subordinated to amounts outstanding under the credit agreement, and are effectively subordinated to any other secured indebtedness that the Corporation may issue from time to time to the extent of the value of the assets securing such indebtedness.

The Notes generally contain comparable covenants as described below for the Corporation’s credit agreement. The New Notes, however, also provide that if the Corporation incurs more than an additional $10,000 of indebtedness (other than indebtedness under the revolving credit facility described below or certain other permitted indebtedness), such indebtedness must be (a) pari passu in right of payment to the New Notes and expressly subordinated in right of payment to the credit agreement at least to the same extent as the New Notes, or (b) expressly subordinated in right of payment to the New Notes. Alternatively, the Corporation can

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redeem the New Notes in whole, but not in part, at a purchase price equal to 100% of the principal amount thereof plus accrued but unpaid interest, if any, or have the subordination provisions removed from the New Notes.

The total fair value of the Corporation’s publicly traded debt, based on quoted market prices, was $237,453 (at a carrying value of $232,688) and $224,709 (at a carrying value of $230,468) at February 28, 2011 and 2010, respectively.

Credit Facility

On April 4, 2006, the Corporation entered into a $650,000 secured credit agreement (the “Original Credit Agreement”). The credit agreement included a $350,000 revolving credit facility and a $300,000 delay draw term loan. The Corporation could request one or more term loans until April 4, 2007. The revolving credit facility was scheduled to mature on April 4, 2011 and any outstanding term loans were scheduled to mature on April 4, 2013. Each term loan was to amortize in equal quarterly installments equal to 0.25% of the amount of such term loan, beginning on April 4, 2007, with the balance payable on April 4, 2013.

On February 26, 2007, the credit agreement dated April 4, 2006 was amended. The amendment decreased the size of the term loan facility to $100,000 and extended the period during which the Corporation may borrow on the term loan.

On February 23, 2009, the Corporation drew down $100,000 in principal amount under the term loan.

On June 11, 2010, the Corporation further amended and restated its Original Credit Agreement by entering into an Amended and Restated Credit Agreement (the “Amended and Restated Credit Agreement”). Pursuant to the terms of the Amended and Restated Credit Agreement, the Corporation may continue to borrow, repay and re-borrow up to $350,000 under the revolving credit facility, with the ability to increase the size of the facility to up to $400,000, subject to customary conditions. The Amended and Restated Credit Agreement also continues to provide for a $25,000 sub-limit for the issuance of swing line loans and a $100,000 sub-limit for the issuance of letters of credit. The proceeds of the borrowings under the Amended and Restated Credit Agreement may be used to provide working capital and for other general corporate purposes.

The obligations under the Amended and Restated Credit Agreement are guaranteed by the Corporation’s material domestic subsidiaries and are secured by substantially all of the personal property of the Corporation and each of its material domestic subsidiaries, including a pledge of all of the capital stock in substantially all of the Corporation’s domestic subsidiaries and 65% of the capital stock of the Corporation’s material first tier international subsidiaries. The Amended and Restated Credit Agreement, including revolving loans thereunder, will mature on June 11, 2015. In connection with the Amended and Restated Credit Agreement, the term loan was terminated and the Corporation repaid the full $99,000 outstanding under the term loan using cash on hand.

Revolving loans that are denominated in U.S. dollars will bear interest at either the U.S. base rate or the London Inter-Bank Offer Rate (“LIBOR”), at the Corporation’s election, plus a margin determined according to the Corporation’s leverage ratio. Swing line loans will bear interest at a quoted rate agreed upon by the Corporation and the swing line lender. In addition to interest, the Corporation is required to pay commitment fees on the unused portion of the revolving credit facility. The commitment fee rate is initially 0.50% per annum and is subject to adjustment thereafter based on the Corporation’s leverage ratio.

The Amended and Restated Credit Agreement contains certain restrictive covenants that are customary for similar credit arrangements, including covenants relating to limitations on liens, dispositions, issuance of debt, investments, payment of dividends, repurchases of capital stock, acquisitions and transactions with affiliates. There are also financial performance covenants that require the Corporation to maintain a maximum leverage ratio and a minimum interest coverage ratio. The credit agreement also requires the Corporation to make certain mandatory prepayments of outstanding indebtedness using the net cash proceeds received from certain dispositions, events of loss and additional indebtedness that the Corporation may incur from time to time.

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Receivables Purchase Agreement

The Corporation is also party to an amended and restated receivables purchase agreement that originally had available financing of up to $150,000. The agreement was set to expire on October 23, 2009. Under the amended and restated receivables purchase agreement, the Corporation and certain of its subsidiaries sell accounts receivable to AGC Funding, which in turn sells undivided interests in eligible accounts receivable to third party financial institutions as part of a process that provides funding to the Corporation similar to a revolving credit facility. Funding under the facility may be used for working capital, general corporate purposes and the issuance of letters of credit. This arrangement is accounted for as a financing transaction.

On March 28, 2008, the amended and restated receivables purchase agreement was amended to decrease the amount of available financing from $150,000 to $90,000.

On September 23, 2009, the amended and restated receivables purchase agreement was further amended. The amendment decreased the amount of available financing under the agreement from $90,000 to $80,000 and allows certain receivables to be excluded from the program in connection with the exercise of rights under insurance and other products that may be obtained from time to time by the Corporation or other originators that are designed to mitigate credit risks associated with the collection of accounts receivable. The amendment also extended the maturity date to September 21, 2012; provided, however, that in addition to customary termination provisions, the receivables purchase agreement will terminate upon termination of the liquidity commitments obtained by the purchaser groups from third party liquidity providers. Such commitments may be made available to the purchaser groups for 364-day periods only (initial 364-day period began on September 23, 2009), and there can be no assurances that the third party liquidity providers will renew or extend their commitments under the receivables purchase agreement. If that is the case, the receivables purchase agreement will terminate and the Corporation will not receive the benefit of the entire three-year term of the agreement. On September 22, 2010, the liquidity commitments were renewed for an additional 364-day period.

The interest rate under the accounts receivable securitization facility is based on (i) commercial paper interest rates, (ii) LIBOR rates plus an applicable margin or (iii) a rate that is the higher of the prime rate as announced by the applicable purchaser financial institution or the federal funds rate plus 0.50%. AGC Funding pays an annual commitment fee of 60 basis points on the unfunded portion of the accounts receivable securitization facility, together with customary administrative fees on outstanding letters of credit that have been issued and on outstanding amounts funded under the facility.

The amended and restated receivables purchase agreement contains representations, warranties, covenants and indemnities customary for facilities of this type, including the obligation of the Corporation to maintain the same consolidated leverage ratio as it is required to maintain under its secured credit facility.

There were no balances outstanding under the amended and restated receivables purchase agreement as of February 28, 2011 or 2010.

At February 28, 2011, the Corporation was in compliance with its financial covenants under the borrowing agreements described above.

As of February 28, 2011, there were no balances outstanding under the Corporation’s revolving credit facility or receivables purchase agreement, neither of which is publicly traded debt. The total fair value of the Corporation’s non-publicly traded debt, term loan and revolving credit facility, based on comparable publicly traded debt prices, was $99,250 (at a carrying value of $99,250) at February 28, 2010.

There was no debt due within one year as of February 28, 2011. Debt due within one year as of February 28, 2010 was $1,000.

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Long-term debt and their related calendar year due dates, net of unamortized discounts, were as follows:

	February 28, 2011		February 28, 2010
7.375% senior notes, due 2016	$	213,077	$	212,184
7.375% notes, due 2016		19,430		18,103
Term loan facility		-		98,250
6.10% senior notes, due 2028		181		181
Other		-		5
	$	232,688	$	328,723

The Corporation also provides financing for certain transactions with some of its vendors, which includes a combination of various guaranties and letters of credit. At February 28, 2011, the Corporation had credit arrangements to support the letters of credit in the amount of $134,014 with $44,730 of credit outstanding.

Aggregate maturities of long-term debt, by fiscal year, are as follows:

2012	$	-
2013		-
2014		-
2015		-
2016		-
Thereafter		254,867
	$	254,867

Interest paid in cash on short-term and long-term debt was $21,637 in 2011, $23,294 in 2010 and $21,721 in 2009.

Guaranties

In April 2009, the Corporation sold certain of the assets of its Retail Operations segment to Schurman and purchased from Schurman its Papyrus trademark and its Papyrus wholesale business division. As part of the transaction, the Corporation agreed to provide Schurman limited credit support through the provision of a Liquidity Guaranty and a Bridge Guaranty in favor of the lenders under Schurman’s Senior Credit Facility.

Pursuant to the terms of the Liquidity Guaranty, the Corporation has guaranteed the repayment of up to $12,000 of Schurman’s borrowings under the Senior Credit Facility to help ensure that Schurman has sufficient borrowing availability under this facility. The Liquidity Guaranty is required to be backed by a letter of credit for the term of the Liquidity Guaranty, which is currently anticipated to end in January 2014. Pursuant to the terms of the Bridge Guaranty, the Corporation has guaranteed the repayment of up to $12,000 of Schurman’s borrowings under the Senior Credit Facility until Schurman is able to include the inventory and other assets of the acquired retail stores in its borrowing base. The Bridge Guaranty is required to be backed by a letter of credit. The letters of credit required to back both guaranties are included within the $44,730 outstanding letters of credit mentioned above. The Bridge Guaranty is scheduled to expire in January 2014; however, upon the Corporation’s request, the Bridge Guaranty may be reduced as Schurman is able to include such inventory and other assets in its borrowing base. Pursuant to such a request, on April 1, 2011, the Bridge Guaranty was terminated and the associated letter of credit was released. See Note 1 for further information. The Corporation’s obligations under the Liquidity Guaranty and the Bridge Guaranty generally may not be triggered unless Schurman’s lenders under its Senior Credit Facility have substantially completed the liquidation of the collateral under Schurman’s Senior Credit Facility, or 91 days after the liquidation is started, whichever is earlier, and will be limited to the deficiency, if any, between the amount owed and the amount collected in connection with the liquidation. There was no triggering event or liquidation of collateral as of February 28, 2011 requiring the use of the guaranties.

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NOTE 12 – RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

The Corporation has a discretionary profit-sharing plan with a contributory 401(k) provision covering most of its United States employees. Corporate contributions to the profit-sharing plan were $9,759 and $9,338 for 2011 and 2010, respectively. In addition, the Corporation matches a portion of 401(k) employee contributions. The Corporation’s matching contributions were $4,875 and $4,787 for 2011 and 2010, respectively. Based on the 2009 operating results, the Corporation elected not to make profit-sharing or 401(k) matching contributions for 2009.

The Corporation also participates in a multi-employer pension plan covering certain domestic employees who are part of a collective bargaining agreement. Total pension expense for the multi-employer plan, representing contributions to the plan, was $467, $417 and $511 in 2011, 2010 and 2009, respectively.

The Corporation has nonqualified deferred compensation plans that provide certain officers and directors with the opportunity to defer receipt of compensation and director fees, respectively, including compensation received in the form of the Corporation’s common shares. The Corporation funds these deferred compensation liabilities by making contributions to a rabbi trust. In accordance with ASC Topic 710-10-25, “Compensation – Recognition – Deferred Compensation – Rabbi Trust,” both the trust assets and the related obligation associated with deferrals of the Corporation’s common shares are recorded in equity at cost and offset each other. There were approximately 0.2 million common shares in the trust at February 28, 2011 with a cost of $3,368 compared to approximately 0.2 million common shares with a cost of $2,856 at February 28, 2010.

In 2001, in connection with its acquisition of Gibson Greetings, Inc. (“Gibson”), the Corporation assumed the obligations and assets of Gibson’s defined benefit pension plan (the “Gibson Retirement Plan”) that covered substantially all Gibson employees who met certain eligibility requirements. Benefits earned under the Gibson Retirement Plan have been frozen and participants no longer accrue benefits after December 31, 2000. The Gibson Retirement Plan has a measurement date of February 28 or 29. No contributions were made to the plan in either 2011 or 2010. The Gibson Retirement Plan was under-funded at February 28, 2011 and 2010.

The Corporation also has an unfunded nonqualified defined benefit pension plan (the “Supplemental Executive Retirement Plan”) covering certain management employees. The Supplemental Executive Retirement Plan has a measurement date of February 28 or 29.

The Corporation also has several defined benefit pension plans at its Canadian subsidiary. These include a defined benefit pension plan covering most Canadian salaried employees, which was closed to new participants effective January 1, 2006, but eligible members continue to accrue benefits and an hourly plan in which benefits earned have been frozen and participants no longer accrue benefits after March 1, 2000. There are also two unfunded plans, one that covers a supplemental executive retirement pension relating to an employment agreement and one that pays supplemental pensions to certain former hourly employees pursuant to a prior collective bargaining agreement. All plans have a measurement date of February 28 or 29. During 2010, the Corporation settled a portion of its obligation under the Canadian hourly plan. The Corporation made a contribution to the plan, which was used to purchase annuities for the affected participants. As a result, a settlement expense of $126 was recorded.

The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits to full-time United States employees who meet certain age, service and other requirements. The plan is contributory, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. The Corporation maintains a trust for the payment of retiree health care benefits. This trust is funded at the discretion of management. The plan has a measurement date of February 28 or 29. The Corporation made changes to its postretirement health care plan in the current year by reducing the employer subsidy by the Corporation for certain groups as well as removing the death coverage for the spouses of active employees and removing the disability coverage for disabled employees unless the employee was already eligible for retiree medical coverage at the time of death or disability, respectively.

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The following table sets forth summarized information on the defined benefit pension plans and postretirement benefits plan:

	Pension Plans						Postretirement Benefits
	2011			2010			2011			2010
Change in benefit obligation:
Benefit obligation at beginning of year	$	162,845		$	140,116		$	110,921		$	120,113
Service cost		957			730			2,290			2,365
Interest cost		8,757			9,279			6,014			7,359
Participant contributions		28			32			4,165			4,591
Retiree drug subsidy payments		-			-			1,670			-
Plan amendments		198			53			(7,263	)		-
Actuarial loss (gain)		5,825			22,034			(18,639	)		(14,649	)
Benefit payments		(10,567	)		(10,080	)		(8,123	)		(8,858	)
Settlements		52			(3,512	)		-			-
Currency exchange rate changes		2,065			4,193			-			-
Benefit obligation at end of year		170,160			162,845			91,035			110,921
Change in plan assets:
Fair value of plan assets at beginning of year		102,092			86,489			66,928			61,898
Actual return on plan assets		11,311			21,691			7,130			11,180
Employer contributions		3,187			4,001			(3,165	)		(1,883	)
Participant contributions		28			32			4,165			4,591
Benefit payments		(10,567	)		(10,080	)		(8,123	)		(8,858	)
Settlements		52			(3,512	)		-			-
Currency exchange rate changes		1,778			3,471			-			-
Fair value of plan assets at end of year		107,881			102,092			66,935			66,928
Funded status at end of year	$	(62,279	)	$	(60,753	)	$	(24,100	)	$	(43,993	)

Amounts recognized on the Consolidated Statement of Financial Position consist of the following:

	Pension Plans						Postretirement Benefits
	2011			2010			2011			2010
Accrued compensation and benefits	$	(2,347	)	$	(2,335	)	$	-		$	-
Other liabilities		(59,932	)		(58,418	)		(24,101	)		(43,993	)
Net amount recognized	$	(62,279	)	$	(60,753	)	$	(24,101	)	$	(43,993	)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	56,938		$	55,275		$	1,268		$	23,611
Net prior service cost (credit)		847			828			(11,316	)		(11,766	)
Net transition obligation		43			46			-			-
Accumulated other comprehensive income	$	57,828		$	56,149		$	(10,048	)	$	11,845

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For the defined benefit pension plans, the estimated net loss, prior service cost and transition obligation that will be amortized from accumulated other comprehensive income into periodic benefit cost over the next fiscal year are approximately $2,392, $180 and $6, respectively. For the postretirement benefit plan, the estimated net loss and prior service credit that will be amortized from accumulated other comprehensive income into periodic benefit cost over the next fiscal year are approximately $0 and ($2,500), respectively.

The following table presents significant weighted-average assumptions to determine benefit obligations and net periodic benefit cost:

	Pension Plans		Postretirement Benefits
	2011	2010	2011	2010
Weighted average discount rate used to determine:
Benefit obligations at measurement date
US	5.25%	5.50-5.75%	5.50%	5.75%
International	5.15%	5.50%	N/A	N/A
Net periodic benefit cost
US	5.50-5.75%	6.75%	5.75%	6.75%
International	5.50%	7.50%	N/A	N/A
Expected long-term return on plan assets:
US	7.00%	7.00%	7.00%	7.00%
International	5.50%	6.00%	N/A	N/A
Rate of compensation increase:
US	Up to 6.50%	Up to 6.50%	N/A	N/A
International	Up to 3.00%	Up to 3.50%	N/A	N/A
Health care cost trend rates:
For year ending February 28 or 29	N/A	N/A	8.50%	9.00%
For year following February 28 or 29	N/A	N/A	10.00%	8.50%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	N/A	N/A	5.00%	5.00%
Year the rate reaches the ultimate trend rate	N/A	N/A	2021	2017

For 2011, the net periodic pension cost for the pension plans was based on long-term asset rates of return as noted above. In developing these expected long-term rate of return assumptions, consideration was given to expected returns based on the current investment policy and historical return for the asset classes.

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For 2011, the Corporation assumed a long-term asset rate of return of 7% to calculate the expected return for the postretirement benefit plan. In developing the 7% expected long-term rate of return assumption, consideration was given to various factors, including a review of asset class return expectations based on historical compounded returns for such asset classes.

	2011			2010
Effect of a 1% increase in health care cost trend rate on:
Service cost plus interest cost	$	915		$	1,036
Accumulated postretirement benefit obligation		7,571			10,262
Effect of a 1% decrease in health care cost trend rate on:
Service cost plus interest cost		(739	)		(841	)
Accumulated postretirement benefit obligation		(6,030	)		(8,373	)

The following table presents selected pension plan information:

	2011		2010
For all pension plans:
Accumulated benefit obligation	$	164,823	$	158,351
For pension plans that are not fully funded:
Projected benefit obligation		170,160		162,845
Accumulated benefit obligation		164,823		158,351
Fair value of plan assets		107,881		102,092

A summary of the components of net periodic benefit cost for the pension plans is as follows:

	2011			2010			2009
Components of net periodic benefit cost:
Service cost	$	957		$	730		$	954
Interest cost		8,757			9,279			9,128
Expected return on plan assets		(6,588	)		(5,637	)		(8,049	)
Amortization of transition obligation		6			6			6
Amortization of prior service cost		178			261			260
Amortization of actuarial loss		133			1,942			459
Settlements		(3	)		126			-
Net periodic benefit cost		3,440			6,707			2,758
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Actuarial loss		1,175			6,069			27,681
Prior service cost		198			53			-
Amortization of prior service cost		(178	)		(261	)		(260	)
Amortization of actuarial loss		(133	)		(1,942	)		(459	)
Amortization of transition obligation		(6	)		(6	)		(6	)
Settlements		3			(126	)		-
Total recognized in net periodic benefit cost and other comprehensive income	$	4,499		$	10,494		$	29,714

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A summary of the components of net periodic benefit cost for the postretirement benefit plan is as follows:

	2011			2010			2009
Components of net periodic benefit cost:
Service cost	$	2,290		$	2,365		$	3,495
Interest cost		6,014			7,359			8,682
Expected return on plan assets		(4,503	)		(4,107	)		(5,100	)
Amortization of prior service credit		(7,712	)		(7,418	)		(7,418	)
Amortization of actuarial loss		1,078			2,386			4,224
Net periodic benefit cost		(2,833	)		585			3,883
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Actuarial gain		(21,265	)		(21,723	)		(14,739	)
Prior service credit added during the year		(7,263	)		-			-
Amortization of actuarial loss		(1,078	)		(2,386	)		(4,224	)
Amortization of prior service credit		7,712			7,418			7,418
Total recognized in net periodic benefit cost and other comprehensive income	$	(24,727	)	$	(16,106	)	$	(7,662	)

At February 28, 2011 and 2010, the assets of the plans are held in trust and allocated as follows:

	Pension Plans						Postretirement Benefits
	2011			2010			2011	2010	Target Allocation
Equity securities:
US		51	%		46	%	43%	37%	15% - 35%
International		31	%		31	%	N/A	N/A	N/A
Debt securities:
US		48	%		53	%	54%	59%	55% - 75%
International		67	%		67	%	N/A	N/A	N/A
Cash and cash equivalents:
US		1	%		1	%	3%	4%	0% - 20%
International		2	%		2	%	N/A	N/A	N/A

As of February 28, 2011, the investment policy for the U.S. pension plans targets an approximately even distribution between equity securities and debt securities with a minimal level of cash maintained in order to meet obligations as they come due. The investment policy for the international pension plans targets an approximately 30/60/10 distribution between equity securities, debt securities and cash and cash equivalents.

The investment policy for the postretirement benefit plan targets a distribution among equity securities, debt securities and cash and cash equivalents as noted above. All investments are actively managed, with debt securities averaging 2.5 years to maturity with a credit rating of ‘A’ or better. This policy is subject to review and change.

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The following table summarizes the fair value of the defined benefit pension plan assets at February 28, 2011:

			Quoted prices in
			active markets for		Significant other
	Fair value at		identical assets		observable inputs
	February 28, 2011		(Level 1)		(Level 2)
U.S. plans:
Short-term investments	$	689	$	689	$	-
Equity securities		42,776		-		42,776
Fixed-income funds		40,717		-		40,717
International plans:
Short-term investments		639		639		-
Equity securities		7,191		-		7,191
Fixed-income funds		15,869		-		15,869
Total:	$	107,881	$	1,328	$	106,553

The following table summarizes the fair value of the defined benefit pension plan assets at February 28, 2010:

			Quoted prices in
			active markets for		Significant other
	Fair value at		identical assets		observable inputs
	February 28, 2010		(Level 1)		(Level 2)
U.S. plans:
Short-term investments	$	683	$	683	$	-
Equity securities		38,079		-		38,079
Fixed-income funds		43,073		-		43,073
International plans:
Short-term investments		241		241		-
Equity securities		6,487		-		6,487
Fixed-income funds		13,529		-		13,529
Total:	$	102,092	$	924	$	101,168

The following table summarizes the fair value of the postretirement benefit plan assets at February 28, 2011:

			Quoted prices in
			active markets for		Significant other
	Fair value at		identical assets		observable inputs
	February 28, 2011		(Level 1)		(Level 2)
Short-term investments	$	1,176	$	1,176	$	-
Equity securities		29,229		29,229		-
Fixed-income funds		36,530		-		36,530
Total:	$	66,935	$	30,405	$	36,530

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The following table summarizes the fair value of the postretirement benefit plan assets at February 28, 2010:

			Quoted prices in
			active markets for		Significant other
	Fair value at		identical assets		observable inputs
	February 28, 2010		(Level 1)		(Level 2)
Short-term investments	$	2,565	$	2,565	$	-
Equity securities		25,035		25,035		-
Fixed-income funds		39,328		-		39,328
Total:	$	66,928	$	27,600	$	39,328

Short-term investments:  Short-term investments are valued at the closing price on the active market based on exchange rate to the United States dollar.

Equity securities:  The fair value of common / collective trust funds are determined based on the quoted prices of the underlying investments. Common stock is valued at the closing price reported on the active market on which the individual securities are traded.

Fixed-income funds:  The fair value of common / collective trust funds are determined based on the quoted prices of the underlying investments. Fixed income funds, which primarily consist of corporate and government bonds, are valued using evaluated prices, such as dealer quotes, available trade information, spreads, bids and offers, prepayment speeds, U.S. Treasury curves and interest rate movements, provided by a pricing vendor.

Although the Corporation does not anticipate that contributions to the Gibson Retirement Plan will be required in 2012, it may make contributions in excess of the legally required minimum contribution level. Any voluntary contributions by the Corporation are not expected to exceed deductible limits in accordance with Internal Revenue Service (“IRS”) regulations.

Based on historic patterns and currently scheduled benefit payments, the Corporation expects to contribute $2,196 to the Supplemental Executive Retirement Plan in 2012. The plan is a nonqualified and unfunded plan, and annual contributions, which are equal to benefit payments, are made from the Corporation’s general funds.

In addition, the Corporation does not anticipate contributing to the postretirement benefit plan in 2012.

The benefits expected to be paid out are as follows:

			Postretirement Benefits
	Pension		Excluding Effect of		Including Effect of
	Plans		Medicare Part D Subsidy		Medicare Part D Subsidy
2012	$	11,131	$	5,289	$	4,529
2013		11,334		5,609		4,792
2014		11,392		5,826		4,874
2015		11,317		6,085		5,030
2016		11,784		6,305		6,059
2017 – 2021		57,969		33,717		32,433

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NOTE 13 – LONG-TERM LEASES AND COMMITMENTS

The Corporation is committed under noncancelable operating leases for commercial properties (certain of which have been subleased) and equipment, terms of which are generally less than 10 years. Rental expense under operating leases for the years ended February 28, 2011, 2010 and 2009 is as follows:

	2011			2010			2009
Gross rentals	$	33,452		$	47,473		$	48,332
Sublease rentals		(16,387	)		(24,891	)		(460	)
Net rental expense	$	17,065		$	22,582		$	47,872

At February 28, 2011, future minimum rental payments for noncancelable operating leases, net of aggregate future minimum noncancelable sublease rentals, are as follows:

Gross rentals:
2012	$	16,195
2013		11,599
2014		8,075
2015		6,143
2016		4,831
Later years		10,525
		57,368
Sublease rentals		(36,052	)
Net rentals	$	21,316

The majority of the sublease rentals in the table above are being paid by Schurman. These amounts relate to retail stores acquired by Schurman that are being subleased to Schurman. See Note 2 for additional information. The failure of Schurman to operate the retail stores successfully could have a material adverse effect on the Corporation, because if Schurman is not able to comply with its obligations under the subleases, the Corporation remains contractually obligated, as primary lessee, under those leases.

NOTE 14 – FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value are classified using the fair value hierarchy based upon the transparency of inputs as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The three levels are defined as follows:

•   Level 1 – Valuation is based upon quoted prices (unadjusted) in active markets for identical assets or liabilities.

•   Level 2 – Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

•   Level 3 – Valuation is based upon unobservable inputs that are significant to the fair value measurement.

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The following table summarizes the financial assets measured at fair value as of the measurement date, February 28, 2011, and the basis for that measurement, by level within the fair value hierarchy:

			Quoted prices		Quoted prices
			in active		in active
	Balance		markets for		markets for		Significant
	as of		identical assets		similar assets		unobservable
	February 28,		and liabilities		and liabilities		inputs
	2011		(Level 1)		(Level 2)		(Level 3)
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	3,223	$	3,223	$	-	$	-
Deferred compensation plan assets(1)		6,871		6,871		-		-
Total	$	10,094	$	10,094	$	-	$	-
Assets measured on a non-recurring basis:
Assets held for sale	$	5,282	$	-	$	5,282	$	-
Total	$	5,282	$	-	$	5,282	$	-

The following table summarizes the financial assets measured at fair value as of the measurement date, February 28, 2010, and the basis for that measurement, by level within the fair value hierarchy:

			Quoted prices		Quoted prices
			in active		in active
	Balance		markets for		markets for		Significant
	as of		identical assets		similar assets		unobservable
	February 28,		and liabilities		and liabilities		inputs
	2010		(Level 1)		(Level 2)		(Level 3)
Assets measured on a recurring basis:
Active employees’ medical plan trust assets	$	4,087	$	4,087	$	-	$	-
Deferred compensation plan assets(1)		4,785		4,785		-		-
Total	$	8,872	$	8,872	$	-	$	-
Assets measured on a non-recurring basis:
Assets held for sale	$	5,557	$	-	$	5,557	$	-
Total	$	5,557	$	-	$	5,557	$	-

(1) There is an offsetting liability for the obligation to its employees on the Corporation’s books.

The fair value of the investments in the active employees’ medical plan trust was considered a Level 1 valuation as it is based on the quoted market value per share of each individual security investment in an active market.

The deferred compensation plan is comprised of mutual fund assets and the Corporation’s common shares. The fair value of the mutual fund assets was considered a Level 1 valuation as it is based on each fund’s quoted market value per share in an active market. The fair value of the Corporation’s common shares was considered a Level 1 valuation as it is based on the quoted market value per share of the Class A common shares in an active market. Although the Corporation is under no obligation to fund employees’ nonqualified accounts, the fair value of the related non-qualified deferred compensation liability is based on the fair value of the mutual fund assets and the Corporation’s common shares.

Certain assets are measured at fair value on a nonrecurring basis and are subject to fair value adjustments only in certain circumstances. In accordance with ASC 360, during the fourth quarter of 2010, assets held for sale relating to the Corporation’s party goods product lines with a carrying value of $13,936 were written down to

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fair value of $5,875, less cost to sell of $318, or $5,557. This resulted in an impairment charge of $8,379, which was recorded in “Material, labor and other production costs” on the Consolidated Statement of Operations. The assets held for sale included land and buildings related to the Kalamazoo facility within the North American Social Expression Products segment. During the fourth quarter of 2011, these assets were subsequently re-measured, at fair value less cost to sell, and an additional impairment charge of $275 was recorded. The fair value of the assets held for sale was considered a Level 2 valuation as it was based on observable selling prices for similar assets that were sold within the past twelve to eighteen months. In addition, land, buildings and certain equipment associated with a distribution facility in the International Social Expression Products segment have been reclassified to “Assets held for sale” on the Consolidated Statement of Financial Position, for all periods presented, as the location met the criteria to be classified as such during 2011. Bids from third parties for the purchase of these assets exceed current book value, therefore no adjustments to the carrying values were required in 2011. The assets included in “Assets held for sale” are expected to sell within one year.

NOTE 15 – COMMON SHARES AND STOCK BASED COMPENSATION

At February 28, 2011 and 2010, common shares authorized consisted of 187,600,000 Class A and 15,832,968 Class B common shares.

Class A common shares have one vote per share and Class B common shares have ten votes per share. There is no public market for the Class B common shares of the Corporation. Pursuant to the Corporation’s Amended and Restated Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. While it is the Corporation’s general policy to repurchase Class B common shares whenever they are offered by a holder, if the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer, other than to a permitted transferee.

Total stock-based compensation expense, recognized in “Administrative and general expenses” on the Consolidated Statement of Operations, was $13,017 ($10,204 net of tax), which reduced earnings per share and earnings per share – assuming dilution by $0.26 and $0.25 per share, respectively, during the year ended February 28, 2011. During 2010, total stock-based compensation expense was $5,819 ($3,648 net of tax), which reduced both earnings per share and earnings per share – assuming dilution by $0.09 per share. During 2009, total stock-based compensation expense was $4,369 ($2,738 net of tax), which reduced both earnings per share and earnings per share – assuming dilution by $0.06 per share.

Under the Corporation’s stock option plans, options to purchase common shares are granted to directors, officers and other key employees at the then-current market price. In general, subject to continuing service, options become exercisable commencing twelve months after the date of grant in annual installments and expire over a period of not more than ten years from the date of grant. The Corporation generally issues new shares when options to purchase Class A common shares are exercised and treasury shares when options to purchase Class B common shares are exercised.

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Stock option transactions and prices are summarized as follows:

						Weighted-Average
	Number of			Weighted-		Remaining		Aggregate Intrinsic
	Class A			Average		Contractual		Value
	Options			Exercise Price		Term (in years)		(in thousands)
Outstanding at February 28, 2010		5,305,132		$	19.00
Granted		587,394			24.52
Exercised		(1,010,493	)		23.92
Cancelled		(348,102	)		21.70
Outstanding at February 28, 2011		4,533,931		$	16.01		6.0	$	14,260
Exercisable at February 28, 2011		3,557,127		$	20.96		5.5	$	8,291

						Weighted-Average
	Number of			Weighted-		Remaining		Aggregate
	Class B			Average		Contractual		Intrinsic Value
	Options			Exercise Price		Term (in years)		(in thousands)
Outstanding at February 28, 2010		1,210,520		$	20.19
Granted		118,375			24.69
Exercised		(162,500	)		24.91
Outstanding at February 28, 2011		1,166,395		$	19.96		5.7	$	2,578
Exercisable at February 28, 2011		865,187		$	22.96		5.2	$	639

The fair value of the options granted is estimated using the Black-Scholes option-pricing model with the following assumptions:

	2011			2010			2009
Risk-free interest rate		1.4	%		1.3	%		2.5	%
Dividend yield		2.3	%		6.0	%		2.7	%
Expected stock volatility		0.81			0.71			0.31
Expected life in years		2.3			2.4			2.4

The weighted average fair value per share of options granted during 2011, 2010 and 2009 was $10.43, $2.83 and $3.13, respectively. The total intrinsic value of options exercised was $9,377, $1,985 and $116 in 2011, 2010 and 2009, respectively.

During 2009, approximately 60,000 performance shares were awarded to certain executive officers under the American Greetings 2007 Omnibus Incentive Compensation Plan (the “Plan”). The performance shares represent the right to receive Class B common shares, at no cost to the officer, upon achievement of management objectives over a performance period of up to two years. The number of performance shares actually earned is based on the percentage of the officer’s target incentive award, if any, that the officer achieves during the performance period under the Corporation’s Key Management Annual Incentive Plan. The Corporation recognizes compensation expense related to performance shares ratably over the estimated period during which the shares could be earned. During 2009, the target incentive awards were not earned as operating targets were not reached and thus, no compensation expense related to the performance shares was recognized. During 2010, the management objectives were met and the executives earned all 59,864 performance shares.

In 2010, the shareholders approved an amendment to the Plan reserving an additional 1,600,000 Class A common shares and 400,000 Class B common shares for issuance under the Plan. In connection with this amendment, in April 2009, performance shares were awarded to certain of the Corporation’s employees, including executive officers under the Plan. The performance shares represent the right to receive Class A common shares or Class B common shares, at no cost to the employee, upon achievement of management objectives over up to three annual performance periods and the satisfaction of a service-based vesting period.

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The number of performance shares actually credited to a participant is based on achieving a corporate consolidated earnings before interest and taxes (“EBIT”) goal at the end of each of the three annual performance periods. Each of the three annual performance periods are subject to the same EBIT goals, which were established as of the date of grant. At the end of each performance period, provided that the performance objectives are met, the shares are then subject to a vesting requirement of two years of continuing service. The Corporation recognizes compensation expense related to performance shares ratably over the estimated combined performance and vesting period. During 2010, the required performance objectives for the first year performance period were satisfied and 709,000 performance shares were credited to participants. During 2011, the required performance objectives for the second year performance period were satisfied and 742,000 performance shares were credited to participants.

The following table summarizes the activity related to performance shares during 2011:

	Number of			Weighted-Average
	Class A			Remaining		Aggregate
	Performance			Contractual		Intrinsic Value
	Shares			Term (in years)		(in thousands)
Unvested at February 28, 2010		615,000
Credited		648,000
Vested		(286,483	)
Forfeited		(227,017	)
Unvested at February 28, 2011		749,500			1.3	$	16,227
	Number of
	Class B
	Performance
	Shares
Unvested at February 28, 2010		153,864
Credited		94,000
Vested		(106,864	)
Forfeited		-
Unvested at February 28, 2011		141,000			1.3	$	3,053

The fair value of the performance shares is estimated using the Black-Scholes option-pricing model with the following assumptions:

	2011			2010
Risk-free interest rate		1.62	%		1.54	%
Dividend yield		4.38	%		4.48	%
Expected stock volatility		0.76			0.78
Expected life in years		2.5			2.3

The fair value per share of the performance shares in 2011 and 2010 was $10.20 and $9.67, respectively.

During 2011, the Company awarded restricted share units to officers and other key employees. The restricted share units represent the right to receive Class A common shares or Class B common shares, at no cost to the employee, upon the satisfaction of a two-year continuous service-based vesting period. The Corporation recognizes compensation expense related to restricted share units ratably over the vesting period.

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The following table summarizes the activity related to restricted stock units during 2011:

	Number of			Weighted-Average
	Class A			Remaining		Aggregate
	Restricted Stock			Contractual Term		Intrinsic Value
	Units			(in years)		(in thousands)
Unvested at February 28, 2010		-
Granted		124,920
Vested		-
Forfeited		(13,921	)
Unvested at February 28, 2011		110,999			0.7	$	2,403
	Number of
	Class B
	Restricted Stock
	Units
Unvested at February 28, 2010		-
Granted		29,675
Vested		-
Forfeited		-
Unvested at February 28, 2011		29,675			1.1	$	642

The fair value of the restricted stock units is estimated using the Black-Scholes option-pricing model with the following assumptions:

	2011
Risk-free interest rate		1.09	%
Dividend yield		2.3	%
Expected stock volatility		0.90
Expected life in years		1.6

The fair value per share of the restricted share units in 2011 was $23.65 at the date of the grant.

The risk-free interest rate was based upon the U.S. Treasury yield curve at the time of the grant. Dividend yield was estimated using the Corporation’s annual dividend in the year when the award was granted. Historical information was the primary basis for the estimates of expected stock volatility and expected life of the award.

As of February 28, 2011, the Corporation had unrecognized compensation expense of approximately $3,157, $4,659, and $1,326 before taxes, related to stock options, performance shares and restricted stock units, respectively.

The unrecognized compensation expense is expected to be recognized over an average period of approximately one year. Cash received from stock options exercised for the years ended February 28, 2011, 2010 and 2009, was $18,842, $5,834, and $366, respectively. The actual tax benefit realized from the exercise of share-based payment arrangements totaled $6,510, $762, and $45 for the years ended February 28, 2011, 2010 and 2009, respectively.

The number of shares available for future grant at February 28, 2011 is 924,164 Class A common shares and 134,054 Class B common shares.

NOTE 16 – BUSINESS SEGMENT INFORMATION

The Corporation is organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution.

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The North American Social Expression Products and International Social Expression Products segments primarily design, manufacture and sell greeting cards and other related products through various channels of distribution with mass merchandise retailers as the primary channel. As permitted under ASC Topic 280, “Segment Reporting,” certain operating divisions have been aggregated into both the North American Social Expression Products and International Social Expression Products segments. The aggregated operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. Approximately 54%, 51% and 54% of the North American Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, is attributable to its top five customers. Approximately 44%, 45% and 39% of the International Social Expression Products segment’s revenue in 2011, 2010 and 2009, respectively, is attributable to its top three customers.

At February 28, 2009, the Corporation owned and operated 341 card and gift retail stores in the United States and Canada through its Retail Operations segment. The stores were primarily located in malls and strip shopping centers. The stores sold products purchased from the North American Social Expression Products segment as well as products purchased from other vendors. During the first quarter of 2010, the Corporation sold all of its card and gift retail store assets to Schurman, which operates stores under the American Greetings, Carlton Cards and Papyrus brands. See Note 2 for further information.

AG Interactive distributes social expression products, including electronic greetings, personalized printable greeting cards and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices.

The Corporation’s non-reportable operating segments primarily include licensing activities and the design, manufacture and sale of display fixtures.

The Corporation’s senior management evaluates segment performance based on earnings before foreign currency exchange gains or losses, interest income, interest expense, centrally-managed costs and income taxes. The accounting policies of the reportable segments are the same as those described in Note 1 – Significant Accounting Policies, except those that are related to LIFO or applicable to only corporate items.

Prior to the sale of the Retail Operations segment, intersegment sales from the North American Social Expression Products segment to the Retail Operations segment were recorded at estimated arm’s-length prices. Intersegment sales and profits were eliminated in consolidation. All inventories resulting from intersegment sales were carried at cost. Accordingly, the Retail Operations segment recorded full profit upon its sales to consumers.

The reporting and evaluation of segment assets include net accounts receivable, inventory on a FIFO basis, display materials and factory supplies, prepaid expenses, other assets and net property, plant and equipment. Unallocated and intersegment items include primarily cash, taxes and LIFO.

Segment results are internally reported and evaluated at consistent exchange rates between years to eliminate the impact of foreign currency fluctuations. An exchange rate adjustment is included in the reconciliation of the segment results to the consolidated results; this adjustment represents the impact on the segment results of the difference between the exchange rates used for segment reporting and evaluation and the actual exchange rates for the periods presented.

Centrally incurred and managed costs are not allocated back to the operating segments. The unallocated items include interest expense on centrally-incurred debt, domestic profit-sharing expense, settlement charges and stock-based compensation expense. In addition, the costs associated with corporate operations including the senior management, corporate finance, legal and human resource functions, among other costs, are included in the unallocated items. In 2010, unallocated items included the negotiated settlement of a lawsuit totaling $24,000, all of which was paid as of February 28, 2010.

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Operating Segment Information

	Total Revenue									Segment Earnings (Loss)
	2011			2010			2009			2011			2010			2009
North American Social Expression Products	$	1,173,599		$	1,231,624		$	1,139,203		$	210,154		$	236,125		$	106,311
Intersegment items		–			(5,104	)		(52,805	)		–			(3,511	)		(38,899	)
Exchange rate adjustment		17,884			8,659			9,050			8,170			3,800			2,539
Net		1,191,483			1,235,179			1,095,448			218,324			236,414			69,951
International Social Expression Products		256,507			250,026			245,331			19,536			16,693			(68,545	)
Exchange rate adjustment		5,205			4,006			25,396			36			153			(9,124	)
Net		261,712			254,032			270,727			19,572			16,846			(77,669	)
Retail Operations		–			11,727			170,066			–			(34,830	)		(19,727	)
Exchange rate adjustment		–			112			8,746			–			(285	)		496
Net		–			11,839			178,812			–			(35,115	)		(19,231	)
AG Interactive		78,407			80,320			82,623			14,103			11,319			(159,670	)
Exchange rate adjustment		(201	)		126			790			(112	)		100			(2,021	)
Net		78,206			80,446			83,413			13,991			11,419			(161,691	)
Non-reportable segments		61,167			53,975			62,338			9,477			7,634			(7,627	)
Unallocated		–			387			–			(106,259	)		(116,476	)		(80,193	)
Exchange rate adjustment		–			–			–			902			232			1,527
Net		–			387			–			(105,357	)		(116,244	)		(78,666	)
	$	1,592,568		$	1,635,858		$	1,690,738		$	156,007		$	120,954		$	(274,933	)

	Depreciation and Amortization							Capital Expenditures
	2011			2010		2009		2011		2010			2009
North American Social Expression Products	$	30,045		$	32,504	$	28,174	$	28,880	$	22,144		$	43,460
Exchange rate adjustment		20			11		22		-		8			52
Net		30,065			32,515		28,196		28,880		22,152			43,512
International Social Expression Products		4,409			4,585		5,120		3,495		1,273			1,226
Exchange rate adjustment		22			74		578		7		20			107
Net		4,431			4,659		5,698		3,502		1,293			1,333
Retail Operations		-			395		4,653		-		29			4,330
Exchange rate adjustment		-			18		268		-		(2	)		228
Net		-			413		4,921		-		27			4,558
AG Interactive		4,150			5,105		8,633		2,762		2,610			3,916
Exchange rate adjustment		(7	)		17		330		-		1			2
Net		4,143			5,122		8,963		2,762		2,611			3,918
Non-reportable segments		1,701			1,820		1,628		1,130		260			2,218
Unallocated		708			636		610		72		207			194
	$	41,048		$	45,165	$	50,016	$	36,346	$	26,550		$	55,733

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	Assets
	2011		2010
North American Social Expression Products	$	956,169	$	961,057
Exchange rate adjustment		4,876		2,273
Net		961,045		963,330
International Social Expression Products		117,928		136,551
Exchange rate adjustment		6,934		(1,539	)
Net		124,862		135,012
Retail Operations		2,080		1,738
Exchange rate adjustment		-		-
Net		2,080		1,738
AG Interactive		17,983		20,352
Exchange rate adjustment		56		(77	)
Net		18,039		20,275
Non-reportable segments		39,204		39,026
Unallocated and intersegment items		371,971		363,353
Exchange rate adjustment		15,201		6,917
Net		387,172		370,270
	$	1,532,402	$	1,529,651

Geographical Information

	Total Revenue						Fixed Assets - Net
	2011		2010		2009		2011		2010
United States	$	1,205,915	$	1,266,876	$	1,235,828	$	218,354	$	220,626
United Kingdom		216,309		209,059		222,918		21,099		20,041
Other international		170,344		159,923		231,992		2,196		2,216
	$	1,592,568	$	1,635,858	$	1,690,738	$	241,649	$	242,883

Product Information

	Total Revenue
	2011		2010		2009
Everyday greeting cards	$	753,027	$	764,199	$	704,380
Seasonal greeting cards		377,282		368,781		356,762
Gift packaging		222,541		221,167		240,452
Other revenue		32,355		37,566		44,339
All other products		207,363		244,145		344,805
	$	1,592,568	$	1,635,858	$	1,690,738

The “All other products” classification includes, among other things, giftware, party goods, calendars, custom display fixtures, stickers, online greeting cards and other digital products.

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Termination Benefits and Facility Closings

Termination benefits are primarily considered part of an ongoing benefit arrangement, accounted for in accordance with ASC Topic 712, “Compensation – Nonretirement Postemployment Benefits,” and are recorded when payment of the benefits is probable and can be reasonably estimated.

The Corporation recorded severance charges of $6,944, $10,814 and $15,688 in 2011, 2010 and 2009, respectively, related to headcount reductions and facility closures at several locations. During 2010, severance charges totaling $1,397 and $2,798 were recorded in the North American Social Expression Products segment related to the planned facility closures in Mexico City, Mexico and Kalamazoo, Michigan, respectively. See Note 2 for further information. The expense of $15,688 recorded in 2009 included enhanced benefits provided to certain domestic employees that were severed in connection with the headcount reductions announced in the fourth quarter of 2009. These one-time termination benefits were accounted for in accordance with ASC Topic 420, “Exit or Disposal Cost Obligations.”

The following table summarizes the severance charges by segment:

	2011		2010		2009
North American Social Expression Products	$	4,737	$	8,517	$	6,247
International Social Expression Products		773		263		4,119
Retail Operations		-		618		1,787
AG Interactive		900		802		1,626
Non-reportable		37		232		1,108
Unallocated		497		382		801
Total	$	6,944	$	10,814	$	15,688

The remaining balance of the severance accrual was $8,002 and $14,030 at February 28, 2011 and 2010, respectively. The payments expected within the next twelve months are included in “Accrued liabilities” while the remaining payments beyond the next twelve months are included in “Other liabilities” on the Consolidated Statement of Financial Position.

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NOTE 17 – INCOME TAXES

Income (loss) from continuing operations before income taxes:

	2011		2010			2009
United States	$	135,859	$	129,115		$	(136,523	)
International		20,148		(8,161	)		(138,410	)
	$	156,007	$	120,954		$	(274,933	)

Income tax expense (benefit) from the Corporation’s continuing operations has been provided as follows:

	2011		2010		2009
Current:
Federal	$	23,263	$	7,730	$	(21,530	)
International		8,980		2,079		2,918
State and local		8,104		4,303		876
		40,347		14,112		(17,736	)
Deferred		28,642		25,268		(29,438	)
	$	68,989	$	39,380	$	(47,174	)

Reconciliation of the Corporation’s income tax expense (benefit) from continuing operations from the U.S. statutory rate to the actual effective income tax rate is as follows:

	2011			2010			2009
Income tax expense (benefit) at statutory rate	$	54,602		$	42,334		$	(96,227	)
State and local income taxes, net of federal tax benefit		5,568			1,431			(1,128	)
Corporate-owned life insurance		(1,909	)		(4,688	)		(633	)
Nondeductible goodwill		-			-			61,445
International items, net of foreign tax credits		697			(2,490	)		(7,613	)
Worthless stock deduction on international subsidiary		(53	)		(6,043	)		(9,460	)
Charitable contributions carryforward expiration		-			-			2,434
Exchange loss of international liquidation		-			2,562			-
Valuation allowance		(1,067	)		302			(2,000	)
Accruals and settlements		8,866			6,313			486
Other		2,285			(341	)		5,522
Income tax at effective tax rate	$	68,989		$	39,380		$	(47,174	)

During 2011, estimated accruals and settlements increased because the Corporation received new information associated with anticipated settlements related to open years which are currently under examination.

During 2010, the Corporation determined it was eligible for a worthless stock deduction related to one of its international subsidiaries, which resulted in the recording of a benefit of $6,043.

During 2009, of the $290,166 of goodwill and other intangible assets impairment charge, $175,558 had no tax basis, and therefore, is permanently nondeductible. As a result, the prior year tax benefit was reduced by $61,445. Also, in 2009, $2,434 of a prior year net charitable contribution carryforward expired. Prior to 2009, the Corporation’s taxable income projections for 2009 supported the utilization of that carryforward in 2009. During 2009, the Corporation determined it was eligible for a worthless stock deduction related to one of its international subsidiaries, which resulted in the recording of a benefit of $9,460.

Income taxes paid from continuing operations were $23,519 in 2011, $12,881 in 2010 and $19,555 in 2009.

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Significant components of the Corporation’s deferred tax assets and liabilities are as follows:

	February 28, 2011			February 28, 2010
Deferred tax assets:
Employee benefit and incentive plans	$	54,186		$	59,859
Net operating loss carryforwards		29,850			37,722
Deferred capital loss		8,490			8,379
Deferred revenue		13,327			9,539
Net reserves not currently deductible		22,689			26,079
Charitable contributions carryforward		1,271			2,094
Foreign tax credit carryforward		26,638			35,948
Goodwill and other intangible assets		50,371			58,104
Other		9,242			2,959
		216,064			240,683
Valuation allowance		(24,042	)		(25,109	)
Total deferred tax assets		192,022			215,574
Deferred tax liabilities:
Property, plant and equipment		18,132			20,647
Other		6,340			1,057
Total deferred tax liabilities		24,472			21,704
Net deferred tax assets	$	167,550		$	193,870

Net deferred tax assets are included on the Consolidated Statement of Financial Position in the following captions:

	February 28, 2011			February 28, 2010
Deferred and refundable income taxes (current)	$	46,628		$	51,929
Deferred and refundable income taxes (noncurrent)		121,806			143,770
Deferred income taxes and noncurrent income taxes payable		(884	)		(1,829	)
Net deferred tax assets	$	167,550		$	193,870

Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases as well as from net operating loss and tax credit carryforwards, and are stated at tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets represent amounts available to reduce income tax payments in future years.

The Corporation periodically reviews the need for valuation allowances against deferred tax assets and recognizes these deferred tax assets to the extent that realization is more likely than not. Based upon a review of earnings history and trends, forecasted earnings and the relevant expiration of carryforwards, the Corporation believes that the valuation allowances provided are appropriate. At February 28, 2011, the valuation allowance of $24,042 related principally to certain international and domestic net operating loss carryforwards and deferred capital losses.

At February 28, 2011, the Corporation had deferred tax assets of approximately $8,961 for international net operating loss carryforwards, of which $4,710 has no expiration dates and $4,251 has expiration dates ranging from 2014 through 2020. In addition, the Corporation had deferred tax assets related to domestic net operating loss, state net operating loss, charitable contribution and foreign tax credit (“FTC”) carryforwards of approximately $15,231, $8,612, $1,271 and $26,638, respectively. The federal net operating loss carryforwards have expiration dates ranging from 2019 to 2027. The state net operating loss carryforwards have expiration

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dates ranging from 2012 to 2031. The charitable contribution carryforward has an expiration date of 2014. The FTC carryforwards have expiration dates ranging from 2015 to 2020.

Deferred taxes have not been provided on approximately $81,256 of undistributed earnings of international subsidiaries since substantially all of these earnings are necessary to meet their business requirements. It is not practicable to calculate the deferred taxes associated with these earnings; however, foreign tax credits would be available to reduce federal income taxes in the event of distribution.

At February 28, 2011, the Corporation had unrecognized tax benefits of $43,323 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $32,811, compared to unrecognized tax benefits of $45,661 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $33,765 at February 28, 2010. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 28, 2011 could decrease approximately $9,498 during 2012 due to anticipated settlements and resulting cash payments related to open years after 1996, which are currently under examination.

The following chart reconciles the Company’s total gross unrecognized tax benefits for the years ended February 28, 2011, 2010 and 2009:

	2011			2010			2009
Balance at beginning of year	$	45,661		$	34,760		$	27,523
Additions based on tax positions related to the current year		2,177			12,673			229
Reductions based on tax positions related to the current year		-			-			(408	)
Additions for tax positions of prior years		1,239			4,656			18,744
Reductions for tax positions of prior years		(2,405	)		(6,345	)		(6,581	)
Settlements		(2,972	)		(83	)		(4,747	)
Statute lapse		(377	)		-			-
Balance at end of year	$	43,323		$	45,661		$	34,760

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and income taxes as a component of income tax expense. During the year ended February 28, 2011, the Corporation recognized a net expense of $16,621 for interest and penalties on unrecognized tax benefits and income taxes. As of February 28, 2011, the total amount of gross accrued interest and penalties related to unrecognized tax benefits and income taxes netted to a payable of $16,312. During the year ended February 28, 2010, the Corporation recognized a net benefit of $812 for interest expense and penalties related to unrecognized tax benefits and refundable income taxes. As of February 28, 2010, the total amount of gross accrued interest and penalties included on the Consolidated Statement of Financial Position related to unrecognized tax benefits and refundable income taxes netted to a refundable of $1,042.

The Corporation is subject to examination by the IRS and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various international tax jurisdictions, including Canada, the United Kingdom, Australia, Italy, Mexico and New Zealand for tax years 2006 to the present.

NOTE 18 – SUBSEQUENT EVENTS

Continuing the strategy of focusing on growing its core greeting card business, on March 1, 2011, the Corporation’s European subsidiary, UK Greetings Ltd., acquired Watermark Publishing Limited and its wholly owned subsidiary Watermark Packaging Limited (“Watermark”). Watermark is a privately held company located in Corby, England, and is considered a leader in the United Kingdom in the innovation and design of greeting cards. Under the terms of the transaction, the Corporation acquired 100% of the equity interests of Watermark in exchange of approximately $17,069 in cash, which was held in an escrow account as of February 28, 2011.

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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Thousands of dollars except per share amounts

The following is a summary of the unaudited quarterly results of operations for the years ended February 28, 2011 and 2010:

	Quarter Ended
Fiscal 2011	May 28		Aug 27		Nov 26		Feb 28
Net sales	$	392,105	$	333,339	$	421,990	$	412,779
Total revenue		396,308		342,819		430,138		423,303
Gross profit		234,092		187,626		222,813		233,314
Net income		30,839		8,532		32,163		15,484
Earnings per share	$	0.78	$	0.21	$	0.80	$	0.39
Earnings per share — assuming dilution		0.75		0.21		0.78		0.37
Dividends declared per share		0.14		0.14		0.14		0.14

The fourth quarter of 2011 included a pretax charge of $5,503 related to scan-based trading implementations in the North American Social Expression Products segment.

	Quarter Ended
Fiscal 2010	May 29		Aug 28		Nov 27		Feb 28
Net sales	$	409,277	$	348,639	$	431,512	$	408,864
Total revenue		412,922		356,350		440,166		426,420
Gross profit		242,108		195,391		226,515		221,203
Net income		9,961		23,122		29,695		18,796
Earnings per share	$	0.25	$	0.59	$	0.75	$	0.48
Earnings per share — assuming dilution		0.25		0.59		0.75		0.46
Dividends declared per share		-		0.12		0.12		0.12

The first quarter of 2010 included a pre-tax loss on disposition of $28,333 in the Retail Operations segment. A pre-tax benefit of $6,993 was recorded during the second quarter due to higher than average death benefit income reported by our third party administrators, in relation to our corporate-owned life insurance programs. During the third quarter of 2010, the shut down of Carlton Mexico operations within the North American Social Expression Products segment resulted in pre-tax charges totaling $5,901.

The fourth quarter of 2010 included a pre-tax asset impairment charge totaling $13,005, a pre-tax gain of $34,178 related to the Party Goods Transaction, and a pre-tax severance charge of $6,555 in the North American Social Expression Products segment. Currency translation reclassification adjustments for amounts recognized in income were also recorded in the fourth quarter within the North American Social Expression Products segment and AG Interactive segment totaling pre-tax charge of $11,300 and pre-tax benefit of $3,274, respectively. The fourth quarter also included a pre-tax charge of $19,000 in relation to a legal settlement.

Quarterly earnings per share amounts do not add to the full year primarily due to share repurchases during the periods.

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Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

There were no disagreements with our independent registered public accounting firm on accounting or financial disclosure matters within the three year period ended February 28, 2011, or in any period subsequent to such date.

Item 9A.      Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

American Greetings maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and communicated to the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

American Greetings carries out a variety of on-going procedures, under the supervision and with the participation of the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of American Greetings concluded that the Corporation’s disclosure controls and procedures were effective as of February 28, 2011.

Changes in Internal Controls.

There has been no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Report of Management on Internal Control Over Financial Reporting.

The management of American Greetings is responsible for establishing and maintaining adequate internal control over financial reporting for the Corporation. American Greetings’ internal control system was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. American Greetings’ management assessed the effectiveness of the Corporation’s internal control over financial reporting as of February 28, 2011. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on management’s assessment under COSO’s “Internal Control-Integrated Framework,” management believes that as of February 28, 2011, American Greetings’ internal control over financial reporting is effective.

Ernst & Young LLP, independent registered public accounting firm, has issued an audit report on the effectiveness of internal control over financial reporting. This attestation report is set forth below.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Shareholders

American Greetings Corporation

We have audited American Greetings Corporation’s internal control over financial reporting as of February 28, 2011, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). American Greetings Corporation’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, American Greetings Corporation maintained, in all material respects, effective internal control over financial reporting as of February 28, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of American Greetings Corporation as of February 28, 2011 and February 28, 2010, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended February 28, 2011 of American Greetings Corporation and our report dated April 29, 2011 expressed an unqualified audit opinion thereon.

/s/  Ernst & Young LLP

Cleveland, Ohio

April 29, 2011

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Item 9B.      Other Information

Not applicable.

PART III

Item 10.      Directors, Executive Officers and Corporate Governance

We hereby incorporate by reference the information called for by this Item 10 from the information contained in (i) our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 24, 2011 under the headings “Proposal One – Election of Directors,” “Security Ownership – Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” and (ii) for information regarding executive officers, Part I of this Annual Report on Form 10-K.

Item 11.      Executive Compensation

We hereby incorporate by reference the information called for by this Item 11 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 24, 2011 under the headings “Compensation Discussion and Analysis,” “Fiscal 2011 Information Concerning Executive Officers,” “Director Compensation,” “Risks Related to Compensation Policies and Practices,” and “Compensation Committee Report.”

Item 12.      Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

We hereby incorporate by reference the information called for by this Item 12 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 24, 2011 under the heading “Security Ownership.”

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about our common shares that may be issued under our equity compensation plans as of February 28, 2011.

	Number of				Number of securities
	securities to be				remaining available for
	issued upon		Weighted-average		future issuance under
	exercise of		exercise price of		equity compensation
	outstanding		outstanding		plans (excluding
	options, warrants		options,		securities
Plan Category	and rights		warrants and rights		reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders(1)		6,902,178	$	16.82		1,129,006
Equity compensation plans not approved by security holders		-		N/A		-
Total		6,902,178	$	16.82		1,129,006

(1) Column (a) includes 4,533,931 Class A common shares and 1,166,395 Class B common shares that may be issued in connection with the exercise of outstanding stock options. The amount in column (a) also includes 749,500 Class A common shares and 141,000 Class B common shares that may be issued upon the settlement of outstanding performance shares that have been awarded under the Corporation’s equity compensation plans, assuming the maximum performance or other criteria have been achieved. In addition, the amount in column (a) includes 110,999 Class A common shares and 29,675 Class B common shares related to restricted stock units that may be issued upon the satisfaction of service-based vesting period. The amount in column (a) also includes 30,115 Class A common shares and 140,563 Class B common

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shares representing share equivalents that have been credited to the account of certain officers or directors who have deferred receipt of shares earned and vested under our 1997 Equity and Performance Incentive Plan or our 2007 Omnibus Incentive Compensation Plan or that were to be paid in lieu of cash directors fees under the 1995 Director Stock Plan, which will be issued under these plans upon the expiration of the deferral period.

Column (b) is the weighted-average exercise price of outstanding stock options; excludes restricted stock units, performance shares and deferred compensation share equivalents.

Column (c) includes 924,164 Class A common shares and 134,054 Class B common shares, which shares may generally be issued under the Corporation’s equity compensation plans upon the exercise of stock options or stock appreciation rights and/or vesting of awards of deferred shares, performance shares or restricted stock units.

Item 13.      Certain Relationships and Related Transactions, and Director Independence

We hereby incorporate by reference the information called for by this Item 13 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 24, 2011 under the headings “Certain Relationships and Related Transactions” and “Corporate Governance.”

Item 14.      Principal Accounting Fees and Services

We hereby incorporate by reference the information called for by this Item 14 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 24, 2011 under the heading “Independent Registered Public Accounting Firm.”

PART IV

Item 15.      Exhibits, Financial Statement Schedules

(a)  The following documents are filed as part of this Annual Report on Form 10-K

1.	Financial Statements
	Report of Independent Registered Public Accounting Firm	46
	Consolidated Statement of Operations — Years ended February 28, 2011, 2010 and 2009	47
	Consolidated Statement of Financial Position — February 28, 2011 and 2010	48
	Consolidated Statement of Cash Flows — Years ended February 28, 2011, 2010 and 2009	49
	Consolidated Statement of Shareholders’ Equity — Years ended February 28, 2011, 2010 and 2009	50
	Notes to Consolidated Financial Statements — Years ended February 28, 2011, 2010 and 2009	51
	Quarterly Results of Operations (Unaudited)	90
2.	Financial Statement Schedules
	Schedule II – Valuation and Qualifying Accounts	S-1
3.	Exhibits required by Item 601 of Regulation S-K

Item		Description
2	Plan of acquisition, reorganization, arrangement, liquidation or succession.
	2.1	Binding Letter Agreement, dated July 20, 2008, between Cookie Jar Entertainment Inc. and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.

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Item		Description
	2.2	Settlement Agreement, dated as of May 7, 2010, by and among the Corporation, Those Characters From Cleveland, Inc., Cookie Jar Entertainment, Inc., Cookie Jar Entertainment (USA), Inc. and Cookie Jar Entertainment Holdings (USA) Inc., amending that certain Binding Letter Agreement, dated July 20, 2008, between Cookie Jar Entertainment Inc. and the Corporation (confidential treatment requested as to certain portions which are omitted and filed separately with the SEC).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 2010, and is incorporated herein by reference.
	2.3	Binding Term Sheet between MoonScoop SAS and the Corporation, dated March 24, 2009.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 29, 2009.
	2.4	Asset Purchase Agreement by and among the Corporation and Amscan Holdings, Inc., dated December 21, 2009.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2010, and is incorporated herein by reference.
3	Articles of Incorporation and By-laws.
	3.1	Amended and Restated Articles of Incorporation of the Corporation. This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated July 1, 2008, and is incorporated herein by reference.
	3.2	Amended and Restated Code of Regulations of the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated July 1, 2008, and is incorporated herein by reference.
4	Instruments defining the rights of security holders, including indentures.
	4.1	Trust Indenture, dated as of July 27, 1998.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 1999, and is incorporated herein by reference.
	4.2	First Supplemental Indenture, dated May 25, 2006, to the Indenture dated July 27, 1998, with respect to the Corporation’s 6.10% Senior Notes due April 1, 2028, between the Corporation, as issuer, and JP Morgan Trust Company, National Association, as Trustee.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated May 26, 2006, and is incorporated herein by reference.
	4.3	Form of Trust Indenture, dated May 24, 2006, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 73/8% Senior Notes due June 1, 2016.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated May 22, 2006, and is incorporated herein by reference.
	4.4	Form of Global Note for the 73/8% Senior Notes due June 1, 2016.
		This Exhibit is included in the Form of Trust Indenture between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, which has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated May 22, 2006, and is incorporated herein by reference.
	4.5	First Supplemental Indenture, dated February 24, 2009, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 73/8% Senior Notes due June 1, 2016.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.

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Item		Description
	4.6	Trust Indenture, dated February 24, 2009, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 73/8% Notes due June 1, 2016.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	4.7	Form of Global Note for the 73/8% Notes due June 1, 2016.
		This Exhibit is included in the Trust Indenture, dated February 24, 2009, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 73/8% Notes due June 1, 2016, which has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
10	Material Contracts
	10.1	Amended and Restated Credit Agreement, dated as of June 11, 2010, among the Corporation, various lending institutions party thereto, PNC Bank, National Association, as the Global Administrative Agent, as the Swing Line Lender, a LC Issuer and the Collateral Agent, JPMorgan Chase Bank, N.A. and Bank of America, N.A., as Co-Syndication Agents, KeyBank National Association and The Bank of Nova Scotia as Co-Documentation Agents, and PNC Capital Markets LLC, as the Lead Arranger and Sole Bookrunner.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 28, 2010, and is incorporated herein by reference.
	10.2	Amended and Restated Pledge and Security Agreement, dated as of June 11, 2010, by and among the Corporation, each of the domestic subsidiaries of the Corporation identified therein and PNC Bank, National Association, as Collateral Agent.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 28, 2010, and is incorporated herein by reference.
	10.3	Amended and restated Guaranty of Payment of Debt, dated as of June 11, 2010, by and among each of the domestic subsidiaries of the Corporation identified therein, and PNC Bank, National Association as global administrative agent.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 28, 2010, and is incorporated herein by reference.
	10.4	Amended and Restated Receivables Purchase Agreement, dated as of October 24, 2006, among AGC Funding Corporation, the Corporation, as Servicer, members of the various Purchaser Groups from time to time party thereto and PNC Bank, National Association, as Administrator and as issuer of Letters of Credit (the “Receivables Purchase Agreement”).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated October 26, 2006, and is incorporated herein by reference.
	10.5	First Amendment to Receivables Purchase Agreement, dated January 12, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	10.6	Omnibus Amendment to Receivables Sale Agreement, Sale and Contribution Agreement and Receivables Purchase Agreement, dated as of February 28, 2007, among AGC Funding Corporation, the Corporation, Gibson Greetings, Inc., Plus Mark, Inc., members of the various Purchaser Groups from time to time party thereto, and PNC Bank, National Association, as Administrator and as issuer of Letters of Credit.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.

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Item		Description
	10.7	Third Amendment to Receivables Purchase Agreement, dated March 28, 2008.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	10.8	Fourth Amendment to Receivables Purchase Agreement, dated as of September 23, 2009. This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated September 24, 2009, and is incorporated herein by reference.
	10.9	Omnibus Amendment and Consent to Receivables Sale Agreement, Sale and Contribution Agreement and Receivables Purchase Agreement, dated as of March 1, 2011, among AGC Funding Corporation, the Corporation, Gibson Greetings, Inc., Plus Mark, Inc., members of the various Purchaser Groups from time to time party thereto, and PNC Bank, National Association, as Administrator and as Issuer of Letters of Credit.
		This Exhibit is filed herewith.
	10.10	Loan Agreement by and between Schurman Fine Papers, d/b/a Papyrus, as Borrower, and the Corporation, as Lender, dated as of April 17, 2009. This Exhibit is filed herewith.
	10.11	Limited Guaranty, issued by the Corporation to Wells Fargo Retail Finance, LLC, dated April 17, 2009. This Exhibit is filed herewith.
	*10.12	Form of Employment Contract with Specified Officers. This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*10.13	Amendment to Form of Employment Contract with Specified Officers. This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.14	American Greetings Severance Benefits Plan (Officers) – Summary Plan Description. This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.15	Amendment to American Greetings Severance Benefits Plan (Officers).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.16	American Greetings Corporation Executive Deferred Compensation Plan. This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*10.17	Amendment One to American Greetings Corporation Executive Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*10.18	Amendment Two to American Greetings Corporation Executive Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*10.19	Amendment Number Three to American Greetings Corporation Executive Deferred Compensation Plan – American Greetings Corporation Executive Third Party Option Plan.

97

Item		Description
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*10.20	Amendment Number Four to American Greetings Corporation Executive Deferred Compensation Plan and Amendment Number One to the American Greetings Corporation Executive Third Party Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated December 14, 2005, and is incorporated herein by reference.
	*10.21	Amendment Number Five to American Greetings Corporation Executive Deferred Compensation Plan.
		This Exhibit is filed herewith.
	*10.22	Form of Agreement under American Greetings Corporation Executive Deferred Compensation Plan Executive Third Party Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*10.23	American Greetings Corporation Outside Directors’ Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated December 14, 2005, and is incorporated herein by reference.
	*10.24	1992 Stock Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 33-58582), dated February 22, 1993, and is incorporated herein by reference.
	*10.25	1995 Director Stock Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 33-61037), dated July 14, 1995, and is incorporated herein by reference.
	*10.26	1996 Employee Stock Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 333-08123), dated July 15, 1996, and is incorporated herein by reference.
	*10.27	1997 Equity and Performance Incentive Plan (as amended on June 25, 2004).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 333-121982), dated January 12, 2005, and is incorporated herein by reference.
	*10.28	American Greetings Corporation 2007 Omnibus Incentive Compensation Plan, as Amended April 27, 2009.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated June 26, 2009, and is incorporated herein by reference.
	*10.29	Description of Compensation Payable to Non-Employee Directors (Fiscal 2010; 2011).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 29, 2009, and is incorporated herein by reference.
	*10.30	Description of Compensation Payable to Non-Employee Directors (Fiscal 2011; 2012).
		This Exhibit is filed herewith.
	*10.31	American Greetings Corporation Second Amended and Restated Supplemental Executive Retirement Plan (Effective October 31, 2007).

98

Item		Description
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended November 23, 2007, and is incorporated herein by reference.
	*10.32	Severance Agreement, dated as of February 28, 2011, between Robert Swellie and the Corporation.
		This Exhibit is filed herewith.
	*10.33	Employment Agreement, dated as of October 17, 2002, between Michael Goulder and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2003, and is incorporated herein by reference.
	*10.34	Amendment to Employment Agreement, effective as of January 1, 2009, between Michael Goulder and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.35	Employment Agreement, dated as of May 6, 2002, between Erwin Weiss and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2003, and is incorporated herein by reference.
	*10.36	Amendment to Employment Agreement, effective as of January 1, 2009, between Erwin Weiss and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.37	Employment Agreement, dated as of August 22, 2003, between Catherine M. Kilbane and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2004, and is incorporated herein by reference.
	*10.38	Employment Agreement, dated as of March 4, 2004, between Thomas H. Johnston and the Corporation, as amended on March 11, 2004.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*10.39	Employment Agreement, dated as of June 1, 1991, between Jeffrey M. Weiss and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2004, and is incorporated herein by reference.
	*10.40	Employment Agreement, dated as of May 1, 1997, between Zev Weiss and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2004, and is incorporated herein by reference.
	*10.41	Employment Agreement, dated April 14, 2003, between Stephen J. Smith and the Corporation.

99

Item		Description
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*10.42	Executive Employment Agreement, dated as of June 12, 2008, between John W. Beeder and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 30, 2008, and is incorporated herein by reference.
	*10.43	Amendment to Employment Agreement, effective January 1, 2009, between John W. Beeder and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.44	Key Management Annual Incentive Plan (fiscal year 2010 Description).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 29, 2009, and is incorporated herein by reference.
	*10.45	Key Management Annual Incentive Plan (fiscal year 2011 Description).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 28, 2010, and is incorporated herein by reference.
	*10.46	Form of Employee Stock Option Agreement under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*10.47	Form of Employee Stock Option Agreement (Revised) under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004) for grants on or after May 1, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*10.48	Form of Director Stock Option Agreement under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*10.49	Form of Director Stock Option Agreement (Revised) under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004) for grants on or after May 1, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*10.50	Form of Employee Stock Option Agreement under 2007 Omnibus Incentive Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 25, 2007, and is incorporated herein by reference.
	*10.51	Form of Director Stock Option Agreement under 2007 Omnibus Incentive Compensation Plan.

100

Item		Description
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 24, 2007, and is incorporated herein by reference.
	*10.52	Form of Restricted Shares Grant Agreement.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*10.53	Split-Dollar Agreement, dated May 7, 2001, between American Greetings and the Morry Weiss and Judith S. Weiss 2001 Irrevocable Insurance Trust, dated March 1, 2001, Gary Weiss, Jeffrey Weiss, Zev Weiss and Elie Weiss, co-trustees.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.54	Agreement to Terminate Split-Dollar Agreement, dated February 16, 2009, between American Greetings and the Morry Weiss and Judith S. Weiss 2001 Irrevocable Insurance Trust, dated March 1, 2001, Gary Weiss, Jeffrey Weiss, Zev Weiss and Elie Weiss, co-trustees.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.55	Agreement between American Greetings Corporation and Morry Weiss in connection with Termination of the Split-Dollar Agreement, dated February 16, 2009.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.56	Form of Performance Share Award Agreement.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2009, and is incorporated herein by reference.
	*10.57	Form of Employee Restricted Stock Unit Agreement.
		This Exhibit is filed herewith.
	*10.58	Form of Director Restricted Stock Unit Agreement.
		This Exhibit is filed herewith.
21		Subsidiaries of the Corporation.
		This Exhibit is filed herewith..
23		Consent of Independent Registered Public Accounting Firm.
		This Exhibit is filed herewith..
(31)a		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
		This Exhibit is filed herewith..
(31)b		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
		This Exhibit is filed herewith..
32		Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
		This Exhibit is filed herewith.

101

Item	Description
101	The following materials from the Corporation’s Annual Report on Form 10-K for the year ended February 28, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statement of Operations for the years ended February 28, 2011, 2010 and 2009, (ii) Consolidated Statement of Financial Position at February 28, 2011 and 2010, (iii) Consolidated Statement of Cash Flows for the years ended February 28, 2011, 2010 and 2009, and (iv) Notes to Consolidated Financial Statements for the year ended February 28, 2011.
	In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

* Management contracts or compensatory plans or arrangements required to be filed as an exhibit hereto pursuant to Item 601 of Regulation S-K.

(b)  Exhibits listed in Item 15 (a) 3. are included herein or incorporated herein by reference.

(c)  Financial Statement Schedules

The response to this portion of Item 15 is submitted below.

3. Financial Statement Schedules included in Part IV of the report:

Schedule II – Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable, and therefore have been omitted.

102

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	AMERICAN GREETINGS CORPORATION (Registrant).
Date: April 29, 2011	By: /s/  Catherine M. KilbaneCatherine M. Kilbane, Senior Vice President, General Counsel and Secretary

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:

SIGNATURE	TITLE		DATE
/s/  Morry Weiss Morry Weiss	Chairman of the Board; Director	) ) ).
/s/  Zev Weiss Zev Weiss	Chief Executive Officer (principal executive officer); Director	) ) ).
/s/  Jeffrey Weiss Jeffrey Weiss	President and Chief Operating Officer; Director	) ) ).
/s/  Scott S. Cowen Scott S. Cowen	Director	) ) ).
/s/  Jeffrey D. Dunn Jeffrey D. Dunn	Director	) ) )	April 29, 2011
/s/  William E. MacDonald, III William E. MacDonald, III	Director	) ) ).
/s/  Michael J. Merriman, Jr. Michael J. Merriman, Jr.	Director	) ) ).
/s/  Charles A. Ratner Charles A. Ratner	Director	) ) ).
/s/  Jerry Sue Thornton Jerry Sue Thornton	Director	) ) ).
/s/  Stephen J. Smith Stephen J. Smith	Senior Vice President and Chief Financial Officer (principal financial officer)	) ) ).
/s/  Joseph B. Cipollone Joseph B. Cipollone	Vice President and Chief Accounting Officer (principal accounting officer)	) ) )

103

SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
AMERICAN GREETINGS CORPORATION AND SUBSIDIARIES
(In thousands of dollars)

COLUMN A	COLUMN B		COLUMN C						COLUMN D			COLUMN E
			ADDITIONS
			(1)			(2)
	Balance		Charged to			Charged (Credited)						Balance
	at Beginning		Costs			to Other			Deductions-			at End
Description	of Period		and Expenses			Accounts-Describe			Describe			of Period
Year ended February 28, 2011:
Deduction from asset account:
Allowance for doubtful accounts	$	2,963	$	3,834		$	(47	)(A)	$	1,376	(B)	$	5,374
Allowance for seasonal sales returns	$	36,443	$	164,389		$	896	(A)	$	167,670	(C)	$	34,058
Allowance for other assets	$	12,400	$	(455	)	$	-		$	1,245	(D)	$	10,700 .
Year ended February 28, 2010:.
Deduction from asset account:
Allowance for doubtful accounts	$	5,006	$	478		$	264	(A)	$	2,785	(B)	$	2,963
Allowance for seasonal sales returns	$	47,121	$	179,109		$	1,854	(A)	$	191,641	(C)	$	36,443
Allowance for other assets	$	30,897	$	(3,786	)	$	-		$	14,711	(D)	$	12,400 .
Year ended February 28, 2009:.
Deduction from asset account:
Allowance for doubtful accounts	$	3,768	$	4,869		$	(18	)(A) (E)	$	3,613	(B)	$	5,006
Allowance for seasonal sales returns	$	57,126	$	223,095		$	(3,068	)(A) (E)	$	230,032	(C)	$	47,121
Allowance for other assets	$	29,700	$	4,547		$	-		$	3,350	(D)	$	30,897

Note A:  Translation adjustment on foreign subsidiary balances.

Note B:  Accounts charged off, less recoveries.

Note C:  Sales returns charged to the allowance account for actual returns.

Note D:  Deferred contract costs charged to the allowance account.

Note E:   Includes additions of $577 for the allowance for doubtful accounts and $2,348 for the allowance for seasonal sales returns due to business acquisitions during 2009.

S-1

EX-10.9

Exhibit 10.9

OMNIBUS AMENDMENT AND CONSENT

     THIS OMNIBUS AMENDMENT AND CONSENT (this “Amendment”), dated as of March 1, 2011 is by and among:

     (i) PLUS MARK LLC (as successor to Plus Mark, Inc.) (“Plus Mark”);

     (ii) AGC FUNDING CORPORATION (“Funding”);

     (iii) AMERICAN GREETINGS CORPORATION (“Greetings”);

     (iv) PNC BANK, NATIONAL ASSOCIATION (in its individual capacity, “PNC”), as purchaser agent for Market Street Funding LLC, as Administrator for each Purchaser Group (in such capacity, the “Administrator”) and as issuer of Letters of Credit (in such capacity, together with its successors and permitted assigns in such capacity, the “LC Bank”); and

     (v) MARKET STREET FUNDING LLC (in its individual capacity, “Market Street”), as a Conduit Purchaser and as a Related Committed Purchaser.

RECITALS

     1. Greetings and Plus Mark are parties to that certain Amended and Restated Receivables Sale Agreement, dated as of October 24, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Receivables Sale Agreement”);

     2. Greetings and Funding are parties to that certain Amended and Restated Sale and Contribution Agreement, dated as of October 24, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Sale and Contribution Agreement”);

     3. Funding, Greetings, as the Servicer, the Administrator, PNC, Market Street and the LC Bank are parties to that certain Amended and Restated Receivables Purchase Agreement, dated as of October 24, 2006 (as amended, restated, supplemented or otherwise modified from time to time, the “Receivables Purchase Agreement”; together with the Receivables Sale Agreement and the Sale and Contribution Agreement, each an “Agreement” and collectively, the “Agreements”);

     4. On or about the date hereof, Plus Mark, Inc., an Ohio corporation, has converted to Plus Mark LLC, an Ohio limited liability company (the “Subject Name Change”); and

     5. The parties hereto desire to amend each of the Agreements to which it is a party as set forth herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

     1. Certain Defined Terms. Capitalized terms that are used herein without definition and that are defined in, or by reference in, Exhibit I to the Receivables Purchase Agreement shall have the same meanings herein as therein defined.

     2. Amendment to Agreements. Each of the Agreements is hereby amended as follows:

     (a) To reflect the occurrence of the Subject Name Change (i) each reference to “Plus Mark, Inc.” is replaced with a reference to “Plus Mark LLC” and (ii) each reference to “corporation” in each instance referring to Plus Mark is replaced with a reference to “limited liability company”.

     (b) Plus Mark hereby (i) assumes all rights, covenants, powers, duties, obligations, responsibilities and liabilities of Plus Mark, Inc. under each of the Agreements and the other Transaction Documents (to the extent that Plus Mark, Inc. was party thereto or bound thereby), whether arising prior to or after the effectiveness hereof and (ii) acknowledges and agrees that it shall be bound by, and agrees to perform, all of the covenants, duties, obligations and responsibilities to which it is subject under, each of the Agreements and the other Transaction Documents (to the extent that Plus Mark, Inc. was party thereto or bound thereby), whether arising prior to or after the effectiveness hereof.

     3. Notice; Consent.

     (a) Notice. Plus Mark hereby provides notice of its intent to perform the Subject Name Change and requests that each of the parties hereto hereby acknowledge and consent to such conversion.

     (b) Consent. Each of the parties hereto hereby acknowledges such notice and consents to the Subject Name Change.

     4. Representations and Warranties. Each of Plus Mark, Funding and Greetings hereby represents and warrants to each of the other parties hereto as follows:

     (a) Representations and Warranties. The representations and warranties made by it in each of the Agreements and the other Transaction Documents are true and correct in all material respects as of the date hereof (except to the extent that such representations and warranties relate expressly to an earlier date, and in which case such representations and warranties shall be true and correct in all material respects as of such earlier date).

     (b) Enforceability. The execution and delivery by it of this Amendment, and the performance of each of its obligations under this Amendment and the Agreements to which it is a party, as amended hereby, are within each of its organizational powers and have been duly authorized by all necessary organizational action on its part. This Amendment and each of the Agreements to which it is a party, as amended hereby, are its valid and legally binding obligations, enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws from time to time in effect affecting the enforcement of creditors’ rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law.

2

     (c) No Default. Both before and immediately after giving effect to this Amendment and the transactions contemplated hereby, no Receivables Sale Termination Event, Sale and Contribution Termination Event, Termination Event or Unmatured Termination Event exists or shall exist.

     5. Effect of Amendment. All provisions of each of the Agreements, as expressly amended and modified by this Amendment, shall remain in full force and effect and are hereby ratified. After this Amendment becomes effective, all references in each of the Agreements (or in any other Transaction Document) to “this Agreement”, “hereof”, “herein” or words of similar effect referring to such Agreement shall be deemed to be references to such Agreement as amended by this Amendment. This Amendment shall not be deemed, either expressly or impliedly, to waive, amend or supplement any provision of any Agreement other than as set forth herein.

     6. Effectiveness. This Amendment shall become effective as of the date hereof upon receipt by the Administrator of each of the following:

     (a) counterparts of this Amendment duly executed by each of the other parties hereto;

     (b) a favorable opinion of Calfee, Halter & Griswold LLP, counsel to Plus Mark, dated within seven (7) days of the date hereof, covering certain security interest matters, in form and substance satisfactory to the Administrator;

     (c) a favorable opinion of Christopher W. Haffke, Deputy General Counsel of Plus Mark, dated within seven (7) days of the date hereof, covering certain limited liability company matters, in form and substance satisfactory to the Administrator;

     (d) a certificate of the Secretary or Assistant Secretary of Plus Mark, dated within seven (7) days of the date hereof, certifying (i) the names and true signatures of its officers who are authorized to sign this Amendment, (ii) the resolutions of the Sole Member of Plus Mark authorizing this Amendment and the transactions contemplated hereby and (iii) the Articles of Organization and Operating Agreement of Plus Mark; and

     (e) a good standing certificate with respect to Plus Mark issued by the Secretary of State of the State of Ohio and dated within seven (7) days of the date hereof.

     7. Authorization to File Financing Statements. Plus Mark hereby authorizes, and each of the parties hereto hereby consent to, the filing of (at the expense of Plus Mark) the UCC-1 financing statement in the form of Exhibit A hereto and the UCC-3 financing statement amendment in the form of Exhibit B hereto.

     8. Costs and Expenses. Plus Mark agrees to pay (or cause to be paid) on demand, all costs and expenses of PNC, the Administrator, the LC Bank and Market Street (including, without limitation, the reasonable fees and expenses of counsel) incurred in connection with this Amendment, the transactions contemplated hereby and the Subject Name Change.

3

     9. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute but one and the same instrument. Delivery of an executed counterpart hereof by facsimile or by email of a .pdf copy thereof shall be effective as delivery of an originally executed counterpart hereof.

     10. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York (including for such purpose Sections 5-1401 and 5-1402 of the general obligations law of the State of New York).

     11. Section Headings. The various headings of this Amendment are included for convenience only and shall not affect the meaning or interpretation of this Amendment, any of the Agreements or any provision hereof or thereof.

(signature pages follow)

4

     IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.

AGC FUNDING CORPORATION
By:	/s/ Gregory Steinberg
	Name:	Gregory Steinberg
	Title:	Treasurer
AMERICAN GREETINGS CORPORATION
By:	/s/ Gregory Steinberg
	Name:	Gregory Steinberg
	Title:	Treasurer
PLUS MARK LLC
By:	/s/ Gregory Steinberg
	Name:	Gregory Steinberg
	Title:	Treasurer

Omnibus Amendment and Consent
(American Greetings)

S-1

PNC BANK, NATIONAL ASSOCIATION, as Administrator
By:	/s/ Scott D. Beran
	Name:	Scott D. Beran
	Title:	Vice President
PNC BANK, NATIONAL ASSOCIATION, as Purchaser Agent for Market Street Funding LLC
By:	/s/ Scott D. Beran
	Name:	Scott D. Beran
	Title:	Vice President
PNC BANK, NATIONAL ASSOCIATION, as LC Bank
By:	/s/ Scott D. Beran
	Name:	Scott D. Beran
	Title:	Vice President

Omnibus Amendment and Consent
(American Greetings)

S-2

MARKET STREET FUNDING LLC, as a Conduit Purchaser and as a Related Committed Purchaser
By:	/s/ Doris J. Hearn
	Name:	Doris J. Hearn
	Title:	Vice President

Omnibus Amendment and Consent
(American Greetings)

S-3

EXHIBIT A

UCC-1 FINANCING STATEMENT

[attached]

Omnibus Amendment and Consent
(American Greetings)

Exhibit A-1

EXHIBIT B

UCC-3 FINANCING STATEMENT AMENDMENT

[attached]

Omnibus Amendment and Consent
(American Greetings)

Exhibit B-1

EX-10.10

Exhibit 10.10

Execution Version

THIS INSTRUMENT AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN INTERCREDITOR AND SUBORDINATION AGREEMENT, DATED AS OF THE DATE HEREOF (THE “SUBORDINATION AGREEMENT”), AMONG BORROWER (AS HEREINAFTER DEFINED), LENDER (AS HEREINAFTER DEFINED) AND SENIOR AGENT (AS HEREINAFTER DEFINED), TO THE INDEBTEDNESS (INCLUDING INTEREST) OWED BY BORROWER PURSUANT TO THAT CERTAIN FIRST AMENDED LOAN AND SECURITY AGREEMENT, DATED AS OF THE DATE HEREOF (THE “SENIOR LOAN AGREEMENT”), AMONG BORROWER, THE SUBSIDIARIES OF BORROWER PARTY THERETO, THE LENDERS FROM TIME TO TIME PARTY THERETO AND SENIOR AGENT AND PURSUANT TO THE OTHER LOAN DOCUMENTS (AS DEFINED IN THE SENIOR LOAN AGREEMENT) AS SUCH SENIOR LOAN AGREEMENT AND OTHER LOAN DOCUMENTS MAY BE AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME AND TO INDEBTEDNESS REFINANCING THE INDEBTEDNESS THEREUNDER AS CONTEMPLATED BY THE SUBORDINATION AGREEMENT; AND EACH HOLDER OF THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.

LOAN AGREEMENT

by and between

SCHURMAN FINE PAPERS, d/b/a PAPYRUS

as Borrower,

and

AMERICAN GREETINGS CORPORATION

as Lender

Dated as of April 17, 2009

TABLE OF CONTENTS

			Page
1.	DEFINITIONS AND CONSTRUCTION			1
	1.1	Definitions		1
	1.2	Accounting Terms		16
	1.3	Code		16
	1.4	Construction		16
	1.5	Schedules and Exhibits		16
2.	LOAN AND TERMS OF PAYMENT			16
	2.1	Revolving Credit		16
	2.2	Procedure for Borrowing		17
	2.3	Payments		17
	2.4	Interest Rates: Rates, Payments, and Calculations		17
	2.5	Crediting Payments		18
	2.6	Designated Account		19
	2.7	Maintenance of Loan Account; Statements of Obligations		19
	2.8	Fees		19
3.	CONDITIONS; TERM OF AGREEMENT			19
	3.1	Conditions Precedent to Initial Extension of Credit		19
	3.2	Conditions Precedent to all Extensions of Credit		21
	3.3	Term		22
	3.4	Effect of Termination		22
	3.5	Early Termination by Borrower; Reduction of Commitment		22
4.	REPRESENTATIONS AND WARRANTIES			23
	4.1	No Encumbrances		23
	4.2	Records		23
	4.3	Legal Status		23
	4.4	Due Organization and Qualification; Subsidiaries		23
	4.5	Due Authorization; No Conflict		24
	4.6	Litigation		25
	4.7	No Material Adverse Change		25
	4.8	Fraudulent Transfer		25

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TABLE OF CONTENTS
(continued)

			Page
	4.9	Employee Benefits		26
	4.10	Environmental Condition		26
	4.11	Brokerage Fees		26
	4.12	Intellectual Property		26
	4.13	Leases		26
	4.14	Indebtedness		26
	4.15	Filing of Tax Returns and Payment of Taxes		27
	4.16	Royalty Payments		27
	4.17	Complete Disclosure		27
	4.18	Reserved		27
	4.19	Insurance		27
	4.20	Requirements of Law		28
	4.21	No Margin Stock		28
	4.22	Investment Company Status		28
	4.23	No Events of Default		28
	4.24	Use of Proceeds		28
	4.25	Shareholder Agreements		28
	4.26	Investments		28
5.	AFFIRMATIVE COVENANTS			28
	5.1	Accounting System		28
	5.2	Financial Statements, Reports, Certificates		28
	5.3	Returns		30
	5.4	Maintenance of Properties		30
	5.5	Tax Matters		31
	5.6	Insurance		31
	5.7	Location of Inventory and Equipment		32
	5.8	Compliance with Laws		32
	5.9	Leases		32
	5.10	Existence		32
	5.11	Environmental		32

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TABLE OF CONTENTS
(continued)

			Page
	5.12	Immediate Notice to Lender		32
	5.13	Disclosure Updates		33
	5.14	Solvency		33
	5.15	Line of Business: Borrower and Subsidiaries		33
	5.16	Royalty Payments		33
6.	NEGATIVE COVENANTS			34
	6.1	Indebtedness		34
	6.2	Liens		35
	6.3	Restrictions on Fundamental Changes		35
	6.4	Disposal of Assets		35
	6.5	Change of Name or Address		35
	6.6	Nature of Business		35
	6.7	Prepayments and Amendments		35
	6.8	Change of Control		36
	6.9	Distributions		36
	6.10	Accounting Methods		36
	6.11	Investments		36
	6.12	Transactions with Affiliates		36
	6.13	Store Openings and Closings		36
	6.14	Suspension		37
	6.15	Use of Proceeds		37
	6.16	Benefit Plans		37
	6.17	Warrants		37
	6.18	Shareholder Agreements		37
	6.19	Fiscal Year		37
7.	EVENTS OF DEFAULT			37
	7.1	Payment		37
	7.2	Covenants, etc.		37
	7.3	Attachment		37
	7.4	Insolvency		38

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TABLE OF CONTENTS
(continued)

			Page
	7.5	Involuntary Insolvency		38
	7.6	Injunction		38
	7.7	Levy		38
	7.8	Judgment		38
	7.9	Material Agreements		38
	7.10	Insurance		39
	7.11	Subordinated Debt		39
	7.12	Misrepresentation		39
	7.13	Loan Documents		39
	7.14	Material Adverse Change		39
	7.15	Change of Control		39
	7.16	Material Restraint		39
8.	LENDER’S RIGHTS AND REMEDIES			39
	8.1	Rights and Remedies		39
	8.2	Remedies Cumulative		40
9.	TAXES AND EXPENSES			40
10.	WAIVERS; INDEMNIFICATION			40
	10.1	Demand; Protest; etc.		40
	10.2	Indemnification		40
	10.3	Costs and Expenses of Lender		41
11.	NOTICES			42
12.	CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER			43
13.	MISCELLANEOUS PROVISIONS			44
	13.1	Successors		44
	13.2	Amendments and Waivers		44
	13.3	No Waivers; Cumulative Remedies		44
	13.4	Reliance by Lender		44
14.	GENERAL PROVISIONS			44
	14.1	Effectiveness		44
	14.2	Section Headings		44

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TABLE OF CONTENTS
(continued)

		Page
14.3	Reserved		44
14.4	Severability of Provisions		44
14.5	Amendments in Writing		44
14.6	Counterparts; Telefacsimile Execution		45
14.7	Revival and Reinstatement of Obligations		45
14.8	Integration		45
14.9	Reserved		45
14.10	Press Releases		45
14.11	No Strict Construction		45

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TABLE OF CONTENTS

EXHIBITS AND SCHEDULES

Exhibit A-1	Form of Compliance Certificate
Exhibit B-1	Business Plan
Exhibit 2.1(f)	Form of Revolving Credit Note
Schedule P-1	Permitted Liens
Schedule 4.3	Legal Status
Schedule 4.4(b)	Capitalization of Borrower
Schedule 4.4(c)	Borrower’s Subsidiaries
Schedule 4.4(d)	Options and Warrants
Schedule 4.5	Consents, Approvals, and Registrations
Schedule 4.6(a)	Litigation
Schedule 4.10	Environmental Matters
Schedule 4.12	Intellectual Property
Schedule 4.14	Permitted Indebtedness
Schedule 4.16	Royalty Contracts and Payments
Schedule 4.19	Insurance
Schedule 4.25	Shareholder Agreements
Schedule 4.26	Existing Permitted Investments
Schedule 5.7	Location of Inventory and Equipment
Schedule 6.15	Subleases

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LOAN AGREEMENT

     THIS LOAN AGREEMENT (this “Agreement”) is entered into as of April 17, 2009 by and between AMERICAN GREETINGS CORPORATION, an Ohio corporation (“Lender”), with offices at One American Road, Cleveland, Ohio 44144, and SCHURMAN FINE PAPERS d/b/a PAPYRUS (“Papyrus” or “Borrower”), in consideration of mutual covenants contained herein and benefits derived herefrom.

RECITALS

     WHEREAS, Borrower has requested that Lender provide, and Lender is willing to provide, a revolving credit facility on the terms and conditions set forth in this Agreement and the other Loan Documents.

     NOW THEREFORE, in consideration of the mutual covenants contained herein and the benefits to be derived herefrom, the parties hereto hereby agree as follows.

WITNESSETH:

1. DEFINITIONS AND CONSTRUCTION.

     1.1 Definitions.

     As used in this Agreement, the following terms shall have the following definitions:

     “Accounts” means all of Borrower’s now owned or hereafter acquired rights, title, and interests with respect to “accounts” (as such term is defined from time to time in the Code and including, without limitation, credit card receivables), and any and all supporting obligations in respect thereof.

     “Acquired Assets” means the “Retailed Purchased Assets” as such term is defined in the Purchase and Sale Agreement.

     “Act” has the meaning set forth in Section 14.9.

     “Administrative Fee” has the meaning set forth in Section 2.8(d).

     “Advances” has the meaning set forth in Section 2.1(a).

     “Affiliate” means, as applied to any Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person, whether through the ownership of Stock, by contract, or otherwise; provided, however, that, for purposes of Section 6.12 hereof: (a) any Person which owns directly or indirectly 10% or more of the securities having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed to control such Person; (b) each director (or comparable manager) of a

Person shall be deemed to be an Affiliate of such Person; and (c) each partnership or joint venture in which a Person is a partner or joint venturer shall be deemed to be an Affiliate of such Person. In no event shall Lender be deemed an Affiliate of Borrower.

     “Agreement” has the meaning set forth in the preamble hereto.

     “AG Credit Agreement” means that certain Credit Agreement, dated as of April 4, 2006, by and among Lender, the foreign subsidiaries of Lender from time to time party thereto, the lenders from time to time party thereto, National City Bank, as global administrative agent, and the other agents party thereto, as the same may be from time to time modified, amended, restated or supplemented, and any renewal, extension or refinancing thereof.

     “Applicable Law” means as to any Person: (i) all statutes, rules, regulations, orders, treaties or other requirements having the force of law, and (ii) all court orders, judgments, opinions, decrees and injunctions, arbitrator’s decisions, and/or similar rulings, in each instance (i) and (ii) of or by any federal, state, municipal, and other Governmental Authority, or court, tribunal, panel, or other body which has or claims jurisdiction over such Person, or any property of such Person, or of any other Person for whose conduct such Person would be responsible.

     “Authorized Person” means the Chief Executive Officer or the Chief Financial Officer of Borrower, or any other officer or employee designated by the Board of Directors of Borrower in writing to Lender and reasonably acceptable to Lender.

     “Availability” means, as of any date of determination, the result of

          (a) the Maximum Revolver Amount

     Minus

          (b) the aggregate unpaid balance of the Loan Account

     Minus

          (c) the undrawn face amount of the Letter of Credit (Bridge).

     “Bankruptcy Code” means the United States Bankruptcy Code, as in effect from time to time.

     “Base Rate” means the greater of (i) the “Base Rate” as defined in the AG Credit Agreement and (ii) the sum of the “Adjusted Eurodollar Rate” as defined in the AG Credit Agreement plus 1.0%.

     “Base Rate Margin” means 6.5% per annum.

     “Benefit Plan” means a “defined benefit plan” (as defined in Section 3(35) of ERISA) for which Borrower or any Subsidiary or ERISA Affiliate of Borrower has been an “employer” (as defined in Section 3(5) of ERISA) within the past six years.

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     “Board of Directors” means the board of directors (or comparable managers) of Borrower or any committee thereof duly authorized to act on behalf thereof.

     “Books” means all of Borrower’s and its Subsidiaries’ now owned or hereafter acquired books and records (including all of its Records indicating, summarizing, or evidencing its assets or liabilities, all of Borrower’s or its Subsidiaries’ Records relating to its or their business operations or financial condition, and all of its or their goods (as defined in the Code) or General Intangibles related to such information).

     “Borrower” has the meaning set forth in the preamble to this Agreement.

     “Borrowing” means a borrowing hereunder consisting of Advances made on the same day by Lender.

     “Business Day” means any day that is not a Saturday, Sunday, or other day on which national banks are authorized or required to close in Cleveland, Ohio.

     “Business Plan” means the set of Projections of Borrower for the period following the Closing Date to January 2011 (on a year by year basis) attached hereto as Exhibit B-1, and similar sets of monthly and annual Projections required to be delivered pursuant to Section 5.2 of this Agreement, together, in each case, with any amendment, modification or revision thereto approved by Lender in its Permitted Discretion.

     “Capital Expenditures” means expenditures for the purchase or construction of fixed assets, plant and equipment which are capitalized in accordance with GAAP.

     “Capital Lease” means a lease that is required to be capitalized for financial reporting purposes in accordance with GAAP.

     “Capitalized Lease Obligation” means any Indebtedness represented by obligations under a Capital Lease.

     “Cash Equivalents” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within one year from the date of acquisition thereof, (b) marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having the highest rating obtainable from either S&P or Moody’s, (c) commercial paper maturing no more than 270 days from the date of acquisition thereof and, at the time of acquisition, having a rating of A-1 or P-1, or better, from S&P or Moody’s, and (d) certificates of deposit or bankers’ acceptances maturing within one year from the date of acquisition thereof either (i) issued by any bank organized under the laws of the United States or any state thereof which bank has a rating of A or A2, or better, from S&P or Moody’s, or (ii) certificates of deposit less than or equal to $100,000 in the aggregate issued by any other bank insured by the Federal Deposit Insurance Corporation.

     “Change of Control” means (a) any “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Exchange Act), other than Permitted Holders, becomes the beneficial

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owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 20% of the Stock of Borrower having the right to vote for the election of members of the Board of Directors of Borrower; (b) a majority of the members of the Board of Directors of Borrower do not constitute Continuing Directors; (c) Parent or a Subsidiary of Parent ceases to collectively own and control, directly or indirectly, 55% of the outstanding capital Stock or limited liability company membership interests of Borrower; or (d) Borrower ceases to own and control, directly or indirectly, 100% of the outstanding capital Stock or limited liability company membership interests of any of its direct or indirect Subsidiaries.

     “Closing Date” means the date on which all of the conditions precedent set forth at Section 3.1 are satisfied as determined by Lender in its Permitted Discretion.

     “Code” means the Uniform Commercial Code, as in effect from time to time in the State of Ohio.

     “Commitment” means Ten Million Dollars ($10,000,000.00).

     “Compliance Certificate” means a certificate substantially in the form of Exhibit A-1 delivered by the chief financial officer of Borrower to Lender.

     “Consolidated” means when used to modify a financial term, test, statement, or report, refers to the application or preparation of such term, test, statement or report (as applicable) based upon the consolidation, in accordance with GAAP, of the financial condition or operating results of Borrower and its Subsidiaries.

     “Continuing Director” means (a) any member of the Board of Directors of Borrower who was a director (or comparable manager) of Borrower on the Closing Date, and (b) any individual who becomes a member of the Board of Directors after the Closing Date if such individual was appointed or nominated for election to the Board of Directors by a majority of the Continuing Directors, but excluding any such individual originally proposed for election in opposition to the Board of Directors in office at the Closing Date in an actual or threatened election contest relating to the election of the directors (or comparable managers) of Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and whose initial assumption of office resulted from such contest or the settlement thereof.

     “Customer Credit Liabilities” means gift certificates, customer deposits, merchandise credits, layaway obligations, frequent shopper programs, and similar liabilities of Borrower to their retail customers and prospective customers.

     “Daily Balance” means, with respect to each day during the term of this Agreement, the amount of an Obligation owed at the end of such day.

     “Default” means an event, condition, or default that, with the giving of notice, the passage of time, or both, would be an Event of Default.

     “Default Rate” means the applicable interest as set forth in Section 2.4(c).

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     “Designated Account” means an account of Borrower located at Wells Fargo Bank, N.A. with account number 4121720502 and ABA number 121000248.

     “Distribution” means, with respect to any Person, (a) the declaration or payment of any dividend on or in respect of any shares of any class of capital Stock of such Person, other than dividends payable solely in shares of common Stock of such Person, (b) the purchase, redemption, or other retirement of any shares of any class of capital Stock of such Person, directly or indirectly, (c) the return of capital by such Person to its shareholders or members, or (d) any other distribution on or in respect of any shares of any class of capital Stock of such Person.

     “Disposed Assets” means the “Wholesale Purchased Assets” as such term is defined in the Purchase and Sale Agreement.

     “Dollars” or “$” means United States dollars.

     “Environmental Actions” means any complaint, summons, citation, notice, directive, order, claim, litigation, investigation, judicial or administrative proceeding, judgment, letter, or other communication from any Governmental Authority, or any third party involving violations of Environmental Laws or releases of Hazardous Materials from (a) any assets, properties, or businesses of Borrower or any predecessor in interest, (b) from adjoining properties or businesses, or (c) from or onto any facilities which received Hazardous Materials generated by Borrower or any predecessor in interest.

     “Environmental Law” means any applicable federal, state, provincial, foreign or local statute, law, rule, regulation, ordinance, code, binding and enforceable guideline, binding and enforceable written policy or rule of common law now or hereafter in effect and in each case as amended, or any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, to the extent binding on Borrower, relating to the environment, employee health and safety, or Hazardous Materials, including the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. § 9601 et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq.; and the Occupational Safety and Health Act, 29 U.S.C. §651 et seq. (to the extent it regulates occupational exposure to Hazardous Materials); any state and local or foreign counterparts or equivalents, in each case as amended from time to time.

     “Environmental Liabilities and Costs” means all liabilities, monetary obligations, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs and expenses (including all reasonable fees, disbursements and expenses of counsel, experts, or consultants, and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand by any Governmental Authority or any third party, and which relate to any Environmental Action.

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     “Environmental Lien” means any Lien in favor of any Governmental Authority for Environmental Liabilities and Costs.

     “EPI” means EPI Printers, Inc.

     “EPI Intercreditor & Subordination Agreement” means that certain Intercreditor & Subordination Agreement, among EPI and Lender, dated as of the date hereof, pursuant to which EPI subordinates its repayment rights and other rights and interest in the EPI Notes in favor of Lender.

     “EPI Notes” means those certain Promissory Notes, dated as of the date hereof, issued by Papyrus in favor of EPI.

     “Equipment” means all of Borrower’s now owned or hereafter acquired right, title, and interest with respect to “equipment” (as such term is defined from time to time in the Code), fixtures and vehicles (including motor vehicles), including all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto.

     “ERISA Affiliate” means (a) any Person subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA whose employees are treated as employed by the same employer as the employees of Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any organization subject to ERISA that is a member of an affiliated service group of which Borrower is a member under IRC Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is a party to an arrangement with Borrower and whose employees are aggregated with the employees of Borrower under IRC Section 414(o).

     “Event of Default” has the meaning set forth in Section 7.

     “Exchange Act” means the Securities Exchange Act of 1934, as in effect from time to time.

     “Existing Warrants” means the warrants listed on Schedule 4.4(b).

     “Existing Warrant-holder” means each of the Persons identified as holders of Existing Warrants on Schedule 4.4(b).

     “Federal Funds Rate” shall mean, for any day, a floating rate equal to the weighted average of the rates on overnight federal funds transactions among members of the Federal Reserve System, as determined by Lender.

     “Federal Reserve Board” means the Board of Governors of the Federal Reserve System, or any successor thereto.

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     “Fiscal” means, when followed by “month” or “quarter”, the relevant fiscal period based on Borrower’s fiscal year and accounting conventions (e.g. a reference to “April Fiscal 2009” is to the fiscal month of April of Borrower’s 2009 fiscal year). When followed by reference to a specific year, the fiscal year which encompasses the majority of months in such fiscal year (e.g. if Borrower’s 2009 fiscal year ends in January 2009 reference to that year would be to Borrower’s “Fiscal 2009”).

     “Funding Date” means any date on which a Borrowing occurs.

     “GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

     “General Intangibles” means all of Borrower’s now owned or hereafter acquired right, title, and interest with respect to “general intangibles” or “intangibles” (as such terms are defined from time to time in the Code), and any and all supporting obligations in respect thereof.

     “Governing Documents” means, with respect to any Person, the certificate or articles of incorporation, by-laws, or other organizational documents of such Person.

     “Governmental Authority” means any federal, state, local or other political subdivision thereof or other governmental or administrative body, instrumentality, department, or agency or any court, tribunal, administrative hearing body, arbitration panel, commission, or other similar dispute-resolving panel or body.

     “Hazardous Materials” means (a) substances that are defined or listed in, or otherwise classified pursuant to, any applicable laws or regulations as “hazardous substances,” “hazardous materials,” “hazardous wastes,” “toxic substances,” or any other formulation intended to define, list, or classify substances by reason of deleterious properties such as ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity, or “EP toxicity”, (b) oil, petroleum, or petroleum derived substances, natural gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and other wastes associated with the exploration, development, or production of crude oil, natural gas, or geothermal resources, (c) any flammable substances or explosives or any radioactive materials, and (d) asbestos in any form or electrical equipment that contains any oil or dielectric fluid containing levels of polychlorinated biphenyls in excess of 50 parts per million.

     “Indebtedness” means (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, interest rate swaps, or other financial products, (c) all obligations under Capital Leases, (d) all obligations or liabilities of others secured by a Lien on any asset of Borrower or its Subsidiaries, irrespective of whether such obligation or liability is assumed, (e) all obligations for the deferred purchase price of assets (other than trade debt incurred in the ordinary course of business and repayable in accordance with customary trade practices), and (f) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person.

     “Indemnified Liabilities” has the meaning set forth in Section 10.2.

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     “Indemnified Person” has the meaning set forth in Section 10.2.

     “Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

     “Inventory” means all Borrower’s now owned or hereafter acquired rights, title, and interests with respect to inventory, including goods held for sale or lease or to be furnished under a contract of service, goods that are leased by Borrower as lessor, goods that are furnished by Borrower under a contract of service, and raw materials, work in process, or materials used or consumed in Borrower’s business.

     “Investment” means, with respect to any Person, any investment by such Person in any other Person (including Affiliates) in the form of loans, guarantees, advances, or capital contributions (excluding (a) commission, travel, and similar advances to officers and employees of such Person made in the ordinary course of business, and (b) bona fide Accounts arising in the ordinary course of business consistent with past practices), purchases or other acquisitions for consideration of Indebtedness or Stock, and any other items that are or would be classified as investments on a balance sheet prepared in accordance with GAAP.

     “IRC” means the Internal Revenue Code of 1986, as amended.

     “Leasehold Interest” means “Leasehold Interest” as defined in the Senior Credit Agreement.

     “Lender” has the meaning set forth in the preamble to this Agreement.

     “Lender’s Account” means an account of Lender located at National City Bank, with account number 4007736, ABA number 041000124 and account name American Greetings Corporation.

     “Lender Expenses” means all (a) costs or expenses (including taxes, and insurance premiums) required to be paid by Borrower under any of the Loan Documents that are paid or incurred by Lender, (b) reasonable out-of-pocket fees or charges paid or incurred by Lender in connection with Lender’s transactions with Borrower, including, reasonable fees or charges for photocopying, notarization, couriers and messengers, telecommunication, public record searches (including tax lien, litigation and UCC searches and including searches with the patent and trademark office, the copyright office, or the department of motor vehicles), filing, recording, publication, appraisal, real estate surveys, real estate title policies and endorsements, and environmental audits, (c) reasonable costs and expenses incurred by Lender in the disbursement of funds to or for the account of Borrower (by wire transfer or otherwise), (d) reasonable out-of-pocket costs and expenses paid or incurred by Lender to correct any default or enforce any provision of the Loan Documents, (e) reasonable audit fees and expenses of Lender related to audit examinations of the Books to the extent of the fees and charges (and in all cases subject to the limitations and restrictions contained in this Agreement), (f) reasonable out-of-pocket costs and expenses of third party claims or any other suit paid or incurred by Lender in enforcing or

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defending the Loan Documents or in connection with the transactions contemplated by the Loan Documents, (g) Lender’s reasonable out-of-pocket fees and expenses (including attorneys’ fees) incurred in advising, structuring, drafting, reviewing, administering, or amending the Loan Documents, and (h) Lender’s reasonable out-of-pocket fees and expenses (including attorneys’ fees) incurred in terminating, enforcing (including attorneys fees and expenses incurred in connection with a “workout,” a “restructuring,” or an Insolvency Proceeding concerning Borrower or in exercising rights or remedies under the Loan Documents), or defending the Loan Documents, irrespective of whether suit is brought.

     “Lender-Related Person” means Lender, together with Lender’s Affiliates, and the officers, directors and employees of Lender.

     “Letter of Credit (Bridge)” means that certain Irrevocable Standby Letter of Credit No. SCL015563 issued by National City Bank on behalf of Lender to WFRF, as beneficiary, with an initial issue date of April 16, 2009, and any renewal or replacement thereof.

     “Lien” means any interest in an asset securing an obligation owed to, or a claim by, any Person other than the owner of the asset, whether such interest shall be based on the common law, statute, or contract, whether such interest shall be recorded or perfected, and whether such interest shall be contingent upon the occurrence of some future event or events or the existence of some future circumstance or circumstances, including the lien or security interest arising from a mortgage, deed of trust, encumbrance, pledge, hypothecation, assignment, deposit arrangement, security agreement, conditional sale or trust receipt, or from a lease, consignment, or bailment for security purposes or from a sale of accounts receivable or chattel paper, or the interest of a lessor under a Capital Lease or other arrangement pursuant to which any Person is entitled to any preference or priority with respect to the property or assets of another Person or the income or profits of such other Person and also including reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases, and other title exceptions and encumbrances affecting Real Property each of the foregoing whether consensual or non-consensual and whether arising by way of agreement, operation of law, legal process or otherwise.

     “Loan Account” has the meaning set forth in Section 2.7.

     “Loan Documents” means this Agreement and all documents executed or delivered in connection with this Agreement, including, without limitation any Revolving Credit Note, the EPI Intercreditor & Subordination Agreement, the Schurman Family Intercreditor & Subordination Agreement, any certificates (including without limitation, each Solvency Certificate, and each Compliance Certificate) from time to time delivered by Borrower pursuant to this Agreement or any other Loan Document, any note or notes executed by Borrower in connection with this Agreement and payable to Lender, and any other agreement entered into, now or in the future, by Borrower and Lender in connection with this Agreement.

     “Material Adverse Change” means (a) a material adverse change in the business, prospects, operations, results of operations, assets, liabilities or condition (financial or otherwise) of Borrower and its Subsidiaries taken as a whole, or (b) any impairment of Borrower’s ability to

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perform its material obligations under the Loan Documents or of Lender’s ability to enforce the Obligations.

     “Maximum Revolver Amount” means $10,000,000.

     “Moody’s” means Moody’s Investors Service, Inc. and any successor company thereto which is a nationally recognized statistical rating organization and otherwise reasonably acceptable to Lender in its Permitted Discretion.

     “Multiple Closing Minimum” has the meaning set forth in Section 6.13.

     “Obligations” means all Advances, debts, principal, interest (including any interest that, but for the provisions of the Bankruptcy Code, would have accrued), contingent reimbursement obligations with respect to outstanding premiums, liabilities, obligations, fees (including, without limitation, the Unused Line Fee), charges, costs, Lender Expenses (including any fees or expenses that, but for the provisions of the Bankruptcy Code, would have accrued), lease payments, guaranties, covenants, indemnification obligations arising pursuant to the Loan Documents (including, without limitation, underSection 10.2), and duties of any kind and description owing by Borrower to Lender pursuant to or evidenced by the Loan Documents and irrespective of whether for the payment of money, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising, and including all interest not paid when due and all Lender Expenses that Borrower is required to pay or reimburse by the Loan Documents, by law, or otherwise. Any reference in this Agreement or in the Loan Documents to the Obligations shall include all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, both prior and subsequent to any Insolvency Proceeding.

     “Papyrus” has the meaning set forth in the preamble to this Agreement.

     “Parent” means Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund II, L.P., and Dorset Capital L.P.

     “Permitted Discretion” means a determination made in good faith and in the exercise of reasonable business judgment.

     “Permitted Dispositions” means (a) sales or other dispositions by Borrower or its Subsidiaries of Equipment that is substantially worn, damaged, or obsolete in the ordinary course of business, (b) sales by Borrower or its Subsidiaries of Inventory to buyers in the ordinary course of business, (c) the use or transfer of money or Cash Equivalents by Borrower or its Subsidiaries in a manner that is not prohibited by the terms of this Agreement or the other Loan Documents, (d) the licensing and sub-licensing by Borrower or its Subsidiaries, on a non-exclusive basis, of patents, trademarks, copyrights, and other intellectual property rights in the ordinary course of business, (e) sales, including “going-out-of business” sales and other dispositions in respect of locations being closed in compliance with Section 6.13 hereof, (f) Permitted Liens and (g) the sale or transfer of the Disposed Assets in accordance with the Purchase and Sale Documents.

     “Permitted Holder” means (a) Parent or its Affiliates and (b) the Schurman Family.

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     “Permitted Investments” means (a) investments in Cash Equivalents, (b) advances made in connection with purchases of goods or services in the ordinary course of business; (c) investments received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, such customers or suppliers arising in the ordinary course of business, (d) Investments existing as of the Closing Date set forth on Schedule 4.26, and (e) other Investments not to exceed $22,000 in the aggregate at any time outstanding.

     “Permitted Liens” means (a) Liens in favor of the Senior Agent, (b) Liens for unpaid Taxes that either (i) are not yet delinquent, or (ii) do not constitute an Event of Default hereunder and are the subject of Permitted Protests, (c) Liens set forth on Schedule P-1, (d) the interests of lessors under operating leases, (e) Liens or the interests of lessors under Capital Leases to the extent that such Liens or interests secure Permitted Purchase Money Indebtedness and so long as such Lien attaches only to the asset purchased or acquired and the proceeds thereof, (f) Liens arising by operation of law or pursuant to contract in favor of warehousemen, landlords, carriers, mechanics, materialmen, laborers, or suppliers, incurred in the ordinary course of business and not in connection with the borrowing of money, and which Liens either (i) are for sums not yet delinquent, (ii) are the subject of Permitted Protests, or (iii) result from the Purchase and Sale, (g) Liens arising from deposits made in connection with obtaining worker’s compensation or other unemployment insurance, (h) Liens or deposits to secure performance of bids, tenders, or leases incurred in the ordinary course of business and not in connection with the borrowing of money, (i) Liens granted as security for surety or appeal bonds in connection with obtaining such bonds in the ordinary course of business, (j) Liens resulting from any judgment or award that is not an Event of Default hereunder, (k) with respect to any Real Property, easements, rights of way, and zoning restrictions that do not materially interfere with or impair the use or operation thereof, (l) non-exclusive licenses or sublicenses entered in the ordinary course of Borrower’s business, (m) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums, (n) Liens which constitute rights of set-off of a customary nature or bankers’ or securities intermediaries’ Liens with respect to amounts on deposit or investment property, as applicable, whether arising by operation of law or by contract, in connection with arrangements entered into with banks or securities intermediaries, to the extent permitted by the Loan Documents, and (o) subleases entered in the ordinary course of Borrower’s business.

     “Permitted Protest” means the right of Borrower or any of its Subsidiaries, as applicable, to protest any Lien, Taxes (other than payroll Taxes or Taxes that are the subject of a United States federal tax lien), or rental payment, provided that (a) a reserve with respect to such obligation is established on the Books in such amount as is required under GAAP and (b) any such protest is instituted promptly and prosecuted diligently by Borrower or any of its Subsidiaries, as applicable, in good faith.

     “Permitted Purchase Money Indebtedness” means, as of any date of determination, (i) Purchase Money Indebtedness, and (ii) Capitalized Lease Obligations in an aggregate amount outstanding at any one time not in excess of $550,000. In no event shall Permitted Purchase Money Indebtedness include Indebtedness incurred for the purpose of financing all or any part of the acquisition cost of any Inventory.

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     “Person” means natural persons, corporations, limited liability companies, limited partnerships, general partnerships, limited liability partnerships, joint ventures, trusts, land trusts, business trusts, or other organizations, irrespective of whether they are legal entities, and governments and agencies and political subdivisions thereof.

     “Preferred Stock” means the Series A Preferred Stock and Series B Preferred Stock of Papyrus.

     “Projections” means Borrower’s forecasted (a) balance sheets, (b) profit and loss statements, and (c) cash flow statements, all prepared on a consistent basis with Borrower’s historical financial statements, together with appropriate supporting details and a statement of underlying assumptions.

     “Purchase and Sale” means the series of transactions between Lender and its Affiliates, on the one hand, and Papyrus and its Affiliates, on the other hand, pursuant to which Papyrus purchases from Lender and its Affiliates the Acquired Assets and sells, transfers and conveys to Lender and its Affiliates the Disposed Assets.

     “Purchase and Sale Agreement” means the Purchase and Sale Agreement among AG and its Subsidiaries party thereto and Papyrus and its Subsidiaries party thereto dated as of the Restatement Date.

     “Purchase and Sale Documents” means, collectively, the Purchase and Sale Agreement and each “Ancillary Agreement” as defined in the Purchase and Sale Agreement.

     “Purchase Money Indebtedness” means Indebtedness (other than the Obligations, but including Capitalized Lease Obligations) incurred at the time of, or within 20 days after, the acquisition of any fixed assets for the purpose of financing all or any part of the acquisition cost thereof.

     “Real Property” means any fee, leasehold or other estate or interest in real property now or hereafter owned or leased hereafter acquired by Borrower and the improvements thereto.

     “Record” means information that is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form.

     “Remedial Action” means all actions taken to (a) clean up, remove, remediate, contain, treat, monitor, assess, evaluate, or in any way address Hazardous Materials in the indoor or outdoor environment, (b) prevent or minimize a release or threatened release of Hazardous Materials so they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, (c) perform any pre-remedial studies, investigations, or post-remedial operation and maintenance activities, or (d) conduct any other actions authorized by Applicable Law, including 42 U.S.C. §9601.

     “Restricted Payment” means (i) any cash dividend or other cash distribution or payment, direct or indirect, on or on account of any shares of any class of stock of Borrower now or hereafter outstanding (including any payments to any holders of Preferred Stock or warrants in their capacity as holders of such Stock but excluding any regular salary or bonus payments or

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other payments which Borrower may make to any Person who holds Stock or warrants in Borrower in such Person’s capacity as an employee of Borrower or any capacity other than as a shareholder or warrant holder in the ordinary course of Borrower’s business); (ii) any dividend or other distribution in respect of, or redemption, purchase or other acquisition, direct or indirect, of any shares of any class of stock of Borrower (including Preferred Stock) now or hereafter outstanding or of any warrants (including Existing Warrants), options or rights to purchase any such stock (including, without limitation, the repurchase of any such stock, warrant, option or right or any refund of the purchase price thereof in connection with the exercise by the holder thereof of any right of rescission or similar remedies with respect thereto); and (iii) any direct salary, non-salary managerial fees, fee (consulting, management or other), fringe benefit, allowance or other expense directly or indirectly paid or payable by Borrower (as compensation or otherwise) to any shareholder or Affiliate of Borrower (other than to an employee or consultant, to the extent of such employee’s or consultant’s compensation; provided that the terms of such compensation are approved by the applicable board of directors or the compensation committee thereof) and (iv) meeting fees, travel and expense reimbursement and clothing allowance payable to the directors of Borrower or any partner, shareholder or Affiliate (in his capacity as a director, partner, shareholder or Affiliate, but not as an employee) thereof, solely for purposes of this subsection (iv), not to exceed $100,000 per annum in the aggregate (and not for each director, partner, shareholder or Affiliate) or such greater amount as may be agreed to in writing by Lender, in its Permitted Discretion, upon request from Borrower provided that such cap on the meeting fees, travel and expense reimbursement and clothing allowance referenced in this clause (iv) shall not apply to the meeting fees, travel and expense reimbursement and clothing allowance payable to any director of Borrower or any partner, shareholder or Affiliate, in each case, solely in his or her capacity as an employee of Borrower.

     “Revolver Usage” means, as of any date of determination, the then extant amount of outstanding principal amount of Advances.

     “Revolving Credit” has the meaning set forth in Section 2.1(a).

     “Revolving Credit Maturity Date” means the date that is nineteen months after the Closing Date; provided, however, after the initial period, this Agreement shall automatically renew for up to three consecutive one-year periods unless either Borrower or Lender provides irrevocable written notice to the other party not less than 90 days prior to the end of such period of its intention to terminate the this Agreement. Notwithstanding the foregoing, the final Revolving Credit Maturity Date shall be June 25, 2013.

     “Revolving Credit Note” has the meaning set forth in Section 2.1(f).

     “Revolving Credit Obligations” means the aggregate of Borrower’s liabilities, obligations, and indebtedness of any character on account of or in respect to the Revolving Credit.

     “Revolving Credit Termination Date” shall mean the earliest to occur of: (a) the Revolving Credit Maturity Date; (b) termination of this Agreement by Borrower pursuant to Section 3.5; (c) termination of this Agreement by Lender pursuant to Section 8.1 for reasons

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other than an occurrence of an Event of Default pursuant to Sections 7.4 or 7.5; or (d) automatically upon the occurrence of an Event of Default pursuant to Sections 7.4 or 7.5.

     “S&P” means Standard & Poor’s Rating Services, a division of The McGraw Hill Companies, Inc., and any successor company thereto which is a nationally recognized statistical rating organization and is otherwise reasonably acceptable to Lender in its Permitted Discretion.

     “Schurman Family” means Dominique Schurman and Marcel Schurman (and each of their lineal heirs and descendants) and the Schurman 1988 Family Trust.

     “Schurman Family Intercreditor & Subordination Agreement” means that certain Intercreditor & Subordination Agreement, dated as of the date hereof, among the Schurman Family and Lender, pursuant to which the Schurman Family subordinates its repayment rights under the Schurman Family Notes in favor of Lender.

     “Schurman Family Notes” means, collectively, that certain Promissory Note, dated as of April 17, 2009, issued by Papyrus to Marcel Schurman, and that certain Promissory Note, dated as of April 17, 2009, issued by Papyrus to Margrit Schurman.

     “SEC” means the United States Securities and Exchange Commission and any successor thereto.

     “Senior Agent” means WFRF, as administrative agent, under the Senior Credit Agreement.

     “Senior Credit Agreement” means that certain First Amended and Restated Loan and Security Agreement, dated as of the date hereof, by and among Papyrus, each of its Subsidiaries party thereto, WFRF, as administrative agent, collateral agent and a revolving credit lender, and each other revolving credit lender party thereto, as amended from time to time.

     “Senior Indebtedness” means the “Obligations” as defined in the Senior Credit Agreement.

     “Shareholder Consent” means an agreement from any shareholder of Borrower, including holders of Preferred Stock, consenting to Borrower entering into the Loan Documents and the transactions contemplated hereby.

     “Solvency Certificate” means a certificate signed by an Authorized Person of Borrower, dated as of the Closing Date, demonstrating that Borrower is Solvent and reasonably acceptable to Lender.

     “Solvent” means, with respect to any Person on a particular date, that such Person is not insolvent (as such term is defined in the Uniform Fraudulent Transfer Act).

     “Stock” means all shares, options, warrants, interests, participations, or other equity equivalents (regardless of how designated) of or in a Person, whether voting or nonvoting, including common stock, preferred stock, or any other “equity security” (as such term is defined

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in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under the Exchange Act).

     “Sublease Requirement” means “Sublease Requirement” as defined in the Senior Credit Agreement.

     “Subordination Agreement” means the Schurman Family Intercreditor & Subordination Agreement and the EPI Intercreditor & Subordination Agreement.

     “Subordinated Indebtedness” means aggregate Indebtedness of Borrower that is subordinate in right of payment and priority to the Obligations in a manner which is satisfactory to Lender in its Permitted Discretion.

     “Subsidiary” of a Person means a corporation, partnership, limited liability company, or other entity in which that Person directly or indirectly owns or controls the shares of Stock having ordinary voting power to elect a majority of the board of directors (or appoint other comparable managers) of such corporation, partnership, limited liability company, or other entity.

     “Taxes” or “Tax” means includes any taxes, duties, fees, premiums, assessments, levies, tariffs and any other charges whatsoever imposed, assessed, reassessed or collected by any Governmental Authority, including all fines, penalties, interest, additions to tax, installments on account of taxes, or other additional amounts imposed, assessed or collected by any Governmental Authority in respect thereof, and including those related to any tax-sharing agreement or any other contract relating to the sharing or payment of any such Taxes, or levied on, or measured by, or referred to as, gross income, net income, gross receipts, profits, royalty, capital, capital gains, transfer, land transfer, sales, goods and services, harmonized sales, use, alternative, net worth, value-added, severance, premium, real property, capital stock, personal property, ad valorem, windfall profits, environmental, excise, stamp, withholding, business, franchise, property development, occupancy, employer health, payroll, employment, health, social services, education and social security taxes, all surtaxes, all customs duties and import and export taxes, countervail and anti-dumping, all license, franchise and registration fees and all employment insurance, health insurance and other government pension plan premiums or contributions, all withholdings on amounts paid to or by the relevant Person, and any liability for any of the foregoing as a transferee, successor, guarantor or by contract or by operation of Applicable Law, whether disputed or not.

     “Tax Returns” includes all returns, elections, filings, forms, and any other documents (whether in electronic, tangible or any other form whatsoever) made, prepared or filed, or to be made, prepared or filed in respect of Taxes under Applicable Law.

     “Unused Line Fee” has the meaning set forth in Section 2.8(a).

     “Voidable Transfer” has the meaning set forth in Section 14.7.

     “WFRF” means Wells Fargo Retail Finance, LLC.

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     1.2 Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP. When used herein, the term “financial statements” shall include the notes and schedules thereto. Whenever the term “Borrower” is used in respect of a financial covenant or a related definition, it shall be understood to mean Borrower and its Subsidiaries on a Consolidated basis unless the context clearly requires otherwise.

     1.3 Code. Any terms used in this Agreement that are defined in the Code shall be construed and defined as set forth from time to time in the Code unless otherwise defined herein.

     1.4 Construction. Unless the context of this Agreement or any other Loan Document clearly requires otherwise, references to the plural include the singular, references to the singular include the plural, the term “including” is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any other Loan Document refer to this Agreement or such other Loan Document, as the case may be, as a whole and not to any particular provision of this Agreement or such other Loan Document, as the case may be. Section, subsection, clause, schedule, and exhibit references herein are to this Agreement unless otherwise specified. Any reference in this Agreement or in the other Loan Documents to any agreement, instrument, or document shall include all alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements, thereto and thereof, as applicable (subject to any restrictions on such alterations, amendments, changes, extensions, modifications, renewals, replacements, substitutions, joinders, and supplements set forth herein). Any reference herein to any Person shall be construed to include such Person’s successors and assigns. Any requirement of a writing contained herein or in the other Loan Documents shall be satisfied by the transmission of a Record and any Record transmitted shall constitute a representation and warranty as to the accuracy and completeness of the information contained therein.

     1.5 Schedules and Exhibits. All of the schedules and exhibits attached to this Agreement shall be deemed incorporated herein by reference.

2. LOAN AND TERMS OF PAYMENT.

     2.1 Revolving Credit.

          (a) During the term of this Agreement, Lender agrees to make cash advances (“Advances”) to Borrower in an aggregate amount at any one time outstanding not to exceed an amount equal to the difference of (i) the Maximum Revolver Amount minus (ii) the undrawn face amount of the Letter of Credit (Bridge), each as then in effect. The Advances to be made under this Section 2 shall be referred to as the “Revolving Credit”.

          (b) Reserved.

          (c) Lender shall have no obligation to make additional Advances hereunder to the extent an Event of Default has occurred and is continuing, or after giving effect to the issuance of such Advance (i) the Revolver Usage would exceed the lesser of Availability or the Maximum Revolver Amount, (ii) a Default or Event of Default would occur or (iii) the

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conditions set forth in Sections 3.1 and 3.2, as applicable, have not been satisfied or waived by Lender.

          (d) Amounts borrowed pursuant to this Section shall be repaid and, subject to the terms and conditions of this Agreement, may be reborrowed at any time during the term of this Agreement.

          (e) All amounts borrowed pursuant to this Section, together with all other Obligations, shall be due and payable on the Revolving Credit Termination Date.

          (f) Borrower’s obligation to repay Advances and other financial accommodations under the Revolving Credit, with interest as provided herein, may be evidenced by a note or notes substantially in the form of Exhibit 2.1(f) (the “Revolving Credit Note”), executed by Borrower, payable to Lender. Neither the original nor a copy of any Revolving Credit Note shall be required, however, to establish or prove any Obligation. Upon Borrower being provided with an affidavit (which shall include an indemnity reasonably satisfactory to Borrower) from Lender to the effect that the Revolving Credit Note has been lost, mutilated, or destroyed, Borrower shall execute and deliver a replacement thereof to Lender.

     2.2 Procedure for Borrowing. Each Borrowing shall be made by an irrevocable written request by an Authorized Person delivered to Lender, which notice must be received by Lender no later than 1:00 p.m. (Cleveland, Ohio time) at least four Business Days prior to the date that is the requested Funding Date, or such shorter period as agreed to by Lender in its sole discretion, and specify (i) the amount of such Borrowing, (ii) the requested Funding Date, which shall be a Business Day and (iii) the use for which the proceeds are to be used.

     2.3 Payments.

          (a) Payments by Borrower. Except as otherwise expressly provided herein, all payments by Borrower shall be made to Lender’s Account and shall be made in immediately available funds, no later than 1:00 p.m. (Cleveland, Ohio time) on the date specified herein. Any payment received by Lender later than 1:00 p.m. (Cleveland, Ohio time), shall be deemed to have been received on the following Business Day and any applicable interest or fee shall continue to accrue until such following Business Day.

          (b) Application of Payments. Except as otherwise provided in the Loan Documents, all payments shall be remitted to Lender and all such payments shall be applied first to Lender Expenses and any fees and charges then due and payable hereunder, second to any accrued but unpaid interest then due and payable hereunder and, third, to reduce the outstanding principal balance of the Obligations.

     2.4 Interest Rates: Rates, Payments, and Calculations.

          (a) Interest Rates. Except as provided in clause (c) below, all Obligations that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to the Base Rate plus the Base Rate Margin.

          (b) Reserved.

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          (c) Default Rate. Upon the occurrence and during the continuation of an Event of Default, and without notice to Borrower, all Obligations that have been charged to the Loan Account pursuant to the terms hereof shall bear interest on the Daily Balance thereof at a per annum rate equal to two percentage points above the per annum rate otherwise applicable hereunder (the “Default Rate”).

          (d) Payment. Interest and all other fees payable hereunder shall be due and payable, in arrears, on the first day of each month at any time that Obligations or Commitments are outstanding. Borrower hereby authorizes Lender, from time to time, without prior notice to Borrower, to charge such interest and fees, all Lender Expenses (as and when incurred), the charges, commissions, fees, and costs provided for in Section 2.8 (as and when accrued or incurred) and all other payments as and when due and payable under any Loan Document to Borrower’s Loan Account, which amounts thereafter shall constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder and shall accrue interest at the rate then applicable to Advances hereunder. Any interest not paid when due shall be compounded by being charged to Borrower’s Loan Account and shall thereafter constitute Advances hereunder and shall accrue interest at the rate then applicable to Advances. Lender shall provide Borrower with copies of invoices it receives in respect to Lender Expenses upon request.

          (e) Computation. All interest and fees chargeable under the Loan Documents shall be computed on the basis of a 360 day year for the actual number of days elapsed. In the event the Base Rate is changed from time to time hereafter, the rates of interest hereunder based upon the Base Rate automatically and immediately shall be increased or decreased by an amount equal to such change in the Base Rate.

          (f) Intent to Limit Charges to Maximum Lawful Rate. In no event shall the interest rate or rates payable under this Agreement, plus any other amounts paid in connection herewith, exceed the highest rate permissible under any law that a court of competent jurisdiction shall, in a final determination, deem applicable. Borrower and Lender, in executing and delivering this Agreement, intend legally to agree upon the rate or rates of interest and manner of payment stated within it; provided, however, that, anything contained herein to the contrary notwithstanding, if said rate or rates of interest or manner of payment exceeds the maximum allowable under applicable law, then, ipso facto, as of the date of this Agreement, Borrower is and shall be liable only for the payment of such maximum as allowed by law, and payment received from Borrower in excess of such legal maximum, whenever received, shall be applied to reduce the principal balance of the Obligations to the extent of such excess.

     2.5 Crediting Payments. The receipt of any payment item by Lender shall not be considered a payment on account unless such payment item is a wire transfer of immediately available federal funds made to Lender’s Account or unless and until such payment item is honored when presented for payment. Should any payment item not be honored when presented for payment, then Borrower shall be deemed not to have made such payment and interest shall be calculated accordingly. Anything to the contrary contained herein notwithstanding, any payment item shall be deemed received by Lender only if it is received into Lender’s Account on a Business Day on or before 1:00 p.m. (Cleveland, Ohio time). If any payment item is received into Lender’s Account on a non-Business Day or after 1:00 p.m. (Cleveland, Ohio time) on a

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Business Day, it shall be deemed to have been received by Lender as of the opening of business on the immediately following Business Day.

     2.6 Designated Account. Lender is authorized to make the Advances under this Agreement based upon instructions received from anyone purporting to be an Authorized Person, or without instructions if pursuant to Section 2.4(c). Borrower agrees to establish and maintain the Designated Account for the purpose of receiving the proceeds of the Advances requested by Borrower and made by Lender hereunder. Notwithstanding the foregoing, Lender, in its sole discretion, may make Advances directly to creditors of Borrower provided such Advance satisfies the requirements of Section 6.15.

     2.7 Maintenance of Loan Account; Statements of Obligations.

          (a) Lender shall maintain an account on its books in the name of Borrower (the “Loan Account”) on which Borrower will be charged with all Advances made by Lender to Borrower and with all other payment Obligations hereunder or under the other Loan Documents, including accrued interest, fees and expenses, and Lender Expenses incurred by Lender. Lender shall render statements regarding the Loan Account to Borrower, including principal, interest, fees, and including an itemization of all charges and expenses constituting Lender Expenses incurred by Lender, and such statements shall be conclusively presumed to be correct and accurate and constitute an account stated between Borrower and Lender unless, within 30 days after receipt thereof by Borrower, Borrower shall deliver to Lender written objection thereto describing the error or errors contained in any such statements.

     2.8 Fees. Borrower shall pay to Lender the following fees and charges, which fees and charges shall be non-refundable when paid (irrespective of whether this Agreement is terminated thereafter):

          (a) Unused Line Fee. On the first day of each month during the term of this Agreement, an unused line fee for in an amount equal to 0.5% per annum times the result of (a) the Maximum Revolver Amount then in effect, less (b) the average Daily Balance of Advances that were outstanding during the immediately preceding month (the “Unused Line Fee”).

          (b) Reserved.

          (c) Reserved.

          (d) Administrative Fee. Borrower shall pay Lender an administrative fee of $10,000 per annum during the term of this facility (the “Administrative Fee”). The Administrative Fee shall in no way limit Borrower’s obligations to pay any other fee, or reimburse Lender for any cost or expense, under the Loan Documents. The Administrative Fee shall be payable on the Closing Date and each anniversary thereof.

3. CONDITIONS; TERM OF AGREEMENT

     3.1 Conditions Precedent to Initial Extension of Credit. The obligation of Lender to make the initial Advance (or otherwise to extend any credit provided for hereunder on the

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Closing Date) is subject to the prior fulfillment, to the satisfaction of Lender in its sole discretion, of each of the conditions precedent set forth below:

          (a) the transactions contemplated under the Purchase and Sale Documents shall have been consummated in accordance with the terms thereof, without waiver of any material condition by Lender;

          (b) Lender shall have received a certified true, accurate and complete copy of the Senior Credit Agreement, all of which shall be satisfactory to Lender, which is in full force and effect;

          (c) Lender shall have received the following duly executed and delivered Loan Documents, in form and substance satisfactory to Lender, and each such document shall be in full force and effect:

     (i) this Agreement (with all exhibits and schedules attached);

     (ii) the Revolving Credit Note;

     (iii) the EPI Intercreditor & Subordination Agreement;

     (iv) the Schurman Family Intercreditor & Subordination Agreement; and

     (v) any other documents or agreements required by Lender.

          (d) no “default” or “event of default” (as such terms or similar terms are defined in any of (i) the Senior Credit Agreement, (ii) the Schurman Family Notes or (iii) the EPI Notes) shall have occurred and be continuing on the date of such Advance, or shall result from the making of such Advance;

          (e) Lender shall have received a pro forma Compliance Certificate dated as of the Closing Date;

          (f) Lender shall have received the Solvency Certificate and Lender shall otherwise be satisfied, in its Permitted Discretion, with the capital structure of Borrower and its Affiliates;

          (g) Lender shall have received a certificate from the Secretary of Borrower attesting to and attaching the resolutions of Borrower’s Board of Directors authorizing its execution, delivery, and performance of this Agreement and the other Loan Documents to which such Person is a party and authorizing specific officers of Borrower to execute the same;

          (h) Lender shall have received Shareholder Consents from at least 85% of all shareholders of Borrower and copies of all consents, approvals, and registrations described on Schedule 4.5;

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          (i) Lender shall have received copies of Borrower’s Governing Documents, as amended, modified, or supplemented to the Closing Date, certified by the Secretary of Borrower, in form and substance satisfactory to Lender;

          (j) Lender shall have received a certificate of status with respect to Borrower, dated within 10 days of the Closing Date, such certificate to be issued by the appropriate officer of the jurisdiction of organization of Borrower, which certificate shall indicate that Borrower is in good standing in such jurisdiction;

          (k) Reserved;

          (l) Lender shall have received the Business Plan, in form and substance satisfactory to Lender in their Permitted Discretion;

          (m) Borrower shall have paid all Lender Expenses incurred in connection with the transactions evidenced by this Agreement;

          (n) Lender shall have received evidence satisfactory to it in its Permitted Discretion that Borrower has received all consents, licenses, approvals or evidence of other actions required by any Person, including any Governmental Authority, in connection with the execution and delivery by Borrower of this Agreement or any other Loan Document or with the consummation of the transactions contemplated hereby or thereby;

          (o) Lender shall have received an Officer’s Closing Certificate dated as of the Closing Date, the form and substance of which shall be satisfactory to Lender;

          (p) Lender shall have received a certified copy of the following:

     (i) Schurman Family Notes and the EPI Notes;

     (ii) evidence of the termination and cancellation of (A) the warrants issued by Borrower and (B) the Preferred Stock; and

     (iii) any Shareholder Agreements.

          (q) all other documents and legal matters in connection with the transactions contemplated by this Agreement shall have been delivered, executed, or recorded and shall be in form and substance satisfactory to Lender.

     3.2 Conditions Precedent to all Extensions of Credit. The obligation of Lender to make any Advance (or to extend any other credit hereunder) shall be subject to the following conditions precedent:

          (a) the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of such extension of credit, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date);

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          (b) Lender shall be satisfied that the proceeds of such Advance will be issued solely for the purposes permitted pursuant to Section 6.15;

          (c) Lender shall have received an officer’s certificate signed by an Authorized Person attesting to and attaching a resolution of the approval of all eligible directors, which shall not include any Institutional Director (as such term is defined in the Stockholders Agreement of the Borrower as in effect on the date hereof) who abstains or recuses herself or himself from the action (i) authorizing such Advance and (ii) acknowledging that based on Borrower’s current financial condition and in the Board of Directors’ good faith determination, such Advance is the only funding option of those currently available to Borrower to make any such payment as described in Section 6.15;

          (d) no “default” or “event of default” (as such terms or similar terms are defined in any of (i) the Senior Credit Agreement, (ii) the Schurman Family Notes or (iii) the EPI Notes) shall have occurred and be continuing on the date of such extension of credit, or shall result from the making of such Advance;

          (e) no Default or Event of Default shall have occurred and be continuing on the date of such extension of credit, nor shall either result from the making thereof;

          (f) no injunction, writ, restraining order, or other order of any nature prohibiting, directly or indirectly, the extending of such credit shall have been issued and remain in force by any Governmental Authority against Borrower, Lender, or any of their Affiliates; and

          (g) no Material Adverse Change shall have occurred since April 1, 2009.

     3.3 Term. This Agreement shall become effective upon the Closing Date. Lender shall have the right to terminate its obligations under this Agreement immediately and without notice upon the occurrence and during the continuation of an Event of Default other than an Event of Default pursuant to Sections 7.4 or 7.5. This Agreement shall automatically terminate without notice upon the occurrence of an Event of Default pursuant to Sections 7.4 or 7.5. Borrower shall have the right to terminate this Agreement pursuant to Section 3.5. If not earlier terminated, this Agreement shall terminate on the Revolving Credit Maturity Date.

     3.4 Effect of Termination. On the Revolving Credit Termination Date, all Revolving Credit Obligations immediately shall become due and payable without notice or demand.

     3.5 Early Termination by Borrower; Reduction of Commitment.

          (a) Borrower has the option, at any time upon 90 days prior written notice to Lender, to terminate the Revolving Credit by paying to Lender, in cash, the Obligations (other than any inchoate Obligations which have not been asserted and are not otherwise known to Borrower or Lender) in full. If Borrower has sent a notice of termination pursuant to the provisions of this Section, then the Commitments shall terminate and Borrower shall be obligated to repay the Obligations in full, on the date set forth as the date of termination of this Agreement in such notice.

          (b) Reserved.

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          (c) Borrower may from time to time, by written notice to Lender, reduce the unused Commitment, provided that Borrower shall not reduce the Commitment if, after giving effect to any concurrent prepayment of any outstanding Obligations in accordance with this Section, the sum of the outstanding Obligations would exceed an amount equal to the difference of (i) the Maximum Revolver Amount minus (ii) the undrawn face amount of the Letter of Credit (Bridge).

4. REPRESENTATIONS AND WARRANTIES.

     In order to induce Lender to enter into this Agreement, Borrower makes the following representations and warranties to Lender which shall be true, correct, and complete, in all material respects, as of the Closing Date, and at and as of the date of each certificate delivered pursuant to Section 5.2 hereof (except to the extent that such representations and warranties relate solely to an earlier date) and such representations and warranties shall survive the execution and delivery of this Agreement.

     4.1 No Encumbrances. Borrower has good and legally marketable title to all of its property, free and clear of Liens except for Permitted Liens.

     4.2 Records. Borrower keeps correct and accurate Books itemizing and describing the type, and quantity of its Inventory and Equipment and the book value thereof.

     4.3 Legal Status. Borrower represents and warrants that (a) Borrower’s exact legal name is that indicated on Schedule 4.3 and on the signature page hereof; (b) Borrower is an organization of the type, and is organized in the jurisdiction, set forth on Schedule 4.3; (c) Schedule 4.3 accurately sets forth Borrower’s organizational identification number or accurately states that Borrower has none; and (d) Schedule 4.3 accurately sets forth Borrower’s place of business or, if more than one, its chief executive office, as well as Borrower’s mailing address, if different.

     4.4 Due Organization and Qualification; Subsidiaries.

          (a) Borrower is duly organized and existing and in good standing under the laws of the jurisdiction of its organization and qualified to do business in any state where the failure to be so qualified reasonably could be expected to result in a Material Adverse Change.

          (b) Set forth on Schedule 4.4(b), is a complete and accurate description of the authorized capital Stock of Borrower, by class, and, as of the Closing Date, a description of the number of shares of each such class that are issued and outstanding. Other than as described on Schedule 4.4(b), there are no subscriptions, options, warrants, or calls relating to any shares of Borrower’s capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. The Borrower is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital Stock or any security convertible into or exchangeable for any of its capital Stock. As of the Closing Date, there is no preferred Stock of Borrower. The preferred Stock of Borrower was converted to common Stock in connection with the Purchase and Sale. No previous holder of any preferred Stock of Borrower received any Restricted Payment, or is entitled to receive any Restricted Payment, in connection with such conversion or otherwise.

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          (c) Set forth on Schedule 4.4(c), is a complete and accurate list of Borrower’s direct and indirect Subsidiaries, showing: (i) the jurisdiction of their organization; (ii) the number of shares of each class of common and preferred Stock authorized for each of such Subsidiaries; and (iii) the number and the percentage of the outstanding shares of each such class owned directly or indirectly by Borrower. All of the outstanding capital Stock of each such Subsidiary has been validly issued and is fully paid and nonassessable.

          (d) Except as set forth on Schedule 4.4(d) hereto, there are no subscriptions, options, warrants, or calls relating to any shares of Borrower’s or its Subsidiaries’ capital Stock, including any right of conversion or exchange under any outstanding security or other instrument. The Existing Warrants have been cancelled and terminated in connection with the Purchase and Sale. No previous Existing Warrant-holder received any Restricted Payment, or is entitled to receive any Restricted Payment, in connection with such cancellation or otherwise.

          (e) Neither Borrower nor any of its Subsidiaries is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of Borrower’s or Subsidiary’s capital Stock or any security convertible into or exchangeable for any such capital Stock.

     4.5 Due Authorization; No Conflict.

          (a) The execution, delivery, and performance by Borrower of this Agreement, the other Loan Documents and the Purchase and Sale Documents have been duly authorized by all necessary action on the part of Borrower.

          (b) The execution, delivery, and performance by Borrower of this Agreement, the other Loan Documents and the Purchase and Sale Documents do not and will not (i) violate any provision of Applicable Law, or the Governing Documents of Borrower, (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any contractual obligation of Borrower which could reasonably be expected to result in a Material Adverse Effect, (iii) result in or require the creation or imposition of any Lien of any nature whatsoever upon any properties or assets of Borrower, other than Permitted Liens, or (iv) require any approval of Borrower’s interestholders or any approval or consent of any Person under any material contractual obligation of Borrower other than consents and approvals which have been already obtained prior to the Closing Date, or as set forth on Schedule 4.5.

          (c) The execution, delivery, and performance by Borrower of this Agreement, the other Loan Documents and the Purchase and Sale Documents do not and will not require any registration with, consent, or approval of, or notice to, or other action with or by, any Governmental Authority or other Person other than registrations, consents and approvals which have been already made or obtained prior to the Closing Date, or as set forth on Schedule 4.5.

          (d) This Agreement, the other Loan Documents and the Purchase and Sale Documents, and all other documents contemplated hereby and thereby, when executed and delivered by Borrower will be the legally valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms, except as enforcement may be

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limited by equitable principles or by bankruptcy, insolvency, reorganization, moratorium, or similar laws relating to or limiting creditors’ rights generally.

     4.6 Litigation.

          (a) Other than those matters disclosed on Schedule 4.6(a) and immaterial matters where the amount in controversy is less than $250,000, there are no actions, suits, or proceedings pending or, to the knowledge of Borrower, threatened against Borrower or any of its Subsidiaries, as applicable. Schedule 4.6(a) includes, as applicable, for each matter set forth thereon (i) the name, docket number and jurisdiction for such matter, (ii) the status of such proceeding, and (iii) whether such matter is covered by an insurance policy and, if so, the insurance carrier, the policy number and the deductible amount associated with such insurance policy.

          (b) There are no actions, suits or proceedings pending or, to the knowledge of Borrower, threatened against Borrower or any of its Subsidiaries, as applicable, that question the validity or enforceability of this Agreement, any other Loan Document or the Purchase and Sale Documents or any action taken by Borrower in connection therewith.

     4.7 No Material Adverse Change. All financial statements relating to Borrower (including any Projections with respect to Acquired Assets and the Purchase and Sale) that have been delivered by Borrower to Lender have been prepared in accordance with GAAP (except, in the case of unaudited financial statements, for the lack of footnotes and being subject to year-end audit adjustments) and present fairly in all material respects Borrower’s financial condition as of the date thereof and results of operations for the period then ended. There has not been a Material Adverse Change with respect to Borrower since the date of the latest financial statements submitted to Lender. The consummation of the transactions contemplated by the Purchase and Sale Documents shall not cause a Material Adverse Change.

     4.8 Fraudulent Transfer. After giving effect to the Purchase and Sale (and the transactions contemplated thereby and hereby):

          (a) Borrower is Solvent;

          (b) no transfer of property is being made by Borrower and no obligation is being incurred by Borrower in connection with the transactions contemplated by this Agreement or the other Loan Documents with the intent to hinder, delay, or defraud either present or future creditors of Borrower; and

          (c) no transfer of property is being made by Borrower without receiving a reasonably equivalent value in exchange for such transfer and Borrower’s remaining assets are not unreasonably small in relation to their businesses.

Lender acknowledges that the representation of Borrower in Section 4.8(a) is made in reliance upon the Business Plan. Lender further acknowledges that it has contributed certain financial data and other information, including certain assumptions, concerning the Acquired Assets to the Business Plan. For purpose of the representation in Section 4.8(a), Borrower has assumed, with

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the permission of Lender, the truth and accuracy of all data and information contributed by Lender that has been incorporated into the Business Plan.

     4.9 Employee Benefits. None of Borrower, any of its Subsidiaries, or any of their ERISA Affiliates maintains or contributes to any Benefit Plan.

     4.10 Environmental Condition. Except as set forth on Schedule 4.10, (a) to Borrower’s knowledge, none of Borrower’s properties or assets has ever been used by Borrower or by previous owners or operators in the disposal of, or to produce, store, handle, treat, release, or transport, any Hazardous Materials, where such production, storage, handling, treatment, release or transport was in violation, in any material respect, of applicable Environmental Law, (b) to Borrower’s knowledge, none of Borrower’s properties or assets has ever been designated or identified in any manner pursuant to any environmental protection statute as a Hazardous Materials disposal site, (c) Borrower has not received notice that a Lien arising under any Environmental Law has attached to any revenues or to any Real Property owned or operated by Borrower, and (d) Borrower has not received a summons, citation, notice, or directive from the Environmental Protection Agency or any other federal or state governmental agency concerning any action or omission by Borrower resulting in the releasing or disposing of Hazardous Materials into the environment.

     4.11 Brokerage Fees. Borrower has not utilized the services of any broker or finder in connection with Borrower’s obtaining financing from Lender under this Agreement and no brokerage commission or finders fee is payable by Borrower in connection herewith.

     4.12 Intellectual Property. Borrower owns, or holds licenses in, all trademarks, trade names, copyrights, patents, patent rights, and licenses that are necessary to the conduct of its business as currently conducted. Attached hereto as Schedule 4.12 is a true, correct, and complete listing of all patents, patent applications, registered trademarks, trademark applications, registered copyrights, and copyright registration applications as to which Borrower is the owner or is an exclusive licensee. All licenses set out in Schedule 4.12 are in good standing and there have been no defaults thereunder by Borrower or, to the knowledge of Borrower, by any other party thereto. All royalty fees have been paid on the patents and patent applications owned by Borrower and set out in Schedule 4.12 and all renewal fees have been paid on the registered trademarks owned by Borrower.

     4.13 Leases. Borrower enjoys peaceful and undisturbed possession under all leases (including subleases) material to the business of Borrower and to which Borrower is a party or under which Borrower is operating other than any sublease to which the Sublease Requirement applies but has not been satisfied. Except for any failure to comply with the Sublease Requirement, all of such leases are valid and subsisting and no material default by Borrower exists under any of them.

     4.14 Indebtedness. Set forth on Schedule 4.14 is a true and complete list of all Indebtedness of Borrower outstanding immediately prior to the Closing Date that is to remain outstanding immediately after the Closing Date. Such Schedule accurately reflects the aggregate principal amount of such Indebtedness and the principle terms thereof and whether (and to what extent) such Indebtedness is secured.

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     4.15 Filing of Tax Returns and Payment of Taxes. Except where the failure to do so could not reasonably result in a Material Adverse Change:

          (a) Borrower has duly and timely filed, or caused to be duly and timely filed, all Tax Returns required to be filed by it in respect of Taxes, and has duly and timely paid, or caused to be duly and timely paid, all Taxes due and payable by it as required by Applicable Law, including all Taxes assessed, reassessed or for which a demand for payment was made by any Governmental Authority, except when and so long as the validity of any such Taxes is being contested in good faith by it or any other Person on its behalf through appropriate proceedings, such contest is a Permitted Protest, and adequate provisions for such Taxes have been made in its financial statements in accordance with GAAP.

          (b) Borrower has duly and timely withheld, or caused to be duly and timely withheld, all Taxes and other amounts required to be withheld by it in accordance with Applicable Law from any amount paid, or credited, or deemed to be paid or credited by it to or for the account of any Person (including any employees, officers or any non-resident Person), and has duly and timely remitted, or caused to be duly and timely remitted, to the appropriate Governmental Authority such Taxes required by Applicable Law to be remitted by it.

          (c) Borrower has not failed to pay any Taxes which has or would result in a Lien (other than a Permitted Lien) on its property. Borrower has only contested a Permitted Lien that is subject to a Permitted Protest.

     4.16 Royalty Payments. Schedule 4.16 lists all contracts or other agreements between Borrower and any other Person pursuant to which Borrower has made any royalty or similar payments in either of the two Fiscal years prior to the Closing Date.

     4.17 Complete Disclosure. All factual information (taken as a whole) furnished by or on behalf of Borrower in writing to Lender (including all information contained in the Schedules hereto or in the other Loan Documents) for purposes of or in connection with this Agreement, the other Loan Documents or any transaction contemplated herein or therein is, and all other such factual information (taken as a whole) hereafter furnished by or on behalf of Borrower in writing to Lender will be, as of the date provided, true and accurate in all material respects on the date as of which such information is dated or certified or otherwise speaks and not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading in any material respect at such time in light of the circumstances under which such information was provided. On the Closing Date, the Business Plan (giving effect to the Purchase and Sale) represents, and as of the date on which any other Business Plan is delivered to Lender, such additional Business Plans represent, Borrower’s good faith best estimate of its future performance for the periods covered thereby.

     4.18 Reserved.

     4.19 Insurance. Schedule 4.19 annexed hereto, is a schedule of all insurance policies owned by Borrower or under which Borrower is the named insured. Each such policy is in full force and effect. Neither the issuer of any such policy nor Borrower is in default or violation of

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any such policy. The coverage reflected on Schedule 4.19 satisfies the requirements of Section 5.6.

     4.20 Requirements of Law. To Borrower’s knowledge, Borrower is in compliance with, and shall hereafter comply with and use its assets in compliance with, all requirements of Applicable Law except where the failure of such compliance will not be reasonably likely to result in a Material Adverse Change. Borrower has not received any notice of any violation of any requirement of law (other than of a violation which could not be reasonably likely to result in a Material Adverse Change) which violation has not been cured or otherwise remedied.

     4.21 No Margin Stock. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying any margin stock (within the meaning of Regulations U, T, and X of the Board of Governors of the Federal Reserve System of the United States). No part of the proceeds of any Borrowing hereunder will be used at any time to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock.

     4.22 Investment Company Status. Borrower is not an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940.

     4.23 No Events of Default. As of any date of determination, both before and after giving effect to the making of any Advances, there are no Events of Default.

     4.24 Use of Proceeds. The proceeds of any Advance is neither intended or anticipated to be used nor been used in any way which would cause a breach of Section 6.15 or otherwise result in an Event of Default.

     4.25 Shareholder Agreements. Schedule 4.25 lists all Shareholder Agreements in place as of the Closing Date, including any voting agreements among shareholders, concerning any class or all classes of Borrower’s capital stock, including Preferred Stock.

     4.26 Investments. Schedule 4.26 lists all Investments of Borrower, or any agreements or other legally binding commitments made by Borrower to invest in any Person, existing as of the Closing Date.

5. AFFIRMATIVE COVENANTS.

     Borrower covenants and agrees that, so long as this Agreement and any other Loan Document remains in effect and until full and final payment of the Obligations (other than any inchoate Obligations which have not been asserted and are not otherwise known to Borrower or Lender), Borrower shall and shall cause each of its Subsidiaries to do all of the following:

     5.1 Accounting System. Maintain a system of accounting that enables Borrower to produce financial statements in accordance with GAAP.

     5.2 Financial Statements, Reports, Certificates. Deliver to Lender:

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          (a) as soon as available, but in any event within 15 days after the end of each month during each of Borrower’s Fiscal years,

          (i) a Borrower prepared Consolidated and individual balance sheet, income statement, and statement of cash flow covering Borrower’s and its Subsidiaries’ operations during such period and comparing the then current Business Plan and the same period during the prior year on a Consolidated, consolidating and individual basis,

          (ii) a certificate signed by the chief financial officer of Borrower to the effect that:

     (A) the financial statements delivered hereunder have been prepared in accordance with GAAP (except for the lack of footnotes and being subject to fiscal year-end audit adjustments) and fairly present in all material respects the financial condition of Borrower and its Subsidiaries,

     (B) the representations and warranties of Borrower contained in this Agreement and the other Loan Documents are true and correct in all material respects on and as of the date of such certificate, as though made on and as of such date (except to the extent that such representations and warranties relate solely to an earlier date), and

     (C) there does not exist any condition or event that constitutes a Default or Event of Default (or, to the extent of any non-compliance, describing such non-compliance as to which he or she may have knowledge and what action Borrower has taken, is taking, or proposes to take with respect thereto).

          (b) Reserved;

          (c) as soon as available, but in any event within 90 days after the end of Borrower’s Fiscal year, Consolidated and consolidating financial statements of Borrower and its Subsidiaries for each such Fiscal year, audited by independent certified public accountants selected by Borrower and reasonably acceptable to Lender and certified, without any qualifications, by such accountants to have been prepared in accordance with GAAP (such audited financial statements to include a balance sheet, income statement, and statement of cash flow and, if prepared, such accountants’ letter to management) together with a certificate of such accountants addressed to Lender stating that such accountants do not have knowledge of the existence of any Default or Event of Default;

          (d) as soon as available but in any event:

          (i) within 15 days after the end of each month during the first twelve calendar months after the Closing Date copies of Borrower’s monthly Business Plan, for the next four week period, on a week-by-week basis; and

          (ii) prior to the last Business Day of each January, in each Fiscal year of Borrower, copies of Borrower’s annual Business Plan, for the forthcoming year, on a month-by-month basis, year by year;

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each such Business Plan to be in form and substance (including as to scope and underlying assumptions) satisfactory to Lender in its Permitted Discretion certified by the chief financial officer of Borrower (in such officer’s capacity as such and not individually) as being such officer’s good faith best estimate of the financial performance of Borrower and its Subsidiaries during the period covered thereby,

          (e) if and when filed by Borrower,

          (i) any filings made by Borrower with the SEC or any other securities commission in any other jurisdiction,

          (ii) copies of Borrower’s federal income tax returns, and any amendments thereto, filed with the Internal Revenue Service or any other relevant Governmental Authority, and

          (iii) any other information that is provided by Borrower to its shareholders generally solely in their capacities as shareholders,

          (f) if and when filed by Borrower and as reasonably requested by Lender, satisfactory evidence of payment of any applicable Taxes in each jurisdiction in which (i) Borrower is required to pay any Taxes, (ii) where Borrower’s failure to pay any such applicable Taxes would result in a Lien (other than a Permitted Lien) on the properties or assets of Borrower, or (iii) where Borrower’s failure to pay any such applicable Taxes reasonably could be expected to result in a Material Adverse Change,

          (g) as soon as Borrower has knowledge of any event or condition that constitutes a Default or an Event of Default, notice thereof and a statement of the curative action that Borrower propose to take with respect thereto, and

          (h) upon the request of Lender, any other report reasonably requested relating to the financial condition of Borrower.

Borrower agrees that it and its Subsidiaries will have the same Fiscal year. Borrower agrees that its independent certified public accountants are authorized to communicate with Lender and to release to Lender whatever financial information concerning Borrower that Lender reasonably may request. Borrower waives the right to assert a confidential relationship, if any, it may have with any accounting firm or service bureau in connection with any information requested by Lender pursuant to or in accordance with this Agreement, and agree that Lender may contact directly any such accounting firm or service bureau in order to obtain such information.

     5.3 Returns. Account for returns of Inventory and Customer Credit Liabilities and record the effects thereof on the general ledger on the same basis and in accordance with the usual customary practices of Borrower, as they exist at the time of the execution and delivery of this Agreement.

     5.4 Maintenance of Properties. Maintain and preserve all of their properties which are necessary or useful in the proper conduct to Borrower’s business in good working order and condition, ordinary wear and tear excepted, and comply at all times with the provisions of all

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material leases to which it is a party as lessee, so as to prevent any loss or forfeiture thereof or thereunder.

     5.5 Tax Matters.

          (a) Duly and timely file, or cause to be duly and timely filed, all Tax Returns required to be filed by it in respect of Taxes, and duly and timely pay, or cause to be duly and timely paid, all Taxes due and payable by it as required by Applicable Law, including all Taxes assessed, reassessed or for which a demand for payment is made by any Governmental Authority, except when and so long as the validity of any such Taxes is being contested in good faith by it or any other Person on its behalf through appropriate proceedings, and such contest is a Permitted Protest and adequate provisions for such Taxes have been made in its financial statements in accordance with GAAP or where the failure to pay such Tax will not be reasonably likely to result in, or result in, a Material Adverse Change.

          (b) Borrower will duly and timely withhold, or cause to be duly and timely withheld, all material Taxes required to be withheld by it in accordance with Applicable Law from any amount paid, or credited, or deemed to be paid or credited by it to or for the account of any Person (including any employees, officers or any non-resident Person), and will duly and timely remit, or cause to be duly and timely remitted, to the appropriate Governmental Authority such Taxes required by Applicable Law to be remitted by it.

          (c) Borrower will not fail to pay any Taxes or other amounts which would result in a Lien (other than a Permitted Lien) on its property. Borrower shall only contest a Permitted Lien that is subject to a Permitted Protest.

          (d) Borrower will, upon written request, furnish to Lender satisfactory evidence that Borrower has paid such Taxes in each jurisdiction in which Borrower is required to pay such Taxes.

     5.6 Insurance.

          (a) At Borrower’s expense, maintain insurance respecting its property and assets wherever located, covering loss or damage by fire, theft, explosion, and all other hazards and risks as ordinarily are insured against by other Persons engaged in the same or similar businesses. Borrower also shall maintain business interruption, public liability, and product liability insurance, as well as insurance against larceny, embezzlement, and criminal misappropriation. All such policies of insurance shall be in such amounts and with such insurance companies as are reasonably satisfactory to Lender. Borrower shall deliver copies of all such policies to Lender.

          (b) Borrower shall give Lender prompt notice of any material loss covered by such insurance. Any monies received as payment for any loss under any insurance policy mentioned above (other than liability insurance policies) or as payment of any award or compensation for condemnation or taking by eminent domain, shall be applied either to the prepayment of the obligations under the Senior Credit Agreement or shall be used to fund the cost of repairs, replacements, or restorations. Any such repairs, replacements, or restorations

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shall be affected with reasonable promptness and shall be of a value at least equal to the value of the items or property destroyed prior to such damage or destruction.

     5.7 Location of Inventory and Equipment. Keep the Inventory and Equipment at the locations identified on Schedule 5.7 (except for Inventory or Equipment in transit and except for samples) or such other locations identified by written notice to Lender not less than 10 Business Days prior to the date on which the Inventory or Equipment is moved to such new location, so long as such new location is within the continental United States.

     5.8 Compliance with Laws. Comply with the requirements of all Applicable Law, including the Fair Labor Standards Act and the Americans With Disabilities Act, other than laws, rules, regulations, and orders the non-compliance with which, individually or in the aggregate, would not result in and reasonably could not be expected to result in a Material Adverse Change.

     5.9 Leases. Pay when due all rents and other amounts payable and perform all material obligations under any material leases and subleases to which Borrower is a party or by which Borrower’s properties and assets are bound, unless such payments are the subject of a Permitted Protest.

     5.10 Existence. At all times preserve and keep in full force and effect Borrower’s valid existence and good standing and any rights and franchises material to Borrower’s businesses, including those with respect to trademark licenses and the Purchase and Sale Documents.

     5.11 Environmental. Keep any property either owned or operated by Borrower free of any Environmental Liens or post bonds or other financial assurances sufficient to satisfy the obligations or liability evidenced by such Environmental Liens, (b) comply, in all material respects, with Environmental Laws and provide to Lender documentation of such compliance which Lender reasonably requests, (c) promptly notify Lender of any release of a Hazardous Material of any reportable quantity from or onto property owned or operated by Borrower and take any Remedial Actions required to abate said release or otherwise to come into compliance with applicable Environmental Law, and (d) promptly provide Lender with written notice within 10 days of the receipt of any of the following: (i) notice that an Environmental Lien has been filed against any of the real or personal property of Borrower, (ii) commencement of any Environmental Action or notice that an Environmental Action will be filed against Borrower, and (iii) notice of a violation, citation, or other administrative order which reasonably could be expected to result in a Material Adverse Change.

     5.12 Immediate Notice to Lender. Borrower shall provide Lender with written notice promptly upon the occurrence of any of the following events, which written notice shall state with reasonable particularity the facts and circumstances of the event for which such notice is being given:

          (a) the occurrence of any “default” or “event of default” under any of the EPI Notes, the Schurman Family Notes or the Senior Credit Agreement;

          (b) any notices provided to the Senior Lender pursuant to the Senior Credit Agreement and not otherwise delivered to Lender, other than borrowing notices;

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          (c) any change in the Authorized Persons;

          (d) any cessation by Borrower of its making payment to its creditors generally as Borrower’s debts become due;

          (e) any failure by Borrower to pay rent at any of Borrower’s locations, which failure continues for more than two Business Days following the last day on which such rent was payable without more than a minimal adverse effect on Borrower;

          (f) any Material Adverse Change;

          (g) the occurrence of any Default or Event of Default;

          (h) any intention on the part of Borrower to discharge Borrower’s present independent accountants or any withdrawal or resignation by such independent accountants from their acting in such capacity;

          (i) any litigation which, if determined adversely to Borrower, could reasonably be expected to result in a Material Adverse Change;

          (j) at Lender’s request, Borrower shall provide Lender, when so distributed, with copies of all national or otherwise material advertising copy (including print advertising and video and radio advertising);

          (k) provide Lender, when received by Borrower, with a copy of any management letter or similar communications from any accountant of Borrower; and

          (l) provide Lender with prompt written notice upon the acquisition or formation of any Subsidiary.

     5.13 Disclosure Updates. Promptly and in no event later than five Business Days after an Authorized Person or other senior officer of Borrower obtains actual knowledge thereof, (a) notify Lender if any written information, exhibit, schedule, or report furnished to Lender contained any untrue statement of a material fact or omitted to state any material fact necessary to make the statements contained therein not misleading in light of the circumstances in which made at the time made, or (b) correct any defect or error that may be discovered therein or in any Loan Document or in the execution, acknowledgement, filing, or recordation thereof.

     5.14 Solvency. Borrower shall be in compliance with Section 4.8 hereof.

     5.15 Line of Business: Borrower and Subsidiaries. Neither Borrower nor any of its Subsidiaries shall engage in any business other than the business in which it is currently engaged or a business reasonably related thereto (the conduct of which reasonably related business is reflected in the then current Business Plan).

     5.16 Royalty Payments. In the event that, as of the end of any Fiscal quarter, Schedule 4.16 fails to list the Persons to which Borrower paid royalty payments or any other similar payment in the previous Fiscal quarter, Borrower shall, within 15 days after the end of such

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Fiscal quarter, provide Lender with an appendix to such Schedule providing details of the Persons to which Borrower paid royalty payments or any other similar payment in the previous Fiscal quarter.

6. NEGATIVE COVENANTS.

     Borrower covenants and agrees that, so long as this Agreement and any other Loan Document remains in effect and until full and final payment of the Obligations (other than any inchoate Obligations which have not been asserted and are not otherwise known to Borrower or Lender), Borrower will not, and will not permit any of its Subsidiaries to do, any of the following:

     6.1 Indebtedness. Create, incur, assume, permit, guarantee, or otherwise become or remain, directly or indirectly, liable with respect to any Indebtedness, except:

          (a) Indebtedness evidenced by this Agreement and the other Loan Documents;

          (b) Indebtedness set forth on Schedule 4.14;

          (c) Permitted Purchase Money Indebtedness;

          (d) refinancings, renewals, or extensions of Indebtedness permitted under clauses (b) and (c) of this Section 6.1 (and continuance or renewal of any Permitted Liens associated therewith) so long as: (i) the terms and conditions of such refinancings, renewals, or extensions do not, in Lender’s reasonable judgment, materially impair the prospects of repayment of the Obligations by Borrower or materially impair Borrower’s creditworthiness, (ii) such refinancings, renewals, or extensions do not result in an increase in the principal amount of the Indebtedness so refinanced, renewed, or extended, (iii) such refinancings, renewals, or extensions do not result in a shortening of the average weighted maturity of the Indebtedness so refinanced, renewed, or extended, nor are they on terms or conditions, that, taken as a whole, are materially more burdensome or restrictive to Borrower, and (iv) if the Indebtedness that is refinanced, renewed, or extended was subordinated in right of payment to the Obligations, then the terms and conditions of the refinancing, renewal, or extension Indebtedness must include subordination terms and conditions that are at least as favorable to Lender as those that were applicable to the refinanced, renewed, or extended Indebtedness;

          (e) Indebtedness comprising Permitted Investments; and

          (f) Indebtedness secured by Permitted Liens;

          (g) Subordinated Indebtedness;

          (h) Senior Indebtedness; and

          (i) other Indebtedness not to exceed $22,000 in the aggregate at any time outstanding.

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     6.2 Liens. Create, incur, assume, or permit to exist, directly or indirectly, any Lien on or with respect to any of its assets, of any kind, whether now owned or hereafter acquired, or any income or profits therefrom, except for Permitted Liens (including Liens that are replacements of Permitted Liens to the extent that the original Indebtedness is refinanced, renewed, or extended under Section 6.1(d) and so long as the replacement Liens only encumber those assets that secured the refinanced, renewed, or extended Indebtedness).

     6.3 Restrictions on Fundamental Changes.

          (a) Enter into any merger, consolidation, reorganization, or recapitalization, or reclassify its Stock or otherwise change Borrower’s type of organization, jurisdiction of organization or other legal or corporate structure.

          (b) Liquidate, wind up, or dissolve itself (or suffer any liquidation or dissolution).

          (c) Convey, sell, lease, license, assign, transfer, or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of its assets (other than as a Permitted Disposition).

          (d) Purchase or otherwise acquire substantially all of the capital stock or all or substantially all of the assets of any other Person with a value of more than $250,000 in the aggregate.

     6.4 Disposal of Assets. Other than Permitted Dispositions, convey, sell, lease, license, assign, transfer, or otherwise dispose of any of the assets of Borrower.

     6.5 Change of Name or Address. Change Borrower’s name or organizational identification number or relocate Borrower’s chief executive office to a new location; provided, however, that Borrower may change its name or chief executive office location upon at least 30 days prior written notice by Borrower to Lender of such change.

     6.6 Nature of Business. Make any change in the principal nature of Borrower’s business except as otherwise permitted by Section 5.15.

     6.7 Prepayments and Amendments.

          (a) Except in connection with a refinancing permitted by Section 6.1(d) and regularly scheduled payments not prohibited under the terms of any subordination agreement, prepay, redeem, defease, purchase, or otherwise acquire any Indebtedness of Borrower, other than the Obligations in accordance with this Agreement.

          (b) Except in connection with a refinancing permitted by Section 6.1(d), directly or indirectly, amend, modify, alter, increase, or change any of the terms or conditions of any agreement, instrument, document, indenture, or other writing evidencing or concerning Indebtedness permitted under Sections 6.1(b), (c), (g) or (h).

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          (c) Directly or indirectly, amend, modify, alter, increase or change any of the terms or conditions of any Purchase and Sale Document without Lender’s prior consent.

     6.8 Change of Control. Cause, permit, or suffer, directly or indirectly, any Change of Control.

     6.9 Distributions. Make or permit any Subsidiary to, directly or indirectly (i) declare, order, pay or make any Restricted Payment or (ii) set aside any sum or property therefore or exercise any set-off or similar rights of Borrower, if any, with respect to any Subordinated Indebtedness.

     6.10 Accounting Methods. Modify or change its method of accounting (other than as may be required to conform to GAAP) or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation or storage of Borrower’s accounting records without said accounting firm or service bureau agreeing to provide Lender information regarding Borrower’s financial condition.

     6.11 Investments. Except for Permitted Investments, directly or indirectly, make or acquire any Investment, or incur any liabilities (including contingent obligations) for or in connection with any Investment.

     6.12 Transactions with Affiliates. Directly or indirectly enter into or permit to exist any transaction with any Affiliate of Borrower (including, without limitation, purchases of Inventory and other transactions between Borrower or any of its Affiliates) except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms, fully disclosed to Lender in reasonable detail, no less favorable to Borrower than would be obtained in an arm’s length transaction with a non-Affiliate.

     6.13 Store Openings and Closings. Commit to open, open or close any location at which Borrower maintains, offers for sale or stores any Inventory unless Borrower has provided Lender at least 30 days’ prior written notice of such commitment, opening or closing and (i) in the case of any such opening, such opening is consistent with the then current Business Plan or Lender has consented thereto in writing or (ii) in the case of any such closing, such closing is consistent with the then current Business Plan or Lender has consented thereto in writing and is conducted in a manner consistent with Borrower’s historical store closing practices, including, without limitation, as to any third party agent that Borrower propose to employ in connection therewith, provided further that if Borrower intends that 5% or more of Borrower’s (individually as to Borrower or in the aggregate among Borrower and its Subsidiaries) stores are to be closed within any Fiscal year or within any period of 12 consecutive months (“Multiple Closing Minimum”), Borrower must retain a nationally-recognized liquidator (or such other Person approved by Lender) as either a consultant or liquidator in connection with the closing of each of such stores. Borrower may purchase Real Property as part of any store opening permitted hereunder provided that (i) such purchase is consistent with the current Business Plan approved by Lender, (ii) the financing of such purchase of Real Property is permitted hereunder and is consistent with the current Business Plan approved by Lender, and (iii) such purchase and, if applicable, the financing thereof, are consented to by Lender in its sole discretion.

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     6.14 Suspension. Suspend or go out of a substantial portion of Borrower’s business.

     6.15 Use of Proceeds. Use the proceeds of the Advances for any purpose other than making (a) any scheduled or required payment of interest or principal of the Senior Indebtedness, or subject to the terms of the applicable Subordination Agreement, the Subordinated Indebtedness, (b) a payment of rent under any sublease listed on Schedule 6.15 or (c) a payment of payroll obligations of Borrower or its Subsidiaries that are due and payable.

     6.16 Benefit Plans. No Borrower, any of its Subsidiaries, or any of their ERISA Affiliates shall maintain or contribute to any Benefit Plan.

     6.17 Warrants. Borrower shall not, and shall not permit any Subsidiary to, grant or issue any warrants with respect to its Stock.

     6.18 Shareholder Agreements. None of the Shareholder Agreements described on Schedule 4.25 shall be amended, modified, superseded, waived, or replaced without Lender’s prior written consent (not to be unreasonably withheld or delayed).

     6.19 Fiscal Year. Borrower shall not change its Fiscal year from the current twelve month period that comprises its Fiscal year as of the Closing Date.

7. EVENTS OF DEFAULT.

     Any one or more of the following events shall constitute an event of default (each, an “Event of Default”) under this Agreement:

     7.1 Payment. If Borrower fails to pay when due and payable or when declared due and payable, all or any portion of the Obligations (whether of principal, interest (including any interest which, but for the provisions of the Bankruptcy Code, would have accrued on such amounts), fees and charges due Lender, reimbursement of Lender Expenses, or other amounts constituting Obligations);

     7.2 Covenants, etc.

          (a) If Borrower fails to perform, keep, or observe any term, provision, condition, covenant, or agreement contained in Articles 5 or 6 of this Agreement or in any of the other Loan Documents;

          (b) If Borrower fails to perform, keep, or observe any other term, provision, condition, covenant, or agreement contained in this Agreement or any other Loan Document, and such failure shall continue unremedied for a period of 15 days after the first to occur of Borrower’s actual knowledge thereof or notice thereof from Lender to Borrower;

     7.3 Attachment. If any material portion of Borrower’s or any of its Subsidiaries’ assets is attached, seized, subjected to a writ or distress warrant, levied upon, or comes into the possession of any third Person;

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     7.4 Insolvency. If an Insolvency Proceeding is commenced by Borrower or any of its Subsidiaries;

     7.5 Involuntary Insolvency. If an Insolvency Proceeding is commenced against Borrower or any of its Subsidiaries and any of the following events occur: (a) Borrower or the applicable Subsidiary consents to the institution of the Insolvency Proceeding against it, (b) the petition commencing the Insolvency Proceeding is not timely controverted, (c) the petition commencing the Insolvency Proceeding is not dismissed within 60 calendar days of the date of the filing thereof, (d) an interim trustee or interim receiver or a trustee or receiver is appointed to take possession of all or any substantial portion of the properties or assets of, or to operate all or any substantial portion of the business of, Borrower or any of its Subsidiaries, or (e) an order for relief shall have been entered therein;

     7.6 Injunction. If Borrower or any of its Subsidiaries is enjoined, restrained, or in any way prevented by court order or otherwise from continuing to conduct all or any material part of its business affairs;

     7.7 Levy. If a notice of Lien, levy, or assessment is filed of record with respect to any material portion of Borrower’s or any of its Subsidiaries’ assets by the United States, or any department, agency, or instrumentality thereof, or by any state, county, municipal, governmental agency or other Governmental Authority, or if any taxes or debts owing at any time hereafter to any one or more of such entities becomes a Lien, whether choate or otherwise, upon Borrower’s or any of its Subsidiaries’ assets and the same is not paid on the payment date thereof;

     7.8 Judgment. If one or more judgments or orders for the payment of money is rendered against Borrower in excess of $250,000 in the aggregate (provided, that, any judgment covered by insurance where the insurer has assumed responsibility in writing for such judgment and acknowledged that Borrower will receive the proceeds of such insurance within 30 days of the issuance of a final, non-appealable judgment and execution thereon is effectively stayed shall not be included in calculating such amount) and shall remain undischarged or unvacated for a period in excess of 30 days or execution shall at any time not be effectively stayed, or any judgment other than for the payment of money, or injunction, attachment, garnishment or execution is rendered against Borrower or any of its assets having a value in excess of $250,000 and shall remain undischarged or unvacated for a period in excess of 30 days or execution shall at any time not be effectively stayed;

     7.9 Material Agreements. If there is a default by Borrower in any Purchase and Sale Document or by any party (other than Lender) in any other agreement material to the operations of the business of Borrower to which Borrower or any of its Subsidiaries is a party and such default (a) occurs at the final maturity of the obligations thereunder (with respect to monetary obligations) or on the date required for performance (with respect to performance obligations), or (b) results in a right by the other party thereto, irrespective of whether exercised, to accelerate the maturity of Borrower’s or its Subsidiaries’ obligations thereunder, to terminate such agreement, or to refuse to renew such agreement pursuant to an automatic renewal right therein, unless such default is a monetary default and the amount necessary for Borrower to pay to cure such default is less than $250,000 and Borrower has established adequate reserves therefor and is contesting such default in good faith;

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     7.10 Insurance. Any event occurs, as a result of which revenue-producing activities (except to the extent such lost revenue is promptly replaced with business interruption insurance) cease or are substantially curtailed at (a) any of Borrower’s principal distribution centers and such cessation or curtailment continues for more than five Business Days or (b) any other facility or facilities of Borrower generating more than 10% of Borrower’s Consolidated revenues for Borrower’s Fiscal year preceding such event, and such cessation or curtailment continues for more than 20 days;

     7.11 Subordinated Debt. If Borrower or any of its Subsidiaries makes any payment on account of Subordinated Indebtedness, except to the extent such payment is permitted by the terms of the subordination provisions applicable to such Indebtedness;

     7.12 Misrepresentation. If any material misstatement or misrepresentation exists in any warranty, representation, statement, or Record made to Lender by Borrower, its Subsidiaries, or any officer, employee, agent, or director of Borrower or any of its Subsidiaries;

     7.13 Loan Documents. Any provision of any Loan Document or any Purchase and Sale Document shall at any time for any reason be declared to be null and void, or the validity or enforceability thereof shall be contested by or on behalf of Borrower, or a proceeding shall be commenced seeking to establish the invalidity or unenforceability thereof (as the case may be), or Borrower shall deny that Borrower has any liability or obligation purported to be created under any Loan Document or any Purchase and Sale Document, in each case other than in connection with any Leasehold Interest subject to the Sublease Requirement;

     7.14 Material Adverse Change. If there is a Material Adverse Change;

     7.15 Change of Control. If a Change of Control shall occur without the consent of Lender; or

     7.16 Material Restraint. The indictment of, or institution of any legal process or proceeding against Borrower or its Subsidiary where the relief, penalties or remedies sought or available include the forfeiture of any property of Borrower or Subsidiary and/or the imposition of any stay or other order, the effect of which could be to restrain in any material way the conduct by Borrower of its business in the ordinary course or would otherwise result in a Material Adverse Change.

8. LENDER’S RIGHTS AND REMEDIES.

     8.1 Rights and Remedies. Upon the occurrence, and during the continuation, of an Event of Default, Lender may exercise any of the rights and remedies provided for in this Agreement or any other Loan Document or otherwise available to it at law or in equity, such rights and remedies to include, without limitation, the following, all of which are authorized by Borrower:

          (a) declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately due and payable;

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          (b) cease advancing money or extending credit to or for the benefit of Borrower under this Agreement, under any of the Loan Documents, or under any other agreement between Borrower and Lender;

          (c) terminate this Agreement and any of the other Loan Documents as to any future liability or obligation of Lender but without affecting the Obligations;

          (d) without notice to Borrower (such notice being expressly waived), and without constituting a retention of any collateral in satisfaction of an obligation (within the meaning of the Code), set off and apply to the Obligations any and all (i) balances and deposits of Borrower held by Lender, or (ii) Indebtedness at any time owing to or for the credit or the account of Borrower held by Lender; and

          (e) Lender shall have all other rights and remedies available to it at law or in equity pursuant to any other Loan Documents.

     8.2 Remedies Cumulative. The rights and remedies of Lender under this Agreement, the other Loan Documents, and all other agreements shall be cumulative and may be exercised simultaneously. Lender shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise by Lender of one right or remedy shall be deemed an election, and no waiver by Lender of any Event of Default shall be deemed a continuing waiver. No delay by Lender shall constitute a waiver, election, or acquiescence by it.

9. TAXES AND EXPENSES.

     If Borrower fails to pay any monies (whether Taxes or, in the case of leased properties or assets, rents or other amounts payable under such leases) due to third Persons, or fails to make any deposits or furnish any required proof of payment or deposit, all as required under the terms of this Agreement, then, Lender, in its sole discretion and without prior notice to Borrower, may do any or all of the following: (a) make payment of the same or any part thereof, or (b) set up such reserves in Borrower’s Loan Account as Lender deems necessary to protect itself from the exposure created by such failure. Any such amounts paid by Lender shall constitute Lender Expenses and any such payments shall not constitute an agreement by Lender to make similar payments in the future or a waiver by Lender of any Event of Default under this Agreement. Lender need not inquire as to, or contest the validity of, any such expense, tax, or Lien and the receipt of the usual official notice for the payment thereof shall be conclusive evidence that the same was validly due and owing.

10. WAIVERS; INDEMNIFICATION.

     10.1 Demand; Protest; etc. Borrower waives demand, protest, notice of protest, notice of intention to accelerate, notice of acceleration, notice of default or dishonor, notice of payment and nonpayment, nonpayment at maturity, release, compromise, settlement, extension, or renewal of documents, instruments, chattel paper, and guarantees at any time held by the Lender on which Borrower may in any way be liable.

     10.2 Indemnification. Borrower shall pay, indemnify, defend, and hold Lender, Lender-Related Persons, and each of their respective officers, directors, employees, agents,

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attorneys, and attorneys-in-fact (each, an “Indemnified Person”) harmless (to the fullest extent permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all reasonable attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them (a) in connection with or as a result of or related to the execution, delivery, enforcement, performance, or administration of this Agreement, any of the other Loan Documents, or the transactions contemplated hereby or thereby, and (b) with respect to any investigation, litigation, or proceeding related to this Agreement, any other Loan Document, or the use of the proceeds of the credit provided hereunder (irrespective of whether any Indemnified Person is a party thereto), or any act, omission, event, or circumstance in any manner related thereto (all the foregoing, collectively, the “Indemnified Liabilities”). The foregoing to the contrary notwithstanding, Borrower shall have no obligation to any Indemnified Person under this Section 10.2 with respect to any Indemnified Liability that a court of competent jurisdiction finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This provision shall survive the termination of this Agreement and the repayment of the Obligations. If any Indemnified Person makes any payment to any other Indemnified Person with respect to an Indemnified Liability as to which Borrower was required to indemnify the Indemnified Person receiving such payment, the Indemnified Person making such payment is entitled to be indemnified and reimbursed by Borrower with respect thereto. Borrower shall be subrogated to an Indemnified Person’s rights of recovery to the extent of any liabilities satisfied by Borrower and such Indemnified Person shall execute and deliver such instruments and papers as are necessary to assign such rights and assist in the execution thereof; provided, however, that, and, notwithstanding the foregoing to the contrary, such subrogation rights of Borrower may not be exercised until payment in full of all Obligations due hereunder and the termination of Lender’s obligation to make Advances under the Revolving Credit and shall be subordinate to the Obligations due Lender in all respects. WITHOUT LIMITATION, THE FOREGOING INDEMNITY SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO INDEMNIFIED LIABILITIES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF ANY NEGLIGENT ACT (NOT CONSTITUTING GROSS NEGLIGENCE) OR OMISSION OF SUCH INDEMNIFIED PERSON OR OF ANY OTHER PERSON.

     10.3 Costs and Expenses of Lender.

          (a) Borrower shall pay from time to time on demand all costs of collection, Lender Expenses and all reasonable costs, expenses, and disbursements (including reasonable attorneys’ fees and expenses) which are incurred by Lender in connection with the preparation, negotiation, execution, administration and delivery of this Agreement and of any other Loan Documents, and all other reasonable costs, expenses, and disbursements which may be incurred in connection with or in respect to the credit facility contemplated hereby or which otherwise are incurred with respect to the Obligations.

          (b) Borrower shall pay from time to time on demand all Lender Expenses (including reasonable attorneys’ fees and reasonable attorneys’ expenses) incurred, following the occurrence of any Event of Default, by Lender.

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          (c) Borrower authorizes Lender to pay all such fees and expenses, and in Lender’s discretion, to add such fees and expenses to the Loan Account.

          (d) The undertaking on the part of Borrower in this Section 10.3 shall survive payment of the Obligations and/or any termination, release, or discharge executed by Lender in favor of Borrower, other than a termination, release, or discharge which makes specific reference to this Section 10.3.

11. NOTICES.

     Unless otherwise provided in this Agreement, all notices or demands by Borrower or Lender to the others relating to this Agreement or any other Loan Document shall be in writing and (except for financial statements and other informational documents which may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, electronic mail (at such email addresses as Borrower or Lender, as applicable, may designate to each other in accordance herewith), or telefacsimile (with a confirming receipt from the sending machine) to Borrower or Lender, as the case may be, at its address set forth below:

If to Borrower: Schurman Fine Papers, d/b/a Papyrus 500 Chadbourne Road Caller Box 6030 Fairfield, CA 94533 Attn: Tom Shaw With a copy to: Dominique Schurman Fax No: (707) 428-0641

With copies to: Morgan Lewis & Bockius LLP One Market Spear Street Tower San Francisco, CA 94024 Attn: Scott Karchmer, Esquire Fax No: (415) 442-1001

If to Lender: American Greetings Corporation One American Road Cleveland, Ohio 44144 Attn: Chris Haffke Fax No: (216) 252-6741

with copies to: Jones Day 901 Lakeside Avenue Cleveland, Ohio 44114 Attn: Rachel Rawson Fax No: (216) 579-0212

     Lender and Borrower may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the other party. All notices or

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demands sent in accordance with this Section 11, shall be deemed received on the earlier of the date of actual receipt or three (3) Business Days after the deposit thereof in the mail.

12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

          (a) THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

          (b) BORROWER AND LENDER IRREVOCABLY CONSENT AND SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE NEW YORK COUNTY SUPREME COURT OF THE STATE OF NEW YORK AND ANY COURT TO WHICH AN APPEAL MAY BE TAKEN THEREFROM AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WHICHEVER LENDER MAY ELECT. THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST ANY ASSETS OR OTHER PROPERTY MAY BE BROUGHT, AT LENDER’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE LENDER ELECTS TO BRING SUCH ACTION OR WHERE SUCH ASSETS OR OTHER PROPERTY MAY BE FOUND. BORROWER WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 12(b).

          (c) BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. BORROWER AND LENDER REPRESENT THAT EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

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13. MISCELLANEOUS PROVISIONS.

     13.1 Successors. This Agreement shall bind and inure to the benefit of the respective successors and assigns of each of the parties; provided, however, that Borrower may not assign this Agreement or any rights or duties hereunder without Lender’s prior written consent and any prohibited assignment shall be absolutely void ab initio. No consent to assignment by Lender shall release Borrower from its Obligations.

     13.2 Amendments and Waivers. No amendment or waiver of any provision of this Agreement or any other Loan Document, and no consent with respect to any departure by Borrower therefrom, shall be effective unless the same shall be in writing and signed by Lender and Borrower and then any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

     13.3 No Waivers; Cumulative Remedies. No failure by Lender to exercise any right, remedy, or option under this Agreement or any other Loan Document nor any delay by Lender in exercising the same, will operate as a waiver thereof. No waiver by Lender will be effective unless it is in writing, and then only to the extent specifically stated. No waiver by Lender on any occasion shall affect or diminish its rights thereafter to require strict performance by Borrower of any provision of this Agreement. Lender’s rights under this Agreement and the other Loan Documents will be cumulative and not exclusive of any other right or remedy that Lender may have.

     13.4 Reliance by Lender. Lender shall be entitled to rely upon any certificate, notice or other document (including any cable, telegram, telex, or facsimile) reasonably believed by Lender to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of attorneys, accountants and other experts selected by Lender.

14. GENERAL PROVISIONS.

     14.1 Effectiveness. This Agreement shall be binding and deemed effective when executed by Borrower and Lender.

     14.2 Section Headings. Headings and numbers have been set forth herein for convenience only. Unless the contrary is compelled by the context, everything contained in each Section applies equally to this entire Agreement.

     14.3 Reserved.

     14.4 Severability of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose of determining the legal enforceability of any specific provision.

     14.5 Amendments in Writing. This Agreement only can be amended by writing in accordance with Section 13.2.

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     14.6 Counterparts; Telefacsimile Execution. This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one and the same agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any party delivering an executed counterpart of this Agreement by telefacsimile also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement. The foregoing shall apply to each other Loan Document mutatis mutandis, except as otherwise specifically provided therein or therefor.

     14.7 Revival and Reinstatement of Obligations. If the incurrence or payment of the Obligations by Borrower or the transfer to Lender of any property should for any reason subsequently be declared to be void or voidable under any state or federal law relating to creditors’ rights, including provisions of the Bankruptcy Code relating to fraudulent conveyances, preferences, or other voidable or recoverable payments of money or transfers of property (collectively, a “Voidable Transfer”), and if Lender is required to repay or restore, in whole or in part, any such Voidable Transfer, or elects to do so upon the reasonable advice of its counsel, then, as to any such Voidable Transfer, or the amount thereof that Lender is required or elects to repay or restore, and as to all reasonable costs, expenses, and attorneys fees of Lender related thereto, the liability of Borrower automatically shall be revived, reinstated, and restored and shall exist as though such Voidable Transfer had never been made.

     14.8 Integration. This Agreement, together with the other Loan Documents, reflects the entire understanding of the parties with respect to the transactions contemplated hereby and shall not be contradicted or qualified by any other agreement, oral or written, before the date hereof.

     14.9 Reserved.

     14.10 Press Releases. The Borrower agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of Lender or its Affiliates or referring to this Agreement or the other Loan Documents without at least two (2) Business Days’ prior notice to Lender and without the prior written consent of Lender unless (and only to the extent that) Borrower or its Affiliate is required to do so under Applicable Law and then, in any event, Borrower or its Affiliate will consult with Lender before issuing such press release or other public disclosure. Borrower, on their own behalf and on behalf of its Affiliates, consents to the publication by Lender of advertising material relating to the financing transactions contemplated by this Agreement using Borrower’s or Affiliates name, product photographs, logo or trademark. Lender shall provide a draft reasonably in advance of any advertising material to Borrower for review and comment prior to the publication thereof.

     14.11 No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement and the other Loan Documents. In the event an ambiguity or question of intent or interpretation arises, this Agreement and the other Loan Documents shall be construed as if drafted jointly by the parties hereto and no presumption or

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burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement and the other Loan Documents.

[The remainder of this page is intentionally left blank.]

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered as of the date first above written.

SCHURMAN FINE PAPERS d/b/a PAPYRUS, as Borrower
By:	/s/ Thomas A. Shaw
	Name:	Thomas A. Shaw
	Title:	Chief Financial Officer
AMERICAN GREETINGS CORPORATION, as Lender
By:	/s/ Catherine M. Kilbane
	Name:	Catherine Kilbane
	Title:	Senior Vice President, General Counsel & Secretary

Signature Page to Loan Agreement — Papyrus

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EX-10.11

Exhibit 10.11

LIMITED GUARANTY

     FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE ACKNOWLEDGED, the undersigned unconditionally guaranties to Wells Fargo Retail Finance, LLC, (together, with any of its successors-in-interest the “Agent”), with an address at One Boston Place, 18^th Floor, Boston, Massachusetts 02108, in its capacity as Agent for the benefit of the Lenders under the Loan Agreement (as defined below), in accordance with the terms and conditions hereof, the payment of the Guaranteed Amount (as defined below); provided, however, that in no event shall Guarantor’s Liability under this Guaranty exceed the Maximum Guaranty Amount, plus Costs of Collection (as defined below) as provided herein.

     1. DEFINITIONS. All initially capitalized terms used here shall have the same meaning as set forth in the Loan Agreement, unless otherwise defined herein. As used herein, the following terms have the following meanings:

     “Costs of Collection” means, all reasonable attorneys’ fees and reasonable out-of-pocket expenses incurred by the Agent’s attorneys, and all reasonable costs and expenses incurred by the Agent (including, without limitation, reasonable and documented costs and expenses associated with travel), which fees, costs and expenses arise out of enforcement against Guarantor of this Guaranty.

     “Guaranteed Amount” means as of any date of determination thereof, the lesser of (i) the Maximum Guaranty Amount or (ii) the aggregate amount of the outstanding Liabilities as of such date, plus all reasonable and documented Costs of Collection incurred by Agent or Lenders in connection with this Guaranty.

     “Guarantor L/C” means one or more irrevocable standby letters of credit, which must aggregate at all times at least the Maximum Guaranty Amount, which Guarantor L/C shall have a minimum tenor of 365 days from the date of issuance, contain customary “evergreen” provisions, be for the account of the Guarantor, be for the benefit of Agent, on behalf of the Lenders, and be issued by an Acceptable Financial Institution (which at all times must remain an Acceptable Financial Institution during the term of the Guarantor L/C) and otherwise be in form and substance reasonably satisfactory to Agent in all material respects in Agent’s Permitted Discretion, together with any supplement thereto, renewal thereof or replacement thereof.

     “Guarantor L/C End Date” means the earliest of (A) the date on which all of the following have occurred: (i) all Liabilities due and payable under the Loan Agreement have been indefeasibly repaid to Agent and/or Lenders in full (except that any outstanding L/C’s may be cash collateralized rather than paid as permitted under the Loan Agreement), (ii) the Commitments have been terminated and (iii) the Revolving Credit Termination Date shall have occurred or (B) January 1, 2014.

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     “Key Date” means the date after Acceleration of the Liabilities on which any of the following events first occur:

     (a) Substantial completion by the Agent of the Agent’s disposition of the Collateral or substantial completion of the exercise by the Agent of the Agent’s rights and remedies as a secured creditor of the Borrowers, following the occurrence of an Event of Default under the Loan Agreement or other Loan Document, in respect of the Collateral;

     (b) Substantial completion of store closing or going-out-of business sales in respect to substantially all of the Borrowers’ Inventory Collateral;

     (c) Consummation of a sale of substantially all of the assets of the Borrowers or confirmation of reorganization plan in a bankruptcy proceeding or other Insolvency Proceeding involving the Borrowers as debtors; or

     (d) The ninety-first (91^st) day after Agent or Lenders have accelerated the Obligations on account of the occurrence of an Event of Default under the Loan Agreement and has commenced to Liquidate the Collateral provided that such Acceleration has not been rescinded in writing by the Agent.

     “Liabilities” means all Obligations, whether now existing or hereafter arising, of the Borrowers to the Agent and Lenders under the Loan Agreement and other Loan Documents including, but not limited to, any interest arising after the commencement of any case with respect to any of the Borrowers under the Bankruptcy Code or other Insolvency Proceeding against any of the Borrowers as debtors (including the payment of interest and other amounts, which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in part in any such case and including loans, interest, fees, charges and expenses related thereto and all other Liabilities of any Borrower to Agent or Lenders under the Loan Agreement or other Loan Documents) due in connection with the Loan Agreement and the Loan Documents.

     “Loan Agreement” means that certain First Amended and Restated Loan and Security Agreement dated as of even date herewith by and between Schurman Fine Papers, d/b/a Papyrus, a California corporation, Papyrus Franchise Corporation, a Delaware corporation, both with its principal executive offices at 500 Chadbourne Road, Caller Box 6030, Fairfield, CA 94533, and 644064 N.B. Inc., a New Brunswick corporation with its principal executive offices at 44 Chipman Hill, Postoffice Box 7289, Stn: A, Suite 1000, Saint John, NB E2L4S6, Canada, and each of their respective Subsidiaries which are Borrowers under the Loan Agreement, from time to time, (collectively, the “Borrowers”), and Wells Fargo Retail Finance, LLC, and its respective successors-in-interest, as the Agent (the “Agent”), with an address at One Boston Place, 18^th Floor, Boston, Massachusetts 02108, and each of the Lenders under the Loan Agreement, as it may be amended, modified, supplemented extended, renewed or replaced in accordance with the terms thereof (provided that definitions from the Loan Agreement of “Accelerate” and

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“Liquidate” as used in the definition of “Key Date” herein shall be such definitions as defined in the Loan Agreement on the date hereof).

     “Maximum Guaranty Amount” means $12,000,000.

     “Subordinated Loan Documents” means the “Loan Documents” as defined in the Loan Agreement, dated as of the date hereof, by and between Schurman Fine Papers, d/b/a Papyrus and Guarantor, as it may be amended, modified, supplemented extended, renewed or replaced.

     “Transaction Documents” means the Purchase & Sale Documents.

     2. GUARANTEE.

     (a) The undersigned Guarantor absolutely and unconditionally guarantees and agrees to be liable for the full and indefeasible payment in cash of the Guaranteed Amount as in effect on the date when demand for payment is made hereunder on or after the occurrence of the Key Date plus all reasonable and documented Costs of Collection incurred by Agent in connection with this Guaranty.

     (b) In order to secure the undersigned’s obligations hereunder with respect to the Guaranteed Amount, the undersigned has arranged for the issuance of one or more Guarantor L/Cs in an aggregate amount at least equal to the Maximum Guaranty Amount to the Agent as beneficiary. Guarantor agrees that, except as expressly permitted under Section 2(c) hereof, it shall at all times until the Guarantor L/C End Date has occurred, maintain Guarantor L/Cs in an amount at least equal to the Maximum Guaranty Amount. Notwithstanding anything to the contrary contained in this Guaranty, Agent agrees that (i) so long as Guarantor maintains a Guarantor L/C in full force and effect in an aggregate undrawn amount at least equal to the Maximum Guaranty Amount, Agent’s sole recourse against Guarantor pursuant to this Guaranty shall be to draw upon the Guarantor L/C for the Guaranteed Amount plus any Costs of Collection (or to apply cash proceeds from a draw on the Guarantor L/C pursuant to Section 2(c) hereof) and to recover any other Costs of Collection due hereunder from Guarantor and (ii) except as provided in subparagraph 2(c) hereof, it shall not draw upon the Guarantor L/C or exercise any other right or remedy available to it against the Guarantor until the Key Date has occurred. Guarantor acknowledges that if, for any reason whatsoever, Agent has not received payment in full of the Liabilities by the Key Date (regardless of whether Agent has been able to complete the liquidation of the Collateral by such date), the Agent may, at any time after the second business day following the Key Date, draw upon the Guarantor L/C (without the requirement of further notice of the Guarantor or exhaustion or completion of any other rights and remedies) in an amount equal to the Guaranteed Amount due as of the date of such draw, plus Costs of Collection then due under subparagraph 2(a) hereof. The Guarantor acknowledges that the Agents’ and Lenders’ efforts to liquidate the Collateral or pursue other rights and remedies may become subject to a stay, injunction or restraining order issued by a court in an Insolvency Proceeding or another court, which order prohibits or delays the Agent and Lenders from pursuing liquidation or sale of the Collateral or other rights and remedies and further acknowledges and agrees that the

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dates set forth in the definition of “Key Date” (or its right to draw on the Guarantor L/Cs on or after the occurrence of the Key Date) shall not be deemed to have been extended by virtue of such stay, injunction or restraining order. If Agent determines that it has received indefeasible payment in full in cash of all of the Liabilities at any time during or after the occurrence of the Key Date without having to draw upon the Guarantor L/C or that Agent only needs to draw upon a portion of the Guarantor L/C in order for Guarantor’s obligations then due and payable hereunder to be paid in cash and satisfied in full, promptly following such determination, after having drawn any amount necessary for it to receive payment of all obligations due hereunder, Agent shall return the Guarantor L/C to Guarantor and Guarantor shall be permitted to terminate it or permit it to expire.

     (c) Notwithstanding anything contained herein to the contrary, the Agent shall also be permitted to draw upon the Guarantor L/C at any time prior to the occurrence of the Guarantor L/C End Date if either or both of the following events described in the following clauses “i” or “ii” occur:

     (i) Prior to the date that is at least thirty (30) days before the expiry date of the Guarantor L/C (if such expiry date is before January 1, 2014), the expiry date of the Guarantor L/C has not been extended or a replacement Guarantor L/C has not been provided to Agent with a later expiry date and the Key Date has not previously occurred. The Agent must provide notice of its failure to receive a notice of renewal of the Guarantor L/C at least fifteen (15) days prior to the Agent’s drawing on the Guarantor L/C (the Agent may send such a notice either before, on, or after the sixtieth (60^th) day prior to the date of the expiration of the term (or renewal term) of any Guarantor L/C, provided that the Agent may make a drawing premised on the failure to renew a Guarantor L/C (as opposed to the occurrence of the Key Date) only on or after the thirtieth (30^th) day prior to the date of the expiration of the term (or renewal term) of a Guarantor L/C.

     (ii) At any time after the date hereof, the issuer of any Guarantor L/C ceases to comply with the definition of “Acceptable Financial Institution” set forth in the Loan Agreement as determined by Agent in its Permitted Discretion.

     If, on or prior to the fifteenth (15^th) day after the Agent receives the proceeds of a drawing on the Guarantor L/C made after the occurrence of one of the events described in the immediately preceding clauses “i” and “ii”, the undersigned delivers a replacement Guarantor L/C to the Agent that is identical to the initial Guarantor L/C from an Acceptable Financial Institution, or that contains modifications acceptable to the Agent in the Agent’s good faith discretion, and is in an amount at least equal to the Maximum Guaranty Amount, then the Agent shall return the cash amount so drawn to the undersigned or as the undersigned may otherwise direct; provided that, if no such replacement Guarantor L/C is delivered prior to the expiration of such fifteen (15) day period, the Agent shall retain all cash proceeds realized from the draw on the Guarantor L/C on deposit in a separate depositary account at Wells Fargo (such account, the “Guarantor Collateral Account”) in respect to which Agent shall have a duly perfected first lien security interest as security for Guarantor’s obligations hereunder. Following the occurrence of the Key Date, Agent

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shall apply the funds in the Guarantor Collateral Account to reduce the Liabilities in an amount not in excess of the Guaranteed Amount then due hereunder (plus any Costs of Collection incurred by Agent or Lender) at any time that it would be entitled to draw on the Guarantor L/C pursuant to Section 2(b) hereof. Any funds remaining in the Guarantor Collateral Account following the indefeasible payment in full in cash of all obligations of the Guarantor to the Agent and Lenders hereunder shall be released to the undersigned or as the undersigned otherwise directs.

     (d) Any amounts paid by the Guarantor pursuant to this Guarantee on account of the Guaranty Amount (including by virtue of draws on the Guarantor L/C) shall reduce the Maximum Guaranty Amount and once so reduced, the Maximum Guaranty Amount may not be increased above such decreased amount, except with the Guarantor’s prior written consent.

     (e) Agent agrees that in the event that Agent seeks to replace any original Guarantor L/C provided by Guarantor which has been lost stolen or destroyed, Agent will deliver to Guarantor a Lost Letter of Credit Indemnity Agreement in the form attached hereto as Exhibit A.

     (f) Agent shall use commercially reasonable efforts to give notice to the Guarantor pursuant to Section 11 hereof of the occurrence of any Key Date with the understanding that, in the event AG is party to any Insolvency Proceeding, the parties agree that Agent shall have no obligation under this Guaranty to send any such notice to AG or any other Person. Agent’s failure to notify Guarantor (or of Guarantor to receive such notice) of the occurrence of the Key Date shall not waive, diminish, restrict, stay, interfere with, impair, or otherwise negatively impact the Agent’s rights and remedies hereunder (including Agent’s right to request and receive a drawing on the Guarantor L/C) or under any other Loan Document or at law or equity. Guarantor agrees that Agent is under no obligation to provide any notice to Guarantor of Agent’s intention to draw on a Guarantor L/C or of any actual drawings on the Guarantor L/C.

     3. OBLIGATIONS NOT AFFECTED. The obligations of the undersigned hereunder shall not be affected by: any fraudulent, illegal, or improper act by the Borrowers, the undersigned or any person liable or obligated to the Agent or any Lender for or on the Liabilities; any release, discharge, or invalidation, by operation of law or otherwise, of the Liabilities; or the legal incapacity of the Borrowers, the undersigned, or any other person liable or obligated to the Agent or any Lender for or on the Liabilities. Interest and Agent’s and Lenders’ Expenses included in the Liabilities shall continue to accrue and shall continue to be deemed Liabilities guarantied hereby notwithstanding any stay to the enforcement thereof against the Borrowers or the disallowance of any claim therefor against the Borrowers.

     4. INCORPORATION OF ALL DISCUSSIONS. This Guarantee and the Loan Agreement incorporate all discussions and negotiations between the undersigned and the Agent, for the benefit of the Lenders, concerning the guaranty provided by the undersigned hereby. No such discussions or negotiations shall limit, modify, or otherwise affect the provisions hereof. No provision hereof may be altered, amended, waived cancelled or modified, except by a written

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instrument executed, sealed, and acknowledged by a duly authorized officer of the Agent and the undersigned.

     5. GENERAL WAIVERS. The undersigned waives: presentment, demand, notice, and protest with respect to the Liabilities and this Guaranty (except as provided herein); any delay on the part of the Agent; any claim which the undersigned may have or to which the undersigned may become entitled to the extent that such claim might otherwise cause any transfer to the Agent by or on behalf of the Borrowers to be avoided as having been, or in the nature of, a preference; and notice of acceptance of this Guaranty.

     6. WAIVER OF SURETYSHIP. The undersigned hereby expressly waives all suretyship defenses, including, without limitation: (i) surrender, release, exchange, substitution, dealing with or taking any additional collateral, and (ii) any impairment of Collateral, including but not limited to failure to perfect a security interest in the Collateral.

     7. WAIVER OF SUBROGATION. The undersigned shall not exercise any right against the Borrowers, by way of subrogation, set-off, reimbursement, indemnity, contribution, or the like with respect to any amounts paid or deemed paid from a draw under the Guarantor L/C in respect of the guaranteed obligations unless and until the Guarantor L/C End Date (defined for purposes of this Section 7 without regard to clause “B” of the definition of such term contained herein) has occurred; provided, however, that nothing contained herein shall restrict the ability of the Guarantor to exercise any rights or remedies available to it under any other agreement with any Borrower or affiliate, including, without limitation, under any Transaction Document or Subordinated Loan Document.

     8. SUBORDINATION. The payment of any amounts due with respect to any indebtedness of the Borrowers now or hereafter owed to the undersigned arising in any way from the exercise of the Agent’s rights and remedies under this Guaranty is hereby subordinated to the prior payment in full of the Liabilities. Any amounts which are collected, enforced and received by the undersigned in violation of this Section 8 shall be held by the undersigned as trustee for the Agent and shall be paid over to the Agent on account of the Liabilities without affecting in any manner the liability of the undersigned under this Guaranty.

     9. AGENT’S BOOKS AND RECORDS. The books and records of the Agent showing the account between the Agent and the Borrowers shall be admissible in any action or proceeding and constitute prima facie evidence and proof of the items contained therein.

     10. CHANGES IN LIABILITIES. Subject to the terms of the Loan Agreement, the undersigned assents to any indulgence or waiver which the Agent might grant or give the Borrowers and/or any other person liable or obligated to the Agent or Lenders for or on the Liabilities. The undersigned authorizes the Agent and Lenders to alter, amend, cancel, waive, or modify any term or condition of the Liabilities and of the obligations of any other person liable or obligated to the Agent or any Lender for or on the Liabilities, without notice to, or consent from, the undersigned. No compromise, settlement, or release by the Agent of the Liabilities or of the

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obligations of any such other person (whether or not jointly liable with the undersigned) and no release of any collateral securing the Liabilities or securing the obligations of any such other person shall affect the obligations of the undersigned hereunder provided that such compromise, settlement or release is in accordance with the provisions of the Loan Agreement. No action by the Agent which has been assented to herein shall affect the obligations of the undersigned to the Agent or the Lenders hereunder.

     11. NOTICES. Unless otherwise provided in this Guaranty, all notices hereunder shall be in writing and shall be personally delivered or sent by registered or certified mail (postage prepaid, return receipt requested), overnight courier, by one party to the other party hereunder at the address set forth below:

To Agent:	Wells Fargo Retail Finance, LLC One Boston Place, 18th Floor Boston, MA 02108 Attn: Joseph Burt Fax No. (617) 523-4032
With copies to:	Brown Rudnick LLP One Financial Center Boston, MA 02111 Attn: Steven Levine, Esquire Fax No. (617) 856-8201
To Guarantor:	American Greetings Corporation One American Road Cleveland, OH 44144 Attn: Catherine M. Kilbane, SVP
With copies to:	Jones Day One American Road 901 Lakeside Avenue Cleveland, OH 44114 Attn: Rachel L. Rawson Fax: (216) 579-0212

     All notices or demands sent in accordance with this Section 11, other than notices by Agent in connection with enforcement of any of its rights or remedies hereunder, shall be deemed received on the earlier of the date of actual receipt or 3 Business Days after the deposit thereof in the mail. Guarantor acknowledges and agrees that notices sent by the Agent in connection with the exercise of its rights and remedies hereunder shall be deemed sent when deposited in the mail or personally delivered, or, where permitted by law, transmitted by telefacsimile or any other method set forth above.

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     12. COSTS OF ENFORCEMENT. The undersigned will pay on demand, without limitation, all reasonable and documented Costs of Collection that have not been reimbursed with the proceeds of a draw on the Guarantor L/C.

     13. BINDING EFFECT. This instrument shall inure to the benefit of the Agent, its successors and assigns; shall be binding upon the successors and assigns of the undersigned; and shall apply to all Liabilities of the Borrowers and any successor to the Borrowers, including any successor by operation of law.

     14. AGENT’S RIGHTS AND REMEDIES. The rights, powers, privileges, and discretions of the Agent hereunder (herein, the “Agent’s Rights and Remedies”) shall be cumulative and not exclusive of any rights or remedies which it would otherwise have. No delay or omission by the Agent in exercising or enforcing any of the Agent’s Rights and Remedies shall operate as, or constitute a waiver thereof. No waiver by the Agent of any of the Agent’s Rights and Remedies or of any default or remedies under any other agreement with the undersigned, or of any default under any agreement with the Borrowers, or any other person liable or obligated for or on the Liabilities, shall operate as a waiver of any other of the Agent’s Rights and Remedies or of any default or remedy hereunder or thereunder. No exercise of any of the Agent’s Rights and Remedies and no other agreement or transaction of whatever nature entered into between the Agent the undersigned, and the Borrowers; and/or any such other person at any time shall preclude any other exercise of the Agent’s Rights and Remedies, but without prejudice to the definition of Key Date. No waiver by the Agent of any of the Agent’s Rights and Remedies on any one occasion shall be deemed a waiver on any subsequent occasion, nor shall it be deemed a continuing waiver. All of the Agent’s Rights and Remedies, and all of the Agent’s rights, remedies, powers, privileges, and discretions under any other agreement or transaction with the undersigned, the Borrowers, or any such other person, shall be cumulative and not alternative or exclusive, and may be exercised by the Agent at such time or times and in such order of preference as the Agent in its sole discretion may determine.

     15. COPIES AND FACSIMILES. This instrument and all documents which have been or may be hereinafter furnished by the undersigned to the Agent may be reproduced by the Agent by any photographic, microfilm, xerographic, digital imaging, or other process. Any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made in the regular course of business). Any facsimile which bears proof of transmission shall be binding on the party which or on whose behalf such transmission was initiated and likewise so admissible in evidence as if the original of such facsimile had been delivered to the party which or on whose behalf such transmission was received.

     16. CHOICE OF LAWS. This instrument shall be governed, construed, and interpreted in accordance with the laws of the State of New York.

     17. CONSENT TO JURISDICTION.

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     (a) The undersigned agrees that any legal action, proceeding, case, or controversy brought against or by the undersigned with respect to this Guaranty, may be brought in the United States District Court of the Southern District of New York (or any appellate court thereof). By execution and delivery of this Guaranty, the undersigned accepts, submits, and consents generally and unconditionally, to the jurisdiction of the aforesaid courts.

     (b) The undersigned WAIVES personal service of any and all process and irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by certified mail, postage prepaid, to the undersigned at the address listed underneath its signature or such other address of the undersigned of which the Agent then has been provided with written notice by Guarantor, such service to become effective five (5) business days after such mailing.

     (c) The undersigned WAIVES, at the option of Agent, any objection based on forum non conveniens and any objection to venue of any action or proceeding instituted hereunder in the aforementioned courts.

     (d) Nothing herein shall affect the right of the Guarantor or Agent to bring legal actions or proceedings in any other competent jurisdiction.

     18. BROAD SCOPE OF GUARANTY. Subject to the limitations set forth herein in Section 2 of this Guaranty and elsewhere herein, it is the intention of the undersigned that the provisions of the within Guaranty be liberally construed to the end that the Agent, for the benefit of the Lenders, may be put in as good a position as if the Borrowers had promptly, punctually, and faithfully performed all Liabilities and that the undersigned had promptly, punctually, and faithfully performed hereunder.

     19. SEVERABILITY. Any determination that any provision herein is invalid, illegal, or unenforceable in any respect in any instance shall not affect the validity, legality, or enforceability of such provision in any other instance and shall not affect the validity, legality, or enforceability of any other provision contained herein.

     20. RIGHT OF SET-OFF. Any and all deposits or other sums at any time credited by or due to the undersigned from the Agent or any Lender or from any participant with any Lender in the Liabilities (a “Participant”) and any cash, securities, instruments or other property of the undersigned in the possession of the Agent, any Lender or any Participant, whether for safekeeping or otherwise (regardless of the reason the Agent, any Lender or any Participant had received the same) may be applied or set off against the obligations of the undersigned to the Agent hereunder.

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     21. TERMINATION. The obligations of the undersigned hereunder shall remain in full force and effect as to all Liabilities, without regard to any reduction of the Liabilities (other than on account of payments made pursuant to the within Guaranty and as provided in Section 2 hereof) until the Guarantor L/C End Date. This Guaranty shall continue to be effective or, if previously terminated, shall be automatically reinstated, without any further action, if at any time payment made or value received with respect to a Liability is rescinded or must otherwise be returned by the Agent or any Lender upon the insolvency, bankruptcy or reorganization of the undersigned, or otherwise, all as though such payment had not been made or value received. THE UNDERSIGNED GUARANTOR ACKNOWLEDGES THAT ITS TERMINATION OF THIS GUARANTY OR FAILURE TO MAINTAIN A GUARANTOR L/C AS REQUIRED HEREUNDER FROM AN ACCEPTABLE FINANCIAL INSTITUTION WITHOUT AGENT’S PRIOR WRITTEN CONSENT SHALL CONSTITUTE AN EVENT OF DEFAULT UNDER THE LOAN AGREEMENT.

     22. MISCELLANEOUS. The undersigned represents and warrants that, prior to the execution of this Guaranty, the undersigned carefully read and reviewed all of the provisions of this Guaranty and was afforded an opportunity to consult with counsel independently selected by the undersigned. The undersigned further represents and warrants that the undersigned has freely and willingly executed this Guaranty with full appreciation of the legal effect of this Guaranty. The undersigned recognizes that the titles to the paragraphs of the within Guaranty are for ease of reference; are not part of this Guaranty; and do not alter or affect substantive provisions hereof.

     23. WAIVER OF JURY TRIAL. The undersigned makes the following waiver knowingly, voluntarily, and intentionally, and understands that the Agent, in the establishment and maintenance of the Agent relationship with the Borrowers and the undersigned, is relying thereon. THE UNDERSIGNED HEREBY IRREVOCABLY WAIVES ANY PRESENT OR FUTURE RIGHT OF THE UNDERSIGNED, THE BORROWERS OR ANY ENDORSER OR ANY OTHER GUARANTOR OF THE BORROWERS, OR ANY OTHER SIMILAR PERSON, TO A TRIAL BY JURY OF ANY CASE OR CONTROVERSY IN WHICH THE AGENT IS OR BECOMES A PARTY (WHETHER SUCH CASE OR CONTROVERSY IS INITIATED BY OR AGAINST THE AGENT OR IN WHICH THE AGENT IS JOINED AS A PARTY LITIGANT), WHICH CASE OR CONTROVERSY ARISES OUT OF, OR IS IN RESPECT OF THIS GUARANTY OR THE LOAN DOCUMENTS.

     24. AUTHORIZATION. Guarantor is a corporation duly organized and in good standing under the laws of the State of Ohio. The execution, delivery and performance of this Guaranty is within the corporate powers of Guarantor, has been duly authorized and is not in contravention of (i) law or (ii) the terms of the organizational documentation of Guarantor, or (iii) any indenture, agreement or undertaking to which Guarantor is a party or by which Guarantor or its property are bound. This Guaranty constitutes the legal, valid and binding obligation of Guarantor enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or limiting creditors’ rights generally or by equitable principles relating to enforceability. Guarantor is a holder of the

Liquidity Guarantee

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Borrowers’ Common Stock and in its capacity as such, will derive material financial benefit from the extensions of credit to the Borrowers to be made under the Loan Agreement.

     25. AMENDMENTS TO LOAN DOCUMENTS. Notwithstanding any other provision of this Guaranty, Agent and Lenders shall not, without Guarantor’s prior written consent: (i) increase the aggregate amount of Guarantor L/C required to be provided by the Guarantor above the Maximum Guaranty Amount, (ii) amend or otherwise modify Section 6.21 of the Loan Agreement, or (iii) extend the Revolving Credit Maturity Date beyond June 30, 2013 if a condition of such extension requires that the Guarantor L/C must be maintained beyond January 1, 2014.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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     It is intended that this Guaranty take effect as a sealed instrument this 12 day of April, 2009.

AMERICAN GREETINGS CORPORATION
By:	/s/ Catherine M. Kilbane
	Name:	Catherine M. Kilbane
	Title:	SVP
	Address:

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EXHIBIT A

LOST LETTER OF CREDIT
INDEMNITY AGREEMENT

     This Agreement is made between [____________________] (the “Bank”) and [______________________________] (the “Guarantor”) with respect to that certain Irrevocable Standby Letter of Credit No. [______ ](the “L/C”) issued by [_______________________] (the “Issuer”) to Bank as beneficiary on behalf of Guarantor as applicant.

     WHEREAS

     1 The L/C requires that Issuer, promptly, upon Bank’s demand, issue a certified true copy of the L/C to replace the original L/C in the event that the original L/C is lost, stolen or destroyed (a “Lost L/C”), and Bank has requested the issuance of such a certified true copy (a “Replacement L/C”).

     2. In connection with the issuance of the replacement L/C Bank may be required to issue to Issuer an Indemnity Agreement in the form exhibited to the L/C (an “Issuer Indemnity”).

     3. The Bank has additionally agreed to enter into this agreement in favor of the Guarantor.

     BANK HEREBY AGREES,

     1. To indemnify and hold harmless each of the Guarantor, its members, its affiliates and the respective successors and assigns of the foregoing from and against any and all liability, loss, damage and expense (including reasonable attorneys’ fees) (collectively “Losses”) arising from or on account of any Lost L/C, including on account of the presentment for payment of any Lost L/C.

     2. Notwithstanding anything to the contrary herein, the Bank not be liable to Guarantor pursuant to Section 1 to the extent that the Bank has indemnified for such Losses by payment to Issuer pursuant to the Issuer Indemnity.

     3. This Agreement shall be governed by and construed in accordance with the laws of the State of California. EACH OF THE PARTIES HERETO HEREBY WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING UNDER OR PURSUANT TO THIS INDEMNITY AGREEMENT.

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     4. This Agreement may only be amended by a written instrument signed by all of the parties hereto.

     IN WITNESS WHEREOF, this Agreement has been duly executed as an instrument under seal this _____ day of ___________, 20_.

By__________________________________
Name:
Title: 

By __________________________________
Name:
Title:
 

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EX-10.21

Exhibit 10.21

AMENDMENT NO. 5
TO THE AMERICAN GREETINGS CORPORATION
EXECUTIVE DEFERRED COMPENSATION PLAN

WHEREAS, American Greetings Corporation (the “Company”) currently maintains the American Greetings Corporation Executive Deferred Compensation Plan (the “Plan”), which was adopted effective October 26, 1993; and

WHEREAS, the Plan has been amended from time to time and most recently by the Fourth Amendment; and

WHEREAS, Section 10.1 of the Plan permits the Company to amend the Plan at any time at the discretion of the Board of Directors or a Committee thereof; and

WHEREAS, effective as of August 1, 2009, the Board of Directors of the Company designated those employees with the corporate position of Executive Director as eligible to participate in the Plan in accordance with Section 3.1 of the Plan; and

WHEREAS, the Company desires to amend the Plan to clarify that such Executive Directors are entitled to participate in the Plan; provided, however, such Executive Directors shall not be entitled to receive either a Restoration Benefit as contemplated by Article V of the Plan or a Maximizer Benefit as contemplated by Section 4.4 of the Plan.

NOW, THEREFORE, the Plan is hereby amended as set forth below. Unless otherwise noted, all provisions of this Amendment are effective as of August 1, 2009.

1.

Section 4.4 of the Plan is hereby deleted in its entirety and replaced with the following:

“Section 4.4 Matching Contributions. An “Employer Matching Contribution” as determined under the American Greetings Corporation Employees’ Profit Sharing Plan, or successor plan, if any, shall be credited to a Participant’s Account (excluding the account of a Participant who is classified as an Executive Director of the Corporation) for each Plan Year in which the Participant is an eligible employee of the Employer but only to the extent such contribution was restricted under such plan due to the limitations imposed under Sections 401(k)(3), 401(m)(2) or 402(g)(1) of the Code.

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	Notwithstanding the foregoing, effective January 1, 2005, no Employer Matching Contribution shall be credited to any Participant who is otherwise eligible to receive an Employer Matching Contribution, to the extent such Employer Matching Contribution corresponds to changes made by such Participant to his or her elective deferrals in the American Greetings Corporation Employees’ Profit Sharing Plan and such changes to his or elective deferrals exceeds the Code Section 402(g) limit. Notwithstanding anything herein to the contrary, a Participant who is an Executive Director of the Corporation shall not be entitled to and not be credited with an Employer Matching Contribution.”
2.	Section 5.1 of the Plan is hereby deleted in its entirety and replaced with the following:
	“Section 5.1 Restoration Benefit. A Participant’s Restoration Benefit shall be equal to the total amount credited to the Participant’s Account under this Article V. Notwithstanding anything herein to the contrary, a Participant classified as an Executive Director of the Corporation shall not be entitled to a Restoration Benefit.”
3.	Section 5.3 of the Plan is hereby deleted in its entirety and replaced with the following:
	“Section 5.3 Restoration Contributions. An amount determined by the Board, in its sole discretion, may be credited to a Participant’s Account for each Plan Year in which the Participant is a participant in the American Greetings Corporation Employees’ Retirement Profit Sharing Plan, and contributions allocated to such Participant’s account(s) thereunder, if any, are restricted due to the limitations imposed under Code Sections 401(a)(17) and 415. Notwithstanding anything herein to the contrary, a Participant classified as an Executive Director of the Corporation shall not be entitled to a Restoration Benefit.”

[signature on following page]

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IN WITNESS HEREOF, the Company has caused this Amendment No. 5 to the Plan to be executed on this 30th day of December, 2009.

AMERICAN GREETINGS CORPORATION
By:	/s/ Brian T. McGrath
	Name:	Brian T. McGrath
	Title:	Senior Vice President, Human Resources

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EX-10.30

Exhibit 10.30

Description of Compensation Payable to Non-Employee Directors

Effective as of May 1, 2011 the non-employee directors of American Greetings Corporation (“American Greetings”) shall receive the following compensation with respect to their service on the Board:

• An annual board retainer fee of $70,000; and

• The Chair of the Nominating and Governance Committee to be paid an annual retainer fee of $10,000, the Chair of the Compensation and Management Development Committee to be paid an annual retainer fee of $15,000, and the Chair of the Audit Committee to be paid an annual retainer fee of $20,000; and

• Non-chair members of the Nominating and Governance Committee and the Compensation and Management Development Committee to be paid an annual retainer fee of $7,500, and non-chair members of the Audit Committee to be paid an annual retainer fee of $10,000; and

• A grant of 3,800 Class A Restricted Stock Units per fiscal year; and

• Reimbursement of expenses related to attending Board and committee meetings.

Pursuant to the American Greetings Corporation 2007 Omnibus Incentive Compensation Plan, non-employee directors may make an election prior to the beginning of each fiscal year to receive American Greetings’ Class A and/or Class B common shares in lieu of all or a portion of the fees due to such Director as compensation for serving on the Board of Directors. For purposes of determining the number of shares to be issued in lieu of such fees, the shares are valued based on the closing price of the American greetings Class A common shares on the last trading day of the calendar quarter prior to the payment of such fees.

EX-10.32

Exhibit 10.32

SEPARATION AGREEMENT

      This Separation Agreement, together with Exhibit A (“General Release”) (attached) (collectively “Agreement”), is entered into between ROBERT SWELLIE (“Employee”) and AMERICAN GREETINGS CORPORATION, an Ohio Corporation (“AG” or “the Company”), regarding the terms of Employee’s separation from the Company. In consideration of the mutual covenants and agreements hereinafter set forth, and intending to be legally bound, the parties agree as follows:

1.

Separation from Service. Employee shall continue full-time employment with American Greetings through February 28, 2011 (“Separation Date”), upon which date he shall voluntarily resign his employment.

2.

Separation Benefits. Subject to the terms of this Agreement, and subject to approval by the Compensation and Management Development Committee of the Board of Directors of American Greetings Corporation, if Employee signs the General Release attached hereto as Exhibit A and it becomes effective, he will receive the following payments and benefits in the manner and time frames described herein. Employee acknowledges and agrees that certain of the payments and benefits differ from and/or are greater than benefits Employee would otherwise be eligible to receive upon resignation or termination absent this Agreement.

a.	Separation Pay. From the Separation Date through February 28, 2014 (“Severance Period”), Employee will receive severance payments in the amount of $28,437.54 per month, which is the equivalent of Employee’s annual base salary rate as of the Separation Date ($341,250.48), less applicable withholdings and payroll deductions, paid in accordance with American Greetings’ payroll practices in the ordinary course.
b.	Health Care. From the Separation Date through Employee’s 65th birthday, February 19, 2017, Employee will continue to receive health care coverage, concurrently with COBRA, at the payroll deduction rate applicable to active senior vice-presidents, as the rate may be changed from time to time in the Company’s sole discretion. For the period beginning with the 19th month of coverage following the Separation Date through Employee’s 65 th birthday, Employee will be obligated to pay 100% of the premium cost of his continued health care coverage hereunder; provided, that American Greetings will pay Employee during such period additional monthly separation pay (through February 28, 2014) and monthly separation pay (thereafter) in an amount which, after taking into account all applicable tax withholding, will equal the amount of such premium cost of coverage. Employee agrees that any amounts that he is obligated to pay for continued health coverage provided hereunder may be deducted by American Greetings from separation pay provided under this Agreement. Employee may make changes in his family status, and add spousal coverage, during this entire time, as permitted under the terms of the Plan, as it may change from time to time.
c.	Life Insurance. Employee will continue to be covered under the Company’s Executive Life Insurance Plan through February 28, 2014. Thereafter, Employee will be responsible for any continued premium payments on the applicable life insurance policy.
d.	Equity Grants. The options to purchase 11,000 Class A common shares of the Company at $7.73 per share that have not vested as of the Separation Date under the terms of the stock option grant made to Employee on May 1, 2009 will vest on May

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	1, 2011 as scheduled under the terms of Employee’s option grant agreement and subject to the terms hereof, and will continue to be exercisable for the remaining 10 year term of the grant. In addition, the 1,400 Class A common shares of the Company subject to the restricted stock unit grant made to Employee on May 3, 2010 that are scheduled to vest on May 3, 2011 will vest as scheduled on May 3, 2011 as contemplated therein notwithstanding Employee’s separation from service; provided any remaining Class A common shares that are not vested as of the Separation Date shall not vest and will be forfeited. Except as set forth in this clause d, Employee’s right to exercise or receive payment under such grants shall be determined under the terms of applicable American Greetings’ equity incentive plan and the applicable grant award agreements. Employee acknowledges and agrees that any other previously granted stock options, restricted stock units or performance shares that did not vest as of the Separation Date are automatically canceled. Employee also acknowledges and agrees that any previously granted, vested stock options that Employee fails to exercise within three (3) months of the Separation Date will be automatically forfeited in accordance with the terms of Employees applicable grant agreement.
e.	Additional Cash Payment. American Greetings will pay Employee an additional $100,000 (less applicable withholdings) as additional separation pay. Such payment shall be made on March 1, 2014.
f.	Outplacement. Commencing on the Separation Date, American Greetings will pay for up to 6 months of outplacement services to assist Employee in seeking employment, beginning on the Separation Date. American Greetings will select the service provider and will make direct payments to the service provider.
g.	Key Management Incentive Plan Eligibility. Employee will be eligible to participate in American Greetings’ Key Management Annual Incentive Plan for fiscal year 2011 at a “Meets Expectations” evaluation level for purposes of determining level of bonus payment. Payment of his bonus, if any, under the Key Management Annual Incentive Plan will be made on the date in 2011 on which bonuses are otherwise payable to active employees thereunder, but in no event later than December 31, 2011.
h.	Company Car. Employee may continue to use, and American Greetings will continue to make lease payments on, Employee’s Company-provided car until the current lease expires. In addition, for the duration of the lease period, the Company will continue to insure the vehicle at no less than the level of insurance coverage existing for other senior vice presidents. The Company will also cover reasonable and necessary maintenance expenses on the same terms and conditions provided to other senior vice presidents for the duration of the lease period. Employee will also be permitted continued use of his Company-provided gas card on the same terms and conditions provided to other senior vice presidents until the lease expires. Thereafter, the Company will provide Employee with an additional lump sum of $1,000 per month, less applicable withholdings, to cover the cost of a vehicle, insurance, maintenance, gas and related expenses, until February 28, 2014, with such payments being included with, and paid at the same time as, his separation pay under Section 2a.

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i. Laptop Computer; Blackberry. Employee will be entitled to temporarily retain his company-issued laptop computer and Blackberry personal digital assistant (“Blackberry”) for a reasonable period of time after the Separation Date, with this period of time determined solely by American Greetings, provided that (i) American Greetings shall cease having any obligation to pay any voice or data monthly service or usage charges for the Blackberry as of 30 days after the Separation Date (provided, that American Greetings shall cooperate with Employee in having Employee’s existing cell phone number transferred to his new personal account) and (ii) American Greetings shall, at its request, be provided an opportunity to verify that none of its trade secrets or other confidential or proprietary business information is stored in the laptop computer or the Blackberry (or to delete such information if present).

3. Reasonable Cooperation. Employee acknowledges and agrees that his agreement to fully cooperate with American Greetings with respect to the provisions of this Section 3 in its entirety is a material term of this Agreement. The failure by Employee to cooperate fully with American Greetings is a material breach of this Agreement.

     a. Transfer of job responsibilities. As directed by American Greetings’ management, Employee shall fully cooperate in transferring to designated employees all of his responsibilities and duties.

     b. Fiduciary Obligations. Employee acknowledges, agrees and represents that at all times until and through February 28, 2011, he carried out his duties in a manner consistent with and in compliance with all present and future requirements of: (i) applicable federal and state laws and regulations; (ii) American Greetings’ policies and procedures; and (iii) the directives and instructions of American Greetings’ management. Employee acknowledges and fully understands that he has a fiduciary relationship with American Greetings and, as a fiduciary, he was under an obligation to use due care and act in the best interest of American Greetings at all times.

     c. Legal matters. Employee agrees to cooperate with American Greetings and its attorneys as may be reasonably required concerning any past, present or future legal matters that relate to or arise out of his employment with American Greetings, with the understanding that any meetings he is required to attend are scheduled during normal business hours at mutually agreeable times. Employee acknowledges that he has advised American Greetings’ General Counsel of all facts of which he is aware that constitute or might constitute violations of the American Greetings’ Code of Business Conduct, ethical standards or legal obligations. American Greetings agrees to reimburse Employee for any and all reasonable costs and expenses (including but not limited to reasonable attorneys’ fees) he may incur in connection with such cooperation, with such reimbursement to occur no later than the end of the taxable year following the taxable year in which such expense was incurred.

     d. Indemnification. Employee shall be indemnified for acts and omissions occurring on or prior to the Separation Date to the fullest extent permitted under applicable law and Company policy. Employee shall be covered under American Greetings’ directors’ and officers’ liability insurance policies in effect from time to time on the same basis that other former directors and officers are covered for acts and omissions occurring prior to separation.

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4. Consulting Services. During the term of this Agreement, following the Separation Date, Employee shall be available to provide consulting services to the Company as an independent contractor on the following terms:

a.	The services may include participating in customer meetings, attending industry functions, responding to inquiries and requests for information; transitioning accounts, and such other services as the Company may designate (“Services”);
b.	Employee shall perform the Services on dates designated by the Company and mutually agreed upon.
c.	Employee shall make a good faith effort to perform the Services in a competent, diligent and professional manner. Employee shall exercise reasonable discretion in determining how the services are performed;
d.	Employee shall have no authority to enter into any agreement with any person or entity on behalf of AG, nor shall Employee represent to anyone that he possesses such authority unless expressly given the authority by AG;
e.	Company shall pay Employee $2,000.00 (Two Thousand Dollars and No Cents) per day for the Services. Employee shall participate in incidental telephone calls, e-mails and correspondence without separate charge, as such incidental services are considered covered by the Separation Pay. The Company shall also reimburse Employee for Employee’s reasonable expenses incurred in the performance of the Services and consistent with the Corporate Business, Travel and Entertainment Expense Policy then in effect. Employee shall submit invoices, and AG shall pay such invoices within thirty (30) days of receipt;
f.	Employee shall not disclose to any person or use any proprietary information obtained or developed in connection with performing the Services, except as required in the rendering of Services hereunder. Such proprietary information includes, but is not limited to, trade secrets, business plans, designs, specifications, manufacturing, research and development data, marketing data, methods, sales and customer information and financial data. Upon completion of the consulting period, Employee will surrender to the Company all Company records and all documents containing proprietary information, if any, that may have come into Employee’s possession in the performance of the Services;
g.	Employee shall be responsible for reporting any income and paying any income taxes, Social Security insurance payments or contributions, or other payments, if applicable, relating to the compensation received for the Services, and Employee agrees to reimburse and indemnify American Greetings with respect to any expenses, penalties, charges or liabilities incurred by the Company as a result of his failure to comply with this provision. Employee shall be solely responsible for any damage or injury caused by his acts or omissions arising out of the performance of Services; and
h.	Nothing in this Section, as written or as implemented, is intended to create and employer-employee, master-servant, or principal-agent relationship between the Company and Employee.

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5.	Acknowledgment of Separation. Employee acknowledges and agrees that as of the Separation Date, he will cease to be an employee of American Greetings and that the only benefits he will receive from American Greetings are those described in this Agreement; provided, however, that this Agreement does not waive any vested benefits Employee may be eligible to receive under American Greetings’ compensation and benefit plans. Employee acknowledges and agrees that the terms and conditions of this Agreement are intended by him and American Greetings to supersede all benefits payable to him upon termination by any other written or oral agreement, and that as of the Separation Date, any other written or oral agreement will no longer have any force and effect.
6.	Breach of the Agreement. Unless prohibited by law, in the event Employee breaches any of his obligations under this Agreement, in addition to any other remedy at law or equity that may be available to the Company, American Greetings will be entitled to (i) terminate any unvested equity awards that remain outstanding, (ii) cease paying any of the amounts payable under section 2 of this Agreement, including, without limitation, separation pay, and (iii) recover any amounts, including, without limitation, separation pay, previously paid under the Agreement. American Greetings will give notice to Employee of Employee’s breach and allow Employee thirty (30) days to cure the breach (if it is curable); if it is not so cured within thirty (30) days, or if the breach is one that cannot be cured, then American Greetings may immediately pursue remedies available to it.
7.	Construction of the Agreement.

     a. This Agreement shall be governed by the State of Ohio as of the effective date of this Agreement or by applicable federal law.

     b. If a court of competent jurisdiction declares that any provision or term of this Agreement is void or invalid, only the term, condition, clause, or provision that is determined to be void or invalid shall be stricken from the Agreement and it shall not affect the remaining provisions of this Agreement, which shall remain in full force and effect. Provided, however, that it is expressly understood and agreed that if a final determination is made by a court of law that the time or any other restriction contained in Section 10 herein is an unenforceable restriction against Employee, then the provisions of Section 10 shall not be rendered void but shall be deemed amended to apply as to such maximum time and to such other maximum extent as such court may determine or indicate to be enforceable.

8. Confidentiality Regarding This Agreement. Except as this Agreement may otherwise be publicly disclosed by American Greetings, Employee agrees not to disclose, or discuss with, any person (other than his spouse, attorney, tax or other financial advisor) any of the terms and/or conditions of this Agreement, except as may be required to notify a potential employer of his confidentiality, non-competition and non-solicitation obligations or as may otherwise be compelled by a court of competent jurisdiction. Employee agrees, however, in the event that the contents of this Agreement are requested pursuant to a subpoena, court order or the like, he will promptly notify American Greetings’ General Counsel prior to disclosing any information so as to afford American Greetings a reasonable amount of time to oppose such order. Except as permitted in this Section 8, disclosure of any term and/or condition of this Agreement is a material breach of this Agreement.

9. Confidentiality and Non-Disclosure. Employee acknowledges that he has an obligation of confidence and non-disclosure with respect to any and all confidential information and trade

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secrets that he acquired during the course of employment with American Greetings. This obligation of confidence and non-disclosure extends to both American Greetings’ information and third-party information held by American Greetings in confidence, and this obligation continues after the Separation Date. Employee is prohibited from using or disclosing such information. Employee agrees that he will not accept or become employed or retained in any capacity whatsoever by any person or entity where such employment or other capacity requires him to disclose or use confidential information, or where such employment or other capacity will, or may cause or reasonably lead to, the inevitable, necessary or effective disclosure or use of confidential information whether through express, implicit, indirect, intentional or unintentional means. Employee also agrees that he will return to American Greetings any and all American Greetings’ property and information that came into his possession, or which he prepared or helped prepare, in connection with or during his employment. He will not retain any copies of such property or information.

10. Non-Competition and Non-Solicitation. Unless Employee has prior written permission from American Greetings’ Senior Vice President of Human Resources, Employee agrees that for the thirty-six month period from March 1, 2011 through February 28, 2014, he shall not: a) be employed directly or indirectly, in any capacity, or work as a consultant or independent contractor in any capacity similar to that held by Employee while employed by AG, for any person, firm, corporation or entity, which designs, manufactures or sells products that are substantially similar in nature to the social expression products designed, manufactured or sold by American Greetings; and/or b) solicit (directly or indirectly) any American Greetings’ employee to enter into employment, directly or indirectly, in any capacity, or work as a consultant or independent contractor for any person, firm, corporation or entity which designs, manufactures or sells products that are substantially similar in nature to the social expression products designed, manufactured or sold by American Greetings. Employee acknowledges and agrees that the remedy at law available to American Greetings for his breach of any of the obligations under Sections 8, 9 or 10 of this Agreement would be inadequate and that damages flowing from such a breach would not readily be susceptible to being measured in monetary terms. Accordingly, Employee acknowledges, consents and agrees that, in addition to any other rights or remedies that American Greetings may have at law, in equity or under this Agreement, upon adequate proof of Employee’s violation of any provision of Sections 8, 9 or 10 of this Agreement, American Greetings will be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage.

11. Non-Disparagement. Employee agrees not to disparage or denigrate American Greetings, its products, or its directors or executive officers orally or in writing.

12. No Admission of Liability. The offering, undertaking or signing of this Agreement are not in any way an acknowledgment or admission that Employee, American Greetings, or any person acting on behalf of American Greetings, has: a) violated or failed to comply with federal, state or local statute, law, regulation, rule or ordinance; or b) failed to comply with any of American Greetings’ policies or procedures.

13. Representations and Warranties. The parties represent and warrant that they have no interest or obligation that is inconsistent with or in conflict with this Agreement or that would prevent, limit or impair their performance of any part of this Agreement. Employee represents that as of the date he has signed this Agreement, he has not filed, directly or indirectly, nor caused to be filed, any claim, charge or cause of action against American Greetings in any forum, including federal, state or local court or in arbitration, any

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administrative proceeding with any federal, state or local administrative agency, or American Greetings’ dispute resolution procedure (“Solutions”). Employee agrees that should any administrative or third party pursue any claims on his behalf, he waives his right to any monetary or recovery of any kind.

14.	Dispute Resolution. All disputes, claims, or controversies arising out of or in connection with this Agreement, Employee’s employment or its termination, including but not limited to those concerning workplace discrimination and all other statutory claims, shall exclusively be submitted to and determined by final and binding arbitration before a single arbitrator (“Arbitrator”) of the American Arbitration Association (“AAA”) in accordance with the association’s then current rules for the resolution of employment disputes (“the Rules”). The Arbitrator shall be selected in accordance with the Rules. The parties consent to the authority of the arbitrator, if the arbitrator so determines, to award fees and expenses (including attorneys’ fees) to the prevailing party in the arbitration. The following claims are not covered by this arbitration agreement: (i) Claims Employee may have for workers’ compensation and unemployment compensation benefits; and (ii) claims by either party for injunctive and/or other equitable relief, including without limitation the enforcement of Sections 8, 9 or 10 as to which Employee understands and agrees that American Greetings may seek and obtain relief from a court of competent jurisdiction. Employee understands that the benefits set forth in this Agreement are, in part, consideration for his acceptance of this arbitration provision. In addition, the promises by American Greetings and by Employee to arbitrate claims rather than litigate them before courts or other bodies provide consideration for each other.
15.	Section 409A of the Internal Revenue Code of 1986 Compliance. It is the intention and purpose of the parties that this Agreement and all payments and benefits hereunder shall be, at all relevant times, in compliance with (or exempt from) Code Section 409A and all other applicable laws, and this Agreement shall be so interpreted and administered. If necessary, any provision of this Agreement, or part thereof, that fails to comply with Section 409A shall be considered null and void. To the extent required by Code Section 409A, no benefits shall be paid under this Agreement during the six-month period following Employee’s Separation Date (the “Postponement Period”). If payment of benefits is required to be delayed for the Postponement Period under Code Section 409A, the accumulated amounts withheld on account of Code Section 409A shall be paid in a lump sum payment within thirty (30) days after the end of the Postponement Period and no interest or other adjustment shall be made for the delayed payment. If Employee dies during the Postponement Period prior to the payment of benefits, the amounts withheld on account of Code Section 409A shall be paid to Employee’s estate within sixty (60) days after Employee’s death.
	This Agreement is intended to meet the requirements of the “short-term deferral” exception, the “separation pay” exception and other exceptions under Code Section 409A. Notwithstanding anything in the Agreement to the contrary, if required by Code Section 409A, payments may only be made under this Agreement upon an event and in a manner permitted by Code Section 409A, to the extent applicable. For purposes of Code Section 409A, any payment required to be made hereunder shall be treated as separate from any other payment or payments required to be made hereunder, and the right to a series of payments under the Agreement shall be treated as a right to a series of separate payments. For purposes of the Agreement, references to a “termination,” “termination of employment,” or like terms shall mean “separation from service” as defined under Code Section 409A to the extent applicable. All reimbursements and in-kind benefits provided under the Agreement shall be

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made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses eligible for reimbursement during the period of time specified in the Agreement; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits provided in any other calendar year; (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred; and (iv) the right to reimbursement or in-kind benefit is not subject to liquidation or exchange for another benefit. In no event may Employee designate the year of payment for any amounts payable under the Agreement except as agreed upon herein. Notwithstanding anything in this Agreement to the contrary, any right of American Greetings to offset or otherwise reduce any sums that may be due or become payable under the Agreement to Employee, including by any overpayment or indebtedness of Employee, shall be subject to limitations imposed by Code Section 409A.

16.

Entire Agreement. This Agreement constitutes the entire understanding between Employee and American Greetings relating to the subject matter contained herein. This Agreement, after acceptance by American Greetings, as signified by its authorized officer’s signature, may not be changed, modified, or altered without the express written consent of a senior officer of American Greetings. Either party’s failure to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver of, or deprive either party of their right thereafter to insist upon strict adherence to that term or any other term of this Agreement. To be effective, any waiver must be in writing and signed by a senior officer of American Greetings.

17.

Time for Consideration of this Agreement.

a.

From the date Employee receives this Agreement, he will have 21 calendar days to consider and sign it. Employee can sign the Agreement at any time before the expiration of the 21-day period, but if he does so, Employee acknowledges that he has done so knowingly and voluntarily and without duress or coercion. Employee is hereby advised and encouraged to consult an attorney prior to signing this Agreement if he desires to do so. Employee acknowledges that if he has signed this Agreement without consulting an attorney, he has done so knowingly and voluntarily.

b.

Employee further acknowledges and agrees that he will not sign the General Release attached as Exhibit A until on or after the Separation Date; he is advised to consult with an attorney prior to signing the General release; and that he has at least 21 calendar days from the date he received this Agreement to review and consider his decision to sign the General Release.

18. Transferability. This Agreement shall be binding upon any successor to American Greetings, whether by merger, consolidation, purchase of assets or otherwise. No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liability hereunder upon any person or entity, other than the parties hereto and their respective successors and assigns, which in Employee’s case will include his heirs and/or his estate, to whom and to which all of the Employee’s rights and benefits hereunder shall inure, to the extent permitted by the Plans under which the benefits set fort in this Agreement are provided.

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19. Right of Recovery. This Agreement, and the right to receive any payments or benefits hereunder, shall be subject to rescission, cancellation or recoupment, in whole or part, if and to the extent so provided under any “clawback” or similar policy of American Greetings in effect on the date of this Agreement or that may be established thereafter, including any modification or amendment thereto.

Signed and Agreed to on behalf of American Greetings Corporation:

/s/ Brian McGrath	2/11/11
Brian McGrath, Senior Vice-President, Human Resources	Date

I ACKNOWLEDGE AND AGREE THAT I HAVE BEEN ADVISED THAT THIS AGREEMENT IS A LEGAL DOCUMENT, AND I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY CONCERNING THIS AGREEMENT. I ACKNOWLEDGE AND AGREE THAT I HAVE CAREFULLY READ AND FULLY UNDERSTAND ALL PROVISIONS OF THIS AGREEMENT, AND AM VOLUNTARILY AND KNOWINGLY SIGNING THE AGREEMENT.

/s/ Robert Swellie	2/8/2011
Robert Swellie	Date

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EXHIBIT A — GENERAL RELEASE

In exchange for the benefits set forth in the Separation Agreement between American Greetings Corporation (“the Company”) and ROBERT SWELLIE (“Employee”) dated February 28, 2011 and to be provided to me following the Effective Date (as defined below) of this General Release and my execution (without revocation) and delivery of this General Release, Employee hereby acknowledges, understands and agrees as follows:

1. Waiver and Release of Employment Claims. In consideration of the promises made by the Company in this Agreement, Employee, for himself, his family, heirs, executors, administrators, personal representatives, agents, employees, assigns, legal representatives and accounts, affiliates and for any partnerships, corporations, sole proprietorships, or other entities owned or controlled by Employee, agrees to waive and release American Greetings, its past, present, and future officers, directors, shareholders, agents, representatives, insurers, employees, attorneys, subsidiaries, affiliated corporations, successors and assigns, from any and all claims, causes of action, and liabilities of any kind, known or unknown, in law or in equity, that Employee had or has as of the Effective Date of this General Release, and that are in any way connected with or arise out of Employee’s employment or the termination of his employment with American Greetings, including but not limited to claims, causes of action, and liabilities involving:

     a. Discrimination, retaliation or harassment based on race, color, religion, gender, gender identity, pregnancy, national origin, ancestry, citizenship, age, marital status, health or medical condition, leave of absence usage, disability, sexual orientation, veteran or military status, or any other protected status under any federal, state or local laws, including but not limited to claims of discrimination, harassment or retaliation under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans With Disabilities Act, the Equal Pay Act, the Pregnancy Discrimination Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the Immigration Reform and Control Act, the Occupational Safety and Health Act, and/or any other state, federal, local or municipal statute, regulation, rule or order that relates to Employee’s employment or its termination;

     b. Any other employment related claim whatsoever including but not limited to, claims relating to wrongful termination, breach of contract (express or implied), breach of implied covenant of good faith and fair dealing, misrepresentation (intentional, fraudulent or negligent), estoppel, public policy violation, whistleblowing, defamation, infliction of emotional distress (intentional or negligent), negligence, personal injury of any kind and invasion of privacy.

     c. Excluded from this Agreement are any claims that cannot be released or waived by law, including but not limited to workers’ compensation claims and the right to file a charge with or participate in an investigation conducted by certain government agencies. Employee acknowledges and agrees, however, that he is releasing and waiving his right to any monetary recovery should any government agency pursue any claims on his behalf that arose prior to the effective date of this Agreement. Employee is not waiving or releasing any of his employee benefits that have already vested according to the terms of American Greetings’ benefits plans.

     d. Employee agrees that he has been properly paid for all hours worked, has not suffered any on-the-job injury for which he has not already filed a claim and that he has been properly provided any needed family or medical leaves of absence.

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2.	Release of Other Claims. In further consideration of the promises made by the Company in this Agreement, Employee, for himself and his family, heirs, executors, administrators, personal representatives, agents, employees, assigns, legal representatives and accounts, affiliates and for any partnerships, corporations, sole proprietorships, or other entities owned or controlled by Employee, fully releases, acquits, and forever discharges American Greetings, its past, present, and future officers, directors, shareholders, agents, representatives, insurers, employees, attorneys, subsidiaries, affiliated corporations, and assigns, from any and all actions, causes of action, claims, grievances, damages, obligations, suits, agreements, costs, expenses, attorneys’ fees, punitive or compensatory damages, back pay or any other liability of any kind whatsoever of which Employees has knowledge as of the time he signs this Agreement.
3.	No Future Lawsuits. Employee promises never to file a lawsuit, demand, action, or otherwise assert any claims against American Greetings referenced in paragraphs 1 or 2 of this General Release. The foregoing sentence shall be construed as a covenant not to sue. This Agreement may be introduced as evidence at any legal proceeding as a complete defense to any claims he ever asserts against American Greetings.
4.	Time for Consideration of this Agreement. Employee acknowledges that he has had at least 21 calendar days from the date of receipt of this Agreement to consider the terms of the Agreement and General Release. Employee can sign the Agreement at any time before the expiration of the 21-day period, but if he does so, Employee acknowledges that he has done so knowingly and voluntarily and without duress or coercion. Employee is hereby advised and encouraged to consult an attorney prior to signing this Agreement and General Release if he desires to do so. Employee acknowledges that if he has signed this Agreement and General Release without consulting an attorney, he has done so knowingly and voluntarily.
5.	Revocation of this Agreement. After Employee signs this General Release, he has seven (7) calendar days to revoke his signature. If he revokes his signature, this Agreement shall not be effective or enforceable. Employee’s revocation must be in writing, signed by him and received by the General Counsel, American Greetings Corporation, One American Road, Cleveland, Ohio, 44144, within seven (7) calendar days after Employee signs the General Release, not including the day Employee received it. This Agreement shall be effective only after the 7-day period has expired without Employee’s revocation.

I ACKNOWLEDGE AND AGREE THAT I HAVE BEEN ADVISED THAT THIS AGREEMENT IS A LEGAL DOCUMENT, AND I HAVE BEEN ADVISED TO CONSULT WITH AN ATTORNEY CONCERNING THIS AGREEMENT. I ACKNOWLEDGE AND AGREE THAT I HAVE CAREFULLY READ AND FULLY UNDERSTAND ALL PROVISIONS OF THIS AGREEMENT, AND AM VOLUNTARILY AND KNOWINGLY SIGNING THE AGREEMENT.

/s/ Robert Swellie	2/28/2011
Robert Swellie	Date

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EX-10.57

Exhibit 10.57

AMERICAN GREETINGS CORPORATION 2007 OMNIBUS
INCENTIVE COMPENSATION PLAN

RESTRICTED STOCK UNIT GRANT AGREEMENT

Award:	Restricted Class __ Stock Units
Grant Date:	___________, 20__ (“Date of Grant”)
Vesting Dates:	The award of Restricted Stock Units shall vest in the manner set forth in your Notice of Grant, as such term is defined below.

THIS AGREEMENT, dated as of the Grant Date stated above, is delivered by American Greetings Corporation (the “Company” or “American Greetings”) to the individual employee of the Company (the “Grantee”) identified in the notice of restricted stock unit award grant (the “Notice of Grant”) delivered to Grantee.

W I T N E S S E T H:

WHEREAS, the Company wishes to give Grantee an opportunity to acquire or enlarge his equity ownership in the Company for the purpose of augmenting Grantee’s proprietary interest in the success of American Greetings and thereby focusing Grantee’s efforts on increasing shareholder value.

A G R E E M E N T

NOW, THEREFORE, Grantee has received or will receive a Notice of Grant, which, if not rejected in accordance with the instructions in such notice, will constitute Grantee’s binding agreement with the following terms:

1. Grant of Restricted Stock Units. Subject to the terms and conditions of this Agreement, the Company hereby grants to Grantee the number of Restricted Stock Units (the “RSUs”) relating to the class and number of common shares of the Company (the “Shares”), as indicated on the Notice of Grant. The grant of RSUs shall represent the right to receive such number of Shares, upon the satisfaction of certain vesting requirements set forth in Section 2, with issuance of such Shares to be made in accordance with Section 2. The RSUs described in this Agreement are in all respects subject to the terms, conditions and provisions of this Agreement, the Notice of Grant and the Company’s 2007 Omnibus Incentive Compensation Plan (the “Plan”).

2. Vesting or Forfeiture of RSUs; Payment of Award.

     (a) Vesting. Except as otherwise provided in this Section 2, RSUs granted to Grantee pursuant to Section 1 shall vest over the period as set forth in the Notice of Grant. If vesting will result in a fractional Share, then the amount vested shall be rounded up to the nearest whole Share; provided, however, the number of shares to vest as of the last vesting date shall be rounded down to such number that will result in the total number of Shares vesting equaling the total grant represented hereby.

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     (b) Payment of Award. Within 90 days after any RSUs are deemed vested pursuant to this Section 2, but in no event longer than the maximum time period permitted under Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the “Code”) to qualify as a short-term deferral, such RSUs shall be issued to Grantee in the form of Shares. At such time, Grantee shall enjoy full shareholder and ownership rights with respect to such Shares. Shares shall be delivered to Grantee either through book-entry transfer of beneficial ownership of the Shares or through delivery of a stock certificate representing all such Shares and registered in his or her name. The method of delivery shall be selected by the Company, in its sole discretion. In the case of Grantee’s death after vesting, payment of any Shares that are vested on his date of death will be made to the beneficiary designated by Grantee in a writing filed with the Company or, if none, to Grantee’s estate.

     (c) Clawback; Accelerated Vesting; Forfeiture.

          (i) This RSU, and the right to receive and retain any Shares covered by this RSU, shall be subject to rescission, cancellation or recoupment, in whole or part, if and to the extent so provided under any “clawback” or similar policy of the Company in effect on the Date of Grant or that may be established thereafter, including, without limitation, any “clawback” or recoupment policy of the Company as may be adopted by the Company from time to time as required by Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or as otherwise required by applicable law.

          (ii) Notwithstanding the foregoing, if any portion of RSUs granted hereby have not vested on the date that Grantee incurs a Separation from Service, as defined in Code Section 409A (“Separation from Service”), as the result of Grantee’s Retirement, death or Disability, Grantee will vest in such number of RSU’s obtained by subtracting (1) the number of RSUs that have vested as of the date of the Separation from Service from (2) the quotient obtained by multiplying (x) the total number of RSUs represented hereby by (y) a percentage equal to the period of time from the Date of Grant to the date of Separation from Service as a percentage of the total vesting period for the RSUs as set forth in the Notice of Grant.

          (iii) If Grantee incurs a Separation from Service for any other reason than those specified in the immediately preceding clause 2(ii), including, without limitation, any Separation from Service initiated by Grantee other than Retirement, death or Disability, or any Separation from Service initiated by the Company for Cause or otherwise, any RSUs not otherwise vested pursuant to this Section 2 on the Grantee’s date of Separation from Service are forfeited. In addition, if Grantee’s Separation from Service is initiated by the Company for Cause, or if and to the extent required by applicable law, then any RSUs vested pursuant to this Section 2, but not yet delivered to Grantee, shall also be forfeited and shall not be delivered.

     (d) Certain Definitions. For purposes of this Agreement

          (i) “Cause” has such meaning as may be defined in any agreement between Grantee and the Company and, if none, will mean any one or more of the following: Grantee’s (1) fraud; (2) misappropriation of funds; (3) commission of a felony or of an act or series of acts which results in material injury to the business reputation of the Company; (4) commission of a crime or act or series of acts involving moral turpitude; (5) commission of an act or series of repeated acts of dishonesty that are materially inimical to the best interests of the Company; (6) willful and repeated failure to perform his or her duties, which failure has not been cured in all substantial respects within fifteen (15) days after the Company gives written notice thereof to Grantee; or (7) breach of any material provision of any employment agreement between the Company and Grantee, which breach has not been cured in all substantial respects within ten (10) days after the Company gives written notice thereof to Grantee.

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          (ii) “Retirement” shall mean Grantee’s Separation from Service after completing ten (10) or more years of continuous service and attaining age sixty-five (65).

          (iii) “Disability” shall mean that Grantee is “disabled” as such term is defined in Code Section 409A(a)(2).

3. Ownership Rights. Except as otherwise provided herein, Grantee will not have the rights of a shareholder of the Company with respect to any Shares issuable upon the vesting of any RSUs. Upon receipt of any portion of Shares issued pursuant to RSUs awarded under Section 1 and vested pursuant to Section 2, Grantee shall be entitled to exercise all ownership rights (including, without limitation, the right to vote and the right to receive dividends) with respect to such Shares, provided that voting and dividend rights with respect to the Shares will be exercisable only if the record date for determining shareholders entitled to vote and receive dividends, as the case may be, falls on or after the date as of which Shares are issued to Grantee pursuant to this Agreement.

4. Deferral of Delivery of Shares. Notwithstanding any provision in this Agreement to the contrary, if any law or regulation of any governmental authority having jurisdiction in the matter requires the Company, the Board, the Committee or Grantee to take any action or refrain from action in connection with the award or delivery of Shares under this Agreement, or to delay such award or delivery, then the award or delivery of such Shares shall be deferred until such action has been taken or such restriction on action has been removed, subject to any applicable requirements under Code Section 409A. If Grantee is eligible to participate in the Company’s Executive Deferred Compensation Plan and the class of common shares that are subject to the RSUs are otherwise eligible for deferral thereunder, at Grantee’s election, Grantee may also defer receipt of any Shares earned under the Agreement in accordance with the Plan, any such deferred Shares to be credited with dividend equivalents. Any such deferred Shares, including dividend equivalents, if any, to be paid at the end of any applicable deferral period shall be paid in shares of the same class of common shares that are subject to the RSUs, rounded to the nearest whole share, with any such deferral election to be made at a time and in a manner that complies with all applicable requirements under Code Section 409A. In addition, if and to the extent required under Code Section 409A, delivery of Shares hereunder to Grantee shall be made no earlier than six months after Grantee’s Separation from Service if Grantee is a “specified employee” on such date.

5. General Provisions. Grantee acknowledges that Grantee has read, understands and agrees with all of the provisions in this Agreement and the Plan, including, but not limited to, the following:

     (a) Administration. The interpretation and construction by the Board and/or the Committee of any provision of this Agreement, the Plan or any notification or document evidencing the grant of RSUs and that any determination by the Board or such Committee pursuant to any provision of this Agreement or the Plan or of any such agreement, notification or document shall be final and conclusive.

     (b) Notices. Any notice that is required or permitted under this Agreement shall be in writing (unless otherwise specified in the Agreement or in a writing from the Company to Grantee), and delivered personally or by mail, postage prepaid, addressed as follows: (i) if to the Company, at One American Road, Cleveland, Ohio 44144, Attention: Human Resources Department, or at such other address as the Company by notice to Grantee may have designated from time to time; (ii) if to Grantee, at the address indicated in Grantee’s then-current personnel records, or at such other address as Grantee by notice to the Company may have designated from time to time. Such notice shall be deemed given upon receipt. From time to time, the Company may also authorize communications and any notice that is required or permitted under this Agreement to be provided electronically either

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through the Company’s email or other systems or through third parties, including any administrator of the Company’s RSU or other equity programs, as designated from time to time by the Company.

     (c) Compliance With Securities Laws. Grantee acknowledges that the RSUs are intended to conform to the extent necessary with all provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 and any and all regulations and rules promulgated by the Securities and Exchange Commission thereunder, including without limitation Rule 144 under the Securities Act of 1933 and Rule 16b-3 under the Securities Exchange Act of 1934. Notwithstanding anything herein to the contrary, the RSUs are granted only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, this RSU Agreement will be deemed amended to the extent necessary to conform to such laws, rules and regulations.

     (d) Taxation. Grantee shall be responsible for all applicable income and withholding taxes and the employee share of FICA taxes with respect to any compensation income generated upon the vesting or issuance of any RSUs under this Agreement. No later than the date as of which an amount first becomes subject to applicable federal, state, or local income, wage or employment tax withholding (including employee share of FICA) with respect to the RSUs awarded hereunder, Grantee shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state or local income, wage or employment taxes of any kind required by law to be withheld with respect to that amount. Unless otherwise determined by the Committee, withholding obligations may be settled (i) with previously owned common shares or (ii) Shares that have vested and that are issuable hereunder (in the minimum amount necessary to satisfy any applicable withholding requirements). The making of that payment or those arrangements is a condition to the obligations of the Company under the Plan, and the Company may, to the extent permitted by law, deduct any taxes from any payment of any kind otherwise payable to Grantee or the Company may retain such number of the Shares issuable upon the vesting of RSUs covered by the grant evidenced by this Agreement as shall be equal in value to the amount of the remaining withholding obligation.

     (e) Nontransferability. This Agreement and the RSUs granted to Grantee shall be nontransferable and shall not be sold, hypothecated or otherwise assigned or conveyed by Grantee to any other person, except as specifically permitted in this Agreement. No assignment or transfer of this Agreement or the rights represented thereby, whether voluntary or involuntary, or by operation of law or otherwise, shall vest in the assignee or transferee any interest or right whatsoever, except as specifically permitted in this Agreement. The Agreement shall terminate, and be of no force or effect, immediately upon any attempt to assign or transfer the Agreement or any of the RSUs to which the Agreement applies.

     (f) Not an Employment Contract. This Agreement shall not be deemed to limit or restrict the right of the Company to terminate Grantee’s employment at any time, for any reason, with or without Cause, or to limit or restrict the right of Grantee to terminate his employment with the Company at any time.

     (g) Adjustments. On any change in the number or kind of outstanding common shares of the Company by reason of a recapitalization, merger, consolidation, reorganization, separation, liquidation, share split, share dividend, combination of shares or any other change in the corporate structure or common shares of the Company, the Company, by action of the Board or the Committee shall make such adjustment, if any, in the number and kind of RSUs subject to this agreement as it considers appropriate in order that the rights of Grantee hereunder are neither enlarged nor diminished.

     (h) Unsecured Creditor Status. This grant of RSUs constitutes a mere promise by the Company to pay Grantee the benefits described in this grant (to the extent credited and vested). Grantee shall have the status of a general unsecured creditor of the Company with respect to the

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benefits payable under this Agreement. Grantee’s right to receive credited and vested shares shall not be subject to any assignment, pledge, levy, garnishment, attachment or other attempt to assign or alienate such shares prior to their delivery to Grantee, including, without limitation, under any domestic relations order, and any such attempted assignment or alienation shall be null, void and of no effect.

     (i) Fractional Shares. Except as otherwise contemplated by Section 2(a), notwithstanding anything in this Agreement to the contrary, in the event that any adjustment to the grant of RSUs or an award of Shares or the calculation of an award pursuant to this Agreement would otherwise result in the creation of a fractional share interest, the affected award shall be rounded to the nearest whole share.

     (j) Amendment or Termination. This Agreement may be amended or terminated at any time by the mutual agreement and written consent of Grantee and the Company, but only to the extent permitted under the Plan. The provisions set forth in this Agreement are subject to the restrictions and other requirements of Code Section 409A and related regulations and rulings. Without limiting the generality of the preceding sentence, such provisions shall be modified and amended, as and where necessary, to bring such provisions into compliance with the requirements set forth in Code Section 409A and related regulations and rulings. This Agreement shall be interpreted (and if necessary, amended) to comply with Code Section 409A and to the extent any provision of this Agreement is inconsistent with Code Section 409A, said Code Section 409A shall control even if such action may reduce or diminish the value of Grantee’s award.

     (k) Severability. If any provision of this Agreement should be held illegal or invalid for any reason, such determination shall not affect the other provisions of this Agreement, and it shall be construed as if such provision had never been included herein.

     (l) Headings/Gender. Headings in this Agreement are for convenience only and shall not be construed to be part of this Agreement. Any reference to the masculine, feminine or neuter gender shall be a reference to other genders as appropriate.

     (m) Governing Law. This Agreement shall be construed, and its provisions enforced and administered, in accordance with the laws of the State of Ohio and, where applicable, federal law.

     (n) Definitions. Initial capitalized terms used in this Agreement that are not otherwise defined herein shall have the meaning set forth in the Plan.

     (o) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed original, but all of which taken together shall constitute one and the same instrument. Grantee’s acceptance of this agreement in accordance with the instructions in the Notice of Grant will constitute Grantee’s binding agreement with the terms hereof.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and unless Grantee otherwise rejects the Notice of Grant in accordance with the instructions in such notice, Grantee will be deemed a party to, and legally bound by the terms of, this Agreement.

AMERICAN GREETINGS CORPORATION
By:
	Brian McGrath, Senior Vice President,
	Human Resources
GRANTEE Unless the Grantee rejects Notice of Grant in accordance with the instructions in such notice, Grantee will be deemed a party to, and legally bound by the terms of, this Agreement.

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EX-10.58

Exhibit 10.58

AMERICAN GREETINGS CORPORATION 2007 OMNIBUS
INCENTIVE COMPENSATION PLAN

RESTRICTED STOCK UNIT GRANT AGREEMENT

Award:	Restricted Class A Stock Units
Grant Date:	___________, 20__ (“Date of Grant”)
Vesting Dates:	The award of Restricted Stock Units shall vest in the manner set forth in your Notice of Grant, as such term is defined below.

THIS AGREEMENT, dated as of the Grant Date stated above, is delivered by American Greetings Corporation (the “Company” or “American Greetings”) to the individual director of the Company (the “Grantee”) identified in the notice of restricted stock unit award grant (the “Notice of Grant”) delivered to Grantee.

W I T N E S S E T H:

WHEREAS, the Company wishes to give Grantee an opportunity to acquire or enlarge his equity ownership in the Company for the purpose of augmenting Grantee’s proprietary interest in the success of American Greetings and thereby focusing Grantee’s efforts on increasing shareholder value.

A G R E E M E N T

NOW, THEREFORE, Grantee has received or will receive a Notice of Grant, which, if not rejected in accordance with the instructions in such notice, will constitute Grantee’s binding agreement with the following terms:

1. Grant of Restricted Stock Units. Subject to the terms and conditions of this Agreement, the Company hereby grants to Grantee the number of Restricted Stock Units (the “RSUs”) relating to the class and number of common shares of the Company (the “Shares”), as indicated on the Notice of Grant. The grant of RSUs shall represent the right to receive such number of Shares, upon the satisfaction of certain vesting requirements set forth in Section 2, with issuance of such Shares to be made in accordance with Section 2. The RSUs described in this Agreement are in all respects subject to the terms, conditions and provisions of this Agreement, the Notice of Grant and the Company’s 2007 Omnibus Incentive Compensation Plan (the “Plan”).

2. Vesting or Forfeiture of RSUs; Payment of Award.

     (a) Vesting. Except as otherwise provided in this Section 2, RSUs granted to Grantee pursuant to Section 1 shall vest over the period as set forth in the Notice of Grant. If vesting will result in a fractional Share, then the amount vested shall be rounded up to the nearest whole Share; provided, however, the number of shares to vest as of the last vesting date shall be rounded down to such number that will result in the total number of Shares vesting equaling the total grant represented hereby.

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     (b) Payment of Award. Within 90 days after any RSUs are deemed vested pursuant to this Section 2, but in no event longer than the maximum time period permitted under Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (the “Code”) to qualify as a short-term deferral, such RSUs shall be issued to Grantee in the form of Shares. At such time, Grantee shall enjoy full shareholder and ownership rights with respect to such Shares. Shares shall be delivered to Grantee either through book-entry transfer of beneficial ownership of the Shares or through delivery of a stock certificate representing all such Shares and registered in his or her name. The method of delivery shall be selected by the Company, in its sole discretion. In the case of Grantee’s death after vesting, payment of any Shares that are vested on his date of death will be made to the beneficiary designated by Grantee in a writing filed with the Company or, if none, to Grantee’s estate.

     (c) Clawback; Accelerated Vesting; Forfeiture.

          (i) This RSU, and the right to receive and retain any Shares covered by this RSU, shall be subject to rescission, cancellation or recoupment, in whole or part, if and to the extent so provided under any “clawback” or similar policy of the Company in effect on the Date of Grant or that may be established thereafter, including, without limitation, any “clawback” or recoupment policy of the Company as may be adopted by the Company from time to time as required by Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or as otherwise required by applicable law.

          (ii) Notwithstanding the foregoing, if any portion of RSUs granted hereby have not vested on the date of Grantee’s death, Disability, or Retirement, provided Grantee is on the Board of Directors on such date (the “Separation Date”), Grantee will vest in such number of RSU’s obtained by subtracting (1) the number of RSUs that have vested as of the Separation Date from (2) the quotient obtained by multiplying (x) the total number of RSUs represented hereby by (y) a percentage equal to the period of time from the Date of Grant to the Separation Date as a percentage of the total vesting period for the RSUs as set forth in the Notice of Grant.

          (iii) If Grantee ceases to serve on the Board of Directors for any other reason than those specified in the immediately preceding clause 2(ii), including, without limitation, if Grantee resigns (other than as a result of Retirement, death or Disability), or any separation from service initiated by the Company for Cause or otherwise, any RSUs not otherwise vested pursuant to this Section 2 on the date Grantee ceases to provide services to the Company as a member of the Board of Directors, are forfeited. In addition, if Grantee’s service as a director is terminated for Cause, or if and to the extent required by applicable law, then any RSUs vested pursuant to this Section 2, but not yet delivered to Grantee, shall also be forfeited and shall not be delivered.

     (d) Certain Definitions. For purposes of this Agreement

          (i) “Cause” has such meaning as may be defined in any agreement between Grantee and the Company and, if none, will mean any one or more of the following: Grantee’s (1) fraud; (2) misappropriation of funds; (3) commission of a felony or of an act or series of acts which results in material injury to the business reputation of the Company; (4) commission of a crime or act or series of acts involving moral turpitude; (5) commission of an act or series of repeated acts of dishonesty that are materially inimical to the best interests of the Company; or (6) willful and repeated failure to perform his or her duties, which failure has not been cured in all substantial respects within fifteen (15) days after the Company gives written notice thereof to Grantee.

          (ii) “Retirement” shall mean termination of Grantee’s service as a director after completing ten (10) or more years of continuous service and attaining age sixty-five (65).

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          (iii) “Disability” shall mean that Grantee is “disabled” as such term is defined in Code Section 409A(a)(2).

3. Ownership Rights. Except as otherwise provided herein, Grantee will not have the rights of a shareholder of the Company with respect to any Shares issuable upon the vesting of any RSUs. Upon receipt of any portion of Shares issued pursuant to RSUs awarded under Section 1 and vested pursuant to Section 2, Grantee shall be entitled to exercise all ownership rights (including, without limitation, the right to vote and the right to receive dividends) with respect to such Shares, provided that voting and dividend rights with respect to the Shares will be exercisable only if the record date for determining shareholders entitled to vote and receive dividends, as the case may be, falls on or after the date as of which Shares are issued to Grantee pursuant to this Agreement.

4. Deferral of Delivery of Shares. Notwithstanding any provision in this Agreement to the contrary, if any law or regulation of any governmental authority having jurisdiction in the matter requires the Company, the Board, the Committee or Grantee to take any action or refrain from action in connection with the award or delivery of Shares under this Agreement, or to delay such award or delivery, then the award or delivery of such Shares shall be deferred until such action has been taken or such restriction on action has been removed, subject to any applicable requirements under Code Section 409A. If Grantee is eligible to participate in the Company’s Director’s Deferred Compensation Plan and the class of common shares that are subject to the RSUs are otherwise eligible for deferral thereunder, at Grantee’s election, Grantee may also defer receipt of any Shares earned under the Agreement in accordance with the Plan, any such deferred Shares to be credited with dividend equivalents. Any such deferred Shares, including dividend equivalents, if any, to be paid at the end of any applicable deferral period shall be paid in shares of the same class of common shares that are subject to the RSUs, rounded to the nearest whole share, with any such deferral election to be made at a time and in a manner that complies with all applicable requirements under Code Section 409A.

5. General Provisions. Grantee acknowledges that Grantee has read, understands and agrees with all of the provisions in this Agreement and the Plan, including, but not limited to, the following:

     (a) Administration. The interpretation and construction by the Board and/or the Committee of any provision of this Agreement, the Plan or any notification or document evidencing the grant of RSUs and that any determination by the Board or such Committee pursuant to any provision of this Agreement or the Plan or of any such agreement, notification or document shall be final and conclusive.

     (b) Notices. Any notice that is required or permitted under this Agreement shall be in writing (unless otherwise specified in the Agreement or in a writing from the Company to Grantee), and delivered personally or by mail, postage prepaid, addressed as follows: (i) if to the Company, at One American Road, Cleveland, Ohio 44144, Attention: Human Resources Department, or at such other address as the Company by notice to Grantee may have designated from time to time; (ii) if to Grantee, at the address indicated in Grantee’s then-current personnel records, or at such other address as Grantee by notice to the Company may have designated from time to time. Such notice shall be deemed given upon receipt. From time to time, the Company may also authorize communications and any notice that is required or permitted under this Agreement to be provided electronically either through the Company’s email or other systems or through third parties, including any administrator of the Company’s RSU or other equity programs, as designated from time to time by the Company.

     (c) Compliance With Securities Laws. Grantee acknowledges that the RSUs are intended to conform to the extent necessary with all provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 and any and all regulations and rules promulgated by the Securities and

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Exchange Commission thereunder, including without limitation Rule 144 under the Securities Act of 1933 and Rule 16b-3 under the Securities Exchange Act of 1934. Notwithstanding anything herein to the contrary, the RSUs are granted only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, this RSU Agreement will be deemed amended to the extent necessary to conform to such laws, rules and regulations.

     (d) Taxation. Grantee shall be responsible for all applicable income and withholding taxes and the employee share of FICA taxes with respect to any compensation income generated upon the vesting or issuance of any RSUs under this Agreement. No later than the date as of which an amount first becomes subject to applicable federal, state, or local income, wage or employment tax withholding (including employee share of FICA) with respect to the RSUs awarded hereunder, Grantee shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state or local income, wage or employment taxes of any kind required by law to be withheld with respect to that amount. Unless otherwise determined by the Committee, withholding obligations may be settled (i) with previously owned common shares or (ii) Shares that have vested and that are issuable hereunder (in the minimum amount necessary to satisfy any applicable withholding requirements). The making of that payment or those arrangements is a condition to the obligations of the Company under the Plan, and the Company may, to the extent permitted by law, deduct any taxes from any payment of any kind otherwise payable to Grantee or the Company may retain such number of the Shares issuable upon the vesting of RSUs covered by the grant evidenced by this Agreement as shall be equal in value to the amount of the remaining withholding obligation.

     (e) Nontransferability. This Agreement and the RSUs granted to Grantee shall be nontransferable and shall not be sold, hypothecated or otherwise assigned or conveyed by Grantee to any other person, except as specifically permitted in this Agreement. No assignment or transfer of this Agreement or the rights represented thereby, whether voluntary or involuntary, or by operation of law or otherwise, shall vest in the assignee or transferee any interest or right whatsoever, except as specifically permitted in this Agreement. The Agreement shall terminate, and be of no force or effect, immediately upon any attempt to assign or transfer the Agreement or any of the RSUs to which the Agreement applies.

     (f) No Continued Service Rights. This Agreement will not confer upon Grantee any right to be retained by or in the service of the Company and will not interfere in any way with the right of the Company to terminate Grantee’s service at any time. Subject to any obligations under law or the Company’s Articles of Incorporation or Code of Regulations the right of the Company to terminate at will Grantee’s service as a director at any time for any reason is specifically reserved.

     (g) Adjustments. On any change in the number or kind of outstanding common shares of the Company by reason of a recapitalization, merger, consolidation, reorganization, separation, liquidation, share split, share dividend, combination of shares or any other change in the corporate structure or common shares of the Company, the Company, by action of the Board or the Committee shall make such adjustment, if any, in the number and kind of RSUs subject to this agreement as it considers appropriate in order that the rights of Grantee hereunder are neither enlarged nor diminished.

     (h) Unsecured Creditor Status. This grant of RSUs constitutes a mere promise by the Company to pay Grantee the benefits described in this grant (to the extent credited and vested). Grantee shall have the status of a general unsecured creditor of the Company with respect to the benefits payable under this Agreement. Grantee’s right to receive credited and vested shares shall not be subject to any assignment, pledge, levy, garnishment, attachment or other attempt to assign or alienate such shares prior to their delivery to Grantee, including, without limitation, under any

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domestic relations order, and any such attempted assignment or alienation shall be null, void and of no effect.

     (i) Fractional Shares. Except as otherwise contemplated by Section 2(a), notwithstanding anything in this Agreement to the contrary, in the event that any adjustment to the grant of RSUs or an award of Shares or the calculation of an award pursuant to this Agreement would otherwise result in the creation of a fractional share interest, the affected award shall be rounded to the nearest whole share.

     (j) Amendment or Termination. This Agreement may be amended or terminated at any time by the mutual agreement and written consent of Grantee and the Company, but only to the extent permitted under the Plan. The provisions set forth in this Agreement are subject to the restrictions and other requirements of Code Section 409A and related regulations and rulings. Without limiting the generality of the preceding sentence, such provisions shall be modified and amended, as and where necessary, to bring such provisions into compliance with the requirements set forth in Code Section 409A and related regulations and rulings. This Agreement shall be interpreted (and if necessary, amended) to comply with Code Section 409A and to the extent any provision of this Agreement is inconsistent with Code Section 409A, said Code Section 409A shall control even if such action may reduce or diminish the value of Grantee’s award.

     (k) Severability. If any provision of this Agreement should be held illegal or invalid for any reason, such determination shall not affect the other provisions of this Agreement, and it shall be construed as if such provision had never been included herein.

     (l) Headings/Gender. Headings in this Agreement are for convenience only and shall not be construed to be part of this Agreement. Any reference to the masculine, feminine or neuter gender shall be a reference to other genders as appropriate.

     (m) Governing Law. This Agreement shall be construed, and its provisions enforced and administered, in accordance with the laws of the State of Ohio and, where applicable, federal law.

     (n) Definitions. Initial capitalized terms used in this Agreement that are not otherwise defined herein shall have the meaning set forth in the Plan.

     (o) Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed original, but all of which taken together shall constitute one and the same instrument. Grantee’s acceptance of this agreement in accordance with the instructions in the Notice of Grant will constitute Grantee’s binding agreement with the terms hereof.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and unless Grantee otherwise rejects the Notice of Grant in accordance with the instructions in such notice, Grantee will be deemed a party to, and legally bound by the terms of, this Agreement.

AMERICAN GREETINGS CORPORATION
By:
	Brian McGrath, Senior Vice President,
	Human Resources

GRANTEE

Unless the Grantee rejects Notice of Grant in accordance with the instructions in such notice, Grantee will be deemed a party to, and legally bound by the terms of, this Agreement.

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EX-21

EXHIBIT 21

AMERICAN GREETINGS CORPORATION
Subsidiaries of the Registrant

Subsidiary	State / Jurisdiction of Incorporation
A.G. (UK), Inc.	Ohio
A.G. Industries, Inc. (d/b/a AGI In-Store)	North Carolina
A.G.C. Investments, Inc.	Delaware
AG Interactive, Inc.	Delaware
AGC Funding Corporation	Delaware
AGC Holdings, LLC	Delaware
AGC, LLC	Delaware
AGCM, Inc.	Ohio
Carlton Cards Limited	Canada
Cloudco, Inc. (d/b/a AG Properties)	Delaware
John Sands (Australia) Ltd.	Delaware
Microcourt Limited	United Kingdom
PhotoWorks, Inc.	Washington
Plus Mark LLC	Ohio
Papyrus-Recycled Greetings, Inc. (f/k/a Recycled Paper Greetings, Inc.)	Illinois
Those Characters From Cleveland, Inc.	Ohio
UK Greetings Limited	United Kingdom

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of American Greetings Corporation listed below of our reports dated April 29, 2011, with respect to the consolidated financial statements and schedule of American Greetings Corporation and the effectiveness of internal control over financial reporting of American Greetings Corporation included in this Annual Report (Form 10-K) for the year ended February 28, 2011.

Registration
Number	Description	Filing Date
2-89471	Post-Effective Amendment No. 1 to Form S-3 Registration Statement	May 27, 1986
33-45673	American Greetings Corporation Employees’ Retirement Profit Sharing Plan — Form S-8 Registration Statement	February 4, 1992
33-58582	American Greetings Corporation 1992 Stock Option Plan — Form S-8 Registration Statement	February 22, 1993
33-61037	American Greetings Corporation 1995 Director Stock Plan — Form S-8 Registration Statement	July 14, 1995
333-08123	American Greetings Corporation 1996 Employee Stock Option Plan - Form S-8 Registration Statement	July 15, 1996
333-41912	American Greetings Corporation 1997 Equity and Performance Incentive Plan (as amended June 24, 2000) — Form S-8 Registration Statement	July 21, 2000
333-65534	American Greetings Corporation 1997 Equity and Performance Incentive Plan (as amended June 22, 2001) — Form S-8 Registration Statement	July 20, 2001
333-121982	American Greetings Corporation 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004) — Form S-8 Registration Statement	January 12, 2005
333-123041	American Greetings Corporation 1995 Director Stock Plan — Form S-8 Registration Statement	February 28, 2005
333-134029	American Greetings Corporation — Form S-3 Registration Statement	May 11, 2006
333-144220	American Greetings Corporation 2007 Omnibus Incentive Compensation Plan — Form S-8 Registration Statement	June 29, 2007
333-146244	American Greetings Corporation Employees’ Retirement Profit Sharing Plan — Form S-8 Registration Statement	September 21, 2007
333-160303	American Greetings Corporation 2007 Omnibus Incentive Compensation Plan — Form S-8 Registration Statement	June 29, 2009

/s/ Ernst & Young LLP

Cleveland, Ohio
April 29, 2011

EX-31.1

Exhibit (31) a

Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Zev Weiss, certify that:

1.	I have reviewed this Annual Report on Form 10-K of American Greetings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of American Greetings Corporation as of, and for, the periods presented in this report;
4.	American Greetings Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for American Greetings Corporation and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to American Greetings Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of American Greetings Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in American Greetings Corporation’s internal control over financial reporting that occurred during American Greetings Corporation’s most recent fiscal quarter (the American Greetings Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, American Greetings Corporation’s internal control over financial reporting; and

5. American Greetings Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to American Greetings Corporation’s auditors and the audit committee of American Greetings Corporation’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect American Greetings Corporation’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in American Greetings Corporation’s internal control over financial reporting.

April 29, 2011

               /s/ Zev Weiss  

Zev Weiss 

   Chief Executive Officer
   (principal executive officer) 

EX-31.2

Exhibit (31) b

Certification of Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stephen J. Smith, certify that:

1.	I have reviewed this Annual Report on Form 10-K of American Greetings Corporation;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of American Greetings Corporation as of, and for, the periods presented in this report;
4.	American Greetings Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for American Greetings Corporation and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to American Greetings Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of American Greetings Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in American Greetings Corporation’s internal control over financial reporting that occurred during American Greetings Corporation’s most recent fiscal quarter (the American Greetings Corporation’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, American Greetings Corporation’s internal control over financial reporting; and

5. American Greetings Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to American Greetings Corporation’s auditors and the audit committee of American Greetings Corporation’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect American Greetings Corporation’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in American Greetings Corporation’s internal control over financial reporting.

April 29, 2011

               /s/ Stephen J. Smith  

Stephen J. Smith 

   Senior Vice President and
   Chief Financial Officer (principal financial officer) 

EX-32

Exhibit (32)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Annual Report of American Greetings Corporation (the “Corporation”) on Form 10-K for the year ended February 28, 2011, as filed with the Securities and Exchange Commission on the date therein specified (the “Report”), each of the undersigned officers of the Corporation certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation as of the dates and for the periods expressed in the Report.

April 29, 2011

/s/ Zev Weiss Zev Weiss

Chief Executive Officer (principal executive officer)

/s/ Stephen J. Smith Stephen J. Smith

Senior Vice President and

Chief Financial Officer (principal financial officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.