10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year
Ended February 28, 2002 Commission File
Number 1-13859

AMERICAN GREETINGS CORPORATION

(Exact name of registrant as specified in Charter)

OHIO	34-0065325
(State of incorporation)	(I.R.S. Employer Identification No.)

One American Road , Cleveland, Ohio	44144
(Address of Principal Executive Offices)	(Zip Code)

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

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

Class A Common Shares, Par Value $1.00

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

Class B Common Shares, Par Value $1.00

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES    X       NO

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

State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of April 29, 2002 — $1,127,168,037

Number of shares outstanding as of April 29, 2002:

CLASS A COMMON — 60,545,631
CLASS B COMMON — 4,605,230

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement filed with the Securities and Exchange Commission on May 20, 2002 with respect to the 2002 Annual Meeting of Shareholders called for June 28, 2002, are incorporated by reference into Part III.

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to Vote of Security Holders
PART II
	Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 7A. Quantitative and Qualitative Disclosures About Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
PART III
PART IV
	Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
SIGNATURES
EX-4(ii)
EX-4(v)
EX-10(ii)(a)(i)
EX-10(ii)(a)(ii)
EX-10(ii)(a)(iii)
EX-10(ii)(a)(ix)
EX-10(ii)(a)(xiv)
EX-10(xvi)
EX-10(xvii)
EX-21
EX-23

PART I

Item 1. Business

     American Greetings Corporation (“the Corporation”) and its subsidiaries operate predominantly in a single industry: the design, manufacture and sale of everyday and seasonal greeting cards and other social expression products. Greeting cards, gift wrap, paper party goods, candles, balloons, stationery and giftware are manufactured and /or sold in the United States by American Greetings Corporation, Gibson Greetings, Inc., Plus Mark, Inc., Carlton Cards Retail, Inc. and CPS Corporation of Delaware Inc.; in Canada by Carlton Cards Limited; in the United Kingdom by Carlton Cards Limited, Camden Graphics Group, Hanson White Ltd., Gibson Greetings International Limited, The Ink Group Publishers Ltd. (U.K.) and Carlton Cards Ltd. (Ireland); in Mexico by Carlton Mexico, S.A. de C.V. ; in Australia by John Sands (Australia) Ltd. and The Ink Group PTY Ltd.; in New Zealand by John Sands (N.Z.) Ltd. and The Ink Group NZ Ltd.; in South Africa by S.A. Greetings Corporation (PTY) Ltd.; and in Singapore, Hong Kong, China, and Malaysia by Memory Lane SDN BHD (85% owned). AmericanGreetings.com, Inc. (92% owned), markets e-mail greetings, personalized printable greeting cards and other social expression products through the Corporation’s websites www.americangreetings.com, www.bluemountain.com, www.egreetings.com, www.beatgreets.com and www.passitaround.com; co-branded websites and on-line services. AmericanGreetings.com also provides design and verse content which is included in various CD-Rom software products for use on personal computers. Magnivision, Inc. produces and sells non-prescription reading glasses and eyeware accessories, and Learning Horizons distributes supplemental educational products. Design licensing and character licensing are done by AGC, Inc. and Those Characters From Cleveland, Inc., respectively. AG Industries, Inc. manufactures custom display fixtures for the Corporation’s products and products of others. (Although other subsidiaries of American Greetings Corporation exist, they are either inactive, of minor importance or of a holding company nature.)

     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, 2002 refers to the year ended February 28, 2002.

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     Many of the Corporation’s products are manufactured at common production facilities and marketed by a common sales force. Marketing and manufacturing functions in the United States and Canada are combined; dual priced cards are produced in the United States and distributed in both countries. Information concerning sales by major product classifications is included in Part II, Item 7. Additionally, information by geographic area is included in Note N to the Consolidated Financial Statements included in Part II, Item 8.

     The Corporation’s products are primarily sold in about 125,000 retail outlets worldwide. In addition, the Corporation licenses its designs to various foreign licensees, so that in total, the Corporation’s products and designs are available in more than 70 nations around the world. The greeting card and gift wrap industry is 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 2,000 companies in this industry in the United States. The Corporation’s principal competitor is Hallmark Cards, Incorporated. On March 9, 2000, the Corporation completed its acquisition of Gibson Greetings, Inc. (“Gibson”). Gibson had been the Corporation’s other principal competitor. Based upon its general familiarity with the greeting card and gift wrap industry and limited information as to its competitors, the Corporation believes that it is the second largest company in the industry and the largest publicly owned company in the industry.

     Excluding the effects of the adoption of the scan-based trading business model and the implementation of the reorganization during 2002 (see Part II, Item 7), unit sales of everyday greeting cards declined 2.9% in 2002 from 2001. Approximately half of the decline was the result of the Corporation completing its activities to reduce inventories at certain retailers while the remainder reflects the continuation of a flat to gradually-declining market in everyday greeting card consumption. In 2001, excluding the impact of the Gibson acquisition, unit sales of everyday cards were down approximately 2%. Net seasonal card unit sales were up 8.7% to prior year worldwide for the Corporation. In 2001, after excluding the impact of the Gibson acquisition, net sales of seasonal greeting cards were down 3.5%.

     Production of the Corporation’s products is generally on a level basis throughout the year. Everyday inventories 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. The Corporation’s two largest customers were converted to a scan-based trading model, and payments for both everyday and seasonal sales to those customers are received generally within 10 to 15 days of the product being sold by those customers at their retail locations. The Corporation and many of its competitors sell seasonal greeting cards with the right of return.

     During the fiscal year, the Corporation experienced no difficulty in obtaining raw materials from suppliers.

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At February 28, 2002, the Corporation employed approximately 10,600 full-time employees and approximately 27,000 part-time employees in the United States which, when jointly considered, equate to approximately 24,100 full-time employees. Approximately 2,800 of the Corporation’s hourly plant employees are unionized, of which approximately 2,000 are covered by the following collective bargaining agreements:

Union	Plant Location	Contract Expiration Date
International Brotherhood	Bardstown, Kentucky		4/15/03
of Teamsters	Corbin, Kentucky *		12/01/02
	Shelbyville, Kentucky **		10/31/01
	Kalamazoo, Michigan		4/30/05
	Cleveland, Ohio		3/31/05
Union of Needle Trades,	Greeneville, Tennessee		10/20/02
Industrial, & Textile Employees	(Plus Mark)
Firemen & Oilers	Berea, Kentucky		3/31/03
Laborers’ International	Henderson, Kentucky **		12/17/04

*    Scheduled to close in 2003.
** Closed February 28, 2002.

     Other locations with unions are the United Kingdom, Mexico, Australia, New Zealand, and South Africa. The Corporation’s headquarters and other manufacturing locations are not unionized. Labor relations at each location have generally been satisfactory.

     The Corporation has a number of patents and registered trademarks which are used in connection with its products. The Corporation’s designs and verses are protected by copyright. Although the licensing of copyrighted designs and trademarks produces additional revenue, in the opinion of the Corporation, the Corporation’s operations are not dependent upon any individual patent, trademark, copyright or intellectual property license. The collective value of the Corporation’s copyrights and trademarks is substantial and the Corporation follows an aggressive policy of protecting its patents, copyrights and trademarks.

     In 2002, the Corporation’s major channel of distribution continues to be mass retail (which is comprised of mass merchandisers, chain drug stores and supermarkets), where it is the social expression industry leader. Other major channels of distribution include card and gift shops, department stores, military post exchanges, variety stores and combo stores (stores combining food, general merchandise and drug items).

     Net sales to the Corporation’s five largest customers, which include mass merchandisers and major drug stores, accounted for approximately 37%, 29% and 33% of net sales in 2002, 2001 and 2000, respectively. Net sales to Wal-Mart Stores, Inc. accounted for 12% of net sales in 2002 and 10% in both 2001 and 2000.

     The Corporation has agreements with various customers for the supply of greeting cards and related products. Contracts are separately negotiated to meet competitive situations; therefore, while some aspects of the agreements may be the same or similar, important contractual terms often vary from contract to contract. Under the agreements, customers typically receive allowances, discounts and/or advances in consideration for the Corporation being allowed to supply customers’ stores for a stated term and/or a specified minimum sales volume

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commitment. Some of these competitive agreements have been negotiated with customers covering a period following that covered by current agreements and requiring the Corporation to make advances prior to the start of such future period. The Corporation views the use of such agreements as advantageous in developing and maintaining business with retail customers. Although risk is inherent in the granting of advances, payments and credits, the Corporation subjects such customers to its normal credit review. Losses attributable to these agreements have historically not been material. Advances, payments and credits made under these agreements are accounted for as deferred costs. The current and long-term portions of such deferred costs, including future payment commitments, are disclosed in Note H to the Consolidated Financial Statements included in Part II, Item 8. Note H also discusses the amortization policy. The Corporation believes that these agreements represent a common practice within the industry. Since Hallmark Cards, the Corporation’s principal competitor, is a non-public company, public disclosure of its practices has been limited.

     The operations of the Corporation, like those of other companies in our industry, are subject to various federal, state and local environmental laws and regulations. These laws and regulations may give rise to claims, uncertainties or possible loss contingencies for future environmental remediation liabilities and costs. The Corporation has 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 the financial condition, cash flows, or operating results of the Corporation.

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Item 2. Properties

     As of February 28, 2002, the Corporation owns or leases approximately 15.7 million square feet of plant, warehouse, store and office space, of which approximately 4.0 million square feet are leased. Space needs in the United States have been met primarily through long-term leases of properties constructed and financed by community development corporations and municipalities.

     The following table summarizes the principal plants and materially important physical properties of the Corporation:

*    – Indicates calendar year.
** – Indicates facility has been closed as part of restructure activity.

					Expiration
	Approximate Square				Date of
	Feet Occupied				Material		Principal
Location	Owned		Leased		Leases *		Activity
Cleveland,		1,700,000					World headquarters; general offices of U.S. Greeting Card Division,
Ohio							Plus Mark, Inc., AG Industries, Inc., Carlton Cards Retail, Inc.,
							Learning Horizons, Inc., AmericanGreetings.com, Inc. and AGC, Inc.;
							creation and design of greeting cards, gift wrap, paper party goods,
							candles, balloons, stationery and giftware; marketing of electronic greetings
Bardstown,		413,500					Cutting, folding, finishing, and packaging of greeting cards
Kentucky
Corbin,		1,010,000					Lithography for greeting cards
Kentucky
Danville,				1,374,000		2002	Distribution of everyday greeting cards and related products
Kentucky
Harrisburg,		417,000					Warehousing for seasonal greeting cards and related products
Arkansas
Lafayette,		194,000					Manufacture of envelopes for greeting cards and packaging of cards
Tennessee
McCrory,				771,000		2004	Order filling and shipping of everyday and seasonal products
Arkansas

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					Expiration
	Approximate Square				Date of
	Feet Occupied				Material		Principal
Location	Owned		Leased		Leases *		Activity
Osceola,		2,800,800					Cutting, folding, finishing and
Arkansas							packaging of seasonal greeting
							cards and warehousing;
							distribution of seasonal products
Ripley,		165,000					Seasonal card printing and
Tennessee							forms
Philadelphia,				120,000		2003	Hand finishing of greeting cards
Mississippi
Kalamazoo,		602,500					Manufacturing and distribution
Michigan							of party supplies
Shelbyville,				250,000		2002	Warehousing for Carlton Cards
Kentucky							Retail, Inc. and distribution for
							Learning Horizons, Inc. **
Forest City,		498,000		558,000			Manufacture of the Corporation's display
North Carolina							fixtures and other custom display fixtures
							by AG Industries, Inc.
Greeneville,		1,410,000		227,000		2004	Printing and packaging of seasonal greeting
Tennessee							cards and wrapping items and order filling
(2 locations)							and shipping for Plus Mark, Inc.
Franklin,		1,000,000					Manufacture of gift wrap and related
Tennessee							items for Plus Mark, Inc.
Henderson,		500,000					Manufacture of gift wrap and related
Kentucky							items for Plus Mark, Inc.**
Miramar,				200,000		2010	General offices of Magnivision,
Florida							Inc.; manufacture, order filling
							and shipping of non-prescription
							reading glasses

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					Expiration
	Approximate Square				Date of
	Feet Occupied				Material		Principal
Location	Owned		Leased		Leases *		Activity
Toronto,				87,000		2004	General offices of Carlton
Ontario,							Cards (Canada) Limited
Canada
Clayton,		208,000					General offices of John Sands
Victoria,							(Australia) Ltd.; manufacture of
Australia							greeting cards and related products
Auckland,		80,000					General offices of John
New Zealand							Sands (New Zealand) Ltd.
Dewsbury,		417,000					General offices of
England							Carlton Cards (UK) Limited;
(2 locations)							manufacture of greeting
							cards and related products
Mexico City,		89,000					General offices of Carlton
Mexico							Mexico, S.A. de C.V. and
							distribution of greeting
							cards and related products
Roodepoort,				105,500		2002	General offices of
South Africa							S.A. Greetings Corporation;
							manufacture and distribution
							of greeting cards and related products
Croydon,		42,000		201,000		2002	General offices of Hanson
England					thru		White; manufacturer and
(8 locations)						2011	distributor of greeting cards
							and related products
Stafford Park,		50,000		29,000		2004	General office and warehouse
England							for Gibson Greetings
(2 locations)							International
Ezakheni,		134,000					Manufacture and distribution
Phoenix, and							of greeting cards and
Aeroton							related products
South Africa
Kajang				7,000		2002	General office of Memory
Selangor							Lane Malaysia
Malaysia

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Item 3. Legal Proceedings

1. In re: Underground Storage Tank Release Report
                   US EPA Facility ID# TN 1-300153
                   Tennessee Department of Environment & Conservation
                   (“TDEC”) v. Plus Mark

This matter was previously disclosed in Form 10-K for the period ended February 29, 2000. In January 2000, Plus Mark, Inc. (“Plus Mark”), a wholly owned subsidiary of the Corporation, received a request from the United States Environmental Protection Agency (“US EPA”) in connection with the excavation of eight underground storage tanks at Plus Mark’s Afton, TN facility to perform initial site characterization for both soil and groundwater. After Plus Mark submitted the initial test results, the US EPA concluded that no further action was required regarding soil, but that further site characterization was required for groundwater. The US EPA transferred the matter to TDEC for administration. No remedy has been determined, but costs are not expected to be material. In November 2001, Plus Mark voluntarily entered into a Remediation Order with TDEC. A Remediation Plan addressing groundwater contamination, including a plan for off-site work, is currently pending TDEC approval.

2. In re: Tennessee Dept. of Environment and Conservation (TDEC) v. Cleo
                   Tennessee State Superfund Site — Carl Wright Site, Henry County, TN

This matter was previously disclosed in Form 10-K for the period ended February 29, 2000. In May 1998, TDEC informed Gibson Greetings, Inc. (“Gibson”), now a wholly owned subsidiary of the Corporation, that Cleo, a former subsidiary of Gibson, may be a potentially responsible party for the costs incurred by the State of Tennessee in remediating the Carl Wright Site. TDEC notified Gibson that storage drums recovered from the Site during clean up bore “Cleo Wrap” labels. Gibson had agreed to indemnify Cleo and its shareholder, CSS, against various environmental liabilities, in connection with the sale of Cleo to CSS. Gibson’s share of the estimated clean up cost is not expected to be material. In November 2001, the Division of Superfund issued a second notice of assessment to “Cleo Wrap/Gibson Greetings” for $94,261.55, representing 8.3% of the clean-up costs assessed. The assessment was paid in January 2002. TDEC will be issuing a 10% refund for timely payment, and an order of contribution protection.

3. In re: Chemical Recovery Systems Site, Elyria, Ohio

This matter was previously disclosed in Form 10-K for the period ended February 28, 2001. In March 2001, the US EPA sent to the Corporation a General Notice of Potential Liability and Request for Information under CERCLA. The Notice stated the US EPA’s intent to conduct a remedial investigation/feasibility study at the Chemical Recovery Systems Site in Elyria, Ohio. The Corporation undertook a review of its records. The alleged shipments to this Site occurred in 1978. The Corporation is part of the de minimus contributor group, and its share of estimated clean-up costs is not expected to be material.

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Item 4. Submission of Matters to Vote of Security Holders

              None

Executive Officers of the Registrant

     The following is a list of the Corporation’s executive officers, their ages as of April 30, 2002, their positions and offices, and number of years in executive office:

			Years as
Name	Age		Executive Officer		Current Position and Office
Morry Weiss		62		30	Chairman and
					Chief Executive Officer
James C. Spira		59		2	President and
					Chief Operating Officer
Jeffrey M. Weiss		38		4	Executive Vice President
Zev Weiss		35		1	Executive Vice President
David R. Beittel		54		1	Senior Vice President
John S.N. Charlton		51		2	Senior Vice President
Mary Ann Corrigan-Davis		48		5	Senior Vice President
Jon Groetzinger, Jr.		53		14	Senior Vice President,
					General Counsel and
					Secretary
Pamela L. Linton		52		1	Senior Vice President
William R. Mason		57		20	Senior Vice President
William S. Meyer		55		14	Senior Vice President,
					Chief Financial Officer
Patricia A. Papesh		54		7	Senior Vice President
Patricia L. Ripple		46		6	Senior Vice President
Erwin Weiss		53		12	Senior Vice President
George A. Wenz		57		4	Senior Vice President
Dale A. Cable		54		10	Vice President, Treasurer
Joseph B. Cipollone		43		1	Vice President,
					Corporate Controller

      Morry Weiss and Erwin Weiss are brothers. Jeffrey M. 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.

      All of the executive officers listed above have served in the capacity shown or similar capacities with the Corporation (or major subsidiary) over the past five years, with the following exceptions.

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     James C. Spira was a management consultant with several firms. He has served on the Board of Directors of the Corporation since 1998. He was appointed Vice Chairman of the Corporation in June 2000 and President and Chief Operating Officer of the Corporation in March 2001.

     Jeffrey M. Weiss was Vice President, Materials Management of the Corporation’s U.S. Greeting Card Division from October 1996 until May 1997; Vice President, Product Management of the Corporation’s U.S. Greeting Card Division from May 1997 until January 1998; and Senior Vice President from January 1998 until becoming Executive Vice President in March 2000.

     Zev Weiss was Regional Sales Director for the Corporation’s Carlton Cards Retail, Inc., unit from July 1994 to May 1995; Regional Sales Manager for the Corporation’s U.S. Greeting Card Division from May 1995 to May 1997; Executive Director of National Accounts for the Corporation’s U.S. Greeting Card Division from May 1997 until March 2000; Vice President, Strategic Business Units from March 2000 until March 2001; and Senior Vice President from March 2001 until becoming Executive Vice President in December 2001.

     David R. Beittel was Vice President, Creative Visual Design of the Corporation’s Carlton Cards Retail, Inc. unit from August 1993 until April 1995; Executive Director, Product Management of the Corporation from April 1995 until January 1997; and Vice President, Creative of the Corporation from January 1997 until becoming Senior Vice President in April 2001.

     John S.N. Charlton was Managing Director of the Consumer Products Division of Pentland Group plc in the United Kingdom from 1988 until 1998; and Managing Director of UK Greetings Ltd. (a wholly-owned subsidiary of the Corporation which owns all of the Corporation’s operating subsidiaries in the United Kingdom) from 1998 until becoming Senior Vice President, International of the Corporation in October 2000.

     Joseph B. Cipollone was Director, Corporate Financial Planning of the Corporation from July 1994 until December 1997; and Executive Director, International Finance of the Corporation from December 1997 until becoming Vice President and Corporate Controller in April 2001.

     Pamela L. Linton was Senior Vice President, Global Human Resources of Amway Corporation from 1997 until 2000. She became Senior Vice President, Human Resources of the Corporation in June 2001.

     George A. Wenz was Vice President, National Accounts from October 1984 until becoming Senior Vice President in June 1997.

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters

(a) Market Information

The Corporation’s Class A common stock is listed on the New York Stock Exchange under the symbol AM. The high and low stock prices, as reported in the New York Stock Exchange listing, for the years ended February 28, 2002 and 2001:

	2002				2001
	High		Low		High		Low
1st Quarter	$	14.50	$	9.75	$	19-9/16	$	15-5/16
2nd Quarter		14.43		9.95		24-1/16		16-7/8
3rd Quarter		15.36		11.49		20.13		8.94
4th Quarter		16.00		11.98		13.91		8.19

National City Bank, Cleveland, Ohio, is the Corporation’s registrar and transfer agent. There is no public market for the Class B Common Shares of the Corporation. Pursuant to the Corporation’s Amended 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.

(b) Shareholders

At February 28, 2002, there were approximately 27,000 holders of Class A Common Shares and 184 holders of Class B Common Shares of record and individual participants in security position listings.

(c) Cash Dividends

Dividends
per share
declared in		2002		2001
2nd Quarter	(paid September 10, 2001 and September 8, 2000)	$	0.10	$	0.21
3rd Quarter	(paid December 7, 2001 and December 8, 2000)		0.10		0.21
3rd Quarter	(paid March 9, 2001)		—		0.10
4th Quarter	(paid June 8, 2001)		—		0.10
		$	0.20	$	0.62

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Item 6. Selected Financial Data

Years ended February 28 or 29
Thousands of dollars except share and per share amounts

Summary of Operations			2002			2001			2000			1999			1998
Net sales			$	2,355,740		$	2,518,814		$	2,175,236		$	2,205,706		$	2,198,765
Gross profit				1,363,495			1,519,543			1,365,889			1,448,626			1,408,077
Restructure and non-recurring charge (gain)				56,715			—			38,873			13,925			(22,125	)
Interest expense				78,599			55,387			34,255			29,326			22,992
Income (loss) before cumulative effect of accounting change				(122,310	)		(92,673	)		89,999			180,222			190,084
Cumulative effect of accounting change, net of tax				—			(21,141	)		—			—			—
Net (loss) income				(122,310	)		(113,814	)		89,999			180,222			190,084
	Earnings (loss) per share:
		Before cumulative effect of accounting change		(1.92	)		(1.46	)		1.37			2.56			2.58
		Cumulative effect of accounting change, net of tax		—			(0.33	)		—			—			—
		Earnings (loss) per share		(1.92	)		(1.79	)		1.37			2.56			2.58
		Earnings (loss) per share — assuming dilution		(1.92	)		(1.79	)		1.37			2.53			2.55
Cash dividends per share**				0.20			0.62			0.80			0.94			0.71
Fiscal year end market price per share				13.77			13.06			17.25			23.69			45.63
Average number of shares outstanding				63,615,193			63,646,405			65,591,798			70,345,980			73,708,100
Financial Position
Accounts receivable — net			$	288,986		$	387,534		$	430,825		$	390,740		$	373,594
Inventories				290,804			365,221			249,433			251,289			271,205
Working capital				350,142			94,455			518,196			728,144			506,029
Total assets				2,614,995			2,712,074			2,517,983			2,419,328			2,161,464
Property, plant and equipment additions				28,969			74,382			50,753			60,950			67,898
Long-term debt				853,113			380,124			442,102			463,246			148,800
Shareholders’ equity				902,419			1,047,190			1,252,411			1,346,611			1,345,217
Shareholders’ equity per share				14.15			16.49			19.41			19.49			18.90
Net return on average shareholders’ equity before cumulative effect of accounting change				(12.5	)%		(8.1	)%		6.9	%		13.4	%		14.0	%
Return on net sales before income taxes and cumulative effect of accounting change				(8.3	)%		3.9	%		6.5	%		12.8	%		13.3	%

** See quarterly results of operations for detailed table.

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

Overview
Fiscal 2002 represented a year of change for the Corporation. Bold initiatives were introduced to address internal business requirements, as well as to respond to continued market pressures.

The Corporation successfully executed a reorganization plan aimed at reducing operating costs, rationalizing its brands, reducing Stock Keeping Units (“SKUs”) in many of its product lines, streamlining its internal reporting relationships along customer-focused process lines, and completing the integration activities for acquisitions made in the prior year. This comprehensive plan impacted virtually all parts of the organization.

At the same time, the Corporation addressed two key market issues. First, it converted its two largest retail accounts to a scan-based trading business model. The high cost of conversion on the part of both the supplier and the retailer demonstrates the commitment to a true partnering relationship. Secondly, the Corporation took major steps to reset its product mix to offer a broader range of lower priced cards. The Corporation’s renewed focus on value was a strategic decision that addressed an industry-wide concern about greeting card prices.

Both net sales and earnings were lower than prior year due to a combination of market-driven declines and “Special Charges” resulting from the Corporation’s decision to implement this reorganization program and the adoption of its new scan-based trading business model. An analysis of the financial results illustrates that the majority of the change in both net sales and pre-tax income (loss) from prior year is the direct result of these initiatives:

	($ millions)
		Net Sales		Pre-Tax Income (Loss)
Reported results for the year ended February 28, 2002		$	2,355.7		($196.3	)
Impact of implementation of scan-based trading model			64.9		88.6
Impact of reorganization initiatives			17.4		208.1
Impact of contractual changes at Internet subsidiary			—		17.7
Results of operations excluding Special Charges		$	2,438.0	$	118.1
For the year ended February 28, 2001, excluding Egreetings write-down		$	2,518.8	$	131.2

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In September, AmericanGreetings.com, the Corporation’s Internet subsidiary, acquired BlueMountain.com. Shortly thereafter, the Corporation introduced an enhanced subscription based service for its electronic greetings, and has been pleased with the early success of this enhanced model.

Results of Operations
Revenue
Net sales for the period ended February 28, 2002 were $2.4 billion, a decrease of 6.5% from the prior year. The effect of special charges taken during the year resulted in the majority of this reduction. Excluding the impact of credits issued for the conversion to scan-based trading and the brand rationalization initiatives, consolidated net sales in the base business were down $80.8 million, or 3.2% from prior year. In 2001, net sales increased 15.8%, driven primarily by the acquisitions of Gibson Greetings, Inc. (“Gibson”) and CPS Corporation (“CPS”). After excluding these acquisitions, net sales in 2001 were down 1% compared to 2000.

The market for everyday products remained somewhat soft for the Corporation, particularly in the United States and Australia. Excluding the effect of special charges, unit sales of everyday greeting cards declined 2.9% from 2001. Approximately half of the decline was the result of the Corporation completing its activities to reduce inventories at certain retailers while the remainder reflects the continuation of a flat to gradually-declining market in everyday greeting card consumption. In 2001, excluding the impact of the Gibson acquisition, unit sales of everyday cards were down approximately 2%. In 2002, the Corporation experienced a 2.8% decline in its average realized selling prices for these everyday cards primarily resulting from the broader distribution of value priced cards in its overall product mix. The Corporation views the introduction of entry price points as an important piece of its longer term strategy.

Seasonal card sales, net of provisions for returns, improved 4.1% from prior year in 2002. The current year performance represents an important reversal of slightly declining trends seen throughout the industry over the past several years and indicates some success in the Corporation’s initiatives to reduce seasonal return rates. After special charges, the Corporation’s greeting card divisions in the United States, Canada, and United Kingdom all experienced improved seasonal card performance. In the United States, where sales less returns increased by 4.4%, the average realized price was reduced by approximately 5.8%. Net seasonal card unit sales were up 8.7% to prior year worldwide for the Corporation. In 2001, after excluding the impact of the Gibson acquisition, net sales of seasonal greeting cards were down 3.5%.

Net sales of all other non-card products were up 0.8% from prior year. On a consolidated basis, increased sales of promotional wrappings were virtually offset by reductions of in-line wrapping products and net sales for the total category were flat with prior year. Most of the increase from prior year resulted from higher sales of calendars, custom display fixtures, ribbons, and tissue.

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The contribution of each major product category as a percent of net sales for the past three years is:

	2002			2001			2000
Everyday Greeting Cards		40	%		42	%		45	%
Seasonal Greeting Cards		20	%		20	%		20	%
Gift Wrapping and Wrap Accessories		17	%		16	%		14	%
All Other Products		23	%		22	%		21	%

The All Other Products classification includes giftware, party goods, reading glasses, candles, balloons, calendars, custom display fixtures, educational products, and stickers.

Expenses and Profit Margins
Although profit margins for the year declined from the prior year, a significant portion of that decrease was attributable to the special charges that occurred during the year. The margins associated with the ongoing base business were improved over the prior year, as the Corporation continued to realize the benefit of the integration of the acquired Gibson and CPS businesses into its operating units.

Material, labor and other production costs were 42.1% of net sales, up from 39.7% in 2001 and 37.2% in 2000. Material, labor and other production costs included the following:

• A pre-tax charge of $49.1 million, net of LIFO valuation benefits, to reduce the value of inventory in the Corporation’s domestic operations to net realizable value associated with its brand rationalization and product line reduction.

• A pre-tax reduction of $8.6 million related to the Corporation’s conversion to scan-based trading.

• Other pre-tax charges of $19.6 million associated with the Corporation’s reorganization of its core business, including equipment moving expenses; fixture, displayer and signage costs; and production system enhancements.

Excluding those items, material, labor and other production costs were 38.2% of net sales in 2002, a decrease from 39.7% in 2001. Favorable production efficiencies and lower cabinet and display costs contributed to the improvement. The increase in 2001 compared to 2000 was due to a shift in sales to higher cost product due primarily to the CPS acquisition and to lower sales of relatively higher margin everyday greeting cards.

Selling, distribution and marketing expenses were 45.0% of net sales in 2002, up from 42.4% in both 2001 and 2000. Special charges included in selling, distribution and marketing expenses were as follows:

• Pre-tax expenses of $18.1 million associated with the Corporation’s reorganization of its core business, primarily field execution costs related to the brand rationalization and product line reduction initiatives.

• A pre-tax charge of $20.0 million to increase the Corporation’s reserves recognizing the shifting of risks and responsibilities from the traditional business model inherent in the change in the

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relationship with the customers converted to scan-based trading and increased risk in the current competitive market.

Excluding those items, selling, distribution and marketing expenses were 41.9% of net sales in 2002, down from 42.4% in 2001. Approximately half of the 50 basis point improvement is the result of lower marketing costs in the Corporation’s Internet unit. In the United States, the Corporation incurred additional field expenses associated with implementing a new agreement with a major retailer, but this was more than offset by lower advertising and sales administration expenses. The amortization of deferred costs relating to contracts with retailers was down 2.8% compared to 2001. In 2001 these costs dropped 4.1% from 2000. Deferred costs and the Corporation’s method of accounting for them are described in Note H to the Consolidated Financial Statements.

Administrative and general expenses were $313.7 million for the year, compared to $280.2 million in 2001 and $227.1 million in 2000. The 2002 amount includes special charges for the costs of the Corporation’s conversion to scan-based trading of $12.4 million and other charges for the Corporation’s reorganization efforts of $13.4 million. Excluding those items, administrative and general expenses increased 2.7% over prior year primarily resulting from increased costs for health care and executive compensation. During the year the Board of Directors approved a stock grant to the President and Chief Operating Officer, and the Corporation recognized the fair value of the grant of $2.6 million as compensation expense. The increase from 2000 to 2001 was related to the acquisitions of the Gibson and CPS businesses, which had higher expense levels prior to savings gained through their integration into the core business.

Interest expense was $78.6 million in 2002, compared to $55.4 million in 2001 and $34.3 million in 2000. The Corporation’s debt levels increased from the prior year to fund the Corporation’s reorganization and scan-based trading initiatives and other general purposes. Higher interest rates on the Corporation’s new credit facilities also contributed to the increase in interest expense. The increase from 2000 to 2001 was due to higher borrowing levels to fund the Corporation’s acquisition of Gibson and CPS, as well as the repurchase of the Corporation’s common stock.

Other expense — net was $51.8 million in 2002 compared to $16.8 million in 2001 and $3.7 million in 2000. The 2002 amount includes a $37 million special charge to reflect the pre-tax, non-cash impairment write-down of goodwill associated with the Corporation’s operations in Australasia as a result of restructuring the business and to address the general economic deterioration in the Pacific Rim. In the fourth quarter of 2002, the Corporation also decided to divest of one of its operating units in the region and recognized a special charge of $9.5 million to reflect its anticipated fair value. The 2001 amount included a $32.5 million non-cash charge for the write-down of the Corporation’s investment in Egreetings Network, Inc. (“Egreetings”) shares acquired as part of the Gibson transaction, as well as an $8.4 million gain on the sale of a building.

The effective tax rate for 2002 was 37.7%. The 2002 effective tax rate reflects the United States statutory rate of 35% combined with the additional net impact of the various foreign, state and local income tax rates. The Corporation’s foreign subsidiary results had negligible effect on the consolidated effective tax rate in 2002.

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In 2001, the Corporation recorded a charge of $143.6 million for potential tax exposure for 1992 through 1999 relating to the Corporation’s corporate-owned life insurance programs (“COLI”). This exposure had been previously discussed in periodic filings with the Securities and Exchange Commission (“SEC”) and represents the effect of proposed adjustments by the Internal Revenue Service (“IRS”) for the disallowance of certain deductions related to these insurance programs. The Corporation will continue to vigorously contest the proposed adjustments or any subsequent adjustments and believes it can distinguish certain of its COLI plans from those addressed in previous tax protests. Additionally, the Corporation recorded the write-down of its investment in shares in Egreetings and established a valuation allowance equal to the full tax benefit of the write-down.

The 2000 effective tax rate was 36.0%. The rate for 2000 included a 2.1 percentage point benefit for utilization of a foreign net operating loss carryforward. See Note O to the consolidated financial statements for details of the differences between taxes at the Federal statutory rate and actual tax expense (benefit).

Cumulative Effect of Accounting Change
In December 1999, the SEC issued Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (“SAB 101”), which, among other guidance, clarified the Staff’s views on various revenue recognition and reporting matters. As a result, effective March 1, 2000, the Corporation adopted a change in its method of accounting for certain shipments of seasonal product, which carry implied acceptance provisions. Under the new accounting method adopted retroactive to March 1, 2000, the Corporation now recognizes revenue on these seasonal shipments at the approximate date the merchandise is received by the customer, commonly referred to in the industry as the ship-to-arrive date (“STA”), and not upon shipment from the Corporation’s distribution facility. STA is a more preferable method of recording revenue due to the large volumes of seasonal product shipment activity and the lead time required to achieve customer-requested delivery dates. The cumulative effect of the change in 2001 resulted in a one-time non-cash reduction to the Corporation’s earnings of $21.1 million (net of tax of $12.6 million), or approximately $0.33 per share. Had this change been adopted effective March 1, 1999, net sales and earnings before the cumulative effect of this accounting change for 2000 would not have been materially impacted.

Special Charges
In its filing of Form 10-K for the period ended February 28, 2001 and in its subsequent Form 10-Q filings, the Corporation has discussed the progress on the implementation of its restructuring and scan-based trading initiatives. Virtually all of those initiatives have been substantially completed and for the year the Corporation incurred total pre-tax special charges of $314.4 million.

The scan-based trading business model represents a significant change in the Corporation’s traditional business practices relative to its two largest customers. The new relationship redefines risks and responsibilities for both parties while at the same time strengthens the reliance upon each other for a true partnering relationship.

The core of the business model rests with the Corporation providing product to the customer on a consignment basis with both parties simultaneously recording sales at the time a product is electronically scanned through the retailer’s cash register. The need for enhanced controls on the

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part of both parties requires a high reliance on the compatibility and coordination of electronic data interchange.

The advance costs of converting to this new business model were substantial for both parties and indicate the commitment to a true partnering relationship. For the Corporation, the single largest financial impact was related to the reversal of previous sales transactions required to revert legal ownership of the inventory in the retail stores back to the Corporation. Following physical inventories conducted at each store location, the Corporation issued sales credits totaling $64.9 million to these two customers and all parties simultaneously modified their electronic inventory tracking systems accordingly. The Corporation incurred additional costs, net of inventory credits, of $23.7 million primarily for the initial inventory counting procedures, systems enhancements, outside consulting, recognition of shrink obligations, and other costs related to this fundamental change in the business relationship.

The Corporation also incurred additional pre-tax special charges of $225.8 million associated with its restructure program. The primary objectives of the restructure program were to complete the integration of recent acquisitions, rationalize the product branding strategy, significantly reduce product line sizes, consolidate manufacturing operations, and reduce costs through the elimination of non-value-added activities. The Corporation established a Project Management Office to charter, scope, and track the progress of various restructuring initiatives to assure achievement of the objectives. By February 28, 2002 all projects had been completed or were substantially complete and the Corporation does not expect to incur any additional special charges related to these projects going forward. The costs for these projects can be summarized as follows:

• A pre-tax restructuring charge of $56.7 million. This pre-tax charge included $39.0 million for the consolidation and rationalization of certain of the Corporation’s domestic and foreign manufacturing and distribution operations. These costs relate directly to employee severance and benefit termination costs, lease termination costs, and certain other costs required to exit certain facilities. In addition, the restructuring charge includes $17.7 million related to the completion of contractual changes with an online partner of the Corporation’s Internet unit.

• A reduction in net sales of $16.2 million for the elimination of the “Forget Me Not” brand and other product line size reductions.

• A pre-tax charge of $49.1 million to reduce the value of inventory in the Corporation’s domestic and Canadian operations to net realizable value associated with the brand rationalization and product line size reduction, highlighted by the elimination of the Corporation’s “Forget Me Not” product brand.

• A pre-tax charge of $46.5 million to reduce the carrying value of the net assets of two of the Corporation’s under-performing foreign operating units in the Pacific Rim.

• A pre-tax charge of $57.3 million for other non-recurring costs related to the restructure efforts, primarily involving field execution, program administration, moving and training costs, fixed asset eliminations, and similar costs incurred at certain of the foreign subsidiaries.

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In a related phase of its restructuring efforts, the Corporation realigned its borrowing capabilities and increased its potential debt capacity to approximately $1.3 billion. The new facilities are comprised of a balanced mix of senior notes, convertible notes, term loans, secured credit facilities, and revolving credit facilities, all with varying maturities and interest rates.

On June 22, 2001, the Corporation entered into agreements to sell $175 million of 7.00% convertible subordinated notes due in 2006 and $260 million of 11.75% senior subordinated notes due in 2008 to qualified institutional investors. The convertible notes outstanding could potentially result in the issuance of 12.6 million shares of the Corporation’s Class A Common Stock. The transactions, which closed on June 29, 2001, resulted in net proceeds to the Corporation of approximately $414.3 million, after deducting underwriting discounts and transactional expenses. The Corporation used the net proceeds from these offerings to repay indebtedness and to provide funds for other general corporate purposes. On August 28, 2001, the Corporation filed Form S-3 and Form S-4 with the Securities and Exchange Commission to register these debt offerings.

On August 9, 2001, the Corporation entered into a new $350 million senior secured credit facility. It consists of three tranches: a $105 million, 364-day revolving credit facility, a $120 million revolving credit facility maturing January 15, 2006, and a $125 million term loan maturing June 15, 2006. The Corporation has the option to request a one-year extension of the 364-day revolving facility. The credit facility contains various restrictive covenants which require, among other things, that the Corporation meet specified periodic financial ratios, minimum net worth and earnings requirements. The credit facility provides for certain restrictions on the Corporation’s ability to incur additional indebtedness and to acquire other businesses and entities. As a final piece of the debt realignment, the Corporation also entered into a three-year, $250 million credit facility secured by certain trade accounts receivable.

Restructuring Activities 2002
During 2002, the Corporation recorded a $56.7 million ($35.3 million net of tax, or earnings per share of $0.55) restructure charge as discussed above. This restructure charge included $29.0 million for employee termination benefits, $2.1 million for facility rationalization costs, $1.5 million for lease exit costs, $17.7 million for a change in the contractual relationship with a partner of the Corporation’s Internet unit and $6.4 million of other costs. In total, approximately 1,600 positions have been eliminated, comprised of approximately 1,200 hourly and 400 salaried positions. All activities were substantially completed by February 28, 2002.

The following table summarizes the provisions and remaining reserve associated with the restructure charge at February 28, 2002:

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	(Thousands of dollars)
				Facility			Lease		Change in
	Termination			Rationalization			Exit		Contractual			Other
	Benefits			Costs			Costs		Relationship			Costs			Total
Provision	$	29,053		$	2,054		$	1,500	$	17,727		$	6,381		$	56,715
Non-cash charge										(17,727	)					(17,727	)
Cash expenditures		(11,076	)		(1,829	)							(6,300	)		(19,205	)
Balance February 28, 2002	$	17,977		$	225		$	1,500	$	—		$	81		$	19,783

Included in accrued liabilities at February 28, 2002 is $19.8 million representing the portion of severance and other exit costs not yet expended. The payment of termination benefits will not be completed until 2006.

The Corporation also recorded the following special charges in 2002:

• Charges associated with a product line size reduction and the elimination of the Corporation’s Forget Me Not greeting card brand. These charges included $49.1 million in material, labor and other production costs to write down inventory, net of a LIFO adjustment benefit, and a $16.2 million reduction in net sales for credits granted to customers for product on hand at their retail locations eliminated from the Corporation’s brands and product lines.

• In conjunction with the integration of recently acquired operations, facility closures and the changes in the distribution infrastructure in Australasia, and to reflect the general economic downturn in the region, a pre-tax, non-cash impairment charge of $37.0 million to write down goodwill related to its operating units in those countries. This amount is included in other expense — net.

• Other special pre-tax charges of $66.8 million associated with the Corporation’s restructure and reorganization efforts, including project coordination and administration expenses, consultant expenses, field labor costs, system enhancements and facility closure costs.

The total pre-tax impact of these special charges was $225.8 million ($140.7 million net of tax) or $2.21 per share.

Also during 2002, the Corporation implemented its scan-based trading business model with certain of its retailers. The impact of its implementation was a $64.9 million reduction in its net sales and a $8.6 million reduction in its material, labor and other production costs. In addition, the Corporation incurred implementation and other costs of $32.3 million, for a total pre-tax impact of $88.6 million ($55.2 million net of tax) or $0.87 per share.

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In summary, the pre-tax special charges consist of the following:

		$ millions		Earnings Per Share
Severance		$	29.0
Lease exit costs			1.5
Facility rationalization costs			2.1
Change in contractual relationship			17.7
Other costs			6.4
Total restructure charge		$	56.7	$	0.56
Brand elimination and product line reduction:
Inventory write-down — net			49.1
Other costs			16.2
	Total		65.3		0.61
Scan-based trading initiative			88.6		0.87
Impairment loss			37.0		0.36
Other			66.8		0.68
Total special charges		$	314.4	$	3.08

Restructuring Activities 2000 — Fourth Quarter
During the three months ended February 29, 2000, the Corporation recorded a $6.1 million ($4.8 million net of tax, or earnings per share of $0.08) restructure charge related to various foreign operations. The primary component of this charge was for the rationalization of various warehouse, distribution and manufacturing facilities in the United Kingdom in order to increase operating efficiency and lower fixed expenses. Additional initiatives included, to a lesser extent, the integration of Mexican manufacturing in the United States and the realignment of various business functions in Australia.

This restructure charge included $5.2 million for employee termination benefits, $0.6 million for lease exit costs, $0.3 million for the write off of assets no longer in use and other restructure costs. In total, approximately 336 positions were eliminated, comprised of 304 hourly and 32 salaried employees. All activities were substantially completed at February 28, 2002.

Restructuring Activities 2000 — Second Quarter
In connection with the Corporation’s initiative to continue to streamline its North American operations and, to a lesser extent, its United Kingdom operations, the Corporation recorded a $40.4 million ($24.2 million net of tax, or earnings per share of $0.36) special charge during the three months ended August 31, 1999, relating primarily to the consolidation of Canadian manufacturing and distribution in the United States. Included in this special charge is a $32.7 million restructure charge primarily for exit costs associated with the closure of certain facilities in Canada and to a lesser extent, costs to exit certain minor United Kingdom businesses. The remaining $7.7 million of the special charge was recorded in material, labor and other production costs for the write-down of inventory in Canada to net realizable value.

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The restructure charge of $32.7 million included $25.8 million of severance, pension and personnel-related benefits, $4.6 million of facility shut-down costs, $1.5 million of lease exit costs and $0.8 million related to other restructure costs. All initiatives associated with the Canadian restructuring have been substantially completed. The largest remaining restructuring activity relates to the Canadian Division’s pension plans. The Corporation has taken the necessary actions to settle the pension liabilities, and Canadian regulatory approval has been obtained. The Corporation is in the process of distributing the remaining pension plan assets to satisfy those obligations.

Net Income and Earnings Per Share
The net loss of $122.3 million or $1.92 per share for 2002 was significantly impacted by the restructuring and other special charges discussed above; the total net impact of these charges was to reduce pre-tax earnings by $314.4 million and earnings per share by $3.08 per share. Excluding these items, net income for 2002 was $73.6 million or $1.16 per share; the Corporation’s management considers these adjusted amounts to be representative of the results of the continuing and ongoing operations of the Corporation.

The net loss of $113.8 million or $1.79 per share for 2001 included non-cash charges of $143.6 million or $2.26 per share for disputed deductions with the IRS relating to the Corporation’s COLI programs and $32.5 million or $0.51 per share for the write-down of the Corporation’s 19.6% investment in shares of Egreetings. Also included was a charge of $21.1 million or $0.33 per share for the cumulative effect of accounting changes related to the recording of certain seasonal shipments. Excluding these charges, adjusted net income for 2001 was $83.5 million or $1.31 per share.

Segment Information
The Corporation is organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. The Social Expression Products segment primarily designs, manufactures and sells greeting cards and other products through various channels of distribution with mass retailers as the primary channel and is managed by geographic location. As permitted under Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” certain operating divisions have been aggregated into the Social Expression Products segment. These operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. AmericanGreetings.com is an Internet-based provider of greetings and other social communication content to consumers and Internet-based businesses.

Social Expression Products Segment
The effect of the conversion to scan-based trading for two major United States customers was to reverse sales and the related cost of sales of product that had previously been shipped to those customers. In addition, the elimination of the Corporation’s “Forget Me Not” brand and the product line reduction resulted in full credits being granted to customers for already-sold product that was eliminated from the Corporation’s ongoing product offerings. The credited product eliminated from the ongoing product offerings was replaced with other product, for which sales were recognized. The Corporation also undertook a number of other restructuring and reorganization initiatives during the

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year. For management evaluation of its operating segments, the effects of these initiatives were excluded from the internal reporting and evaluation of the performance of the operating segments. These items are reported consistently in Note N to the Consolidated Financial Statements.

Excluding the effects of the Corporation’s restructuring and other special charges, the net sales of the Social Expression Products Segment decreased 4.8% from 2001 to 2002, as unit sales of everyday greeting cards decreased significantly in the United States and Australia, and to a lesser extent in Canada. However, net sales of seasonal cards in this segment were up approximately 4% in 2002 from 2001. Net sales in 2001 had increased from 2000 by 14.2% primarily due to the acquisition of Gibson; excluding Gibson, net sales decreased 1.7% from 2000 to 2001. Total segment everyday greeting card unit sales decreased approximately 3% in 2002 from 2001, while seasonal greeting card unit sales increased approximately 9%. In 2001, total segment greeting card sales had increased approximately 14%; excluding Gibson, greeting card unit volume declined approximately 4%.

Segment earnings, net of intersegment items and excluding the restructure and other special initiatives discussed above, decreased 8.2% in 2002 from 2001, which was due to the lower sales of higher-margin everyday greeting cards in the United States. Earnings were improved, however, in other countries where the Social Expression Products Segment has operations, including Canada, the United Kingdom, Mexico and South Africa. The improvements in these countries was attributable to benefits relating to the various restructure and other cost-saving initiatives undertaken beginning in 2000. Segment earnings, net of intersegment items, decreased 7.3% in 2001 from 2000, which was due to lower everyday greeting card sales in the United States. Partially offsetting that decrease was improved performance in Canada due primarily to benefits relating to the integration of manufacturing in the United States.

AmericanGreetings.com, Inc. Segment
In March 2001, AmericanGreetings.com acquired Egreetings Network, Inc., a company that operates an online card and entertainment Internet site, www.egreetings.com. This acquisition was previously disclosed in the Corporation’s Form 8-K filed on April 3, 2001 and Form 8-K/A filed on June 1, 2001.

In September 2001, AmericanGreetings.com acquired the BlueMountain.com division of At Home Corporation. The BlueMountain.com division operates an online card and entertainment Internet site, www.bluemountain.com. This acquisition was previously disclosed in the Corporation’s Form 8-K filed on September 27, 2001 and Form 8-K/A filed on November 21, 2001.

AmericanGreetings.com made significant progress in 2002 in terms of both revenue growth and profitability. Net sales increased 63.0% in 2002 compared to 2001, as its advertising revenue nearly doubled from $17.4 million in 2001 to $30.5 million in 2002. With the Corporation’s acquisition and integration of Egreetings and BlueMountain.com and their respective Internet sites in 2002, AmericanGreetings.com has become the market leader in the online greeting card category and is consistently ranked among the top 15 Internet sites in terms of unique visitors as measured by the Neilsen//NetRatings. With the move away from providing free electronic greetings to a subscription-fee based business model beginning in December 2001, it is anticipated that AmericanGreetings.com’s revenue will be further enhanced.

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In 2001, net sales improved 70% from 2000 due to increased advertising revenue resulting from new advertising sales initiatives and higher traffic. AmericanGreetings.com more than doubled its Internet site traffic in 2001 over 2000 as a result of moving to a new business model as a relationship service provider which included providing free electronic greetings.

The segment loss of $2.1 million in 2002 excludes a $17.7 million charge related to the completion of contractual changes with an online strategic partner. The reduction in the segment loss from $36.1 million in 2001 was due to the higher revenues as well as lower expenses due to the contractual changes noted above.

The segment loss for 2001 compared to 2000 reflected increased partner share costs associated with various Internet distribution agreements and the Corporation’s continued investment in technology and content for expanded Internet services and increased volume growth.

Liquidity and Capital Resources
Cash flow from operations provided $36.4 million in 2002, compared to $109.8 million in 2001 and $168.5 million in 2000. Significant improvements in accounts receivable, inventories and other current assets enabled the Corporation to generate positive cash flow from operations for the year despite its net loss.

Accounts receivable, net of the effect of acquisitions and divestitures, generated $94.9 million in cash in 2002, compared to the generation of $29.2 million in cash in 2001 and a use of $35.9 million in cash in 2000. Cash collections were strong during the year, aided in part by the conversion to scan-based trading for two major customers. Post conversion, these customers now remit payments on a weekly basis, thus avoiding seasonal peaks in their accounts receivable. Net accounts receivable at February 28, 2002 were 12.3% of the previous twelve months’ net sales, down from 15.4% at February 28, 2001 and 19.8% at February 29, 2000.

Inventories, net of the effects of acquisitions and divestitures, decreased $63.9 million in 2002, compared with an increase of $46.6 million in 2001 and a decrease of $11.7 million in 2000. The reduction in 2002 includes inventory write-downs of $49.1 million, net of LIFO adjustment benefits, recorded during the year, partially offset by a $17.0 million increase related to the Corporation’s conversion to scan-based trading. As a percentage of the previous twelve months’ material, labor and other production costs, inventories were 29.3% at February 28, 2002, down from 36.5% at February 28, 2001 and 30.8% at February 29, 2000.

Deferred costs — net represents payments under agreements with certain retailers net of the related amortization of those payments. In 2002, payments exceeded amortization by $124.8 million, which included the Corporation’s significant expansion of its agreements with three major customers. The 2002 amount compares with amortization exceeding net cash payments by $4.1 million in 2001 and net cash payments of $5.6 million in 2000. Payments are made under new, existing, amended and extended agreements, and a portion of the year-to-year fluctuation in these amounts are due to the timing of various payment and effective dates of the agreements. However, these deferred costs are amortized against operations over the estimated periods of the agreements, so that the effect on earnings is less volatile. Total commitments under the agreements are capitalized as deferred costs

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when the agreements are consummated, and any future payment commitments are recorded as liabilities at that time. Future payment commitments under existing agreements at February 28, 2002 were $192.4 million, with $111.6 million due during 2003. See Note H to the Consolidated Financial Statements for further discussion of deferred costs related to customer agreements. See “Critical Accounting Policies” below for further discussion related to the accounting treatment of customer agreements.

Accounts payable and other liabilities decreased $37.2 million in 2002 compared to an increase of $87.3 million in 2001 and a decrease of $0.7 million in 2000. The decrease in 2002 primarily reflects the decreases in income taxes payable and dividends payable, offset partially by liabilities established in connection with the 2002 restructure charge, primarily for employee severance payment obligations. The decrease in income taxes payable reflects the tax benefits of the loss incurred by the Corporation in 2002, and the decrease in dividends payable reflects the elimination of quarterly shareholder dividend payments. The increase in 2001 was due to the increase in income taxes payable that year for the recording of $143 million for the COLI tax exposure, partially offset by cash payments associated with the 2000 restructuring activities and with the integration costs of acquisitions.

The net amount of $22.5 million used for business acquisitions and divestitures in 2002 represents the cash price paid of $35.0 million for the BlueMountain.com acquisition, less $12.5 million received in the sale of a domestic business unit, M&D Balloons. The 2001 amount of $180.0 million includes the net cash payments of $139 million made that year for the completion of the acquisition of Gibson and $31 million paid for the acquisition of CPS. The 2000 amount of $65.9 million included a $30 million escrow payment made at the inception of the Gibson acquisition process and $35.5 million paid for the acquisition of Contempo Colours, Inc. (“Contempo”).

Capital expenditures were $29.0 million in 2002, down from $74.4 million in 2001 and $50.8 million in 2000. Capital expenditures during 2002 were controlled very stringently and limited to only critical operating necessities. In 2001, capital expenditures included $14 million of investments in facilities and manufacturing equipment in the United Kingdom in order to increase operating efficiency and enable facility rationalization. In addition, capital expenditures in 2001 included $7.3 million for the expansion of the acquired Contempo party goods manufacturing facility and $4.5 million related to the Gibson acquisition.

Investing activities other than acquisitions, divestitures and capital expenditures used $21.7 million compared to providing $56.4 million in 2001 and using $20.9 million in 2000. The cash used in 2002 reflects additional cash required for the Corporation’s COLI program. The cash provided in 2001 included $20.3 million cash proceeds from the sale of a building and the settlement of a $15 million supply agreement loan. The use of cash in 2000 was due to a supply agreement loan and lower cash distributions received from the Corporation’s COLI program.

Net cash provided from financing activities was $86.1 million in 2002. The net increase in long-term debt of $473.3 million and the reduction of short-term debt in 2002 reflects the Corporation’s realignment of its borrowing facilities, including $260 million of 11.75% senior subordinated notes, $175 million of 7.00% convertible subordinated notes, and the borrowings made under the $350 million senior secured credit facility. These notes and the credit facility are discussed in more detail

26

above and in Note I to the Consolidated Financial Statements. In 2001, cash provided from financing activities was $78.8 million, primarily as a result of an increase in short-term borrowings to fund the Gibson and CPS acquisitions.

In 2002, the Corporation had negligible transactions affecting its outstanding shares, as there was limited stock option activity due to the lower market price of the Corporation’s publicly-traded Class A shares, and the Corporation did not make any significant purchases of treasury shares. During 2001, the Corporation purchased 1.0 million Class A shares at an average price of $20.56 per share or $21 million. Additionally in 2001, the Corporation purchased 1.2 million Class A shares in connection with the CPS acquisition at an average price of $20.36 per share or $24.4 million. In total in 2001, 2.2 million Class A shares were purchased at an average price of $20.46 or approximately $45 million. During 2000, a total of 4.6 million Class A shares were purchased at an average price of $28.25 per share or approximately $130 million.

A total of $26.6 million was paid as dividends to shareholders during 2002. This reduction from $52.7 million in 2001 and $51.2 million in 2000 represents the suspension of quarterly dividend payments after the $0.10 per share dividend declared in September 2001 and paid in December 2001.

The Corporation’s operating cash flow and existing credit facilities are expected to meet currently anticipated funding requirements. The seasonal nature of the business results in peak working capital requirements which are financed through short-term borrowings. See above and Note I to the Consolidated Financial Statements for further discussion of the Corporation’s credit facilities.

Market Risk
During 2002, the Corporation entered into an exclusive supply agreement with a major customer. The agreement provided for certain advances and allowances to be earned over the length of the commitment. Subsequent to entering into the agreement, the customer filed for Chapter 11 protection as it reorganizes. The Corporation expects that the customer will emerge from Chapter 11 a smaller and stronger competitor in the mass retail market. As the customer goes through the normal process of affirming all its contracts, the Corporation fully expects its contract to be affirmed. However, in the unlikely event the Corporation’s contract with the customer is not affirmed, the Corporation will have a claim for the unearned portion of advances. The Corporation maintains adequate reserves for deferred contract costs and does not expect that a rejection of this contract would result in a material loss. The unlikely event of a rejection of the contract or the customer’s failure to emerge from bankruptcy could potentially result in a substantial reduction to the Corporation’s sales base and could negatively impact the Corporation’s ability to achieve forecasted sales and profit performance levels.

The Corporation’s market risk is further impacted from changes in interest rates and foreign currency exchange rates. The Corporation manages interest rate exposure through a mix of fixed and floating rate debt. A significant portion of the Corporation’s debt has fixed rates, limiting its exposure to fluctuations in interest rates. To date, risks associated with interest rate movements have not been significant and are not expected to be so in the near term.

27

Approximately 17% of the Corporation’s 2002 revenues were generated from operations outside the United States. Operations in Australasia, Canada, Malaysia, Mexico, South Africa and the United Kingdom are denominated in currencies other than United States dollars. Each of these operations conducts substantially all of its business in its local currency and is not subject to material operational risks associated with fluctuations in exchange rates. The Corporation’s net income was not materially impacted by the translation of the foreign operations’ functional currencies into United States dollars. Exposure to exchange rate fluctuations historically has not been significant; however, no assurance can be given that future results will not be adversely affected by significant changes in foreign currency exchange rates.

Critical Accounting Policies
The consolidated financial statements of the Corporation are prepared in accordance with accounting principles generally accepted in the United States, which requires the Corporation to make estimates and assumptions (see Note A to the Consolidated Financial Statements).

The Corporation exercises considerable judgment in establishing estimates for certain critical accounting policies which could have a material impact in the preparation of its consolidated financial statements:

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 to it (e.g., bankruptcy filings), a specific reserve 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 reserves for bad debts based on estimates developed by using standard quantitative measures based on historical write-offs and current economic conditions. The establishment of reserves requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Although the Corporation considers these balances adequate and proper, changes in economic conditions in the retail markets in which the Corporation operates could have a material effect on the required reserve balances.

Deferred Costs
The Corporation has agreements with various customers for the supply of greeting cards and related products. The Corporation views the use of such agreements as advantageous in developing and maintaining business with its retail customers. Virtually all contracts are separately negotiated to meet competitive situations; therefore, while some aspects of the agreements may be the same or similar, important contractual terms often vary from contract to contract. Under the agreements, customers typically receive allowances, discounts and/or advances in consideration for the Corporation being allowed to supply customers’ stores for a stated term and/or specify a minimum sales volume commitment. Although risk is inherent in the granting of advances, payments and credits, the Corporation subjects such customers to its normal credit review. However, in circumstances where the Corporation is aware of a particular customer’s inability to meet its financial obligations to it (e.g., bankruptcy filings), the Corporation records a specific reserve to reduce the deferred costs to its

28

estimated net realizable value. Losses attributable to these specific events have historically not been material. In addition, on contractual arrangements that are based upon a minimum volume commitment, the Corporation adjusts the amortization period to reflect its latest estimates for the attainment of the minimum volume requirements. The buying patterns of its customers can change over time due to store openings and closings, industry consolidation, and changes in consumer shopping trends. The Corporation regularly reviews contract performance and applies quantitative analysis to forecast future sales expectations on an individual customer basis.

Sales Returns
The Corporation provides for estimated returns of seasonal cards in the same period as the related revenues are recorded. These estimates are based on historical sales returns, the amount of current year seasonal 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 the estimates if factors such as the historical data the Corporation uses to calculate these estimates does not properly reflect future returns or as a result of changes in economic conditions of the customer and/or its market. The Corporation regularly monitors its actual performance to estimated rates and the losses attributable to any changes have historically not been material.

New Accounting Pronouncements
In June 1998, Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”, was issued. This Statement, which establishes new accounting and reporting standards for derivative financial instruments, along with its amendments SFAS No. 137 and SFAS No. 138, became effective for the Corporation March 1, 2001. The adoption of the Statements did not have a material effect on the Corporation’s consolidated financial statements.

In July 2001, SFAS No. 141, “Business Combinations”, was issued. This Statement, which supersedes Accounting Principles Board (“APB”) Opinion No. 16, “Business Combinations”, eliminated the pooling-of-interests method of accounting for business combinations and modifies the application of the purchase accounting method. The provisions of SFAS No. 141 were effective for transactions accounted for using the purchase method completed after June 30, 2001.

Also in July 2001, SFAS No. 142, “Goodwill and Intangible Assets”, was issued. This Statement, which supersedes APB Opinion No. 17, “Intangible Assets”, eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and addresses the impairment testing and recognition for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement’s effective date. SFAS No. 142 will be effective for the Corporation beginning in the first quarter of fiscal 2003. The Corporation is currently assessing the Statement and has not yet determined the impact of its adoption on its financial statements.

In October 2001, SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, was issued. This Statement, which supersedes SFAS No. 121, “Accounting for the Impairment of

29

Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, provides a single accounting model for long-lived assets to be disposed of. Although retaining many of the fundamental recognition and measurement provisions of SFAS No. 121, the Statement significantly changes the criteria that would have to be met to classify an asset as held-for-sale. This distinction is important because assets held-for-sale are stated at the lower of their fair values or carrying amounts and depreciation is no longer recognized. The Corporation is required to adopt this Statement for fiscal 2003. The Corporation is analyzing the effect of this Statement and does not expect it to have a material effect on the Corporation’s consolidated financial position, results of operations or cash flows.

In November 2001, the Financial Accounting Standards Board’s Emerging Issues Task Force (“EITF”) issued EITF Issue No. 01-09 (“EITF 01-09”), “Accounting for Consideration Given by a Vendor to a Customer/Reseller”, which addresses the accounting for consideration given by a vendor to a customer including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller. EITF 01-09 also codifies and reconciles related guidance issued by the EITF including EITF No. 00-25, “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products”, and EITF No. 00-14, “Accounting for Certain Sales Incentives”. EITF 01-09 outlines the presumption that consideration given by a vendor to a customer, a reseller or a customer of a reseller is to be treated as a reduction of revenue. The Corporation is required to adopt EITF 01-09 no later than the first quarter of fiscal 2003. Although the Corporation does not expect the adoption to have any effect on its operations, it will have a material effect on certain reported classifications. Upon adoption, the Corporation will be required to reclassify certain prior period amounts to conform to these reporting requirements. The Corporation has not yet completed its analysis of the amounts which will be reclassified for prior periods.

Factors That May Affect Future Results
The Corporation believes that the restructuring and reorganization activities it completed in 2002 will strengthen its position in the social expression industry. However, other potential challenges in the economic environment in which it operates may have negative impacts on the Corporation and its operating results in the future. These challenges include the continuing decrease and/or further deterioration of the sales levels of greeting cards, both in price and volume, purchased by the ultimate consumer at the Corporations’ customers’ retail locations, which may be affected in the future.

The Corporation has maintained a strong customer base in a wide variety of channels of distribution through its investment in deferred costs related to its agreements with certain retailers and other competitive arrangements. The agreements have lessened the impact to the Corporation from loss of business due to the retailer consolidations in recent years. These agreements have been a strategic element of the Corporation’s growth and the financial condition of the retail customers is continually monitored and evaluated to reduce risk.

The statements contained in this document that are not historical facts are forward-looking statements. Actual results may differ materially from those projected in the forward-looking statements. These forward-looking statements involve risks and uncertainties, including but not limited to retail bankruptcies and consolidations, successful integration of acquisitions, a weak retail

30

environment, consumer acceptance of products as priced and marketed, the impact of technology on core product sales and competitive terms of sale offered to customers. Risks pertaining specifically to the Corporation’s electronic marketing business include the viability of Internet advertising as a generator of revenue and the public’s continued acceptance of paid Internet greetings and other social expression products.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Derivative Financial Instruments - The Corporation does not hold or issue derivative financial instruments for trading purposes.

Interest Rate Exposure - Based on the Corporation’s overall interest rate exposure as of and during the year ended February 28, 2002, a hypothetical 10% movement in interest rates would not materially affect the Corporation’s results of operations.

Foreign Currency Exposure - The Corporation’s international operations expose it 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 income of international subsidiaries to U.S. dollars could affect comparability of results between years. The earnings of the Corporation were not materially affected by exchange rate fluctuations for the years ended February 28 or 29, 2002, 2001, or 2000. At February 28, 2002, a hypothetical 10% movement in foreign exchange rates would not have a material effect on the Corporation’s results of operations.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, for a discussion of the Corporation’s exposure to market risk.

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Item 8. Financial Statements and Supplementary Data

CONSOLIDATED STATEMENT OF OPERATIONS

Years ended February 28 or 29, 2002, 2001 and 2000

Thousands of dollars except share and per share amounts

			2002			2001			2000
Net sales			$	2,355,740		$	2,518,814		$	2,175,236
Costs and expenses:
		Material, labor and other production costs		992,245			999,271			809,347
		Selling, distribution and marketing		1,059,092			1,068,543			921,392
		Administrative and general		313,655			280,202			227,075
		Restructure charges		56,715			—			38,873
		Interest expense		78,599			55,387			34,255
		Other expense — net		51,758			16,778			3,670
				2,552,064			2,420,181			2,034,612
(Loss) income before income taxes (benefit) and cumulative effect of accounting change				(196,324	)		98,633			140,624
Income tax (benefit) expense				(74,014	)		191,306			50,625
(Loss) income before cumulative effect of accounting change				(122,310	)		(92,673	)		89,999
Cumulative effect of accounting change, net of tax				—			(21,141	)		—
Net (loss) income			$	(122,310	)	$	(113,814	)	$	89,999
(Loss) earnings per share:
	Before cumulative effect of accounting change		$	(1.92	)	$	(1.46	)	$	1.37
	Cumulative effect of accounting change, net of tax						(0.33	)		—
(Loss) earnings per share			$	(1.92	)	$	(1.79	)	$	1.37
(Loss) earnings per share — assuming dilution			$	(1.92	)	$	(1.79	)	$	1.37
Average number of shares outstanding				63,615,193			63,646,405			65,591,798

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

February 28, 2002 and 2001
Thousands of dollars

ASSETS			2002		2001
CURRENT ASSETS
	Cash and cash equivalents		$	100,979	$	51,691
	Trade accounts receivable, less allowances of $137,121 and $184,799 respectively (principally for sales returns)			288,986		387,534
	Inventories			290,804		365,221
	Deferred and refundable income taxes			200,206		190,241
	Prepaid expenses and other			185,207		211,049
		Total current assets		1,066,182		1,205,736
GOODWILL — NET				199,195		229,802
OTHER ASSETS				933,133		799,348
PROPERTY, PLANT AND EQUIPMENT — NET				416,485		477,188
			$	2,614,995	$	2,712,074

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LIABILITIES AND SHAREHOLDERS' EQUITY				2002			2001
CURRENT LIABILITIES
	Debt due within one year			$	11,720		$	378,904
	Accounts payable				130,601			139,753
	Accrued liabilities				188,356			164,310
	Accrued compensation and benefits				109,004			89,936
	Dividends payable				—			12,732
	Income taxes				150,588			192,936
	Other current liabilities				125,771			132,710
			Total current liabilities		716,040			1,111,281
LONG-TERM DEBT					853,113			380,124
OTHER LIABILITIES					115,795			146,187
DEFERRED INCOME TAXES					27,628			27,292
SHAREHOLDERS’ EQUITY Common shares — par value $1:
		Class A - 71,750,368 shares issued less 12,597,692 Treasury shares in 2002 and 71,739,574 shares issued less 12,879,781 Treasury shares in 2001			59,153			58,860
		Class B - 6,066,092 shares issued less 1,457,615 Treasury shares in 2002 and 6,066,096 shares issued less 1,437,283 Treasury shares in 2001			4,608			4,629
Capital in excess of par value					286,158			286,054
Treasury stock					(438,824	)		(447,127	)
Accumulated other comprehensive loss					(69,614	)		(58,179	)
Retained earnings					1,060,938			1,202,953
		Total shareholders’ equity			902,419			1,047,190
				$	2,614,995		$	2,712,074

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

Years ended February 28 or 29, 2002, 2001 and 2000

Thousands of dollars

				2002			2001			2000
OPERATING ACTIVITIES:
	Net (loss) income			$	(122,310	)	$	(113,814	)	$	89,999
	Adjustments to reconcile to net cash provided by operating activities:
		Cumulative effect of accounting change, net of tax			—			21,141			—
		Write-down of equity investment			—			32,554			—
		Impairment charge			37,000			—			—
		Restructure charges			37,510			—			30,704
		Depreciation and amortization			84,308			98,057			76,600
		Deferred income taxes			(3,463	)		61,227			54,248
		Changes in operating assets and liabilities, net of effects of acquisitions and divestitures:
			Decrease (increase) in trade accounts receivable		94,906			29,201			(35,883	)
			Decrease (increase) in inventories		63,942			(46,587	)		11,655
			Decrease (increase) in other current assets		7,569			(67,292	)		(57,261	)
			(Increase) decrease in deferred costs — net		(124,798	)		4,110			(5,640	)
			(Decrease) increase in accounts payable and other liabilities		(37,176	)		87,256			(689	)
		Other — net			(1,137	)		3,947			4,786
			Cash Provided by Operating Activities		36,351			109,800			168,519
INVESTING ACTIVITIES:
	Business acquisitions and divestitures				(22,500	)		(179,993	)		(65,947	)
	Property, plant and equipment additions				(28,969	)		(74,382	)		(50,753	)
	Proceeds from sale of fixed assets				4,020			22,294			1,490
	Investment in corporate-owned life insurance				(8,927	)		181			2,746
	Other				(16,768	)		33,944			(25,183	)
			Cash Used by Investing Activities		(73,144	)		(197,956	)		(137,647	)
FINANCING ACTIVITIES:
	Increase in long-term debt				554,398			—			1,076
	Reduction of long-term debt				(81,122	)		(80,431	)		(16,397	)
	(Decrease) increase in short-term debt				(363,437	)		257,541			81,097
	Sale of stock under benefit plans				2,929			—			1,171
	Purchase of treasury shares				(121	)		(45,530	)		(130,151	)
	Dividends to shareholders				(26,566	)		(52,743	)		(51,213	)
			Cash Provided (Used) by Financing Activities		86,081			78,837			(114,417	)
INCREASE (DECREASE) IN CASH AND EQUIVALENTS					49,288			(9,319	)		(83,545	)
	Cash and Cash Equivalents at Beginning of Year				51,691			61,010			144,555
	Cash and Cash Equivalents at End of Year			$	100,979		$	51,691		$	61,010

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Years ended February 28 or 29, 2002, 2001 and 2000
Thousands of dollars except per share amounts

																				Accumulated
			Common Shares						Capital in						Shares			Deferred		Other
									Excess of			Treasury			Held			Compensation		Comprehensive			Retained
			Class A			Class B			Par Value			Stock			In Trust			Plans		(Loss) Income			Earnings			Total
BALANCE FEBRUARY 28, 1999			$	64,433		$	4,660		$	304,086		$	(320,492	)	$	(20,480	)	$	20,480	$	(23,565	)	$	1,317,489		$	1,346,611
	Net income																							89,999			89,999
	Other comprehensive loss:
		Foreign currency translation adjustment																			(1,744	)					(1,744	)
		Unrealized loss on available-for-sale securities (net of tax of $1,131)																			(2,263	)					(2,263	)
	Comprehensive income																										85,992
	Cash dividends — $0.80 per share																							(51,213	)		(51,213	)
	Exchange of shares			23			(23	)
	Sale of shares under benefit plans, including tax benefits			20			2			826			122														970
	Purchase of treasury shares			(4,603	)		(6	)					(125,556	)													(130,165	)
	Sale of treasury shares						14			34			168														216
BALANCE FEBRUARY 29, 2000				59,873			4,647			304,946			(445,758	)		(20,480	)		20,480		(27,572	)		1,356,275			1,252,411
	Net loss																							(113,814	)		(113,814	)
	Other comprehensive loss:
		Foreign currency translation adjustment																			(30,350	)					(30,350	)
		Unrealized loss on available-for-sale securities (net of tax of $129)																			(257	)					(257	)
	Comprehensive loss																										(144,421	)
	Cash dividends — $0.62 per share																							(39,407	)		(39,407	)
	Exchange of shares			1			(1	)
	Sale of shares under benefit plans, including tax benefits			3						24																	27
	Purchase of treasury shares			(2,220	)		(24	)					(43,287	)													(45,531	)
	Sale of treasury shares			3			7						202											(101	)		111
	Shares issued in acquisition			1,200						(18,916	)		41,716														24,000
BALANCE FEBRUARY 28, 2001				58,860			4,629			286,054			(447,127	)		(20,480	)		20,480		(58,179	)		1,202,953			1,047,190
	Net loss																							(122,310	)		(122,310	)
	Other comprehensive loss:
		Foreign currency translation adjustment																			(13,315	)					(13,315	)
		Unrealized gain on available-for-sale securities (net of tax of $940)																			1,880						1,880
		Comprehensive loss																									(133,745	)
	Cash dividends — $0.20 per share																							(13,834	)		(13,834	)
	Exchange of shares			42			(27	)					(15	)
	Sale of shares under benefit plans, including tax benefits			11						104																	115
	Purchase of treasury shares						(8	)					(113	)													(121	)
	Sale of treasury shares						6						13											(109	)		(90	)
	Stock grants			240			8						8,418											(5,762	)		2,904
BALANCE FEBRUARY 28, 2002			$	59,153		$	4,608		$	286,158		$	(438,824	)	$	(20,480	)	$	20,480	$	(69,614	)	$	1,060,938		$	902,419
See notes to consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years ended February 28 or 29, 2002, 2001 and 2000
Thousands of dollars except per share amounts

NOTE A — SIGNIFICANT ACCOUNTING POLICIES

Consolidation: The consolidated financial statements include the accounts of the Corporation and its subsidiaries. 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, 2002 refers to the year ended February 28, 2002. The Corporation’s subsidiary, AmericanGreetings.com, Inc., is consolidated on a two-month lag corresponding with its fiscal year-end of December 31.

Reclassifications: Certain amounts in the prior year financial statements have been reclassified to conform with the 2002 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.

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

Financial Instruments: The carrying value of the Corporation’s financial instruments approximate their fair market values, other than the fair value of the Corporation’s publicly-traded debt. See Note I.

Concentration of Credit Risks: The Corporation sells primarily to customers in the retail trade, including those in the mass merchandiser, drug store, supermarket and other channels of distribution. These customers are located throughout the United States, Canada, the United Kingdom, Australia, New Zealand, Mexico, South Africa, Malaysia, Hong Kong and Singapore. Net sales to the Corporation’s five largest customers accounted for approximately 37%, 29% and 33% of net sales in 2002, 2001 and 2000, respectively. Net sales to Wal-Mart Stores, Inc. accounted for 12% of net sales in 2002 and 10% of net sales in 2001 and 2000.

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

During 2002, the Corporation entered into an exclusive supply agreement with a major customer. The agreement provided for certain advances and allowances to be earned over the length of the commitment. Subsequent to entering into the agreement, the customer filed for Chapter 11 protection as it reorganizes. The Corporation expects that the customer will emerge from Chapter 11 a smaller and stronger competitor in the mass retail market. As the

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE A — SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

customer goes through the normal process of affirming all its contracts, the Corporation fully expects its contract to be affirmed. However, in the unlikely event the Corporation’s contract with the customer is not affirmed, the Corporation will have a claim for the unearned portion of advances. The Corporation maintains adequate reserves for deferred contract costs and does not expect that a rejection of this contract would result in a material loss. The unlikely event of a rejection of the contract or the customer’s failure to emerge from bankruptcy could potentially result in a substantial reduction to the Corporation’s sales base and could negatively impact the Corporation’s ability to achieve forecasted sales and profit performance levels.

Inventories: Finished products, work in process and raw material inventories are carried at the lower of cost or market. The last-in, first-out (LIFO) cost method is used for approximately 60% of the domestic inventories. The foreign subsidiaries principally use the first-in, first-out method. Display material and factory supplies are carried at average cost.

Investment in Life Insurance: The Corporation’s investment in corporate-owned life insurance policies is recorded in other assets net of policy loans. The net life insurance expense, including interest expense, is included in administrative and general expenses in the Consolidated Statement of Operations. The related interest expense, which approximates amounts paid, was $24,103, $26,120 and $40,564 in 2002, 2001 and 2000, respectively.

Goodwill: Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired and is amortized on a straight-line basis over a period of 40 years for goodwill associated with the Social Expressions Products segment and 5 to 15 years for goodwill associated with all other businesses. Accumulated amortization of goodwill at February 28, 2002 and 2001 was $46,605 and $34,708, respectively. Goodwill is reviewed annually for impairment in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 121, “Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of ” (SFAS No. 121). Impairment losses are recorded when the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. See “New Pronouncements” and “Other expense-net” below for further discussion.

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 balance sheet; revenue and expense accounts are translated at average monthly exchange rates. Translation adjustments are reflected as a component of shareholders’ equity.

Property and Depreciation: Property, plant and equipment are carried at cost. Depreciation and amortization of buildings, equipment and fixtures is computed principally by the straight-line method over the useful lives of the various assets. The cost of buildings is depreciated over 25 to 40 years and equipment and fixtures over 3 to 20 years. Property, plant and equipment are reviewed annually for impairment in accordance with SFAS No. 121.

38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE A — SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition: Sales of seasonal product to non-related retailers are recognized at the approximate date the product is received by the customer and upon the sales of products at Corporation-owned retail locations. Seasonal cards are sold with the right of return on unsold merchandise. The Corporation provides for estimated returns of seasonal cards when those sales to non-related retailers are recognized. Accrual rates utilized for establishing estimated returns reserves have approximated actual returns experience. The allowance for sales returns was $102,265 and $136,831 at February 28, 2002 and 2001, respectively.

Except for seasonal products, sales are recorded by the Corporation upon shipment of products to non-related retailers and upon the sales of products at Corporation-owned retail locations. Sales of these products are generally sold without the right of return. Sales credits for non-seasonal product are issued at the Corporation’s sole discretion for damaged, obsolete and outdated products.

Sales of both everyday and seasonal products to retailers with scan-based trading arrangements with the Corporation are recognized when the products are sold by those retailers.

In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements” (SAB 101), which among other guidance clarified the Staff’s views on various revenue recognition and reporting matters. As a result, effective March 1, 2000, the Corporation adopted a change in its method of accounting for certain shipments of seasonal product. Under this accounting method, the Corporation recognizes revenue on these seasonal shipments at the approximate date the merchandise is received by the customer, commonly referred to in the industry as the ship-to-arrive date (“STA”), and not upon shipment from the distribution facility. STA is a more preferable method of recording revenue due to the large volumes of seasonal product shipment activity and the lead time required to achieve customer-requested delivery dates.

The implementation of the change has been accounted for as a change in accounting principle and applied cumulatively as if the change occurred at March 1, 2000. The effect of the change was a one-time non-cash reduction to the Corporation’s earnings of $21,141 (net of tax of $12,564) or approximately $0.33 per share, which is included in operations for the year ended February 28, 2001. The Corporation recognized approximately $44,400 in net sales that are included in the cumulative effect adjustment as of March 1, 2000. Had this change been adopted effective March 1, 1999, net sales and earnings before the cumulative effect of this accounting change in 2000 would not have been materially impacted.

Shipping and Handling Fees: The Corporation classifies shipping and handling fees as part of selling, distribution and marketing expenses. Shipping and handling costs were $153,144, $154,007 and $116,930 in 2002, 2001 and 2000, respectively.

39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE A — SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Advertising Expense: Advertising costs are expensed as incurred. Advertising expense was $57,049, $61,610, and $76,879 in 2002, 2001 and 2000, respectively.

Other Expense — Net: In 2002, other expense-net included $37,000 for the write-down of goodwill related to the Corporation’s subsidiary in Australasia and $9,464 for the write-down to the anticipated selling price of one of its foreign operating units, which the Corporation has decided to divest. See Note C for further discussion. In 2001, other expense — net included $32,554 related to the write-down of the Corporation’s investment in Egreetings Network, Inc. (“Egreetings”) to its fair market value and a pre-tax gain of $8,400 on the sale of a building in Canada. In 2000, other expense — net included costs to convert the Corporation’s computer systems to be Year 2000 compliant. In the years presented, other expense — net also included amortization of goodwill, foreign exchange gains and losses, gains and losses on asset disposals, and royalty and interest income.

Income Taxes: Deferred income taxes are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes.

Stock-Based Compensation: The Corporation has elected to follow Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for its employee stock options. Because the exercise price of the Corporation’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized. The Corporation has adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”.

New Pronouncements: In June 1998, SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, was issued. This Statement, which establishes new accounting and reporting standards for derivative financial instruments, along with its amendments SFAS No. 137 and SFAS No. 138, became effective for the Corporation on March 1, 2001. The adoption of the Statements did not have a material effect on the Corporation’s consolidated financial statements.

In July 2001, SFAS No. 141, “Business Combinations”, was issued. This Statement, which supersedes APB Opinion No. 16, “Business Combinations”, eliminated the pooling-of-interests method of accounting for business combinations and modifies the application of the purchase accounting method. The elimination of the pooling-of-interests method is effective for transactions initiated after June 30, 2001. The remaining provisions of SFAS No. 141 are effective for transactions accounted for using the purchase method that are completed after June 30, 2001.

40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE A — SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Also in July 2001, SFAS No. 142, “Goodwill and Intangible Assets”, was issued. This Statement, which supersedes APB Opinion No. 17, “Intangible Assets”, eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and addresses the impairment testing and recognition for goodwill and intangible assets. SFAS No. 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement’s effective date. SFAS No. 142 will be effective for the Corporation beginning in the first quarter of 2003. The Corporation is currently assessing the Statement and has not yet determined the complete impact of its adoption on its financial statements.

In October 2001, SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”, was issued. This Statement, which supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, provides a single accounting model for the disposal of long-lived assets. Although retaining many of the fundamental recognition and measurement provisions of SFAS No. 121, the Statement significantly changes the criteria that would have to be met to classify an asset as held-for-sale. This distinction is important because assets held-for-sale are stated at the lower of their fair values or carrying amounts and depreciation is no longer recognized. The Corporation is required to adopt this Statement for 2003. The Corporation is analyzing the effect of this Statement and does not expect it to have a material effect on the Corporation’s consolidated financial position, results of operations or cash flows.

In November 2001, the Financial Accounting Standards Board’s Emerging Issues Task Force (“EITF”) issued EITF Issue No. 01-09 (“EITF 01-09”), “Accounting for Consideration Given by a Vendor to a Customer/Reseller”, which addresses the accounting for consideration given by a vendor to a customer including both a reseller of the vendor’s products and an entity that purchases the vendor’s products from a reseller. EITF 01-09 also codifies and reconciles related guidance issued by the EITF including EITF No. 00-25, “Vendor Income Statement Characterization of Consideration Paid to a Reseller of the Vendor’s Products”, and EITF No. 00-14, “Accounting for Certain Sales Incentives”. EITF 01-09 outlines the presumption that consideration given by a vendor to a customer, a reseller or a customer of a reseller is to be treated as a reduction of revenue. The Corporation is required to adopt EITF 01-09 no later than the first quarter of fiscal 2003. Although the Corporation does not expect the adoption to have any effect on its operations, it will have a material effect on certain reported statement of operations classifications. Upon adoption, the Corporation will be required to reclassify certain prior period amounts to conform to these reporting requirements. The Corporation has not yet completed its analysis of the amounts which will be reclassified for prior periods.

41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE B — ACQUISITIONS

2002 — BlueMountain.com

On September 12, 2001, the Corporation completed its acquisition of BlueMountain.com, a division of At Home Corporation, for a cash price of $35,000. The BlueMountain.com division operates an online card and entertainment Internet site, www.bluemountain.com. The acquisition was affected through AmericanGreetings.com, Inc., and the majority of the purchase price was allocated to goodwill.

2001 — Gibson Greetings, Inc.

On March 9, 2000, the Corporation completed its acquisition of Gibson Greetings, Inc. (“Gibson”) for a cash price of $10.25 per share. Gibson distributed individual relationship communication products, including greeting cards, gift wrap, party goods and licensed products. Gibson held a minority equity interest in Egreetings; the Corporation subsequently acquired the remaining shares of Egreetings in March 2001.

The acquisition has been accounted for by the purchase method of accounting, and accordingly, the consolidated statements of operations include the results of Gibson beginning with the first quarter of 2001. The assets acquired and liabilities assumed were recorded at estimated fair values as determined by the Corporation’s management based on information available and on assumptions as to future operations. For financial statement purposes, the excess of cost over net assets acquired is amortized by the straight-line method over 40 years. A summary of the assets acquired and liabilities assumed in the acquisition follows:

Estimated fair values:
	Assets acquired	$	296,086
	Liabilities assumed		(165,065	)
Excess of cost over net assets acquired			49,288
Purchase price			180,309
Less cash acquired			10,147
Net cash paid (including $30,000 paid in 2000)		$	170,162

The acquisition of Gibson was primarily financed through short-term borrowings.

As a result of the acquisition of Gibson, the Corporation incurred acquisition integration expenses for the incremental costs to exit and consolidate activities at Gibson locations, to involuntarily terminate Gibson employees, and for other costs to integrate operating locations and other activities of Gibson with the Corporation. Generally accepted accounting principles require that these acquisition integration expenses, which are not associated with the generation of future revenues and have no future economic benefit, be reflected as assumed liabilities in the allocation of the purchase price to the net assets acquired. An additional requirement is that acquisition integration expenses which are associated with the generation of future

42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE B — ACQUISITIONS (CONTINUED)

revenues and have future economic benefit, and those associated with integrating Gibson operations into the Corporation’s locations, must be recorded as expense. The components of the acquisition integration liabilities included in the purchase price allocation for Gibson follow:

	Facility		Workforce
	Obligations		Reductions		Other		Total
Provision in 2001	$	59,483	$	11,405	$	19,363	$	90,251
Cash expenditures		5,649		10,084		10,973		26,706
Balance February 28, 2001		53,834		1,321		8,390		63,545
Cash expenditures		6,063		1,321		6,848		14,232
Balance February 28, 2002	$	47,771	$	—	$	1,542	$	49,313

The acquisition integration liabilities are based on the Corporation’s integration plan which focuses on distribution facility rationalization. The Corporation anticipates making payments on the facility obligations until 2006.

Unaudited pro forma results of operations for the twelve month period ended February 29, 2000, as if the Corporation and Gibson had been combined as of the beginning of that period, are presented below. Consolidated results for the year ended February 28, 2001, as reported, include the results of Gibson for the entire period. The pro forma results include estimates and assumptions which the Corporation’s management believes are reasonable. However, the pro forma results do not include any cost savings or other effects of the planned integration of the Corporation and Gibson, and are not necessarily indicative of the results which would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future. The pro forma results for the twelve months ended February 29, 2000 include a charge recorded by Gibson of approximately $23,000 to write down the inventory and related assets for one of its operations.

	Pro forma
	Twelve months ended
	February 29, 2000
Net sales	$	2,521,663
Net income	$	51,104
Earnings per share and earnings per share assuming dilution	$	0.78

2001 — CPS Corporation

On July 13, 2000, the Corporation completed its acquisition of CPS Corporation (“CPS”), for a cash price of $31,000 plus 1,200,000 shares of the Corporation’s common stock. CPS is a supplier of gift wrap and decorative packaging.

43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE C — RESTRUCTURING AND SPECIAL CHARGES

2002

During 2002, the Corporation undertook three initiatives: the reorganization of the core greeting card business, the implementation of scan-based trading, and a change in the contractual relationship with a strategic partner of the Corporation’s Internet business. In total, the Corporation incurred $314,448 of pre-tax special charges during 2002 in connection with these initiatives.

Included in the special charges noted above is a restructure charge of $56,715 ($35,333 net of tax, or earnings per share of $0.56). This charge was for costs associated with the consolidation and rationalization of certain of the Corporation’s domestic and foreign manufacturing and distribution operations, including employee severance and benefit termination costs. The restructure charge also included a charge for a change in the contractual relationship with a partner of the Corporation’s Internet unit. More specifically, the restructure charge included $29,053 for employee termination benefits, $2,054 for facility rationalization costs, $1,500 for lease exit costs, $17,727 for a change in the contractual relationship with a partner of the Corporation’s Internet unit and $6,381 of other related costs. In total, approximately 1,600 positions were eliminated, comprised of approximately 1,200 hourly and 400 salaried positions. All activities were substantially completed by February 28, 2002.

The following table summarizes the provisions and remaining reserve associated with the restructure charge at February 28, 2002:

				Facility					Change in
	Termination			Rationalization			Lease Exit		Contractual			Other
	Benefits			Costs			Costs		Relationship			Costs			Total
Provision	$	29,053		$	2,054		$	1,500	$	17,727		$	6,381		$	56,715
Non-cash charge										(17,727	)					(17,727	)
Cash expenditures		(11,076	)		(1,829	)							(6,300	)		(19,205	)
Balance February 28, 2002	$	17,977		$	225		$	1,500	$	—		$	81		$	19,783

Included in accrued liabilities at February 28, 2002 is $19,783 representing the portion of severance and other exit costs not yet expended. The payment of termination benefits will not be completed until 2006.

The Corporation also recorded the following special charges in 2002:

• Charges associated with a product line size reduction and the elimination of the Corporation’s Forget Me Not greeting card brand. These charges included $49,082 in material, labor and other production costs to write down inventory, and a $16,206 reduction in net sales for credits granted to customers for product on hand at their retail locations eliminated from the Corporation’s brands and product lines.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE C — RESTRUCTURING AND SPECIAL CHARGES (CONTINUED)

• In conjunction with the integration of recently-acquired operations, facility closures and the changes in the distribution infrastructure in those countries, and to reflect the general economic downturn in the region, a pre-tax, non-cash impairment charge of $37,000 recorded in the fourth quarter to write down goodwill related to its operating units in Australasia. This amount is included in other expense-net.

• Other special pre-tax charges of $66,838 associated with the Corporation’s restructure and reorganization efforts, including project coordination and administration expenses, consultant expenses, field labor costs, system enhancements and facility closure costs.

The total pre-tax impact of these special charges was $225,841 ($140,699 net of tax) or $2.21 per share.

Also during 2002, the Corporation implemented its scan-based trading business model with two of its retail customers. The impact of its implementation was a $64,901 reduction in its net sales and a $8,599 reduction in its material, labor and other production costs. In addition, the Corporation incurred implementation and other costs of $32,305, primarily for the initial inventory accounting procedures, systems enhancements, outside consulting and other related costs, for a total pre-tax impact of $88,607 ($55,203 net of tax) or $0.87 per share.

The total pre-tax impact of special charges and the implementation of the scan-based trading business model was $314,448, or $3.08 per share.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE C — RESTRUCTURING AND SPECIAL CHARGES (CONTINUED)

2000

Fourth Quarter

During the quarter ended February 29, 2000, the Corporation recorded a restructuring charge of $6,126 ($4,849 net of tax, or earnings per share of $0.08) related to various foreign operations. The primary component of this charge was for the rationalization of various warehouse, distribution and manufacturing facilities in the United Kingdom in order to increase operating efficiency and lower fixed expenses. Additional initiatives included, to a lesser extent, the integration of Mexican manufacturing in the United States and the realignment of various business functions in Australia.

The restructure charge included $5,198 for employee termination benefits, $654 for lease exit costs, $274 for the write off of assets no longer in use and other restructure costs. In total, approximately 336 positions were eliminated, comprised of 304 hourly and 32 salaried employees. All activities have been substantially completed at February 28, 2002.

Second Quarter

In connection with the Corporation’s initiative to continue to streamline its North American operations, and to a lesser extent, its United Kingdom operations, the Corporation recorded a $40,429 ($24,224 net of tax, or earnings per share of $0.36) special charge during the three months ended August 31, 1999 relating primarily to the consolidation of Canadian manufacturing and distribution in the United States. Included in this special charge is a $32,747 restructure charge primarily for exit costs associated with the closure of certain facilities in Canada and to a lesser extent, costs to exit certain minor United Kingdom businesses. The remaining $7,682 of the special charge was recorded in material, labor and other production costs for the write-down of inventory in Canada to net realizable value.

The restructure charge of $32,747 included $25,820 of severance, pension and personnel related benefits, $4,634 of facility shut-down costs, $1,454 of lease exit costs and $839 related to other restructure costs. All initiatives associated with the Canadian restructuring have been substantially completed, with the exception of the settlement of the Canadian Division’s pension plans. The Corporation has taken the necessary actions to settle the pension liabilities, and Canadian regulatory approval has been obtained. The Corporation is in the process of distributing the remaining pension plan assets to satisfy those obligations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE C — RESTRUCTURING AND SPECIAL CHARGES (CONTINUED)

     The following table summarizes the provisions, payments and remaining reserves associated with the restructure charges recorded in 2000:

				Facility			Lease
	Termination			Shut-Down			Exit			Other
	Benefits			Costs			Costs			Costs			Total
Provision in 2000	$	31,018		$	4,634		$	2,108		$	1,113		$	38,873
Cash expenditures		(1,646	)		(454	)		(930	)					(3,030	)
Non-cash charges		(4,358	)		(99	)		(162	)		(519	)		(5,138	)
Balance February 29, 2000		25,014			4,081			1,016			594			30,705
Cash expenditures		(19,152	)		(514	)		(12	)		(35	)		(19,713	)
Non-cash charges					(2,334	)					(342	)		(2,676	)
Change in estimate		45									(45	)
Impact of foreign currency exchange rate changes		(419	)		(85	)		(70	)		(17	)		(591	)
Balance February 28, 2001		5,488			1,148			934			155			7,725
Cash expenditures		(4,464	)		(152	)		(934	)		(155	)		(5,705	)
Change in estimate		(80	)		80
Balance February 28, 2002	$	944		$	1,076		$	—		$	—		$	2,020

     At February 28, 2002 and 2001, $2,020 and $7,725, respectively, were included in accrued liabilities representing the portion of the restructuring charge not yet expended.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE D — (LOSS) EARNINGS PER SHARE

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

		2002			2001			2000
Numerator:
	Net (loss) income for earnings per share and earnings per share — assuming dilution	$	(122,310	)	$	(113,814	)	$	89,999
Denominator (thousands):
	Denominator for earnings per share — weighted average shares outstanding		63,615			63,646			65,592
	Effect of dilutive securities — stock options and convertible debt		—			—			—
	Denominator for (loss) earnings per share — assuming dilution — adjusted weighted average shares outstanding		63,615			63,646			65,592
(Loss) earnings per share		$	(1.92	)	$	(1.79	)	$	1.37
(Loss) earnings per share — assuming dilution		$	(1.92	)	$	(1.79	)	$	1.37

Certain stock options and convertible debt have been excluded for the years presented because they would have been antidilutive.

NOTE E — ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Accumulated other comprehensive (loss) income consists of the following components:

	Foreign			Unrealized Gains			Accumulated
	Currency			(Losses) on			Other
	Translation			Available-For-Sale			Comprehensive
	Adjustments			Securities			Income (Loss)
Balance at February 28, 1999	$	(30,256	)	$	6,691		$	(23,565	)
Other comprehensive loss		(1,744	)		(2,263	)		(4,007	)
Balance at February 29, 2000		(32,000	)		4,428			(27,572	)
Other comprehensive loss		(30,350	)		(257	)		(30,607	)
Balance at February 28, 2001		(62,350	)		4,171			(58,179	)
Other comprehensive (loss) income		(13,315	)		1,880			(11,435	)
Balance at February 28, 2002	$	(75,665	)	$	6,051		$	(69,614	)

     Gross unrealized holding gains on available-for-sale securities as of February 28, 2002 and 2001 are $9,091 and $6,271, respectively.

48

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE F — INVENTORIES

	2002		2001
Raw material	$	55,949	$	49,408
Work in process		34,157		33,370
Finished products		240,202		330,664
		330,308		413,442
Less LIFO reserve		83,907		93,111
		246,401		320,331
Display material and factory supplies		44,403		44,890
	$	290,804	$	365,221

The Corporation experienced a LIFO liquidation in 2002, which decreased pre-tax loss by approximately $9,500, or loss per share of $0.09.

NOTE G — PROPERTY, PLANT AND EQUIPMENT

	2002		2001
Land	$	12,801	$	15,085
Buildings		308,065		320,849
Equipment and fixtures		713,345		750,160
		1,034,211		1,086,094
Less accumulated depreciation		617,726		608,906
	$	416,485	$	477,188

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE H — DEFERRED COSTS

The Corporation has agreements with certain customers for the supply of greeting cards and related products. Deferred costs relating to these agreements are charged to operations on a straight-line basis over the effective period of each agreement. The Corporation generally enters into these agreements for an initial estimated period of five to six years. The majority of individual agreements include a minimum purchase commitment to the Corporation on the part of the customer. In these cases, the Corporation periodically reviews the progress toward the commitment and adjusts the estimated amortization period accordingly. Deferred costs estimated to be charged to operations during the next year are classified with prepaid expenses and other. Total commitments under the agreements are capitalized as deferred costs and future payment commitments, if any, are recorded as liabilities when the agreements are consummated.

At February 28, 2002 and 2001, deferred costs and future payment commitments are included in the following financial statement captions:

	2002			2001
Prepaid expenses and other	$	134,853		$	142,436
Other assets		814,606			717,400
Other current liabilities		(111,636	)		(119,770	)
Other liabilities		(80,732	)		(111,030	)
	$	757,091		$	629,036

50

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE I — LONG AND SHORT-TERM DEBT

On July 27, 1998, the Corporation issued $300,000 of 30-year senior notes with a 6.10% coupon rate under its $600,000 shelf registration with the Securities and Exchange Commission. The majority of the proceeds was used to retire commercial paper and other short-term debt, with the remainder used for other general corporate purposes and short-term investments.

On June 29, 2001, the Corporation issued $260,000 of 11.75% senior subordinated notes, due on July 15, 2008. The transaction resulted in net proceeds to the Corporation of $244,711, after deducting underwriting discounts and transactional expenses. The majority of the proceeds was used to repay indebtedness and to provide funds for general corporate purposes. On August 28, 2001, the Corporation filed Form S-4 with the Securities and Exchange Commission as required to register this debt offering.

On June 29, 2001, the Corporation issued $175,000 of 7.00% convertible subordinated notes, due on July 15, 2006. The notes are convertible at the option of the holders into shares of the Corporation’s common stock at any time before the close of business on July 15, 2006, at a conversion rate of 71.9466 common shares per $1 principal amount of notes. The convertible notes outstanding could potentially result in the issuance of approximately 12,600,000 shares of the Class A Common Stock of the Corporation. The transaction resulted in net proceeds to the Corporation of $169,589, after deducting transactional expenses. The majority of the proceeds was used to repay indebtedness and to provide funds for general corporate purposes. On August 28, 2001, the Corporation filed Form S-3 with the Securities and Exchange Commission as required to register this debt offering.

The total fair value of the Corporation’s publicly traded debt, based on quoted market prices, was $730,850 and $214,500 at February 28, 2002 and 2001, respectively.

On August 9, 2001, the Corporation entered into a new $350,000 senior secured credit facility. This facility consists of three tranches: (1) a $105,000, 364-day revolving facility, of which there were no amounts outstanding at February 28, 2002; (2) a $120,000 revolving facility maturing January 15, 2006, of which there were no amounts outstanding at February 28, 2002; and (3) a $125,000 term loan maturing June 15, 2006, at an interest rate of 6.6% at February 28, 2002. The Corporation has the option to request a one-year extension of the 364-day revolving facility. The term loan is payable in twenty quarter-annual principal installments, commencing November 30, 2001, and continuing

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE I — LONG AND SHORT-TERM DEBT (CONTINUED)

on the last day of each succeeding February, May, August, and November thereafter. The credit facility is secured by the domestic assets of the Corporation and a 66 2/3% interest in the common stock of its foreign subsidiaries. The credit facility contains various restrictive covenants which require, among other things, that the Corporation meet specified periodic financial ratios, minimum net worth, maximum leverage, and earnings requirements. The credit facility also restricts the Corporation’s ability to incur additional indebtedness and to engage in acquisitions of other businesses and entities.

On August 7, 2001, the Corporation entered into a three-year Accounts Receivable Securitization Financing that provides for up to $250,000 and is secured by certain trade accounts receivable. Under the terms of the agreement, the Corporation transfers receivables to a wholly-owned consolidated subsidiary that in turn utilizes the receivables to secure borrowings through a credit facility with a financial institution. There were no borrowings outstanding under this agreement at February 28, 2002.

The Corporation’s subsidiary in South Africa has credit agreements permitting borrowings of up to $3,853. At February 28, 2002, the amount outstanding under this foreign revolving credit facility is $388, classified as short-term.

At February 28, 2002 and 2001, debt due within one year consists of the following:

	2002		2001
Current maturities of long-term debt	$	3,123	$	664
Commercial paper		—		359,541
Other short-term debt		8,597		18,699
	$	11,720	$	378,904

52

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE I — LONG AND SHORT-TERM DEBT (CONTINUED)

At February 28, 2002 and 2001, long-term debt consists of the following:

	2002		2001
Revolving credit and commercial paper	$	—	$	80,484
Term loan agreements		123,125		—
Notes payable		727,607		299,996
Other		5,504		308
		856,236		380,788
Less current maturities		3,123		664
	$	853,113	$	380,124

     Aggregate maturities of long-term debt are as follows:

2003	$	3,123
2004		6,738
2005		1,265
2006		1,250
2007		294,375
Thereafter		549,485
	$	856,236

As part of its normal operations, the Corporation provides certain financing for some of its vendors, which includes a combination of various guarantees and letters of credit. At February 28, 2002, the Corporation had credit arrangements to support the guarantees and letters of credit in the amount of $86,382 with $45,597 of open guarantees and credits outstanding.

Interest paid on short-term and long-term debt was $68,128 in 2002, $54,637 in 2001 and $34,051 in 2000.

53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE J — RETIREMENT PLANS

The Corporation has a non-contributory profit-sharing plan with a contributory 401(k) provision covering most of its United States employees. Contributions to the profit-sharing plan were $4,365, $5,175, and $11,858 for 2002, 2001 and 2000, respectively. The Corporation matches a portion of 401(k) employee contributions contingent upon meeting specified annual operating results goals. The Corporation’s matching contributions were $5,059, $0, and $4,517 for 2002, 2001 and 2000, respectively.

The Corporation also has several defined benefit and defined contribution pension plans covering certain employees in foreign countries. The cost of these plans was not material in any of the years presented. In the aggregate, the actuarially computed plan benefit obligation approximates the fair value of the plan assets.

In 2001, the Corporation assumed the obligations and assets of Gibson’s defined benefit pension plan (the Retirement Plan) which covered substantially all Gibson employees who met certain eligibility requirements. Benefits earned under the Retirement Plan have been frozen and participants no longer accrue benefits after December 31, 2000. The Corporation will contribute to the plan amounts sufficient to ensure the Retirement Plan meets funding requirements.

54

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE J — RETIREMENT PLANS (CONTINUED)

     The following table sets forth summarized information on the Retirement Plan:

		2002			2001
Change in benefit obligation:
	Benefit obligation at beginning of year	$	95,211		$	—
	Acquired business		—			95,540
	Interest cost		5,898			5,770
	Actuarial gain		(8,675	)		—
	Benefit payments		(7,023	)		(6,099	)
	Benefit obligation at end of year		85,411			95,211
Change in plan assets:
	Fair value of plan assets at beginning of year		85,948			—
	Fair value of plan assets of acquired business		—			84,080
	Actual return on plan assets		2,732			7,967
	Benefit payments		(7,023	)		(6,099	)
Fair value of plan assets at year end			81,657			85,948
Underfunded status at year end			(3,754	)		(9,263	)
	Unrecognized (gain)		(7,505	)		(2,109	)
Accrued benefit cost		$	(11,259	)	$	(11,372	)
Assumptions
	Discount rate		7.25	%		6.25	%
	Expected return on plan assets		7.25	%		7.25	%

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE J — RETIREMENT PLANS (CONTINUED)

A summary of the components of net periodic (income) for the Retirement Plan for the years ended February 28, 2002 and 2001, is as follows:

	2002			2001
Interest cost	$	5,898		$	5,770
Expected return on plan assets		(6,011	)		(5,858	)
Net periodic benefit (income)	$	(113	)	$	(88	)

56

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE K — POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits to full-time United States employees who meet certain age and service requirements. In addition, for retirements on or after January 2, 1992 the retiree must have been continuously enrolled for health care for a minimum of five years or since January 2, 1992. The plan is contributory, with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. The Corporation made significant changes to its retiree health care plan in 2002 by imposing dollar maximums on the per capita cost paid by the Corporation for future years. The Corporation maintains a trust for the payment of retiree health care benefits. This trust is funded at the discretion of management.

		2002			2001
Change in benefit obligation:
	Benefit obligation at beginning of year	$	113,855		$	80,452
	Acquired business		—			3,034
	Service cost		2,558			2,402
	Interest cost		8,672			6,649
	Participant contributions		2,593			3,527
	Plan amendments		(50,899	)		—
	Actuarial losses		23,259			24,829
	Benefit payments		(7,461	)		(7,038	)
	Benefit obligation at end of year		92,577			113,855
Change in plan assets:
	Fair value of plan assets at beginning of year		55,593			47,269
	Actual return on plan assets		1,950			5,838
	Contributions		7,461			9,524
	Benefit payments		(7,461	)		(7,038	)
	Fair value of plan assets at end of year		57,543			55,593
Underfunded status at end of year			(35,034	)		(58,262	)
Unrecognized prior service (credit)			(50,899	)		—
Unrecognized loss			66,058			44,148
Accrued benefit cost		$	(19,875	)	$	(14,114	)

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE K — POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (CONTINUED)

	2002			2001
Components of net periodic benefit cost:
Service cost	$	2,558		$	2,402
Interest cost		8,672			6,649
Expected return on plan assets		(4,233	)		(3,627	)
Amortization of actuarial loss		3,631			1,685
Net periodic benefit cost	$	10,628		$	7,109

                   Weighted average assumptions as of February 28:

Discount rate		7.25	%		7.25	%
Expected return on assets		8.00	%		8.00	%
Health care cost trend rate	12.0% in 2002			10.0% in 2001
	decreasing 0.5% per			decreasing 1% per
	year to 6%			year to 5%

Effect of a 1% increase in health care cost trend rate on:
	Service cost plus interest cost	$	2,034		$	1,636
	Accumulated postretirement benefit obligation		7,553			17,481
Effect of a 1% decrease in health care cost trend rate on:
	Service cost plus interest cost	$	(1,623	)	$	(1,300	)
	Accumulated postretirement benefit obligation		(6,095	)		(14,175	)

58

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE L — 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 25 years. Rental expense under operating leases for the years ended February 28, 2002 and 2001 and February 29, 2000 follows:

		2002		2001		2000
Gross rentals		$	70,705	$	71,479	$	59,876
Less sublease rentals			1,985		2,611		3,638
	Net rental expense	$	68,720	$	68,868	$	56,238

At February 28, 2002, future minimum rental payments for noncancelable operating leases, net of aggregate future minimum noncancelable sublease rentals, follow:

Gross Rentals:
	2003	$	49,647
	2004		41,385
	2005		31,617
	2006		26,102
	2007		22,082
	Later years		50,768
			221,601
Sublease rentals			(10,357	)
Net rentals		$	211,244

59

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE M — COMMON SHARES AND STOCK OPTIONS

At February 28, 2002 and 2001, common shares authorized consisted of 187,600,000 Class A and 15,832,968 Class B shares.

Class A shares have one vote per share and Class B 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 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.

Under the Corporation’s Stock Option Plans, options to purchase Class A and Class B shares are granted to directors, officers and other key employees at the then-current market price. In general, subject to continuing employment, options become exercisable commencing twelve months after date of grant in annual installments and expire over a period of not more than ten years from the date of grant. Under certain grants made in 2002, the options become exercisable when the market value of Class A shares reaches a specified share price or 18 months after the grant date, whichever occurs first. These options expire at the earlier of six months plus one day after a specified share price is reached or ten years from the date of grant. The options granted to non-employee directors become exercisable in either six installments over five years or in four installments over four years.

The Corporation has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under SFAS No. 123, “Accounting for Stock-Based Compensation”, requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, because the exercise price of the Corporation’s employee stock options equals the market price of the underlying stock on the date of grant, no compensation expense is recognized.

Pro forma information regarding net income and earnings per share is required by SFAS No. 123 and has been determined as if the Corporation had accounted for its employee stock options issued subsequent to February 28, 1995 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using the Black-Scholes option pricing model.

60

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE M — COMMON SHARES AND STOCK OPTIONS (CONTINUED)

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Corporation’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management’s opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options’ vesting period. The pro forma information for stock options indicates an increase in net loss of $7,849 in 2002 and $4,863 in 2001, and a decrease in net income of $8,520 in 2000. The pro forma information and related assumptions under the Black-Scholes method follow:

			2002			2001			2000
Net (loss) income			$	(130,159	)	$	(118,677	)	$	81,479
(Loss) earnings per share			$	(2.05	)	$	(1.86	)	$	1.24
(Loss) earnings per share – assuming dilution			$	(2.05	)	$	(1.86	)	$	1.24
Assumptions:
	Risk-free interest rate			4.5	%		5.9	%		5.4	%
	Dividend yield			3.9	%		5.4	%		3.2	%
	Expected stock volatility			0.58			0.46			0.41
	Expected life in years:
		Grant date to exercise date		7.6			7.7			5.7
		Vest date to exercise date		2.4			2.4			2.4

61

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE M — COMMON SHARES AND STOCK OPTIONS (CONTINUED)

Stock option transactions and prices are summarized as follows:

			Number of Options						Weighted-Average Exercise Price Per Share
			Class A			Class B			Class A		Class B
Options outstanding   February 28, 1999				2,278,031			769,186		$	29.18	$	27.30
	Granted			3,648,950			—			23.81		—
	Exercised			(20,800	)		(2,000	)		20.28		19.25
	Cancelled			(293,000	)		(1,000	)		26.09		26.13
Options outstanding   February 29, 2000				5,613,181			766,186		$	25.87	$	27.32
	Granted			775,500			—			15.45		—
	Exercised			(1,600	)		—			16.53		—
	Cancelled			(626,850	)		(76,500	)		25.16		24.15
Options outstanding   February 28, 2001				5,760,231			689,686		$	24.57	$	27.67
	Granted			4,847,728			442,277			10.29		9.95
	Exercised			(10,600	)		—			8.72		—
	Cancelled			(1,566,231	)		(98,590	)		19.63		20.10
Options outstanding   February 28, 2002				9,031,128			1,033,373		$	17.74	$	20.81
Options exercisable at February 28 or 29:
		2002		2,638,850			591,096		$	26.97	$	28.94
		2001		2,469,531			689,686			27.44		27.74
		2000		1,709,281			649,436			27.47		26.93

The weighted average remaining contractual life of the options outstanding as of February 28, 2002 is 7.4 years.

62

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE M — COMMON SHARES AND STOCK OPTIONS (CONTINUED)

Range of exercise prices for options outstanding:

			Outstanding				Exercisable
											Weighted-
					Weighted				Weighted		Average
					Average				Average		Remaining
Exercise Price			Optioned		Exercise		Optioned		Exercise		Contractual
Ranges			Shares		Price		Shares		Price		Life (Years)
	$8.50000 - 8.50000			94,400	$	8.50000		23,600	$	8.50000		8.78
		9.95000 - 9.95000		4,292,861		9.95000		—		—		8.92
	10.13000 - 17.56250			948,694		14.08713		132,900		15.95152		8.95
	18.00000 - 23.56250			2,484,400		23.25868		970,950		23.23712		6.68
	23.68750 - 29.43750			813,950		26.69548		695,150		26.89719		4.58
	29.50000 - 29.50000			1,090,300		29.50000		1,083,900		29.50000		4.70
	29.87500 - 48.50000			317,146		38.66776		304,896		38.69506		5.22
	50.00000 - 50.00000			16,000		50.00000		12,000		50.00000		6.33
	50.25000 - 50.25000			6,600		50.25000		6,400		50.25000		5.96
	51.62500 - 51.62500			150		51.62500		150		51.62500		6.34
$8.50000 - $51.62500				10,064,501				3,229,946

63

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE N — BUSINESS SEGMENT INFORMATION

The Corporation is organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. The Social Expression Products segment primarily designs, manufactures and sells greeting cards and other products through various channels of distribution with mass retailers as the primary channel and is managed by geographic location. As permitted under Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” certain operating divisions have been aggregated into one reportable segment. These operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods.

AmericanGreetings.com, Inc. (92.2% owned) is an Internet-based provider of greetings and other social communication content to consumers and Internet-based businesses.

The Corporation’s non-reportable operating segments include the design, manufacture and sale of promotional Christmas product, non-prescription reading glasses, educational materials and display fixtures; and the sale of both the Corporation’s products and other products through retail stores.

The Corporation evaluates segment performance based on earnings before foreign currency exchange gains or losses, interest income, interest expense and income taxes. Centrally incurred and managed costs and special charges are not allocated back to the operating segments. The accounting policies of the reportable segments are the same as those described in Note A — Significant Accounting Policies, except those that are related to LIFO or applicable to only corporate items.

Intersegment sales are recorded at wholesale prices. Intersegment sales and profits are eliminated in consolidation. All inventories resulting from intersegment sales are carried at cost.

The reporting and evaluation of segment assets include net accounts receivable, inventory on a “first-in, first-out” basis, display materials and factory supplies, prepaid expenses, other assets (including net deferred costs), and net property, plant and equipment.

Segment results are 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.

64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE N — BUSINESS SEGMENT INFORMATION (C0NTINUED)

Operating Segment Information

						Net Sales									Earnings
			2002			2001			2000			2002			2001			2000
Social Expression Products			$	1,856,794		$	1,948,697		$	1,716,376		$	295,527		$	319,596		$	337,711
Intersegment items				(83,436	)		(85,659	)		(85,229	)		(58,913	)		(61,825	)		(59,763	)
	Net			1,773,358			1,863,038			1,631,147			236,614			257,771			277,948
AmericanGreetings.com				39,731			24,378			14,345			(2,131	)		(36,065	)		(20,373	)
Non-reportable segments				633,975			629,821			500,068			72,969			58,337			50,779
Special charges				(82,372	)		—			3,583			(311,971	)		—			(46,387	)
Egreetings write down				—			—			—			—			(32,554	)		—
Exchange rate adjustment				(22,045	)		1,577			26,093			(2,862	)		(271	)		(1,391	)
Unallocated items — net				13,093			—			—			(188,943	)		(148,585	)		(119,952	)
		Consolidated	$	2,355,740		$	2,518,814		$	2,175,236		$	(196,324	)	$	98,633		$	140,624

					Assets					Depreciation and Amortization								Capital Expenditures
		2002			2001			2000		2002			2001		2000			2002			2001			2000
Social Expression Products		$	1,632,733		$	1,777,479		$	1,693,037	$	48,451		$	46,489	$	44,220		$	15,198		$	56,565		$	25,494
AmericanGreetings.com			64,641			48,563			31,663		4,884			22,773		6,385			3,223			4,741			3,762
Non-reportable segments			415,577			417,462			264,168		27,911			24,343		21,733			12,675			14,792			21,275
Unallocated and intersegment items			510,990			484,956			500,455		3,631			3,873		5,115			—			—			—
Exchange rate adjustment			(8,946	)		(16,386	)		28,660		(569	)		579		(853	)		(2,127	)		(1,716	)		222
	Consolidated	$	2,614,995		$	2,712,074		$	2,517,983	$	84,308		$	98,057	$	76,600		$	28,969		$	74,382		$	50,753

Other Information

Product Information

		2002		2001		2000
Everyday greeting cards		$	933,934	$	1,063,576	$	976,922
Seasonal greeting cards			472,624		513,464		438,921
Gift wrapping and wrap accessories			395,421		395,639		301,131
All other			553,761		546,135		458,262
	Consolidated Net Sales	$	2,355,740	$	2,518,814	$	2,175,236

Geographic Information

				Net Sales				Fixed Assets - Net
		2002		2001		2000		2002		2001		2000
United States		$	1,961,619	$	2,087,090	$	1,751,686	$	366,279	$	416,447	$	371,622
Foreign			394,121		431,724		423,550		50,206		60,741		75,793
	Consolidated	$	2,355,740	$	2,518,814	$	2,175,236	$	416,485	$	477,188	$	447,415

65

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE O — INCOME TAXES

Income (loss) before income taxes and cumulative effect of accounting change:

	2002			2001		2000
United States	$	(168,972	)	$	76,159	$	123,190
Foreign		(27,352	)		22,474		17,434
	$	(196,324	)	$	98,633	$	140,624

Income taxes (benefit) have been provided as follows:

		2002			2001			2000
Current:
	Federal	$	(49,729	)	$	212,138		$	3,029
	Foreign		4,963			(2,799	)		(9,082	)
	State and local		(8,494	)		21,821			1,197
			(53,260	)		231,160			(4,856	)
Deferred (principally federal)			(20,754	)		(39,854	)		55,481
		$	(74,014	)	$	191,306		$	50,625

Significant components of the Corporation’s deferred tax assets and liabilities at February 28, 2002 and 2001 are as follows:

			2002			2001
Deferred tax assets:
	Employee benefit and incentive plans		$	27,408		$	20,742
	Sales returns			4,714			11,225
	Deferred capital loss carryforward			11,394			11,394
	Inventory costing			10,500			24,698
	Reserves			89,563			35,096
	Other			85,929			99,334
				229,508			202,489
	Valuation allowance			(44,756	)		(20,861	)
		Total deferred tax assets		184,752			181,628
Deferred tax liabilities:
	Depreciation			46,210			30,056
	Other			19,789			25,567
		Total deferred tax liabilities		65,999			55,623
	Net deferred tax assets		$	118,753		$	126,005

The increase in the valuation allowance was primarily due to an increase in foreign net operating losses and net operating losses acquired pursuant to 2002 acquisitions.

66

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — CONTINUED

NOTE O — INCOME TAXES (CONTINUED)

Reconciliation of income tax (benefit) expense using the statutory rate and actual income tax exposure is as follows:

	2002			2001			2000
Income tax (benefit) expense at statutory rate	$	(68,714	)	$	34,522		$	49,218
State and local income taxes, net of federal tax benefit		(6,386	)		3,286			5,346
Contested liability – COLI		—			143,581			—
Deferred capital loss carryforward		—			11,394			—
Foreign differences		2,153			(6,790	)		(11,037	)
Other		(1,067	)		5,313			7,098
Income tax at effective tax rate	$	(74,014	)	$	191,306		$	50,625

Income taxes (refunded) paid were $(25,564) in 2002, $(18,174) in 2001 and $19,821 in 2000.

Deferred taxes have not been provided on approximately $66,327 of undistributed earnings of foreign 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, 2002, the Corporation had approximately $50,463 of foreign operating loss carryforwards, of which $27,639 have no expiration dates and $22,824 have expiration dates ranging from 2003 through 2012.

Included in income tax expense in 2001 was a charge for $143,581 for potential tax exposure for the fiscal years ended 1992 through 1999 relating to the Corporation’s corporate-owned life insurance program (COLI). This charge sufficiently provides for any anticipated effect of proposed adjustments by the IRS for the disallowance of certain deductions related to this insurance program. The Corporation believes that it has fully complied with the tax law as it related to its COLI program and is vigorously contesting the proposed adjustments or any subsequent assessments.

67

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, 2002 and 2001:

				Quarter Ended
	May 31			Aug 31			Nov 30		Feb 28
Fiscal 2002
Net sales	$	505,740		$	488,225		$	705,433	$	656,342
Gross profit		254,124			301,824			391,921		415,626
Restructure charges		52,925			—			—		3,790
Net income (loss)		(80,096	)		(35,716	)		6,625		(13,123	)
Earnings (loss) per share		(1.26	)		(0.56	)		0.10		(0.20	)
Earnings (loss)per share – assuming dilution		(1.26	)		(0.56	)		0.10		(0.20	)

			Quarter Ended
	May 31		Aug 31			Nov 30		Feb 28
Fiscal 2001
Net sales	$	595,741	$	493,732		$	766,095	$	663,246
Gross profit		392,417		298,621			410,237		418,268
Cumulative effect of accounting change, net of tax		21,141		—			—		—
Net income (loss)		17,365		(35,505	)		32,015		(127,689	)
Earnings (loss) per share		0.27		(0.55	)		0.50		(2.01	)
Earnings (loss) per share – assuming dilution		0.27		(0.55	)		0.50		(2.01	)

68

REPORT OF INDEPENDENT AUDITORS

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, 2002 and 2001, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended February 28, 2002. Our audits also included the financial statement schedule listed in the Index at Item 14(a) 3. 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 auditing standards generally accepted in the 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, 2002 and 2001 and the consolidated results of their operations and their cash flows for each of the three years in the period ended February 28, 2002, in conformity with accounting principles generally accepted in the United States. 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 A to the consolidated financial statements, effective March 1, 2000, the Corporation changed its method of accounting for certain shipments of seasonal product.

/s/ Ernst & Young LLP

Cleveland, Ohio
March 26, 2002

69

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

     There were no disagreements with the Corporation’s independent auditors on accounting or financial disclosure matters within the three year period ended February 28, 2002, or in any period subsequent to such date.

PART III

     The Corporation hereby incorporates by reference the information called for by Part III of Form 10-K from the Corporation’s Notice of Annual Meeting of Shareholders to be held June 28, 2002, and related Proxy Statement filed with the Securities and Exchange Commission on May 20, 2002.

(Next item is Part IV)

70

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)
1.	Financial Statements Included in Part II of this report:

Consolidated Statement of Operations - Years ended February 28 or 29, 2002, 2001 and 2000

Consolidated Statement of Financial Position - February 28, 2002 and 2001

Consolidated Statement of Cash Flows - Years ended February 28 or 29, 2002, 2001 and 2000

Consolidated Statement of Shareholders’ Equity - Years ended February 28 or 29, 2002, 2001 and 2000

Notes to Consolidated Financial Statements - Years ended February 28 or 29, 2002, 2001 and 2000

Quarterly Results of Operations (Unaudited)

Report of Independent Auditors

2.	Exhibits required by Item 601 of Regulation S-K:
(3)		Articles of Incorporation and By-laws

(i)	Amended Articles of Incorporation of the Registrant
	This Exhibit has been previously filed as an Exhibit to the Registrant’s 10-K Annual Report for the Fiscal year ended February 28, 1999, and is incorporated herein by reference.
(ii)	Amended Regulations of the Registrant
	This Exhibit has been previously filed as an Exhibit to the Registrant’s 10-K Annual Report for the Fiscal year ended February 28, 1999, and is incorporated herein by reference.

71

PART IV - Continued

(4) Instruments Defining the Rights of Security Holders, including indentures

(i)	Trust Indenture, dated as of July 27, 1998
	This Exhibit has been previously filed as an Exhibit to the Registrant’s 10-K Annual Report for the Fiscal year ended February 28, 1999, and is incorporated herein by reference.
(ii)	Credit Agreement dated August 7, 2001, among the Registrant, National City Bank, Goldman Sachs Credit Partners L.P., Keybank National Association and certain named financial institutions as lenders
(iii)	Indenture dated as of June 29, 2001 between the Registrant, as issuer, and The Huntington National Bank, as Trustee, with respect to the Registrant’s 11.75% Senior Subordinated Notes due 2008
	This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-4 Registration Statement (Registration No. 333-68536) dated August 28, 2001, as is incorporated herein by reference.
(iv)	Indenture dated as of June 29, 2001 between the Registrant, as issuer, and National City Bank, as Trustee, with respect to the registrant’s 7.00% Convertible Subordinated Notes due July 15, 2006
	This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-3 Registration Statement (Registration No. 333-68526) dated August 28, 2001, and is incorporated herein by reference.
(v)	Receivables Purchase Agreement dated as of August 7, 2001, among AGC Funding Corporation, the Registrant, Market Street Funding Corporation and PNC Bank, National Association.

(10) Material Contracts

(i)(A)	(i)	Officers’ contracts *
			This Exhibit has been previously filed as an Exhibit to the Registrant’s Form 10-K Annual Report for the fiscal year ended February 28, 1999, and is incorporated herein by reference.

72

PART IV - Continued

(ii) (A)	(i)	Shareholders’ Agreement dated November 19, 1984 *
	(ii)	Executive Bonus Plan *
	(iii)	Executive Incentive Compensation Plan (as Amended and Restated as at March 6, 1989) *
	(iv)	Executive Deferred Compensation Plan *
		This Exhibit has been previously filed as an Exhibit to the Registrant’s Form 10-K Annual Report for the Fiscal Year ended February 28, 1999, and is incorporated herein by reference.
	(v)	1982 Incentive Stock Option Plan *
		This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-8 Registration Statement (Registration No. 2-84911) dated July 1, 1983, and is incorporated herein by reference.
	(vi)	1985 Incentive Stock Option Plan *
		This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-8 Registration Statement (Registration No. 33-975) dated November 7, 1985, and is incorporated herein by reference.
	(vii)	Supplemental Executive Retirement Plan *
		This Exhibit has been previously filed as an Exhibit to the Registrant’s Form 10-K Annual Report for the Fiscal Year ended February 28, 1999, and is incorporated herein by reference.
	(viii)	1987 Class B Stock Option Plan *
		This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-8 Registration Statement (Registration No. 33-16180) dated July 31, 1987, and is incorporated herein by reference.
	(ix)	Stock Option Agreement with Morry Weiss dated January 25,1988 *

73

PART IV - Continued

(x)	1992 Stock Option Plan *
	This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-8 Registration Statement (Registration No. 33-58582) dated February 22,1993, and is incorporated herein by reference.
(xi)	CEO and Named Executive Officers Compensation Plan *
	This Exhibit has been previously filed as an Exhibit to the Registrant’s Form 10-K Annual Report for the Fiscal Year ended February 28, 2001, and is incorporated herein by reference.
(xii)	1995 Director Stock Plan *
	This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-8 Registration Statement (Registration No. 33-61037) dated July 14, 1995, and is incorporated herein by reference.
(xiii)	1996 Employee Stock Option Plan *
	This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-8 Registration Statement (Registration No. 33-08123) dated July 15, 1996, and is incorporated herein by reference.
(xiv)	1997 Equity and Performance Incentive Plan *

74

PART IV - Continued

(xv)	Employment Agreement dated as of September 25, 2001 between James C. Spira and the Registrant *
	This Exhibit has been previously filed as an Exhibit to the Registrant’s Form S-8 Registration Statement (Registration No. 333-75696) dated December 21, 2001, and is incorporated herein by reference.
(xvi)	Employment Agreement dated as of March 27, 2002 between William S. Meyer and the Registrant *
(xvii)	Employment Agreement dated as of March 1, 2001 between William R. Mason and the Registrant *

(iii)(A)	(i)	Agreement to defer stock option gains with Morry Weiss dated December 15, 1997 *
		This Exhibit has been previously filed as an Exhibit to the Registrant’s Form 10-K Annual Report for the Fiscal Year ended February 28, 1998, and is incorporated herein by reference.

(21)	Subsidiaries of the Registrant
(23)	Consent of Independent Auditors

Executive Compensation Plans and Arrangements
	The Corporation’s executive compensation plans and arrangements are listed under Exhibit 10 hereof and marked by an asterisk (*)

75

PART IV - Continued

(b)	Reports on Form 8-K
	On April 3, 2001, the Corporation filed Form 8-K with the Securities and Exchange Commission. This filing reported that the Corporation had completed its acquisition of Egreetings Network, Inc. On June 1, 2001, the Corporation filed Form 8-K/A with the Securities and Exchange Commission. This filing amended the Form 8-K filed April 3, 2001 to include the historical and pro forma information required for the combined entity.
	On September 27, 2001, the Corporation filed Form 8-K with the Securities and Exchange Commission. This filing reported that the Corporation had acquired the BlueMountain.com division of At Home Corporation. On November 21, 2001, the Corporation filed Form 8-K/A with the Securities and Exchange Commission. This filing amended the Form 8-K filed September 27, 2001 to include the historical and pro forma information required for the combined entity.
	On December 21, 2001, the Corporation filed Form 8-K with the Securities and Exchange Commission. This filing reported that on December 18, 2001, the Corporation had issued a press release announcing financial results for the fiscal quarter ended November 30, 2001. This filing also reported that on December 18, 2001, the Corporation announced suspension of its dividend.

(c)	Exhibits listed in Item 14(a) 3. are included herein or incorporated herein by reference.
(d)	Financial Statement Schedules
	The response to this portion of Item 14 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 Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.

76

PART IV - Continued

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:	May 29, 2002	By: /s/ Jon Groetzinger, Jr. Jon Groetzinger, Jr. Secretary

77

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	Chairman of the Board; Chief Executive Officer;	) )
Morry Weiss	Director	)
		)
/s/ James C. Spira	President; Chief Operating Officer;	) )
James C. Spira	Director	)
		)
		)
/s/ Scott S. Cowen	Director	) )
Scott S. Cowen		)
		)
/s/ Stephen R. Hardis	Director	) )
Stephen R. Hardis		)
		)
/s/ Charles Ratner	Director	) )	May 29, 2002
Charles Ratner		)
		)
/s/ Harry H. Stone	Director	) )
Harry H. Stone		)
		)
/s/ Harriet Mouchly-Weiss	Director	) )
Harriet Mouchly-Weiss		)
		)
/s/ Jack Kahl	Director	) )
Jack Kahl		)
		)
/s/ Jerry Sue Thornton	Director	) )
Jerry Sue Thornton		)
		)
/s/ William S. Meyer	Senior Vice President; Chief Financial Officer	) )
William S. Meyer	(principal financial officer)	)
		)
/s/ Joseph B. Cipollone	Vice President; Corporate Controller	) )
Joseph B. Cipollone	(principal accounting officer)	)

78

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
AMERICAN GREETINGS CORPORATION AND SUBSIDIARIES
(000)

COLUMN A			COLUMN B		COLUMN C							COLUMN D				COLUMN E
					ADDITIONS
			Balance		(1)		(2)									Balance
			at Beginning		Charged to Costs		Charged to Other									at End
Description			of Period		and Expenses		Accounts-Describe					Deductions-Describe				of Period
Year ended February 28, 2002:
	Deduction from asset account:
		Allowance for doubtful accounts	$	47,968	$	21,594	$	1,558		(A	)	$	36,264	(B	)	$	34,856
		Allowance for sales returns	$	136,831	$	306,566	$	(286	)	(A	)	$	340,846	(C	)	$	102,265
		Allowance for other assets	$	14,900	$	20,000	$	0				$	0			$	34,900
Year ended February 28, 2001:
	Deduction from asset account:
		Allowance for doubtful accounts	$	19,245	$	24,968	$	25,002		(A	)	$	21,247	(B	)	$	47,968
		Allowance for sales returns	$	116,792	$	362,885	$	23,866		(A	)	$	366,712	(C	)	$	136,831
		Allowance for other assets	$	14,900	$	6,483	$	0				$	6,483			$	14,900
Year ended February 29, 2000:
	Deduction from asset account:
		Allowance for doubtful accounts	$	15,583	$	7,808	$	(9	)	(A	)	$	4,137	(B	)	$	19,245
		Allowance for sales returns	$	132,103	$	282,170	$	1,796		(A	)	$	299,277	(C	)	$	116,792
		Allowance for other assets	$	16,400	$	0	$	0				$	1,500			$	14,900

Note A:	Includes translation adjustment on foreign subsidiary balances; business unit divestitures for the year ended February 28, 2002 of $525 allowance for doubtful accounts and $269 allowance for sales returns; business unit acquisitions for the year ended February 28, 2001 of $21,842 allowance for doubtful accounts and $26,460 allowance for sales returns; and other reclasses and adjustments.
Note B:	Accounts charged off, less recoveries.
Note C:	Sales returns charged to the allowance account for actual returns for the year.

S - 1

EX-4.II 3 l94460aexv4wii.txt EX-4(II) Exhibit 4(ii) ================================================================================ ================================================================================ CREDIT AGREEMENT AMONG AMERICAN GREETINGS CORPORATION, AS BORROWER THE FINANCIAL INSTITUTIONS NAME HEREIN, AS LENDERS NATIONAL CITY BANK, AND GOLDMAN SACHS CREDIT PARTNERS L.P., AS JOINT-LEAD ARRANGERS AND CO-SYNDICATION AGENTS NATIONAL CITY BANK, AS THE GLOBAL AGENT KEYBANK NATIONAL ASSOCIATION, AS DOCUMENTATION AGENT --------------------- DATED AS OF AUGUST 7, 2001 --------------------- ================================================================================ ================================================================================ TABLE OF CONTENTS ARTICLE I. DEFINITIONS............................................................................................ 1 ARTICLE II. AMOUNT AND TERMS OF CREDIT............................................................................27 Section 2.1. Amount and Nature of Credit.......................................................................27 Section 2.2. Conditions to Credit Events.......................................................................34 Section 2.3. Payment on Notes, Etc.............................................................................35 Section 2.4. Payments Net of Taxes.............................................................................36 Section 2.5. Voluntary Prepayment; Prepayment Fees.............................................................37 Section 2.6. Facility and Other Fees...........................................................................38 Section 2.7. Modification of Commitment........................................................................39 Section 2.8. Mandatory Payment.................................................................................40 Section 2.9. Computation of Interest And Fees; Default Rate....................................................43 Section 2.10. Fixed Charge Coverage Ratio Condition............................................................43 Section 2.11. Extension of Commitment..........................................................................44 ARTICLE III. ADDITIONAL PROVISIONS RELATING TO FIXED RATE........................................................44 Section 3.1. Reserves or Deposit Requirements, Etc.............................................................44 Section 3.2. Tax Law, Etc......................................................................................45 Section 3.3. Eurodollar or Alternate Currency Deposits Unavailable or Interest Rate Unascertainable............45 Section 3.4. Indemnity.........................................................................................46 Section 3.5. Changes in Law Rendering Fixed Rate Loans Unlawful................................................46 Section 3.6. Funding...........................................................................................46 Section 3.7. Capital Adequacy..................................................................................46 ARTICLE IV. CONDITIONS PRECEDENT.................................................................................47 Section 4.1. Notes.............................................................................................47 Section 4.2. Guaranties of Payment.............................................................................47 Section 4.3. Security Documents................................................................................47 Section 4.4. Officer's Certificate, Resolutions, Organizational Documents......................................48 Section 4.5. Legal Opinions....................................................................................48 Section 4.6. Good Standing Certificates and Articles of Incorporation..........................................48 Section 4.7. Closing and Legal Fees; Fee Letters...............................................................48 Section 4.8. Lien Searches.....................................................................................49 Section 4.9. Insurance Certificates............................................................................49 Section 4.10. Senior Indenture.................................................................................49 Section 4.11. Subordinated Indenture...........................................................................49 Section 4.12. Subordinated Convertible Indenture...............................................................49 Section 4.13. Permitted Receivables Facility...................................................................50 Section 4.14. Existing Credit Agreement........................................................................50 Section 4.15. Financial Projections............................................................................50 Section 4.16. Regulatory Approvals.............................................................................50 Section 4.17. Closing Certificate..............................................................................50 -i- Section 4.18. No Material Adverse Change.......................................................................50 Section 4.19. Miscellaneous....................................................................................51 ARTICLE V. COVENANTS.............................................................................................51 Section 5.1. Insurance.........................................................................................51 Section 5.2. Money Obligations.................................................................................51 Section 5.3. Financial Statements..............................................................................51 Section 5.4. Financial Records.................................................................................51 Section 5.5. Franchises........................................................................................53 Section 5.6. ERISA Compliance..................................................................................53 Section 5.7. Financial Covenants...............................................................................53 Section 5.8. Borrowing.........................................................................................53 Section 5.9. Liens.............................................................................................54 Section 5.10. Regulations U and X..............................................................................56 Section 5.11. Investments and Loans............................................................................57 Section 5.12. Merger and Sale of Assets........................................................................57 Section 5.13. Acquisitions.....................................................................................58 Section 5.14. Capital Expenditures.............................................................................59 Section 5.15. Notice...........................................................................................59 Section 5.16. Environmental Compliance.........................................................................60 Section 5.17. Affiliate Transactions...........................................................................60 Section 5.18. Use of Proceeds..................................................................................60 Section 5.19. Corporate Names; Location of Collateral..........................................................61 Section 5.20. Restricted Payments..............................................................................61 Section 5.22. Amendment of Organizational Documents............................................................61 Section 5.23. Real Property Matters............................................................................63 Section 5.24. Restrictive Agreements; Material Indebtedness Agreements.........................................63 ARTICLE VI. REPRESENTATIONS AND WARRANTIES........................................................................64 Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification..........................................65 Section 6.2. Corporate Authority...............................................................................65 Section 6.3. Compliance With Laws..............................................................................66 Section 6.4. Litigation and Administrative Proceedings.........................................................66 Section 6.5. Title to Assets...................................................................................66 Section 6.6. Liens and Security Interests......................................................................67 Section 6.7. Tax Returns.......................................................................................67 Section 6.8. Environmental Laws................................................................................67 Section 6.9. Continued Business................................................................................67 Section 6.10. Employee Benefits Plans..........................................................................67 Section 6.11. Consents or Approvals............................................................................68 Section 6.12. Solvency.........................................................................................68 Section 6.13. Financial Statements.............................................................................68 Section 6.14. Regulations......................................................................................69 Section 6.15. Material Agreements..............................................................................69 Section 6.16. Intellectual Property............................................................................69 Section 6.17. Insurance........................................................................................69 -ii- Section 6.18. Accurate And Complete Statements.................................................................69 Section 6.19. Location; Trade Names............................................................................69 Section 6.20. Investment Company; Holding Company..............................................................70 Section 6.21. Senior Indenture.................................................................................70 Section 6.22. Subordinated Indenture and Subordinated Convertible Indenture....................................70 Section 6.23. Defaults.........................................................................................70 ARTICLE VII. EVENTS OF DEFAULT....................................................................................70 Section 7.1. Payments..........................................................................................71 Section 7.2. Special Covenants.................................................................................71 Section 7.3. Other Covenants...................................................................................71 Section 7.4. Representations And Warranties....................................................................71 Section 7.5. Cross Default.....................................................................................71 Section 7.6. ERISA Default.....................................................................................71 Section 7.7. Change in Control.................................................................................71 Section 7.8. Money Judgment....................................................................................71 Section 7.9. Material Adverse Change...........................................................................71 Section 7.10. Senior Indenture.................................................................................71 Section 7.11. Subordinated Indenture and Subordinated Convertible Indenture....................................72 Section 7.12. Validity of Loan Documents.......................................................................72 Section 7.13. Solvency.........................................................................................72 ARTICLE VIII. REMEDIES UPON DEFAULT...............................................................................72 Section 8.1. Optional Defaults.................................................................................73 Section 8.2. Automatic Defaults................................................................................73 Section 8.3. Letters of Credit.................................................................................73 Section 8.4. Offsets...........................................................................................73 Section 8.5. Equalization Provision............................................................................74 ARTICLE IX. THE GLOBAL AGENT......................................................................................75 Section 9.1. Appointment And Authorization.....................................................................75 ection 9.2. Note Holders.......................................................................................75 Section 9.3. Consultation With Counsel.........................................................................75 Section 9.4. Documents.........................................................................................75 Section 9.5. The Global Agent And Affiliates...................................................................75 Section 9.6. Knowledge of Default..............................................................................75 Section 9.7. Action by the Global Agent........................................................................76 Section 9.8. Notices; Default..................................................................................76 Section 9.9. Indemnification of the Global Agent...............................................................76 Section 9.10. Successor Agent..................................................................................76 ARTICLE X. INTERCREDITOR PROVISIONS...............................................................................77 Section 10.1. Definitions......................................................................................77 Section 10.2. Creditor Obligations to be Ratably Secured.......................................................79 Section 10.3. Appointment of the Collateral Agent..............................................................80 Section 10.4. Pro Rata Distribution of the Creditor Collateral.................................................80 -iii- Section 10.5. Payments or Proceed Received by a Creditor Prior to a Sharing Event..............................80 Section 10.6. Payments or Proceeds Received by the Collateral Agent Prior to a Sharing Event.............................................................................81 Section 10.7. Payments or Proceeds Received After a Sharing Event..............................................81 Section 10.8. Distribution of Proceeds.........................................................................81 Section 10.9. Delivery of Creditor Collateral to the Collateral Agent..........................................82 Section 10.10. Return of Payments..............................................................................82 Section 10.11. Lending Party Rights and Remedies...............................................................82 Section 10.12. Rights and Remedies of the Collateral Agent Upon Sharing Event..................................83 Section 10.13. Appoint of Power of Attorney....................................................................83 Section 10.14. Obligations Unaffected; Modification of Lending Documents.......................................83 Section 10.15. Release of Creditor Collateral..................................................................83 Section 10.16. Accounting......................................................................................83 Section 10.17. Contesting Liens or Security Interests..........................................................84 Section 10.18. Actions by the Collateral Agent.................................................................84 Section 10.19. Bankruptcy Filing...............................................................................84 Section 10.20. Indemnification by Creditors....................................................................85 Section 10.21. Right to Opt Out................................................................................85 Section 10.22. Third Parties...................................................................................85 Section 10.23. Successor Collateral Agent......................................................................85 Section 10.24. Termination.....................................................................................85 ARTICLE XI. MISCELLANEOUS.........................................................................................86 Section 11.1. Lenders' Independent Investigation...............................................................86 Section 11.2. No Waiver; Cumulative Remedies...................................................................86 Section 11.3. Amendments, Consents.............................................................................86 Section 11.4. Notices..........................................................................................87 Section 11.5. Costs, Expenses And Taxes........................................................................87 Section 11.6. Indemnification..................................................................................87 Section 11.7. Obligations Several; No Fiduciary Obligations....................................................88 Section 11.8. Execution in Counterparts........................................................................88 Section 11.9. Binding Effect; Borrowers' Assignment............................................................88 Section 11.10. Lender Assignments/Participations...............................................................88 Section 11.11. Designation.....................................................................................91 Section 11.12. Severability of Provisions; Captions; Attachments...............................................92 Section 11.13. Governing Law; Submission to Jurisdiction.......................................................92 Section 11.14. Legal Representation of Parties.................................................................92 Section 11.15. Judgment Currency...............................................................................92 Section 11.16. Designated Senior Indebtedness..................................................................93 Section 11.17. Jury Trial Waiver..............................................................................S-1 -iv- This CREDIT AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this "Agreement") is made effective as of the 7th day of August, 2001, among: (a) AMERICAN GREETINGS CORPORATION, an Ohio corporation ("Borrower"); (b) the financial institutions named in SCHEDULE 1 hereto (collectively, the "Lenders", and individually each a "Lender"); (c) KEYBANK NATIONAL ASSOCIATION, as documentation agent (the "Documentation Agent"); (d) NATIONAL CITY BANK and GOLDMAN SACHS CREDIT PARTNERS L.P. ("Goldman Sachs"), as joint-lead arrangers and co-syndication agents (collectively, the "Lead Arrangers", and individually each a "Lead Arranger"); and (e) NATIONAL CITY BANK, as administrative agent for all of the Lenders (together with any successor appointed pursuant to Section 9.10 hereof, the "Global Agent"). WITNESSETH: WHEREAS, Borrower and the Lenders desire to contract for the establishment of credits in the aggregate principal amounts hereinafter set forth, to be made available to Borrower upon the terms and subject to the conditions hereinafter set forth; NOW, THEREFORE, it is mutually agreed as follows: ARTICLE I. DEFINITIONS As used in this Agreement, the following terms shall have the following meanings: "364 Day Commitment" shall mean the obligation hereunder, during the applicable Commitment Period, of each 364 Day Lender to participate in the making of 364 Day Revolving Loans up to the aggregate amount set forth opposite such Lender's name under the column headed "364 Day Commitment Amount" as set forth on SCHEDULE 1 hereto (or such other amount as shall be determined pursuant to Section 2.7 hereof). "364 Day Exposure" shall mean, at any time, the aggregate principal amount of all 364 Day Revolving Loans outstanding. "364 Day Lender" shall mean a Lender with a 364 Day Commitment. "364 Day Note" shall mean a 364 Day Revolving Credit Note in the form of the attached EXHIBIT C, executed and delivered pursuant to Section 2.1(b) hereof. 1 "364 Day Revolving Loan" shall mean a loan granted to Borrower by the 364 Day Lenders in accordance with Section 2.1(b) hereof. "Acquisition" shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person, or any business or division of any Person (other than the purchase of Receivables Related Assets by the Receivables Subsidiary from AGSC in connection with the Permitted Receivables Facility), (b) the acquisition of in excess of fifty percent (50%) of the stock (or other equity interest) of any Person, or (c) the acquisition of another Person (other than a Company) by a merger or consolidation or any other combination with such Person. "Additional Commitment" shall have the meaning given to such term in Section 2.7(c) hereof. "Additional Convertible Proceeds Amount" shall mean the Convertible Excess Proceeds used by Borrower within one hundred eighty (180) days of the Closing Date to effect an Acquisition permitted pursuant to Section 5.13 hereof. "Additional Lender" shall mean a financial institution that shall become a Lender hereunder during the Commitment Increase Period pursuant to Section 2.7(c) hereof. "Additional Lender Assumption Agreement" shall mean an Assumption Agreement in form and substance satisfactory to the Global Agent, wherein an Additional Lender shall become a Lender hereunder. "Adjusted Consolidated Cash Flow" shall mean, for any period, Consolidated Net Earnings plus: (a) an amount equal to any extraordinary loss plus any net loss realized by the Companies in connection with any Disposition, to the extent such losses were deducted in computing such Consolidated Net Earnings; plus (b) provision for taxes based on income or profits of the Companies, to the extent such provision for taxes was deducted in computing such Consolidated Net Earnings; plus (c) Consolidated Interest Expense whether paid or accrued and whether or not capitalized (including, without limitation, amortization of debt issuance costs and original issue discount, non-cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with capital lease obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net of the effect of all payments made or received pursuant to Hedge Agreements), to the extent that any such expense was deducted in computing such Consolidated Net Earnings; plus (d) non-recurring and special charges deducted in computing Consolidated Net Earnings; plus (e) depreciation, amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) and other non-cash expenses (excluding any such non-cash expense to the extent that it represents an accrual of or reserve for cash expenses in any future period or amortization of a prepaid cash expense that was paid in a prior period) of the Companies to the extent that such depreciation, amortization and other non-cash expenses were deducted in computing such Consolidated Net Earnings; minus (f) non-cash items increasing such Consolidated Net Earnings, other than the accrual of revenue in the ordinary course of business, in each case, on a Consolidated basis and in accordance with GAAP. 2 "Advantage" shall mean any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) received by any Lender in respect of the Applicable Debt, if such payment results in that Lender having less than its Pro Rata Share (based upon its Applicable Commitment Percentage and, in the case of a Sharing Event pursuant to the terms of Section 8.5 hereof, based upon its Equalization Percentage, as defined in Section 8.5 hereof) of the Applicable Debt then outstanding, than was the case immediately before such payment. "Affiliate" shall mean any Person, directly or indirectly, controlling, controlled by or under common control with a Company and "control" (including the correlative meanings, the terms "controlling", "controlled by" and "under common control with") shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Company, whether through the ownership of voting securities, by contract or otherwise. "AGSC" shall mean American Greetings Service Corp. "AGSC Note" shall mean the Subordinated Promissory Note, dated as of August 7, 2001, by Borrower to AGSC, as the same may, with the prior written consent of the Global Agent, from time to time be amended, restated or otherwise modified. "Alternate Currency" shall mean Australian Dollars, Euros and Pounds Sterling, or any other foreign currency, other than Eurodollars, agreed to by the Global Agent, in consultation with the General Revolving Lenders, that shall be freely transferable and convertible into Dollars. "Alternate Currency Loan" shall mean a General Revolving Loan that is denominated in an Alternate Currency and on which Borrower shall pay interest at a rate based on the applicable LIBO Pre-Margin Rate. "Alternate Currency Exposure" shall mean, at any time, the sum of (a) the aggregate principal amount of all Alternate Currency Loans outstanding, and (b) the Alternate Currency Letter of Credit Exposure. "Alternate Currency Letter of Credit Exposure" shall mean, at any time, the sum of (a) the Dollar Equivalent of the aggregate undrawn face amount of all issued and outstanding Letters of Credit denominated in an Alternate Currency, and (b) the Dollar Equivalent of the aggregate amount of the draws made on Letters of Credit denominated in an Alternate Currency that have not been reimbursed by Borrower or converted to a General Revolving Loan pursuant to Section 2.1(a)(ii) hereof. "Alternate Currency Maximum Amount" shall mean the Dollar Equivalent of Forty Million Dollars ($40,000,000). "Applicable Commitment Percentage" shall mean, for each Lender, (a) with respect to the General Revolving Commitments, the percentage, if any, set forth opposite such Lender's name, if any, under the column headed "General Revolving Commitment Percentage" as 3 described in SCHEDULE 1 hereto; (b) with respect to the 364 Day Commitments, the percentage, if any, set forth opposite such Lender's name under the column headed "364 Day Commitment Percentage" as described in SCHEDULE 1 hereto; and (c) with respect to the Term Loan Commitments, the percentage, if any, set forth opposite such Lender's name under the column headed "Term Loan Commitment Percentage" as described in SCHEDULE 1 hereto. "Applicable Debt" shall mean: (a) with respect to the General Revolving Commitments, collectively, (i) all Indebtedness incurred by Borrower to the Fronting Lender, the Swing Line Lender and the General Revolving Lenders pursuant to this Agreement and includes, without limitation, the principal of and interest on all General Revolving Notes and the Swing Line Note and all obligations with respect to Letters of Credit, (ii) each extension, renewal or refinancing thereof, in whole or in part, (iii) the facility, prepayment and other fees and amounts payable hereunder in connection with the General Revolving Commitments, and (iv) all Related Expenses incurred in connection with the foregoing; (b) with respect to the 364 Day Commitments, collectively, (i) all Indebtedness incurred by Borrower to the 364 Day Lenders pursuant to this Agreement and includes, without limitation, the principal of and interest on all 364 Day Notes, (ii) each extension, renewal or refinancing thereof, in whole or in part, (iii) the facility, prepayment and other fees and amounts payable hereunder in connection with the 364 Day Commitments, and (iv) all Related Expenses incurred in connection with the foregoing; and (c) with respect to the Term Loan Commitments, collectively, (i) all Indebtedness incurred by Borrower to the Term Loan Lenders pursuant to this Agreement and includes, without limitation, the principal of and interest on all Term Notes, (ii) each extension, renewal or refinancing thereof in whole or in part, (iii) all prepayment and other fees and amounts payable hereunder in connection with the Term Loan Commitments, and (iv) all Related Expenses incurred in connection with the foregoing. "Applicable Facility Fee Rate" shall mean the number of basis points that is determined, based upon the S&P Rating or the Moody's Rating (whichever is higher, but subject to the proviso set forth below), as follows:

-------------------------------------------------------------------------------------------------------------- APPLICABLE FACILITY FEE RATE APPLICABLE FACILITY FEE RATE FOR GENERAL REVOLVING FOR 364 DAY COMMITMENTS S&P RATING MOODY'S RATING COMMITMENTS -------------------------------------------------------------------------------------------------------------- A or higher A2 or higher 8.50 basis points 7.00 basis points -------------------------------------------------------------------------------------------------------------- A- A3 10.00 basis points 8.50 basis points -------------------------------------------------------------------------------------------------------------- BBB+ Baa1 12.50 basis points 10.00 basis points -------------------------------------------------------------------------------------------------------------- BBB Baa2 25.00 basis points 20.00 basis points -------------------------------------------------------------------------------------------------------------- BBB- Baa3 37.50 basis points 25.00 basis points -------------------------------------------------------------------------------------------------------------- BB+ Ba1 50.00 basis points 37.50 basis points -------------------------------------------------------------------------------------------------------------- BB or lower or unrated Ba2 or lower or 50.00 basis points 37.50 basis points unrated --------------------------------------------------------------------------------------------------------------

4 Changes to the Applicable Facility Fee Rate shall be immediately effective upon any change in the Moody's Rating or the S&P Rating; provided, however, that (a) (i) if, at any time, there shall be a Split Rating of one rating, then the Applicable Facility Fee Rate then in effect shall be based upon the higher of the Moody's Rating or the S&P Rating, or (ii) if, at any time, there shall be a Split Rating of two ratings or more, then the Applicable Facility Fee Rate then in effect shall be based upon the rating that is one level below the higher of the Moody's Rating or the S&P Rating; or (b) notwithstanding the foregoing subpart (a) hereof, if, at any time, either (i) the Moody's Rating shall be below Baa2 or (ii) the S& P Rating shall be below BBB, then, in such case, the Applicable Facility Fee Rate then in effect shall be based upon the lower of the Moody's Rating or the S&P Rating. The above matrix does not modify or waive, in any respect, the rights of the Global Agent and the Lenders to charge the Default Rate, or the rights and remedies of the Global Agent and the Lenders hereunder. "Applicable Margin" shall mean the number of basis points that is determined, based upon the S&P Rating or the Moody's Rating (whichever is higher, but subject to the proviso set forth below), as follows:

- ----------------------------------------------------------------------------------------------------------------------- APPLICABLE MARGIN APPLICABLE MARGIN APPLICABLE MARGIN APPLICABLE MARGIN S&P RATING MOODY'S FOR FIXED RATE LOANS FOR FIXED RATE LOANS FOR BASE RATE FOR BASE RATE RATING UNDER GENERAL UNDER 364 DAY LOANS UNDER LOANS UNDER 364 REVOLVING COMMITMENTS GENERAL REVOLVING DAY COMMITMENTS COMMITMENTS COMMITMENTS - ----------------------------------------------------------------------------------------------------------------------- A or higher A2 or higher 91.50 basis points 93.00 basis points 0 basis points 0 basis points - ----------------------------------------------------------------------------------------------------------------------- A- A3 115.00 basis points 116.50 basis points 0 basis points 0 basis points - ----------------------------------------------------------------------------------------------------------------------- BBB+ Baa1 137.50 basis points 140.00 basis points 0 basis points 0 basis points - ----------------------------------------------------------------------------------------------------------------------- BBB Baa2 175.00 basis points 180.00 basis points 0 basis points 0 basis points - ----------------------------------------------------------------------------------------------------------------------- BBB- Baa3 212.50 basis points 225.00 basis points 0 basis points 0 basis points - ----------------------------------------------------------------------------------------------------------------------- BB+ Ba1 250.00 basis points 262.50 basis points 100 basis points 100 basis points - ----------------------------------------------------------------------------------------------------------------------- BB or lower Ba2 or 300.00 basis points 312.50 basis points 150 basis points 150 basis points or unrated lower or unrated - -----------------------------------------------------------------------------------------------------------------------

Changes to the Applicable Margin shall be immediately effective upon any change in the Moody's Rating or the S&P Rating, as applicable; provided, however, that (a) (i) if, at any time, there shall be a Split Rating of one rating, then the Applicable Margin then in effect shall be based upon the higher of the Moody's Rating or the S&P Rating, or (ii) if, at any time, there shall be a Split Rating of two ratings or more, then the Applicable Margin then in effect shall be based upon the rating that is one level below the higher of the Moody's Rating or the S&P Rating; or (b) notwithstanding the foregoing subpart (a) hereof, if, at any time (i) either the Moody's Rating shall be below Baa2 or (ii) the S&P Rating shall be below BBB, then, in such case, the Applicable Margin then in effect shall be based upon the lower of the Moody's Rating or the S&P Rating. The above matrix does not modify or waive, in any respect, the rights of the Global Agent and the Lenders to charge the Default Rate, or the rights and remedies of the Global Agent and the Lenders hereunder. 5 "Applicable Term Loan Margin" shall mean, with respect to the Term Loan, (a) four hundred fifty (450) basis points for any portion of the Term Loan that is a Eurodollar Loan, and (b) two hundred fifty (250) basis points for any portion of the Term Loan that is a Base Rate Loan; provided, however, that, the Applicable Term Loan Margin shall be increased by an additional fifty (50) basis points at any time that either (i) the Moody's Rating shall be Ba2 or lower, (ii) the S&P Rating shall be BB or lower or (iii) if Adjusted Consolidated Cash Flow for any period of four consecutive quarters ending on or prior to May 31, 2003, shall be less than Two Hundred Twenty-Five Million Dollars ($225,000,000). Any change to the Applicable Term Loan Margin shall be immediately effective upon any change in the Moody's Rating or the S&P Rating. The foregoing does not modify or waive, in any respect, the rights of the Global Agent and the Lenders to charge the Default Rate, or the rights and remedies of the Global Agent and the Lenders hereunder. "Assignment Agreement" shall mean an Assignment and Acceptance Agreement in the form of the attached EXHIBIT K. "Base Rate" shall mean a rate per annum equal to the greater of (a) the Prime Rate or (b) one-half of one percent (1/2%) in excess of the Federal Funds Effective Rate. Any change in the Base Rate shall be effective immediately from and after such change in the Base Rate. "Base Rate Loan" shall mean a Loan described in Section 2.1(a), (b) or (c) hereof on which Borrower shall pay interest at a rate based upon the Base Rate. "Business Day" shall mean a day of the year on which banks are not required or authorized to close in Cleveland, Ohio, and, if the applicable Business Day relates to any Eurodollar Loan, on which dealings are carried on in the London interbank Eurodollar market, and, if the applicable Business Day relates to any Alternate Currency Loan, on which commercial banks are open for international business (including the clearing of currency transfer in the relevant Alternate Currency) in the principal financial center of the home country of such Alternate Currency. "Capital Distribution" shall mean a payment made, liability incurred or other consideration given for the purchase, acquisition, redemption or retirement of any capital stock or other equity interest of any Company or as a dividend, return of capital or other distribution (other than any stock dividend, stock split or other equity distribution payable only in capital stock or other equity of the Company in question) in respect of any Company's capital stock or other equity interest. "Capitalization Ratio" shall mean, for the most recently completed fiscal quarter of the Companies, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated Total Indebtedness, to (b) the sum of Consolidated Total Indebtedness and Consolidated Net Worth. "Cash Dividend" shall mean a Capital Distribution of Borrower payable in cash to the shareholders of Borrower with respect to any class or series of stock of Borrower. "Cash Equivalent" shall mean (a) a security that is the direct obligation of the United States of America, any member state of the European Union or any other sovereign nation 6 acceptable to the Global Agent so long as the full faith of and credit of such nation is pledged in support thereof; (b) time deposits, certificates of deposit or bankers acceptances issued by any Lender or any other domestic or foreign commercial bank or United States branch of a foreign bank licensed under the laws of the United States or a State thereof having (i) capital and surplus in excess of Two Hundred Fifty Million Dollars ($250,000,000) and (ii) a Keefe Bank Watch Rating of "B" or better or, with respect to any investment or deposit in a foreign bank in excess of Two Hundred Fifty Thousand Dollars ($250,000), an equivalent rating from a comparable foreign rating agency (each an "Approved Depository"); (c) commercial paper or securities that at the time of investment therein shall have been assigned one of the two highest quality ratings in accordance with the rating systems employed by either Moody's or S&P; or (d) fully collateralized repurchase obligations entered into with any Lender or Approved Depository, having a term of not more than thirty (30) days and covering securities of the type describe in subpart (a) above. "Casualty Event Proceeds" shall mean any funds, in excess of the aggregate amount of One Million Dollars ($1,000,000) for any single casualty event, received by any Company or Companies from (a) insurance losses, returns or unearned premiums under any policy of insurance; (b) any condemnation, eminent domain or other proceeding relating to the Real Property; or (c) any litigation, settlement or other legal proceeding. "Change in Control" shall mean (a) the acquisition of, or, if earlier, the shareholder or director approval of the acquisition of, ownership or voting control, directly or indirectly, beneficially or of record, on or after the Closing Date, by any Person or group (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934, as then in effect), of shares representing more than twenty percent (20%) of the aggregate ordinary Voting Power represented by the issued and outstanding capital stock of Borrower; provided, however, that the foregoing restriction shall not apply to the Permitted Holders so long as the acquisition by the Permitted Holders of such Voting Power shall not result, directly or indirectly, in a "going private transaction" within the meaning of the Securities Exchange Act of 1934; (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors of Borrower by Persons who were neither (i) nominated by the board of directors of Borrower nor (ii) appointed by directors so nominated; or (c) the occurrence of a change in control, or other similar provision, as defined in any Material Indebtedness Agreement. "Closing Date" shall mean the effective date of this Agreement. "Closing Fee Letter" shall mean the Closing Fee Letter between Borrower and the Lenders, dated as of the Closing Date. "Code" shall mean the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder. "Collateral" shall mean, collectively, (a) all of the Collateral, as defined in each of the respective Security Documents executed by any Company, (b) all of the Mortgaged Real Property, and (c) any other property, whether tangible or intangible, at any time securing the Debt, or any part thereof. 7 "Collateral Agent" shall mean National City Bank in its capacity as collateral agent under this Agreement and the Security Documents, together with any successor collateral agent appointed pursuant to Section 10.23 hereof. "Collateral Assignment and Security Agreement" shall mean a Collateral Assignment and Security Agreement, in the form of the attached EXHIBIT G, executed and delivered on or after the Closing Date by a Company to the Collateral Agent, pursuant to which such Company shall have granted to the Collateral Agent a security interest in and an assignment of all intellectual property owned by such Company, as the same may from time to time be amended, restated or otherwise modified. "Combined Closing Commitment Amount" shall mean Two Hundred Twenty-Five Million Dollars ($225,000,000). "Combined Maximum Commitment Amount" shall mean Two Hundred Forty-Five Million Dollars ($245,000,000). "Commitment" shall mean the obligation hereunder of (a) the General Revolving Lenders to make General Revolving Loans, the Fronting Lender to issue Letters of Credit and the Swing Line Lender to make Swing Loans pursuant to the General Revolving Commitments, up to the Maximum General Revolving Commitment Amount, (b) the 364 Day Lenders to make 364 Day Loans pursuant to the 364 Day Commitments, up to the Maximum 364 Day Commitment Amount, and (c) the Term Loan Lenders to make the Term Loan pursuant to the Term Loan Commitment, in the Term Loan Commitment Amount. "Commitment Increase Period" shall mean the period from the Closing Date to July 31, 2002, or such later date as shall be agreed to in writing by the Global Agent. "Commitment Period" shall mean (a) with respect to the General Revolving Commitments, the period from the Closing Date to January 15, 2006, and (b) with respect to the 364 Day Commitment, the period from the Closing Date to August 6, 2002, or, in the case of both (a) and (b), such earlier date on which the Commitment shall have been terminated pursuant to Article VIII hereof. "Company" shall mean Borrower or a Subsidiary. "Companies" shall mean Borrower and all Subsidiaries. "Compliance Certificate" shall mean a certificate, substantially in the form of the attached EXHIBIT F. "Consideration" shall mean, in connection with an Acquisition, the aggregate consideration paid, including borrowed funds, cash, the issuance of securities or notes, the assumption or incurring of liabilities (direct or contingent), the payment of consulting fees or fees for a covenant not to compete and any other consideration paid for the purchase. "Consolidated" shall mean the resultant consolidation of the financial statements of Borrower and its Subsidiaries in accordance with GAAP, including principles of consolidation 8 consistent with those applied in preparation of the consolidated financial statements referred to in Section 6.13 hereof. "Consolidated Adjusted Net Worth" shall mean, at any date, (a) the net book value (after deducting all applicable reserves and excluding any re-appraisal or write-up of assets) of the assets (other than patents, goodwill or other intangibles) of the Companies, minus (b) Consolidated Total Liabilities. "Consolidated Capital Expenditures" shall mean, for any period, the amount of capital expenditures of the Companies, as determined on a Consolidated basis and in accordance with GAAP. "Consolidated Depreciation and Amortization Charges" shall mean, for any period, the aggregate of all depreciation and amortization charges for fixed assets, leasehold improvements and general intangibles (specifically including goodwill) of the Companies for such period, as determined on a Consolidated basis and in accordance with GAAP. "Consolidated EBITDA" shall mean, for any period, on a Consolidated basis and in accordance with GAAP, Consolidated Net Earnings for such period plus the aggregate amounts deducted in determining such Consolidated Net Earnings in respect of (a) income taxes, (b) Consolidated Interest Expense, (c) Consolidated Depreciation and Amortization Charges, and (d) the Restructuring Charges. "Consolidated Interest Expense" shall mean, for any period, the interest expense of the Companies for such period, as determined on a Consolidated basis and in accordance with GAAP; provided, however, that Consolidated Interest Expense shall include the interest component of the Permitted Receivables Facility. "Consolidated Net Earnings" shall mean, for any period, the net income (loss) of the Companies for such period, as determined on a Consolidated basis and in accordance with GAAP. "Consolidated Net Worth" shall mean, at any date, the Consolidated stockholders' equity of the Companies, determined as of such date in accordance with GAAP. "Consolidated Total Indebtedness" shall mean all Indebtedness of the Companies, as determined on a Consolidated basis and in accordance with GAAP, including but not limited to all Indebtedness under the Permitted Receivables Facility. "Consolidated Total Liabilities" shall mean the total of items of Indebtedness or liabilities of the Companies that, in accordance with GAAP, would be included in determining total liabilities on the liability side of the balance sheet of the Companies as of the date of determination, as determined on a Consolidated basis. "Controlled Group" shall mean a Company and each Person required to be aggregated with a Company under Code Sections 414(b), (c), (m) or (o). 9 "Convertible Excess Proceeds" shall mean the gross proceeds received by Borrower pursuant to the issuance of notes under the Subordination Convertible Indenture in excess of One Hundred Fifty Million Dollars ($150,000,000). "Credit Event" shall mean (a) the making by any Lender of a Loan, the conversion by any Lender of a Fixed Rate Loan or Base Rate Loan, or the continuation by any Lender of a Fixed Rate Loan, (b) the making by the Swing Line Lender of a Swing Loan, or (c) the issuance by the Fronting Lender of any Letter of Credit. "Credit Exposure" shall mean, at any time, with respect to any Commitment, the sum of the Dollar Equivalent of (a) the aggregate principal amount of Loans outstanding thereunder, and (b) the Letter of Credit Exposure, if any. "Debt" shall mean, collectively, (a) all Indebtedness and other obligations incurred by Borrower to the Global Agent, the Swing Line Lender, the Fronting Lender or the Lenders pursuant to this Agreement and includes, without limitation, the principal of and interest on all Notes and all obligations in connection with Letters of Credit; (b) each extension, renewal or refinancing thereof in whole or in part; (c) the facility and other fees, including any prepayment fee, payable hereunder; and (d) all Related Expenses. "Default" shall mean an event or condition that constitutes, or with the lapse of any applicable grace period or the giving of notice or both would constitute, an Event of Default and that has not been waived by the Required Lenders (or, if applicable, all of the Lenders) in writing. "Default Rate" shall mean a rate per annum equal to two percent (2%) in excess of the Base Rate from time to time in effect. "Derived Base Rate" shall mean with respect to Base Rate Loans, a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) plus the Base Rate. "Derived Fixed Rate" shall mean with respect to Eurodollar Loans or Alternate Currency Loans, a rate per annum equal to the sum of (a) the Applicable Margin (from time to time in effect), plus (b) the applicable LIBO Pre-Margin Rate, plus (c) (i) if the S&P Rating shall be lower than BBB- but higher than BB or the Moody's Rating shall be lower than Baa3 but higher than Ba2, seventy-five (75) basis points, or (ii) if the S&P Rating shall be BB or lower or the Moody's Rating shall be Ba2 or lower, one hundred (100) basis points. "Derived Swing Loan Rate" shall mean, with respect to any Swing Loan, a rate per annum quoted to Borrower by the Swing Line Lender and agreed to by Borrower, which rate shall be determined by the Swing Line Lender by adding the Applicable Margin (from time to time in effect) to the Swing Line Lender's costs of funds, as determined by Swing Line Lender. "Derived Term Loan Base Rate" shall mean a rate per annum equal to the sum of the Applicable Term Loan Margin (from time to time in effect) plus the Base Rate. 10 "Derived Term Loan Eurodollar Rate" shall mean a rate per annum equal to the sum of the Applicable Term Loan Margin (from time to time in effect) plus the LIBO Pre-Margin Rate applicable to Eurodollar Loans. "Designated Lending Office" shall mean, with respect to the Global Agent, the address set forth on the signature pages to this Agreement, or such other office or address as the Global Agent shall designate in writing to Borrower and the appropriate Lenders. "Disposition" shall mean the sale, lease, transfer or other disposition of assets (whether in one or more than one transaction) by a Company, other than a sale, lease, transfer or other disposition made by a Company pursuant to Section 5.12(e) hereof. "Dividend Reduction Amount" shall mean (a) for any date of determination on or before February 28, 2003, an amount equal to (i) the maximum amount of Cash Dividends Borrower was permitted to make during the period from the Closing Date to the date of determination, or if such period is longer than twelve months, during the twelve month period immediately preceding such date of determination minus (ii) the actual amount of Cash Dividends made by Borrower during the relevant period, and (b) for any date of determination after February 28, 2003 an amount equal to (i) the maximum amount of Cash Dividends Borrower was permitted to make during the most recently completed fiscal year pursuant to Section 5.20(a) hereof, minus (ii) the actual amount of Cash Dividends made by Borrower during such fiscal year. "Dollars" or "$" shall mean the lawful currency of the United States of America. "Dollar Equivalent" of (a) an Alternate Currency Loan, shall mean the Dollar equivalent of the amount of such Alternate Currency Loan, determined by the Global Agent on the basis of its spot rate at approximately 11:00 A.M. London time on the date two (2) Business Days before the date of such Alternate Currency Loan, for the purchase of the relevant Alternate Currency with Dollars for delivery on the date of such Alternate Currency Loan, and (b) any other amount, shall mean the Dollar equivalent of such amount, determined by the Global Agent on the basis of its spot rate at approximately 11:00 A.M. London time on the date for which the Dollar equivalent amount of such amount is being determined, for the purchase of the relevant Alternate Currency with Dollars for delivery on such date; provided, however, that, in calculating the Dollar Equivalent for purposes of determining (i) Borrower's obligation to prepay Loans pursuant to Section 2.8 hereof, or (ii) Borrower's ability to request additional Loans pursuant to the Commitment, the Global Agent may, in its discretion, on any Business Day (prior to payment in full of the Debt) selected by the Global Agent, calculate the Dollar Equivalent of each such Loan. The Global Agent shall notify Borrower of the Dollar Equivalent of such Alternate Currency Loan or any other amount at the time that Dollar Equivalent shall be determined. "Domestic Company" shall mean Borrower or a Domestic Subsidiary. "Domestic Subsidiary" shall mean a Subsidiary that is not a Foreign Subsidiary. "Eligible Receivables" shall mean accounts receivable eligible for inclusion in the Permitted Receivables Facility against which the provider of such Permitted Receivables Facility is willing to lend as of the date of the most recent Permitted Receivables Facility Certificate. 11 "Eligible Transferee" shall mean any commercial bank, financial institution or other "accredited investor" (as defined in SEC Regulation D) that is not Borrower or a Subsidiary or any Affiliate thereof. "Environmental Laws" shall mean all provisions of law, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by the government of the United States of America, Australia, Canada, the United Kingdom or any other foreign jurisdiction, or by any state or municipality thereof, or by any court, agency, instrumentality, regulatory authority or commission of any of the foregoing concerning health, safety and protection of, or regulation of the discharge of substances into, the environment. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated pursuant thereto. "ERISA Event" shall mean (a) the existence of a condition or event with respect to an ERISA Plan that presents a risk of the imposition of an excise tax or any other liability on a Company or of the imposition of a Lien on the assets of a Company; (b) the engagement by a Controlled Group member in a non-exempt "prohibited transaction" (as defined under ERISA Section 406 or Code Section 4975) or a breach of a fiduciary duty under ERISA that could result in liability to a Company; (c) the application by a Controlled Group member for a waiver from the minimum funding requirements of Code Section 412 or ERISA Section 302 or a Controlled Group member is required to provide security under Code Section 401(a)(29) or ERISA Section 307; (d) the occurrence of a Reportable Event with respect to any Pension Plan as to which notice is required to be provided to the PBGC; (e) the withdrawal by a Controlled Group member from a Multiemployer Plan in a "complete withdrawal" or a "partial withdrawal" (as such terms are defined in ERISA Sections 4203 and 4205, respectively); (f) the involvement of, or occurrence or existence of any event or condition that makes likely the involvement of, a Multiemployer Plan in any reorganization under ERISA Section 4241; (g) the failure of an ERISA Plan (and any related trust) that is intended to be qualified under Code Sections 401 and 501 to be so qualified or the failure of any "cash or deferred arrangement" under any such ERISA Plan to meet the requirements of Code Section 401(k); (h) the taking by the PBGC of any steps to terminate a Pension Plan or appoint a trustee to administer a Pension Plan, or the taking by a Controlled Group member of any steps to terminate a Pension Plan; (i) the failure by a Controlled Group member or an ERISA Plan to satisfy any requirements of law applicable to an ERISA Plan; (j) the commencement, existence or threatening of a claim, action, suit, audit or investigation with respect to an ERISA Plan, other than a routine claim for benefits; or (k) any occurrence by or any expectation of the incurrence by a Controlled Group member of any liability for post-retirement benefits under any Welfare Plan, other than as required by ERISA Section 601, ET. SEQ. or Code Section 4980B. "ERISA Plan" shall mean an "employee benefit plan" (within the meaning of ERISA Section 3(3)) that a Controlled Group member at any time sponsors, maintains, contributes to, has liability with respect to or has an obligation to contribute to such plan. "Eurodollar" shall mean a Dollar denominated deposit in a bank or branch outside of the United States. 12 "Eurodollar Loan" shall mean a Loan described in Section 2.1(a), (b) or (c) hereof that is denominated in Eurodollars and on which Borrower shall pay interest at a rate based on the applicable LIBO Pre-Margin Rate. "Event of Default" shall mean an event or condition that constitutes an event of default as defined in Article VII hereof. "Excess Cash Flow" shall mean, for any period, on a Consolidated basis and in accordance with GAAP, an amount (if positive) equal to (a) the sum, without duplication, of the amounts for such period of (i) Consolidated EBITDA plus (ii) other income (to the extent it has been excluded from the calculation of Consolidated EBITDA), minus (b) the sum, without duplication, of the amounts for such period of (i) Operating Working Capital Adjustment, (ii) Consolidated Interest Expense, (iii) Consolidated Capital Expenditures (net of any related refinancings with respect to such expenditures), (iv) scheduled or mandatory principal payments with respect to Consolidated Total Indebtedness (other than optional prepayments of the General Revolving Commitments or the 364 Day Commitments), (v) Capital Distributions, (vi) cash Restructuring Charges, (vii) the charges set forth on SCHEDULE 6.7 hereto, and (viii) provisions for current taxes based on income of the Companies and payable in cash with respect to such period. As used in this definition, (A) "Consolidated Current Assets" shall mean, as of the date of determination, the amount of Consolidated total assets that may properly be classified as current assets in accordance with GAAP, excluding cash and cash equivalents, deferred and refundable income taxes, and including Other Assets, (B) "Consolidated Current Liabilities" shall mean, as of the date of determination, the amount of Consolidated Total Liabilities that may properly be classified as current liabilities in accordance with GAAP, excluding debt due within one year, and including Other Liabilities, (C) "Operating Working Capital Adjustment" shall mean, for any period, the amount (that may be a negative number) by which Operating Working Capital as of the beginning of such period exceeds (or is less than) Operating Working Capital as of the end of such period, and (D) "Operating Working Capital" shall mean, as of the date of determination, the excess of Consolidated Current Assets over Consolidated Current Liabilities. "Excess Cash Flow Prepayment" shall have the meaning given to such term in Section 2.8(b) hereof. "Federal Funds Effective Rate" shall mean, for any day, the rate per annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the "Federal Funds Effective Rate" as of the Closing Date. "Financial Officer" shall mean any of the following officers: chief executive officer, president, chief financial officer or treasurer. Unless otherwise qualified, all references to a Financial Officer in this Agreement shall refer to a Financial Officer of Borrower. 13 "Financial Projections" shall mean the financial projections prepared by Borrower and delivered to the Global Agent and the Lenders for the period from May 31, 2001 through February 29, 2004. "Fixed Charge Coverage Ratio Condition" shall mean any time that Borrower's Fixed Charge Coverage Ratio (as defined in the Subordinated Indenture) shall be less than (a) 2.50 to 1.00 for the period from the Closing Date through June 29, 2002, (b) 2.75 to 1.00 on June 30, 2002 through June 29, 2003, and (c) 3.00 to 1.00 thereafter, as calculated in accordance with the terms and conditions of the Subordinated Indenture. "Fixed Rate Loan" shall mean a Eurodollar Loan or an Alternate Currency Loan. "Foreign Subsidiary" shall mean a Subsidiary that is organized outside of the United States, including any Subsidiary organized under the laws of any territory of the United States. "Fronting Lender" shall mean, as to any Letter of Credit transaction hereunder, National City Bank, as the issuer of such Letter of Credit, or such other General Revolving Lender (or subsidiary or affiliate thereof), as determined by the Global Agent, as shall agree to issue a Letter of Credit in its own name, but on behalf of the General Revolving Lenders. "GAAP" shall mean generally accepted accounting principles as then in effect, which shall include the official interpretations thereof by the Financial Accounting Standards Board, applied on a basis consistent with the past accounting practices and procedures of Borrower and its Subsidiaries. "General Revolving Commitment" shall mean the obligation hereunder, during the applicable Commitment Period, of (a) each Lender to participate in the making of General Revolving Loans up to the aggregate amount set forth opposite such Lender's name under the column headed "General Revolving Commitment Amount" as set forth on SCHEDULE 1 hereto (or such other amount as shall be determined pursuant to Section 2.7 hereof, (b) the Swing Line Lender to make, and each General Revolving Lender to participate, if required, in the making of, Swing Loans pursuant to the Swing Line Commitment, and (c) the Fronting Lender to issue, and each Lender to participate in the issuance of, Letters of Credit pursuant to the Letter of Credit Commitment. "General Revolving Commitment Exposure" shall mean, at any time, the sum of the Dollar Equivalent of (a) the aggregate principal amount of all General Revolving Loans outstanding, (b) the Swing Line Exposure, and (c) the Letter of Credit Exposure. "General Revolving Lender" shall mean a Lender with a General Revolving Commitment. "General Revolving Note" shall mean a General Revolving Credit Note in the form of the attached EXHIBIT A, executed and delivered pursuant to Section 2.1(a)(i) hereof. "General Revolving Loan" shall mean a loan granted to Borrower by the General Revolving Lenders in accordance with Section 2.1(a)(i) hereof. 14 "Global Agent Fee Letter" shall mean the Global Agent Fee Letter between Borrower and the Global Agent, dated as of the Closing Date. "Guarantor" shall mean a Person that pledges its credit or property in any manner for the payment or other performance of the indebtedness, contract or other obligation of another and includes (without limitation) any guarantor (whether of payment or of collection), surety, co-maker, endorser or Person that agrees conditionally or otherwise to make any purchase, loan or investment in order thereby to enable another to prevent or correct a default of any kind. "Guarantor of Payment" shall mean each of the Companies set forth on SCHEDULE 2 hereto that are each executing and delivering a Guaranty of Payment, or any other Person that shall have delivered a Guaranty of Payment to the Global Agent subsequent to the Closing Date. "Guaranty of Payment" shall mean each Guaranty of Payment of Debt, in the form of EXHIBIT H hereto, executed and delivered on or after the Closing Date in connection herewith by a Guarantor of Payment, as the same may from time to time be amended, restated or otherwise modified. "Hedge Agreement" shall mean any hedge agreement, interest rate swap, cap, collar or floor agreement, or other interest rate management device entered into by Borrower with any Person in connection with any Indebtedness of Borrower. "Indebtedness" shall mean, for any Company (excluding in all cases trade payables payable in the ordinary course of business by such Company), without duplication, (a) all obligations to repay borrowed money, direct or indirect, incurred, assumed, or guaranteed, (b) all obligations for the deferred purchase price of capital assets, (c) all obligations under conditional sales or other title retention agreements, (d) all obligations (contingent or otherwise) under any letter of credit, banker's acceptance, currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device, (e) all synthetic leases, (f) all lease obligations that have been or should be capitalized on the books of such Company in accordance with GAAP, (g) all obligations of such Company with respect to asset securitization financing, including, but not limited to, all obligations of any Company under the Permitted Receivables Facility, (h) all obligations to advance funds to, or to purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person, and (i) any other transaction (including forward sale or purchase agreements) having the commercial effect of a borrowing of money entered into by such Company to finance its operations or capital requirements. "Intellectual Property" shall mean, with respect to any Person, all patents, patent applications, trademarks, service marks, copyrights, licenses and other intellectual property of such Person. "Interest Adjustment Date" shall mean the last day of each Interest Period. "Interest Coverage Ratio" shall mean, for the most recently completed four fiscal quarters of the Companies, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest Expense. 15 "Interest Period" shall mean, with respect to any Fixed Rate Loan, the period commencing on the date such Fixed Rate Loan is made and ending on the last day of such period, as selected by Borrower pursuant to the provisions hereof, and, thereafter, each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period, as selected by Borrower pursuant to the provisions hereof. The duration of each Interest Period for any Fixed Rate Loan shall be one month, two months, three months or six months, in each case as Borrower may select upon notice, as set forth in Section 2.2 hereof, provided that (a) if Borrower shall fail to so select the duration of any Interest Period for a Eurodollar Loan, Borrower shall be deemed to have converted such Eurodollar Loan to a Base Rate Loan at the end of the then current Interest Period; (b) Borrower may not select any Interest Period for a Fixed Rate Loan that shall end after any date when principal shall be due on such Fixed Rate Loan, and (c) if Borrower shall fail to select a new Interest Period with respect to an outstanding Alternate Currency Loan at least three (3) Business Days prior to the Interest Adjustment Date applicable to such Alternative Currency Loan, such Alternate Currency Loan shall be repaid on the last day of the applicable Interest Period. ... "Landlord's Agreement" shall mean a landlord's waiver or mortgagee's waiver, each in form and substance satisfactory to the Collateral Agent, delivered by a Company in connection with this Agreement, as the same may from time to time be amended, restated or otherwise modified. "Lender Credit Exposure" shall mean, for any Lender, at any time, the aggregate of such Lender's respective Pro Rata Shares of the General Revolving Commitment Exposure, the 364 Day Exposure and the Term Loan Exposure. "Letter of Credit" shall mean any sight commercial documentary letter of credit or any standby letter of credit that shall be issued by the Fronting Lender for the account of Borrower, including amendments thereto, if any, and shall have an expiration date no later than the earlier of (a) one year after its date of issuance or (b) thirty (30) days prior to the last day of the applicable Commitment Period. "Letter of Credit Commitment" shall mean the commitment of the Fronting Lender, on behalf of the Lenders, to issue Letters of Credit in an aggregate face amount of up to the Dollar Equivalent of Sixty Million Dollars ($60,000,000), during the Commitment Period applicable to the General Revolving Commitment, on the terms and conditions set forth in Section 2.1(a)(ii) hereof. "Letter of Credit Exposure" shall mean, at any time, the sum of the Dollar Equivalent of (a) the aggregate undrawn face amount of all issued and outstanding Letters of Credit, and (b) the aggregate of the draws made on Letters of Credit that have not been reimbursed by Borrower or converted to a General Revolving Loan pursuant to Section 2.1(a)(ii) hereof. "Leverage Ratio" shall mean, at any time, for the most recently completed four fiscal quarters of the Companies, on a Consolidated basis and in accordance with GAAP, the ratio of (a) Consolidated Total Indebtedness to (b) Consolidated EBITDA. "LIBO Pre-Margin Rate" shall mean: 16 (a) with respect to a Eurodollar Loan, the rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%), as determined by the Global Agent, that equals the average rate per annum at which deposits in Dollars are offered for deposits of the duration and amount in question, at 11:00 A.M. (London time) (or as soon thereafter as practicable) two Business Days prior to the first day of the Interest Period in question, to the Global Agent by prime banking institutions in any eurodollar market reasonably selected by the Global Agent, as adjusted for reserves required under Regulation D of the Federal Reserve Act or under any other applicable law or regulation; and (b) with respect to an Alternate Currency Loan, the rate per annum (rounded upwards, if necessary, to the next higher 1/16 of 1%), as determined by the Global Agent, that equals the average rate per annum at which deposits in the relevant Alternate Currency are offered for deposits of the duration and amount in question, at 11:00 A.M. (London time) (or as soon thereafter as practicable) two Business Days prior to the first day of the Interest Period in question, to the Global Agent by prime banking institutions in any Alternate Currency market reasonably selected by the Global Agent, as adjusted for reserves required under Regulation D of the Federal Reserve Act or under any other applicable law or regulation. "Lien" shall mean any mortgage, security interest, lien (statutory or other), charge, encumbrance on, pledge or deposit of, or conditional sale, leasing, sale with a right of redemption or other title retention agreement and any capitalized lease with respect to any property (real or personal) or asset. "Loan" shall mean a General Revolving Loan, a 364 Day Revolving Loan, a Swing Loan or the Term Loan. "Loan Documents" shall mean, collectively, this Agreement, each Note, each Guaranty of Payment, each Security Document, the Global Agent Fee Letter, the Closing Fee Letter, each Assignment Agreement, and all documentation relating to each Letter of Credit, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced. "Mandatory Prepayment Event" shall mean (a) the receipt by any Company of any Casualty Event Proceeds; (b) a public or private offering of equity or debt securities by any Company; or (c) a Significant Asset Disposition the proceeds of which have not been reinvested in accordance with Section 5.12(f) hereof. "Material Adverse Effect" shall mean a material adverse effect on (a) the business, operations, property, condition (financial or otherwise) or prospects of Borrower, (b) the business, operations, property, condition (financial or otherwise) or prospects of the Companies taken as a whole, or (c) the validity or enforceability of this Agreement or any of the other Loan Documents or the rights and remedies of the Global Agent or the Lenders hereunder or thereunder. "Material Indebtedness Agreement" shall mean any debt instrument, lease (capital, operating or otherwise), guaranty, contract, commitment, agreement or other arrangement evidencing any Indebtedness of any Company in excess of the aggregate amount of Five Million Dollars ($5,000,000) (or the Dollar Equivalent thereof). 17 "Maximum 364 Day Commitment Amount" shall mean the principal amount of One Hundred Five Million Dollars ($105,000,000) (or such other amount as shall be determined pursuant to Section 2.7 hereof). "Maximum Acquisition Amount" shall mean an amount equal to (a) Ten Million Dollars ($10,000,000), plus (b) the Additional Convertible Proceeds Amount (which amount shall only be applicable in connection with one Acquisition), if any, plus (c) the Dividend Reduction Amount. "Maximum Annual Dividend Amount" shall mean, for any fiscal year of the Companies, Twenty-Seven Million Dollars ($27,000,000); provided, however, that, (a) if, during any fiscal quarter, the S&P Senior Rating shall be BB (or lower) or the Moody's Senior Rating shall be Ba2 (or lower), the Maximum Annual Dividend Amount for purposes of determining the Maximum Quarterly Dividend Amount for such fiscal quarter shall be Thirteen Million Five Hundred Thousand Dollars ($13,500,000), (b) if, during any fiscal quarter, the S&P Senior Rating shall be BBB- and the Moody's Senior Rating shall be Baa3, the Maximum Annual Dividend Amount for purposes of determining the Maximum Quarterly Dividend Amount for such fiscal quarter shall be Fifty Million Dollars ($50,000,000), and (c) if, during any fiscal quarter, the S&P Senior Rating shall be BBB and the Moody's Senior Rating shall be Baa2, the Maximum Annual Dividend Amount for purposes of determining the Maximum Quarterly Dividend Amount for such fiscal quarter shall be an amount equal to the greater of (i) Fifty Million Dollars ($50,000,000), or (ii) fifty percent (50%) of Consolidated Net Earnings for such year. In determining the foregoing amount, if, during any period of the Companies, there is a change in the S&P Senior Rating or the Moody's Senior Rating, then the lowest ratings level of each of the S&P Senior Rating and the Moody's Senior Rating in effect during such fiscal year shall apply. "Maximum General Revolving Commitment Amount" shall mean the principal amount of One Hundred Twenty Million Dollars ($120,000,000) (including the Dollar Equivalent of each Alternate Currency Loan), or such other amount as shall be determined pursuant to Section 2.7 hereof. "Maximum Quarterly Dividend Amount" shall mean, for any fiscal quarter of the Companies, an amount equal to twenty-five percent (25%) of the Maximum Annual Dividend Amount. "Minimum Borrowing Amount" shall mean with respect to (a) a Base Rate Loan, an amount of not less than One Million Dollars ($1,000,000), increased by increments of One Hundred Thousand Dollars ($100,000), (b) a Fixed Rate Loan, an amount of not less than Five Million Dollars ($5,000,000) (or, with respect to an Alternate Currency Loan, the Dollar Equivalent thereof), increased by increments of One Million Dollars ($1,000,000) (or, with respect to an Alternate Currency Loan, such approximately comparable amount as shall result in a rounded number of the applicable Alternate Currency), and (iii) a Swing Loan, an amount of not less than One Million Dollars ($1,000,000). "Minimum Required Consolidated EBITDA Amount" shall mean, for the fiscal period set forth in the table below, the amount set forth opposite such period: 18

--------------------------------------------------------------------------------------------------- PERIOD AMOUNT --------------------------------------------------------------------------------------------------- For the four quarter period ending August 31, 2001 $216,000,000 --------------------------------------------------------------------------------------------------- For the four quarter period ending November, 30, 2001 $229,000,000 --------------------------------------------------------------------------------------------------- For the four quarter period ending February 28, 2002 $256,000,000 --------------------------------------------------------------------------------------------------- For the four quarter period ending May 31, 2002 $309,000,000 --------------------------------------------------------------------------------------------------- For the four quarter period ending August 31, 2002 $302,000,000 --------------------------------------------------------------------------------------------------- For the four quarter period ending November, 30 2002 $334,000,000 --------------------------------------------------------------------------------------------------- For the four quarter period ending February 28, 2003 $404,000,000 ---------------------------------------------------------------------------------------------------

"Moody's" shall mean Moody's Investors Service, Inc., or any successor to such company. "Moody's Rating" means the rating accorded to Borrower's senior credit facilities by Moody's. "Moody's Senior Rating" shall mean the senior implied rating accorded to Borrower by Moody's. "Mortgage" shall mean a Mortgage, Deed of Trust or other instrument, in form and substance reasonably satisfactory to the Global Agent, executed by a Company on or after the Closing Date, with respect to a Mortgaged Real Property, as the same may from time to time be amended, restated or otherwise modified. "Mortgaged Real Property" shall mean each of the parcels of real property as set forth on SCHEDULE 3 hereto, or interests therein, owned or leased by a Company, together with each other parcel of real property that shall become subject to a Mortgage on or after the Closing Date, in each case together with all of such Company's right, title and interest in the improvements and buildings thereon and all appurtenances, easements or other rights belonging thereto. "Multiemployer Plan" shall mean a Pension Plan that is subject to the requirements of Subtitle E of Title IV of ERISA. "Note" shall mean any General Revolving Note, any 364 Day Note, the Swing Line Note, any Term Note or any other note delivered pursuant to this Agreement. "Notice of Loan" shall mean a Notice of Loan in the form of the attached EXHIBIT E. "Obligor" shall mean (a) a Person whose credit or any of whose property is pledged to the payment of the Debt and includes, without limitation, any Guarantor, and (b) any signatory to a Related Writing. "Organizational Documents" shall mean, with respect to any Person (other than an individual), such Person's Articles (Certificate) of Incorporation, or equivalent formation documents, and Regulations (Bylaws), or equivalent governing documents, and any amendments to any of the foregoing. 19 "Other Assets" shall have the meaning assigned to such term in the applicable Consolidated balance sheet for the Companies determined in conformity with the historical accounting practices of the Companies in effect as of the date of the financial statements for the fiscal year ended February 28, 2001. "Other Liabilities" shall have the meaning assigned to such term in the applicable Consolidated balance sheet for the Companies determined in conformity with the historical accounting practices of the Companies in effect as of the date of the financial statements for the fiscal year ended February 28, 2001. "PBGC" shall mean the Pension Benefit Guaranty Corporation, or its successor. "Pension Plan" shall mean an ERISA Plan that is a "pension plan" (within the meaning of ERISA Section 3(2)). "Permitted Foreign Subsidiary Loans and Investments" shall mean (a) the investments, existing as of the Closing Date, by a Domestic Company (other than the Receivables Subsidiary) in Foreign Subsidiaries, as set forth on SCHEDULE 5.11 hereto; (b) loans and investments by a Domestic Company (other than the Receivables Subsidiary) to or in a Foreign Subsidiary made on or after the Closing Date in the ordinary course of business, so long as the aggregate amount of all such loans and investments by all Domestic Companies shall not, at any time, exceed (i) Ten Million Dollars ($10,000,000) (or the Dollar Equivalent thereof), minus (ii) the Dollar Equivalent of the amount of Indebtedness of Foreign Subsidiaries guaranteed by a Domestic Company pursuant to subpart (c) of this definition; and (c) loans to a Foreign Subsidiary by any Person (other than a Company), and any guaranty of such loans by a Domestic Subsidiary (other than the Receivables Subsidiary), so long as the aggregate principal amount of all such loans shall not exceed the Dollar Equivalent of Fifteen Million Dollars ($15,000,000) at any time. "Permitted Holders" shall mean Morry Weiss, Judith A. Weiss, Harry H. Stone, Gary Weiss, Jeffrey Weiss, Zev Weiss, Elie Weiss, the Irving I. Stone Limited Liability Co. and the American Greetings Corporation Retirement Profit Sharing and Savings Plan or any Person controlled by any of the foregoing. "Permitted Investment" shall mean an investment of a Company in the stock (or other debt or equity instruments) of a Person (other than a Company), so long as (a) the Company making the investment shall be Borrower or a Guarantor of Payment; and (b) the aggregate amount of all such investments of all Companies shall not exceed, at any time, the Dollar Equivalent of Fifteen Million Dollars ($15,000,000). "Permitted Receivables Facility" shall mean the accounts receivable facility established pursuant to the Receivables Facility Documents whereby certain of the Companies shall have sold or transferred, or hereafter sell or transfer, the accounts receivables of the Companies directly or indirectly to the Receivables Subsidiary which in turn transfers to a buyer, purchaser or lender undivided fractional interests in such accounts receivable, so long as (a) no portion of the Indebtedness or any other obligation (contingent or otherwise) under such Permitted Receivables Facility shall be guaranteed by any Company, (b) there shall be no recourse or obligation to any Company (other than the Receivables Subsidiary) whatsoever other than pursuant to customary representations, warranties, covenants and indemnities entered into in the 20 ordinary course of business in connection with such Permitted Receivables Subsidiary, and (c) no Company (other than the Receivables Subsidiary) shall have provided, either directly or indirectly, any other credit support of any kind in connection with such Permitted Receivables Facility, other than as set forth in subpart (b) of this definition. "Permitted Receivables Facility Certificate" shall mean a certificate executed by a Financial Officer of Borrower and delivered to the Global Agent, certifying (a) the Prior Seasonal Peak Drawing Level for purposes of complying with Section 5.27 hereof, (b) that the provider of the Permitted Receivables Facility has informed Borrower in writing that such provider has confirmed the amount of the Prior Seasonal Peak Drawing Level as specified in the foregoing subpart (a) and that there has not been and is not anticipated to be any change or condition in the existing or expected Eligible Receivables as compared to those used in the calculation of the Prior Seasonal Peak Drawing Level that could reasonably be expected to have a material adverse impact on the amount available for drawing under the Permitted Receivables Facility, and (c) that all credit enhancements in effect as of the date of the Permitted Receivables Facility Certificate shall remain in full force and effect for the term of the Permitted Receivables Facility. "Person" shall mean any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, institution, trust, estate, government or other agency or political subdivision thereof or any other entity. "Pledge Agreement" shall mean a Pledge Agreement, in the form of the attached EXHIBIT J, executed and delivered to the Collateral Agent by a Company on or after the Closing Date, as the same may from time to time be amended, restated or otherwise modified. "Prepayment Proceeds" shall mean the proceeds of any Mandatory Prepayment Event minus taxes, fees and expenses actually paid in connection with such Mandatory Prepayment Event; provided, however, that, with respect to a Mandatory Prepayment Event relating to the issuance of equity securities by any Company, Prepayment Proceeds shall be limited to an amount equal to eight percent (80%) of such Prepayment Proceeds. "Prime Rate" shall mean the interest rate established from time to time by the Global Agent as the Global Agent's prime rate, whether or not such rate is publicly announced; the Prime Rate may not be the lowest interest rate charged by the Global Agent for commercial or other extensions of credit. Each change in the Prime Rate shall be effective immediately from and after such change. "Prior Seasonal Peak Drawing Level" shall mean, as of any date of calculation, the amount that Borrower could have drawn as of the most recent November 30 prior to the date of calculation pursuant to the terms of the Permitted Receivables Facility in effect on the date of calculation, as determined by applying the criteria (after giving effect to the existence of any credit enhancements in effect as of the date of calculation) for Eligible Receivables of any Receivables Facility Participant to the accounts receivable of such Receivables Facility Participant as of the prior November 30, excluding for purposes of making such calculation (a) twenty percent (20%) of any accounts receivable owed by Wal-Mart, Kmart or their respective affiliates as of November 30, 2000 (other than any such accounts receivable owed to Plus Mark, Inc. which shall not be subject to such twenty percent (20%) exclusion), and (b) the entire 21 amount of any accounts receivable owed by any other Person that, as of the date of calculation, does not satisfy the credit standards of Borrower or the provider of the Permitted Receivables Facility. "Pro Rata Basis" or "pro rata basis" shall mean, as appropriate, (a) distribution to the applicable Lenders by the Global Agent in accordance with the Applicable Commitment Percentages, or (b) distribution among the Commitments in accordance with the Credit Exposure thereunder. "Pro Rata Share" or "pro rata share" shall mean, with respect to the Applicable Debt, a Lender's share in accordance with such Lender's Applicable Commitment Percentage. "Ratable Account" or "ratable account" shall mean each Lender's share of the Applicable Debt in accordance with such Lender's Applicable Commitment Percentage. "Ratable Share" or "ratable share" shall mean each Lender's share of the Applicable Debt in accordance with such Lender's Applicable Commitment Percentage. "Ratably" or "ratably" shall mean in accordance with each Lender's Ratable Share. "Real Property" shall mean any one of the parcels of real property, or interests therein, owned or leased by a Company (including, but not limited to, the Mortgaged Real Property), together with all improvements and buildings thereon and all appurtenances, easements or other rights belonging thereto. "Receivables Facility Documents" shall mean, collectively, the Receivables Purchase Agreement, dated as of August 7, 2001, among the Receivables Subsidiary, the members of various purchase groups, as Purchasers, American Greetings Corp., as Servicer, and PNC Bank, National Association, as Administrator, together with each other document, instrument or agreement executed in connection with the foregoing, as any of the foregoing may, in accordance with Section 5.24(b) hereof, be amended, restated or otherwise modified or replaced from time to time. "Receivables Facility Participant" shall mean Borrower, Gibson Greetings, Inc. or Plus Mark, Inc. "Receivables Related Assets" shall mean (a) any indebtedness and other obligations owed to any Receivables Facility Participant by, or any right of such Receivables Facility Participant to payment from or on behalf of, the Person obligated with respect to such indebtedness or other obligations, arising in connection with the sale of goods or the rendering of services by any Receivables Facility Participant (in each case, an "Account Receivable") that is subject to the Permitted Receivables Facility, and the following to the extent that they are proceeds of or relate to the Accounts Receivable that are subject to the Permitted Receivables Financing: (i) accounts, (ii) instruments, (iii) chattel paper, (iv) general intangibles, (v) the merchandise or goods (including returned goods), the sale or lease of which gave rise to such Accounts Receivable, and the insurance proceeds thereof, (vi) contractual rights (including any agreement, lease, invoice or other writing), guaranties, insurance, claims and indemnities, (vii) books and records, (viii) all documentation of title evidencing the shipment or storage of any 22 goods (including returned goods), (ix) guaranties and collections of such Accounts Receivable, (x) any security interest or liens and property thereto from time to time purporting to secure payment of such Accounts Receivable, (xi) lock-box accounts and amounts on deposit therein, (xii) monies due or to become due, and (xiii) all proceeds and products of and all amounts received or receivable under any of the foregoing; (b) the Purchase and Sale Agreement (as defined in the Permitted Receivables Facility Documents) and all rights of AGSC thereunder; and (c) the Receivables Sale Agreement (as defined in the Receivables Facility Documents) and all rights of Borrower thereunder. "Receivables Subsidiary" shall mean AGC Funding Corporation, a Delaware corporation, and a Wholly-Owned Subsidiary of Borrower that shall have been established as a "bankruptcy remote" Subsidiary for the sole purpose of acquiring accounts receivable under the Permitted Receivables Facility and that shall not engage in any activities other than in connection with the Permitted Receivables Facility. "Related Expenses" shall mean any and all costs, liabilities and expenses (including, without limitation, losses, damages, penalties, claims, actions, reasonable attorneys' fees, legal expenses, judgments, suits and disbursements) incurred by, imposed upon, or asserted against, the Global Agent, Collateral Agent or any Lender in any attempt by the Global Agent or Collateral Agent (a) to obtain, preserve, perfect or enforce any security interest evidenced by any Security Document or any other Loan Document or any Related Writing; (b) to obtain payment, performance or observance of any and all of the Debt; (c) to maintain, insure, audit, collect, preserve, repossess or dispose of any of the collateral securing the Debt or any thereof, including, without limitation, costs and expenses for appraisals, assessments and audits of any Company or any such collateral; or (d) incidental or related to (a) through (c) above, including, without limitation, interest thereupon from the date incurred, imposed or asserted until paid at the Default Rate. "Related Writing" shall mean each Loan Document and any other assignment, mortgage, security agreement, guaranty agreement, subordination agreement, financial statement, audit report or other writing furnished by Borrower, Subsidiary or Obligor, or any of their respective officers, to the Global Agent or the Lenders pursuant to or otherwise in connection with this Agreement. "Reportable Event" shall mean a reportable event as that term is defined in Title IV of ERISA, except actions of general applicability by the Secretary of Labor under Section 110 of such Act. "Required Lenders" shall mean the holders of at least fifty-one percent (51%) of the Total Commitment Amount, or, if there shall be any borrowing hereunder, the holders (including such Lender's risk participation with respect to outstanding Swing Loans and Letters of Credit) of at least fifty-one percent (51%) of the sum of the Dollar Equivalent of (a) the aggregate amount of the Loans outstanding (other than Swing Loans), (b) the Letter of Credit Exposure, and (c) the Swing Line Exposure. "Restricted Payment" shall mean (a) any Capital Distribution; (b) any amount paid by a Company in repayment, redemption, retirement, repurchase, direct or indirect, of any Subordinated Indebtedness, including, but not limited to, the Indebtedness incurred pursuant to 23 the notes issued in connection with the Subordinated Indenture or the Subordinated Convertible Indenture; (c) any amount paid by a Company in repayment, redemption, retirement, repurchase, direct or indirect, of any the Indebtedness incurred pursuant to the notes or securities issued in connection with the Senior Indenture; or (d) the exercise by a Company of any right of defeasance or covenant defeasance or similar right with respect to (i) any Subordinated Indebtedness, including, but not limited to the Indebtedness incurred pursuant to the notes issued in connection with the Subordinated Indenture or the Subordinated Convertible Indenture, or (ii) the Indebtedness incurred pursuant to the notes or securities issued in connection with the Senior Indenture. "Restructuring Charges" shall mean the restructuring charges, write-downs and reserves taken by Borrower in accordance with GAAP in connection with the restructuring of the Companies to the extent such restructuring charges, write-downs and reserves were deducted in determining Consolidated Net Earnings; provided, however, that (a) the aggregate amount of all such charges shall not exceed Three Hundred Fifty Million Six Hundred Thousand Dollars ($350,600,000), which amount shall include no more than (i) Thirty Two Million Six Hundred Thousand Dollars ($32,600,000) related to the write-down of Borrower's investment in Egreetings Network, Inc., (ii) Eighteen Million Dollars ($18,000,000) related to changes in contractual relationships with strategic partners of americangreetings.com, (iii) Ninety Million Dollars ($90,000,000) related to the implementation of scan-based trading at select retailers, or (iv) Two Hundred Ten Million Dollars ($210,000,000) related to corporate restructuring, and (b) only those charges that shall have been taken during Borrower's fiscal year ending February 28, 2002 shall be deemed to be Restructuring Charges for purposes of this Agreement. "SEC" shall mean the United States Securities and Exchange Commission, or any governmental body or agency succeeding to any of its principal functions. "Security Agreement" shall mean a Security Agreement, in the form of EXHIBIT J hereto, executed and delivered by a Company to the Collateral Agent in connection with this Agreement, as the same may from time to time be amended, restated or otherwise modified. "Security Documents" shall mean each Security Agreement, each Pledge Agreement, each Collateral Assignment and Security Agreement, each Mortgage, each Landlord's Agreement, each U.C.C. financing statement executed in connection herewith or securing any interest created in any of the foregoing documents, and any other documents relating to any of the foregoing, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced. "Senior Indenture" shall mean the Indenture between Borrower and NBD Bank, as trustee, dated as of July 27, 1998, as the same may, in accordance with Section 5.24(b) hereof, from time to time be amended, supplemented, restated or otherwise modified or replaced. "Significant Asset Disposition" shall mean a Disposition or Dispositions in which the aggregate fair market value or book value, whichever is greater, of the assets sold, leased, transferred or otherwise disposed of shall be greater than or equal to One Million Dollars ($1,000,000). 24 "Standard & Poor's" shall mean Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc., or any successor to such company. "S&P Rating" means the rating accorded to Borrower's senior credit facilities by Standard & Poor's. "S&P Senior Rating" shall mean the corporate credit rating accorded to Borrower by S&P. "Split Rating" shall exist at any time there shall be a difference in level between the Moody's Rating and the S&P Rating that correlates with the Moody's Rating. "Subordinated", as applied to Indebtedness, shall mean that the Indebtedness shall have been subordinated (by written terms or written agreement being, in either case, in form and substance satisfactory to the Global Agent and the Required Lenders) in favor of the prior payment in full of the Debt. "Subordinated Convertible Indenture" shall mean the Indenture between Borrower and National City Bank, as trustee, dated as of June 29, 2001, as the same may, in accordance with Section 5.24(b) hereof, from time to time be amended, supplemented, restated or otherwise modified or replaced, pursuant to which Borrower shall have issued the 7.00% Convertible Subordinated Notes Due July 15, 2006. "Subordinated Indenture" shall mean the Indenture between Borrower and The Huntington National Bank, as trustee, dated as of June 29, 2001, as the same may, in accordance with Section 5.24(b) hereof, from time to time be amended, supplemented, restated or otherwise modified or replaced, pursuant to which Borrower shall have issued the 11.75% Senior Subordinated Notes Due 2008. "Subsidiary" of Borrower or any of its Subsidiaries shall mean (a) a corporation more than fifty percent (50%) of the Voting Power of which is owned, directly or indirectly, by Borrower or by one or more other subsidiaries of Borrower or by Borrower and one or more subsidiaries of Borrower, (b) a partnership or limited liability company of which Borrower, one or more other subsidiaries of Borrower or Borrower and one or more subsidiaries of Borrower, directly or indirectly, is a general partner or managing member, as the case may be, or otherwise has the power to direct the policies, management and affairs thereof, or (c) any other Person (other than a corporation) in which Borrower, one or more other subsidiaries of Borrower or Borrower and one or more subsidiaries of Borrower, directly or indirectly, has at least a majority interest in the Voting Power or the power to direct the policies, management and affairs thereof. "Swing Line" shall mean the credit facility established by the Swing Line Lender for Borrower in accordance with Section 2.1(a)(iii) hereof. "Swing Line Commitment" shall mean the commitment of the Swing Line Lender to make Swing Loans to Borrower up to the maximum aggregate amount at any time outstanding of Ten Million Dollars ($10,000,000), in accordance with the terms and conditions of the Swing Line. 25 "Swing Line Exposure" shall mean, at any time, the aggregate principal amount of all Swing Loans outstanding. "Swing Line Lender" shall mean the Global Agent, as holder of the Swing Line Commitment. "Swing Line Note" shall mean the Swing Line Note in the form of the attached EXHIBIT B, executed and delivered pursuant to Section 2.1(a)(iii) hereof. "Swing Loan" shall mean a loan granted to Borrower by the Swing Line Lender under the Swing Line. "Swing Loan Maturity Date" shall mean, with respect to any Swing Loan, the earlier of (a) the last day of the period for such Swing Loan as established by the Swing Line Lender and agreed to be Borrower but in no event later than thirty (30) days after the date such Swing Loan is made, or (b) the last day of the applicable Commitment Period. "Term Loan" shall mean the Term Loan made by the Term Loan Lenders pursuant to Section 2.1(c) hereof. "Term Loan Commitment" shall mean the obligation hereunder of each Term Loan Lender to participate in the making of the Term Loan, up to the amount set forth opposite such Term Loan Lender's name under the column headed "Term Loan Commitment Amount", as set forth on SCHEDULE 1 hereto. "Term Loan Commitment Amount" shall mean One Hundred Twenty-Five Million Dollars ($125,000,000). "Term Loan Exposure" shall mean, at any time, the outstanding principal amount of the Term Loan. "Term Loan Lender" shall mean a Lender with a Term Loan Commitment. "Term Loan Maturity Date" shall mean June 15, 2006. "Term Loan Prepayment Fee" shall mean (a) for the period from the Closing Date through the first anniversary of the Closing Date, an amount equal to five percent (5%) of the principal amount to be prepaid, (b) for the period from the second anniversary of the Closing Date through the third anniversary of the Closing Date, an amount equal to three percent (3%) of the principal amount to be prepaid, and (c) for the period from the third anniversary of the Closing Date through the fourth anniversary of the Closing Date, an amount equal to one percent (1%) of the principal amount to be prepaid; provided, however, that, notwithstanding the foregoing, the Term Loan Prepayment Fee with respect to a prepayment of the Term Loan pursuant to Section 2.8(b) or subdivision (vi) of Section 5.12(f) hereof, shall be an amount equal to one percent (1%) of the principal amount to be prepaid. "Term Note" shall mean a Term Note in the form of the attached EXHIBIT D, executed and delivered pursuant to Section 2.1(c) hereof. 26 "Total Commitment Amount" shall mean the Dollar Equivalent of the amount of the Commitment. "Voting Power" shall mean, with respect to any Person, the exclusive ability to control, through the ownership of shares of capital stock, partnership interests, membership interests or otherwise, the election of members of the board of directors or other similar governing body of such Person, and the holding of a designated percentage of Voting Power of a Person means the ownership of shares of capital stock, partnership interests, membership interests or other interests of such Person sufficient to control exclusively the election of that percentage of the members of the board of directors or similar governing body of such Person. "Welfare Plan" shall mean an ERISA Plan that is a "welfare plan" within the meaning of ERISA Section 3 (l). "Wholly-Owned Subsidiary" shall mean, with respect to any Person, any corporation, limited liability company or other entity, all of the securities or other ownership interest of which having ordinary voting power to elect a majority of the board of directors, or other persons performing similar functions, are at the time directly or indirectly owned by such Person. Any accounting term not specifically defined in this Article I shall have the meaning ascribed thereto by GAAP. The foregoing definitions shall be applicable to the singular and plurals of the foregoing defined terms. ARTICLE II. AMOUNT AND TERMS OF CREDIT Section 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and conditions of this Agreement, each Lender shall participate, to the extent hereinafter provided, in making Loans to Borrower, and issuing Letters of Credit at the request of Borrower, in such aggregate amount as Borrower shall request pursuant to the Commitment. Each Lender, for itself and not one for any other, agrees to participate in Loans made and Letters of Credit issued hereunder during the Commitment Period on such basis that (i) immediately after the completion of any borrowing by Borrower, the Dollar Equivalent of the aggregate principal amount then outstanding on each Note (other than any Swing Line Note) issued to such Lender or, if there is no Note, outstanding from such Lender, when combined with the Dollar Equivalent of such Lender's Pro Rata Share of any Letter of Credit Exposure or Swing Line Exposure, shall not be in excess of the respective amounts of any of such Lender's 364 Day Commitment, General Revolving Commitment or Term Loan Commitment; and (ii) the Dollar Equivalent of the principal amount outstanding on each Note issued to such Lender (other than any Swing Line Note) or, if there is no Note, outstanding from such Lender, shall represent, respectively that percentage of the aggregate principal amount of Loans (other than Swing Loans) then outstanding under each of the 364 Day Commitments, General Revolving Commitments and Term Loan Commitments that shall be such Lender's Applicable Commitment Percentage. 27 Within each Commitment, each borrowing (other than Swing Loans) from the Lenders hereunder shall be made Pro Rata according to the respective Applicable Commitment Percentages of the Lenders. The Loans may be made and Letters of Credit may be issued as follows: (a) GENERAL REVOLVING COMMITMENTS. (i) GENERAL REVOLVING LOANS. Subject to the terms and conditions of this Agreement, during the applicable Commitment Period, the General Revolving Lenders shall make a General Revolving Loan or General Revolving Loans to Borrower in such amount or amounts as Borrower may from time to time request, but not exceeding in aggregate principal amount at any time outstanding hereunder the Maximum General Revolving Commitment Amount, when such General Revolving Loans are combined with the Letter of Credit Exposure and the Swing Line Exposure; provided, however, that Borrower shall not request a General Revolving Loan hereunder (and the General Revolving Lenders shall not be obligated to make a General Revolving Loan) if, after giving effect thereto, (A) the Alternate Currency Exposure would exceed the Alternate Currency Maximum Amount or (B) the General Revolving Commitment Exposure would exceed the Maximum General Revolving Commitment. Borrower shall have the option, subject to the terms and conditions set forth herein, to borrow General Revolving Loans, maturing on the last day of the applicable Commitment Period, by means of any combination of Base Rate Loans, Eurodollar Loans, or Alternate Currency Loans. With respect to each Alternate Currency Loan, subject to the other provisions of this Agreement, Borrower shall have the right to receive all of the proceeds of such Alternate Currency Loan in an Alternate Currency. Each Alternate Currency Loan shall be made in a single Alternate Currency. Borrower shall pay interest on the unpaid principal amount of Base Rate Loans outstanding from time to time under the General Revolving Commitment from the date thereof until paid at the Derived Base Rate from time to time in effect. Interest on such Base Rate Loans shall be payable, commencing September 30, 2001, and on the last day of each succeeding December, March, June and September thereafter and at the maturity thereof. Borrower shall pay interest on the unpaid principal amount of each Fixed Rate Loan outstanding from time to time under the General Revolving Commitment, fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Margin) at the Derived Fixed Rate. Interest on such Fixed Rate Loan shall be payable on each Interest Adjustment Date (provided that if an Interest Period shall exceed three months, the interest shall be paid every three months, commencing three months from the beginning of such Interest Period). At the request of Borrower to the Global Agent, subject to the notice and other provisions of Section 2.2 hereof, the General Revolving Lenders shall convert, under the General Revolving Commitment, (A) Base Rate Loans to Eurodollar Loans at any time and (B) Eurodollar Loans to Base Rate Loans on any Interest Adjustment Date. No General Revolving Loan may be converted to or from an Alternate Currency Loan. The obligation of Borrower to repay the Base Rate Loans and Fixed Rate Loans made by the General Revolving Lenders pursuant to the General Revolving Commitment and to pay 28 interest thereon shall be evidenced by a General Revolving Note, payable to the order of each General Revolving Lender in the principal amount of its General Revolving Commitment, or, if less, the aggregate unpaid principal amount of General Revolving Loans made hereunder by such General Revolving Lender. Subject to the provisions of this Agreement, Borrower shall be entitled under this Section 2.1(a)(i) to borrow funds, repay the same in whole or in part and re-borrow hereunder at any time and from time to time during the applicable Commitment Period. (ii) LETTERS OF CREDIT. Subject to the terms and conditions of this Agreement, during the applicable Commitment Period, the Fronting Lender, shall, in its own name, but only as agent for the General Revolving Lenders, issue such Letters of Credit for the account of Borrower, as Borrower may from time to time request. Borrower shall not request any Letter of Credit (and the Fronting Lender shall not be obligated to issue any Letter of Credit) if, after giving effect thereto, (A) the Letter of Credit Exposure would exceed the Letter of Credit Commitment, (B) the General Revolving Commitment Exposure would exceed the Maximum General Revolving Commitment Amount, or (C) the Alternate Currency Exposure would exceed the Alternate Currency Maximum Amount. Borrower may request that a Letter of Credit be issued in Dollars or an Alternate Currency. The issuance of each Letter of Credit shall confer upon each General Revolving Lender the benefits and liabilities of a participation consisting of an undivided pro rata interest in the Letter of Credit to the extent of the Applicable Commitment Percentage of such General Revolving Lender. Each request for a Letter of Credit shall be delivered to the Global Agent and the Fronting Lender not later than 11:00 A.M. (Cleveland, Ohio time) three Business Days prior to the day upon which the Letter of Credit is to be issued (or such shorter time period as may be agreed to by the Fronting Lender). Each such request shall be in a form acceptable to the Global Agent and the Fronting Lender and specify the face amount thereof, whether such Letter of Credit shall be a commercial documentary or a standby Letter of Credit, the type of currency, the account party, the beneficiary, the intended date of issuance, the expiry date thereof, and the nature of the transaction to be supported thereby. Concurrently with each such request, Borrower, shall execute and deliver to the Fronting Lender an appropriate application and agreement, being in the standard form of the Fronting Lender for such letters of credit, as amended to conform to the provisions of this Agreement if required by the Global Agent. Global Agent shall give each General Lender notice of each such request for a Letter of Credit. In respect of each Letter of Credit that shall be a commercial documentary letter of credit and the drafts thereunder, if any, Borrower agrees (1) to pay to the Global Agent, for the pro rata benefit of the General Revolving Lenders, a non-refundable commission based upon the Dollar Equivalent of the face amount of such Letter of Credit, which shall be paid on the date that any draw shall have been made on such Letter of Credit, at a rate equal to (y) one-half (1/2) of the Applicable Margin (in effect on the date such payment is to be made, times (z) the Dollar Equivalent amount drawn under such Letter of Credit, and (2) to pay to the Fronting Lender such issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as shall be generally charged by the Fronting Lender under its fee schedule as in effect from time to time. In respect of each Letter of Credit that shall be a standby letter of credit and the drafts thereunder, if any, Borrower agrees (a) to pay to the Global Agent, for the pro rata benefit of the Lenders, a non-refundable commission based upon the Dollar Equivalent of the face amount of 29 such Letter of Credit, which shall be paid quarterly in arrears, at a rate per annum equal to (i) the then current Applicable Margin (and specifically including any additional amount payable pursuant to subpart (c) of the definition of Derived Fixed Rate) for Eurodollar Loans (i.e., the Applicable Margin for Eurodollar Loans in effect on the date such Letter of Credit shall be issued and, as to each quarterly payment thereafter, the Applicable Margin for Eurodollar Loans in effect on the date of such quarterly payment), times (ii) the Dollar Equivalent of the average undrawn face amount of such Letter of Credit during such fiscal quarter, (b) to pay to the Fronting Lender, for its sole account, an additional Letter of Credit fee, which shall be paid on each date that such Letter of Credit shall be issued or renewed at the rate of one-eighth percent (1/8 of 1%) of the face amount of such Letter of Credit, and (c) to pay to the Fronting Lender for its sole account, such other issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as shall be generally charged by the Fronting Lender under its fee schedule as in effect from time to time. Whenever a Letter of Credit shall have been drawn, Borrower shall immediately reimburse the Fronting Lender for the amount drawn in Dollars or in the Alternate Currency in which such Letter of Credit shall have been issued, as the case may be. If the amount drawn in Dollars shall not be reimbursed by Borrower within one Business Day of the drawing of such Letter of Credit, at the sole option of the Fronting Lender, Borrower shall be deemed to have requested a General Revolving Loan, subject to the provisions of Section 2.1(a)(i), in the amount drawn. Such General Revolving Loan shall be evidenced by the General Revolving Notes. Each General Revolving Lender agrees to make a General Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each General Revolving Lender acknowledges and agrees that its obligation to make a General Revolving Loan pursuant to Section 2.1(a)(i) hereof, when required by this Section 2.1(a)(ii) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to the Global Agent, for the account of the Fronting Lender, of the proceeds of such General Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not the General Revolving Commitment of such General Revolving Lender shall have been reduced or terminated. Borrower irrevocably authorizes and instructs the Global Agent to apply the proceeds of any borrowing pursuant to this paragraph to reimburse, in full, the Fronting Lender for the amount drawn on such Letter of Credit. Each such General Revolving Loan shall be deemed to be a Base Rate Loan. Each General Revolving Lender is hereby authorized to record on its records relating to its General Revolving Note such Lender's Pro Rata Share of the amounts paid and not reimbursed on the Letters of Credit. If, for any reason, the Fronting Lender shall be unable to or, in the opinion of the Global Agent, it shall be impracticable to, convert any Letter of Credit to a General Revolving Loan pursuant to the preceding paragraph, the Fronting Lender shall have the right to request that each General Revolving Lender purchase a participation in the amount due with respect to such Letter of Credit, and the Global Agent shall promptly notify each General Revolving Lender thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but without further action, the Fronting Lender hereby agrees to grant to each General Revolving Lender, and each General Revolving Lender hereby agrees to acquire from the Fronting Lender, an undivided participation interest in the amount due with respect to such Letter of Credit in an amount equal to such General Revolving Lender's Applicable Commitment Percentage of the Dollar Equivalent of the aggregate principal amount of the amount due with respect to such Letter of Credit. In 30 consideration and in furtherance of the foregoing, each General Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay in Dollars to the Global Agent, for the account of the Fronting Lender, such General Revolving Lender's ratable share of the Dollar Equivalent of the amount due with respect to such Letter of Credit (determined in accordance with the Applicable Commitment Percentage of such General Revolving Lender). Each General Revolving Lender acknowledges and agrees that its obligation to acquire participations in the amount due under any Letter of Credit that shall have been drawn but not reimbursed by Borrower pursuant to this Section 2.1(a)(ii) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that each such payment shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not the General Revolving Commitment of such General Revolving Lender shall have been reduced or terminated. Each General Revolving Lender shall comply with its obligation under this Section 2.1 (a)(ii) by wire transfer of immediately available funds, in the same manner as provided in Section 2.2 hereof with respect to General Revolving Loans. Each General Revolving Lender is hereby authorized to record on its records such General Revolving Lender's Pro Rata Share of the amounts paid and not reimbursed on the Letters of Credit. (iii) SWING LOANS. Subject to the terms and conditions of this Agreement, during the Commitment Period applicable to the General Revolving Commitment, the Swing Line Lender shall make a Swing Loan or Swing Loans to Borrower in such amount or amounts as Borrower may from time to time request; provided that Borrower shall not request any Swing Loan hereunder if, after giving effect thereto, (A) the General Revolving Commitment Exposure would exceed the Maximum General Revolving Commitment Amount, or (B) the Swing Line Exposure would exceed the Swing Line Commitment. Each Swing Loan shall be due and payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan shall be made in Dollars. Borrower shall pay interest, for the sole benefit of the Swing Line Lender (and any General Revolving Lender that shall have purchased a participation in such Swing Loan), on the unpaid principal amount of each Swing Loan outstanding from time to time from the date thereof until paid, at the Derived Swing Loan Rate applicable to such Swing Loan. Interest on each Swing Loan shall be payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan shall bear interest for a minimum of one day. The obligation of Borrower to repay the Swing Loans and to pay interest thereon shall be evidenced by a Swing Line Note of Borrower payable to the order of the Swing Line Lender in the principal amount of the Swing Line Commitment, or, if less, the aggregate unpaid principal amount of Swing Loans made hereunder by the Swing Line Lender. Subject to the provisions of this Agreement, Borrower shall be entitled under this Section 2.1(a)(iii) to borrow funds, repay the same in whole or in part and reborrow hereunder at any time and from time to time during the Commitment Period applicable to the General Revolving Commitment. If the Swing Line Lender shall so elect, by giving notice to Borrower and the Lenders, Borrower agrees that the Swing Line Lender shall have the right, in its sole discretion, to require that any Swing Loan be refinanced as a General Revolving Loan. Such General Revolving Loan shall be a Base Rate Loan unless and until converted by Borrower to a Eurodollar Loan pursuant 31 to Section 2.1(a)(i) and Section 2.2 hereof. Upon receipt of such notice by Borrower, Borrower shall be deemed, on such day, to have requested a General Revolving Loan in the principal amount of the Swing Loan in accordance with Section 2.1(a)(i) hereof. Each General Revolving Lender agrees to make a General Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each General Revolving Lender acknowledges and agrees that such General Revolving Lender's obligation to make a General Revolving Loan pursuant to Section 2.1(a)(i) hereof when required by this Section 2.1(a)(iii) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to the Swing Line Lender, for the account of the Swing Line Lender, of the proceeds of such General Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such General Revolving Lender's General Revolving Commitment shall have been reduced or terminated. Borrower irrevocably authorizes and instructs the Swing Line Lender to apply the proceeds of any borrowing pursuant to this paragraph to repay in full such Swing Loan. If, for any reason, the Swing Line Lender shall be unable or, in the opinion of the Swing Line Lender, it shall be impracticable, to convert any Swing Loan to a General Revolving Loan pursuant to the preceding paragraph, then, on any day that a Swing Loan shall be outstanding (whether before or after the maturity thereof), the Swing Line Lender shall have the right to request that each General Revolving Lender purchase a participation in such Swing Loan, and the Swing Line Lender shall promptly notify each General Revolving Lender thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but without further action, the Swing Line Lender hereby agrees to grant to each General Revolving Lender, and each General Revolving Lender hereby agrees to acquire from the Swing Line Lender, an undivided participation interest in such Swing Loan in an amount equal to such General Revolving Lender's Applicable Commitment Percentage of the aggregate principal amount of such Swing Loan. In consideration and in furtherance of the foregoing, each General Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Swing Line Lender, for its sole account, such General Revolving Lender's ratable share of such Swing Loan (determined in accordance with such General Revolving Lender's Applicable Commitment Percentage). Each General Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swing Loans pursuant to this Section 2.1(a)(iii) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such General Revolving Lender's General Revolving Commitment shall have been reduced or terminated. Each General Revolving Lender shall comply with its obligation under this Section 2.1(a)(iii) by wire transfer of immediately available funds, in the same manner as provided in Section 2.2 hereof with respect to General Revolving Loans to be made by such General Revolving Lender. Each General Revolving Lender is hereby authorized to record on its records such General Revolving Lender's Pro Rata Share of the amounts paid and not reimbursed on the Swing Loans. (b) 364 DAY COMMITMENTS. Subject to the terms and conditions of this Agreement, during the applicable Commitment Period, the 364 Day Lenders shall make a 364 Day Revolving Loan or 364 Day 32 Revolving Loans to Borrower in such amount or amounts as Borrower may from time to time request, but not exceeding in aggregate principal amount at any time outstanding hereunder the Maximum 364 Day Commitment Amount. Borrower shall have the option, subject to the terms and conditions set forth herein, to borrow 364 Day Revolving Loans, maturing on the last day of the applicable Commitment Period, by means of any combination of Base Rate Loans or Eurodollar Loans. Borrower shall pay interest on the unpaid principal amount of Base Rate Loans outstanding from time to time under the 364 Day Commitment from the date thereof until paid at the Base Rate from time to time in effect. Interest on such Base Rate Loans shall be payable, commencing September 30, 2001, and on the last day of each succeeding December, March, June and September thereafter and at the maturity thereof. Borrower shall pay interest on the unpaid principal amount of each Eurodollar Loan outstanding from time to time under the 364 Day Commitment, fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Margin) at the Derived Fixed Rate applicable to Eurodollar Loans. Interest on such Eurodollar Loan shall be payable on each Interest Adjustment Date (provided that if an Interest Period shall exceed three months, the interest shall be paid every three months, commencing three months from the beginning of such Interest Period). At the request of Borrower to the Global Agent, subject to the notice and other provisions of Section 2.2 hereof, the 364 Day Lenders shall convert, under the 364 Day Commitment, (i) Base Rate Loans to Eurodollar Loans at any time and (ii) Eurodollar Loans to Base Rate Loans on any Interest Adjustment Date. The obligation of Borrower to repay the Base Rate Loans and Eurodollar Loans made by the 364 Day Lenders pursuant to the 364 Day Commitment and to pay interest thereon shall be evidenced by a 364 Day Note, payable to the order of each 364 Day Lender in the principal amount of its 364 Day Commitment, or, if less, the aggregate unpaid principal amount of 364 Day Revolving Loans made hereunder by such 364 Day Lender. Subject to the provisions of this Agreement, Borrower shall be entitled under this Section 2.1(b) to borrow funds, repay the same in whole or in part and re-borrow hereunder at any time and from time to time during the applicable Commitment Period. (c) TERM LOAN COMMITMENTS. Subject to the terms and conditions of this Agreement, the Term Loan Lenders shall make the Term Loan to Borrower on the Closing Date in the Term Loan Commitment Amount. To evidence the Term Loan, Borrower shall, upon request of any Term Loan Lender, execute and deliver to such Term Loan Lender a Term Note. The Term Loan shall be payable in twenty (20) quarter-annual installments, commencing November 30, 2001, and continuing on the last day of each succeeding February, May, August and November thereafter until paid in full. From November 30, 2001 through February 28, 2006, each payment shall be in the principal amount of Three Hundred Twelve Thousand Five Hundred Dollars ($312,500), with the last payment to be paid on the Term Loan Maturity Date in the amount of the then remaining balance of the Term Loan. 33 Borrower shall notify the Global Agent, in accordance with the notice provisions of Section 2.2 hereof, whether the Term Loan will be a Base Rate Loan or a Eurodollar Loan. The Term Loan may be a mixture of a Base Rate Loan and Eurodollar Loans. The Term Loan Lenders, at the request of Borrower to the Global Agent, subject to the applicable notice and other provisions of Section 2.2 hereof, shall convert a Base Rate Loan to a Eurodollar Loan at any time and shall convert a Eurodollar Loan to a Base Rate Loan on any Interest Adjustment Date. With respect to any portion of the Term Loan that shall be a Base Rate Loan, Borrower shall pay interest on the unpaid principal amount thereof outstanding from time to time from the date thereof until paid, commencing September 30, 2001, and continuing on the last day of each succeeding December, March, June and September thereafter and at the maturity thereof, at the Derived Term Loan Base Rate from time to time in effect. With respect to any portion of the Term Loan that shall be a Eurodollar Loan, Borrower shall pay interest on the unpaid principal amount of each Eurodollar Loan outstanding from time to time, fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Term Loan Margin), the Derived Term Loan Eurodollar Rate. Interest on such Eurodollar Loan shall be payable on each Interest Adjustment Date (provided that if an Interest Period shall exceed three months, the interest shall be paid every three months, commencing three months from the beginning of such Interest Period). Section 2.2. CONDITIONS TO CREDIT EVENTS. The obligation of the Global Agent, the Swing Line Lender, the Fronting Lender or any Lender to participate in any Credit Event shall be conditioned, in the case of each such Credit Event, upon: (a) all conditions precedent as listed in Article IV hereof shall have been satisfied; (b) for General Revolving Loans, 364 Day Revolving Loans or the Term Loan, (i) in respect of Base Rate Loans, receipt by the Global Agent of a Notice of Loan by 11:00 A.M. (Cleveland, Ohio time) on the proposed date of borrowing or conversion, and (ii) in respect of Fixed Rate Loans, receipt by the Global Agent by 11:00 A.M. (Cleveland, Ohio time) three Business Days (or, with respect to Alternate Currency Loans, four Business Days) prior to the proposed date of borrowing, conversion or continuation. The Global Agent shall notify each Lender of the date, amount and Interest Period (if applicable) promptly upon the receipt of such notice, and, in any event, by 2:00 P.M. (Cleveland, Ohio time) on the date such notice is received. On the date such Loan is to be made, each Lender shall provide the Global Agent, not later than 3:00 P.M. (Cleveland, Ohio time), with the amount of Dollars or, if applicable, Alternate Currency required of it, in federal or other immediately available funds; (c) for Swing Loans, receipt by the Global Agent of a Notice of Loan, such notice to be received by 11:00 A.M. (Cleveland, Ohio time) on the proposed date of borrowing; (d) with respect to Letters of Credit, satisfaction of the notice provisions set forth in Section 2.1(a)(ii) hereof; 34 (e) Borrower's request for a Loan shall have been for no less than the Minimum Borrowing Amount for such Loan; (f) the fact that no Default or Event of Default shall then exist or immediately after such Credit Event would exist; and (g) the fact that each of the representations and warranties contained in Article VI hereof shall be true and correct with the same force and effect as if made on and as of the date of such Credit Event, except to the extent that any thereof expressly relate to an earlier date. At no time shall Borrower request that Fixed Rate Loans be outstanding for more than six different Interest Periods at any time, and, if Base Rate Loans are outstanding, then Fixed Rate Loans shall be limited to five different Interest Periods at any time. Each request by Borrower with respect to any Credit Event hereunder shall be deemed to be a representation and warranty by Borrower as of the date of such request as to the facts specified in (f) and (g) above. Each request for a Fixed Rate Loan shall be irrevocable and binding on Borrower and Borrower shall indemnify the Global Agent and the applicable Lenders against any loss or expense incurred by the Global Agent or such Lenders as a result of any failure by Borrower to consummate such transaction including, without limitation, any loss (including loss of anticipated profits) or expense incurred by reason of liquidation or re-employment of deposits or other funds acquired by such Lenders to fund such Fixed Rate Loan. A certificate as to the amount of such loss or expense submitted by such Lenders to Borrower shall be conclusive and binding for all purposes, absent manifest error. If the Global Agent shall elect to advance the proceeds of a Loan prior to receiving funds from the applicable Lenders, the Global Agent shall have the right, upon prior notice to Borrower, to debit any account of Borrower or otherwise receive from Borrower, on demand, such amount, in the event that any such Lender shall fail to reimburse the Global Agent in accordance with this subsection. The Global Agent shall also have the right to receive interest from any such Lender at the Federal Funds Effective Rate in the event that such Lender shall fail to provide its portion of the Loan on the date requested and the Global Agent shall elect to provide such funds. Section 2.3. PAYMENT ON NOTES, ETC. (a) PAYMENTS WITHOUT SET-OFF. Each payment made hereunder by Borrower shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever. (b) PAYMENTS IN ALTERNATE CURRENCY. With respect to any Alternate Currency Loan, all payments (including prepayments) to any Lender of the principal of or interest on such Alternate Currency Loan shall be made in the same Alternate Currency as the original Loan. All such payments shall be remitted by Borrower to the Global Agent at the Designated Lending Office for the account of the Lenders not later than 11:00 35 A.M. (Cleveland, Ohio time) on the due date thereof in same day funds. Any payments received by the Global Agent after 11:00 A.M. (Cleveland, Ohio time) shall be deemed to have been made and received on the next following Business Day. (c) PAYMENTS IN DOLLARS. With respect to (i) any Loan (other than as set forth in subparts (b) above), or (ii) any other payment to the Global Agent or the Lenders that shall not be covered by subsection (b) above, all such payments (including prepayments) of the principal of or interest on such Loan or other payment, including but not limited to principal, interest, fees or any other amount owed by Borrower under this Agreement, shall be made in Dollars. All payments described in this subsection (c) shall be remitted to the Global Agent at its Designated Lending Office for the account of the appropriate Lenders not later than 11:00 A.M. (Cleveland, Ohio time) on the due date thereof in immediately available funds. Any such payments received by the Global Agent after 11:00 A.M. (Cleveland, Ohio time) shall be deemed to have been made and received on the next following Business Day. (d) PAYMENTS TO LENDERS. Upon the Global Agent's receipt of payments hereunder, the Global Agent shall immediately distribute to the appropriate Lenders their respective Ratable Shares, if any, of the amount of principal, interest, and facility and other fees received by the Global Agent for the account of such Lenders. Payments received by the Global Agent in Dollars shall be delivered to the appropriate Lenders in Dollars in immediately available funds. Payments received by the Global Agent in any Alternate Currency shall be delivered to the appropriate Lenders in such Alternate Currency in same day funds. Each Lender shall record any principal, interest or other payment, the principal amounts of Base Rate Loans and Fixed Rate Loans, the type of currency for each Loan, all prepayments and the applicable dates, including Interest Periods, with respect to the Loans made, and payments received by such Lender, by such method as such Lender may generally employ; provided, however, that failure to make any such entry shall in no way detract from the obligations of Borrower under this Agreement or the Notes. The aggregate unpaid amount of Loans, types of Loans, Interest Periods and similar information with respect to such Loans and Letters of Credit set forth on the records of the Global Agent shall be rebuttably presumptive evidence with respect to such information, including the amounts of principal and interest owing to each Lender. (e) TIMING OF PAYMENTS. Whenever any payment to be made hereunder, including, without limitation, any payment to be made on any Note, shall be stated to be due on a day that shall not be a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in each case be included in the computation of the interest payable on such Note; provided, however, that, with respect to any Fixed Rate Loan, if the next succeeding Business Day shall fall in the succeeding calendar month, such payment shall be made on the preceding Business Day and the relevant Interest Period shall be adjusted accordingly. Section 2.4. PAYMENTS NET OF TAXES. (a) GENERAL PROVISIONS. All payments under this Agreement shall be made absolutely net of, without deduction or offset for, and altogether free and clear of, any and all present and future taxes, levies, deductions, charges and withholdings and all liabilities with respect thereto, under the laws of the United States of America or any foreign jurisdiction (or any state or political subdivision thereof), excluding income and franchise taxes imposed on any Lender (and withholding relating thereto) under the laws of the United States of America, Australia or any 36 other foreign jurisdiction (or any state or political subdivision thereof). If Borrower shall be compelled by law to deduct any such taxes or levies (other than such excluded taxes) or to make any such other deductions, charges or withholdings, then Borrower shall pay such additional amounts as may be necessary in order that the net payments after such deduction, and after giving effect to any United States or foreign jurisdiction (or any state or political subdivision thereof) income taxes required to be paid by the Lenders in respect of such additional amounts, shall equal the amount of interest, and other fees and amounts payable as provided in Section 2.1 and Section 2.6 hereof for each Loan or Letter of Credit, plus any principal then due. (b) ALTERNATE CURRENCY TRANSACTIONS. All payments on account of principal, if any, interest and other fees and amounts payable hereunder shall be made without set-off or counterclaim and, unless otherwise required by law, shall be made free and clear of and without deduction for withholding tax or similar tax, present or future, imposed by any taxing authority in any jurisdiction (in this subsection (b) hereof, a "Tax"). If Borrower shall be required to withhold or pay any Tax, it shall make the required withholding and payment in accordance with and within the time allowed by law, and shall nonetheless pay to the appropriate Lender such additional amounts as shall be necessary to cause such Lender actually to receive in full all amounts (after taking account of any further deduction or withholding that is required to be made as a consequence of the payment of such additional amounts) on account of principal and interest or other fees or amounts owing to it hereunder, as if such Tax had not been paid. As soon as practicable after the date that any Tax shall become due and payable, (i) Borrower shall give to such Lender the original or a copy of a receipt for the payment of the Tax, or, if such receipts are not issued by or received from the taxing authority to which the Tax was paid, a certificate of an officer of Borrower, confirming the date and amount of the payment so made and reasonable details of the calculation of the amount due; and (ii) Borrower shall indemnify and save such Lender harmless from and against any claim, liability, loss, cost, expense (including without limitation legal, accounting and other professional fees, and interest and penalty charges or fines imposed by any taxing authority in respect of or arising from non-payment of such Tax) to which such Lender may be exposed or that it may incur, by reason of Borrower's failure to make punctual payment of any amount required to be paid to a taxing authority pursuant to subsection (b) hereof. Section 2.5. VOLUNTARY PREPAYMENT; PREPAYMENT FEES. (a) RIGHT TO PREPAY. Borrower shall have the right, at any time or from time to time, to prepay, on a Pro Rata Basis for all of the applicable Lenders (or, with respect to Swing Loans, the applicable Swing Line Lender), all or any part of the principal amount of the Notes of Borrower then outstanding, as designated by Borrower, plus interest accrued on the amount so prepaid to the date of such prepayment. (b) PREPAYMENT FEES. (i) Prepayments of Base Rate Loans shall be without any premium or penalty; (ii) In any case of prepayment of a Fixed Rate Loan, Borrower agrees that if the reinvestment rate with respect to Eurodollars or the Alternate Currency, as the case may be, of such Fixed Rate Loan, as quoted by the money desk of the Global Agent (the "Reinvestment Rate"), shall be lower than the Adjusted LIBOR Rate applicable to the 37 Fixed Rate Loan that is intended to be prepaid (hereinafter, "Last LIBOR"), then Borrower shall, upon written notice from the Global Agent, promptly pay to the Global Agent, for the account of the applicable Lenders, in immediately available funds, a prepayment fee equal to the product of (A) a rate (the "Prepayment Rate") which shall be equal to the difference between the Last LIBOR and the Reinvestment Rate, times (B) the prepayment principal amount of the Fixed Rate Loan that is to be prepaid, times (C) (1) the number of days remaining in the Interest Period of the Fixed Rate Loan that is to be prepaid divided by (2) three hundred sixty (360). In addition, Borrower shall immediately pay directly to the Global Agent, for the account of the applicable Lenders, the amount of any additional costs or expenses (including, without limitation, cost of telex, wires, or cables) incurred by the Global Agent or the Lenders in connection with the prepayment, upon Borrower's receipt of a written statement from the Global Agent; and (iii) In the case of prepayment of any Swing Loan, Borrower agrees to pay to the Swing Line Lender, on demand, for any resulting loss, cost or expense of the Swing Line Lender as a result thereof, including, without limitation, any loss incurred in obtaining, liquidating or employing deposits. (c) TERM LOAN PREPAYMENT FEES. In addition to any fees payable pursuant to subpart (b) above, in the case of any prepayment of the Term Loan, whether in whole or in part, Borrower shall pay to the Global Agent, for the account of the Term Loan Lenders, on the date of such prepayment, a fee equal to the Term Loan Prepayment Fee and if, as a result of such prepayment, any Fixed Rate Loan shall be prepaid prior to the Interest Adjustment Date applicable thereto, Borrower shall pay to the Term Loan Lenders the prepayment fees set forth in subsection (b) hereof. (d) NOTICE OF PREPAYMENT. Borrower shall give the Global Agent written notice of prepayment of any Base Rate Loan by not later than 11:00 A.M. (Cleveland, Ohio time) on the Business Day such prepayment is to be made and written notice of the prepayment of any Fixed Rate Loan not later than 1:00 P.M. (Cleveland, Ohio time) three Business Days prior to the Business Day on which such prepayment is to be made. (e) MINIMUM AMOUNT. Except in the case of a mandatory prepayment in connection with Section 2.8 or Article III hereof, each prepayment of a Fixed Rate Loan by Borrower shall be in the aggregate principal amount of not less than Five Million Dollars ($5,000,000) (or, with respect to an Alternate Currency Loan, the Dollar Equivalent of such amount). Section 2.6. FACILITY AND OTHER FEES. (a) GENERAL FACILITY FEE. Borrower shall pay to the Global Agent, for the ratable account of the General Revolving Lenders, as a consideration for the General Revolving Commitments, a facility fee from the Closing Date to and including the last day of the applicable Commitment Period, payable quarterly, at a rate per annum equal to (i) the Applicable Facility Fee Rate in effect on the date that such facility fee shall be due, times (ii) the average daily Maximum General Revolving Commitment Amount during such quarter. The facility fee with respect to the General Revolving Commitments shall be payable in arrears, on September 30, 38 2001 and on the last day of each succeeding December, March, June and September thereafter, and on the last day of the applicable Commitment Period. (b) 364 DAY FACILITY FEE. Borrower shall pay to the Global Agent, for the ratable account of the 364 Day Lenders, as a consideration for the 364 Day Commitments, a facility fee from the Closing Date to and including the last day of the applicable Commitment Period, payable quarterly, at a rate per annum equal to (i) the Applicable Facility Fee Rate in effect on the date that such facility fee shall be due, times (ii) the average daily Maximum 364 Day Commitment Amount during such quarter. The facility fee with respect to the 364 Day Commitments shall be payable in arrears, on September 30, 2001 and on the last day of each succeeding December, March, June and September thereafter, and on the last day of the applicable Commitment Period. (c) GLOBAL AGENT FEES. Borrower shall pay to the Global Agent, for its sole benefit, the fees set forth in the Global Agent Fee Letter. Section 2.7. MODIFICATION OF COMMITMENT. (a) REDUCTION OF GENERAL REVOLVING COMMITMENTS. Borrower may at any time or from time to time permanently reduce in whole, or ratably in part, the General Revolving Commitments to an amount not less than the then existing General Revolving Commitment Exposure by giving the Global Agent not fewer than three Business Days' notice of such reduction, provided that any such partial reduction shall be in an aggregate amount, for all of the General Revolving Lenders, of not less than Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000). The Global Agent shall promptly notify each General Revolving Lender of the date of each such reduction and such General Revolving Lender's proportionate share thereof. After each such reduction, the facility fees payable hereunder shall be calculated upon the General Revolving Commitments as so reduced in accordance with Section 2.6(a) hereof. If Borrower shall reduce in whole the General Revolving Commitments, on the effective date of such reduction (Borrower having prepaid in full the unpaid principal balance, if any, of the General Revolving Notes and the Swing Line Note, together with all interest and facility and other fees accrued and unpaid, and so long as there shall exist no Letter of Credit Exposure), all of the General Revolving Notes shall be delivered to the Global Agent marked "Canceled" and the Global Agent shall redeliver such General Revolving Notes to Borrower. Any partial reduction in the General Revolving Commitments shall be effective during the remainder of the applicable Commitment Period. (b) REDUCTION OF 364 DAY COMMITMENTS. Borrower may at any time or from time to time permanently reduce in whole, or ratably in part, the 364 Day Commitments to an amount not less than the then existing 364 Day Exposure by giving the Global Agent not fewer than three Business Days' notice of such reduction, provided that any such partial reduction shall be in an aggregate amount, for all of the 364 Day Lenders, of not less than Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000). The Global Agent shall promptly notify each 364 Day Lender of the date of each such reduction and such 364 Day Lender's proportionate share thereof. After each such reduction, the facility fees payable hereunder shall be calculated upon the 364 Day Commitments as so reduced in accordance with Section 2.6(b) hereof. If Borrower shall reduce in whole the 364 Day Commitments, on the effective date of such reduction (Borrower having prepaid in full the unpaid principal balance, if 39 any, of the 364 Day Notes, together with all interest and facility and other fees accrued and unpaid), all of the 364 Day Notes shall be delivered to the Global Agent marked "Canceled" and the Global Agent shall redeliver such 364 Day Notes to Borrower. Any partial reduction in the 364 Day Commitments shall be effective during the remainder of the applicable Commitment Period. (c) INCREASE IN COMMITMENT. At any time during the Commitment Increase Period, Borrower may request that the Global Agent proportionally increase the Maximum 364 Day Commitment Amount and Maximum General Revolving Commitment Amount from the Combined Closing Commitment Amount to the Combined Maximum Commitment Amount by either (i) proportionally increasing, for one or more Lenders, with their prior written consent, their 364 Day Commitment and General Revolving Commitment, or (ii) including one or more Additional Lenders, each with a new 364 Day Commitment and a new General Revolving Commitment (with the same Commitment Percentage for the 364 Day Commitment and the General Revolving Commitment), as a party to this Agreement (collectively, the "Additional Commitment"). During the Commitment Increase Period, the Lenders agree that the Global Agent, in its sole discretion, may permit one or more Additional Commitments upon satisfaction of the following requirements: (A) each Additional Lender, if any, shall execute an Additional Lender Assumption Agreement, (B) the Global Agent shall provide to each Lender a revised SCHEDULE 1 to this Agreement at least three Business Days prior to the effectiveness of such Additional Commitments (each an "Assumption Effective Date"), and (C) Borrower shall execute and deliver to the Global Agent and the Lenders such replacement or additional 364 Day Notes and General Revolving Notes as shall be required by the Global Agent. The Lenders hereby authorize the Global Agent to execute each Additional Lender Assumption Agreement on behalf of the Lenders. On each Assumption Effective Date, the 364 Day Lenders and the General Revolving Lenders shall make adjustments among themselves with respect to the 364 Day Loans and General Revolving Loans then outstanding and amounts of principal, interest, facility fees and other amounts paid or payable with respect thereto as shall be necessary, in the opinion of the Global Agent, in order to reallocate among such Lenders such outstanding amounts, based on the revised Applicable Commitment Percentages and to otherwise carry out fully the terms of this Section 2.7(c). Borrower shall not request any increase in the Commitment pursuant to this Section 2.7(c) if a Default or an Event of Default shall then exist or immediately after giving effect to any such increase would exist. Section 2.8. MANDATORY PAYMENT. (a) COMMITMENTS. If (i) the General Revolving Commitment Exposure at any time shall exceed the Maximum General Commitment Amount as then in effect, Borrower shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the General Revolving Loans sufficient to bring the General Revolving Commitment Exposure within the Maximum General Revolving Commitment Amount, (ii) the 364 Day Exposure at any time shall exceed the Maximum 364 Day Commitment Amount as then in effect, Borrower shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the 364 Day Revolving Loans sufficient to bring the 364 Day Exposure within the Maximum 364 Day Commitment Amount, or (iii) the Alternate Currency Exposure shall at any time exceed the Alternate Currency Maximum Amount, then Borrower shall, as promptly as practicable, but in no event later than the next Business Day, 40 prepay an aggregate principal amount of Alternate Currency Loans sufficient to bring the Alternate Currency Exposure within the Alternate Currency Maximum Amount. (b) EXCESS CASH FLOW. Within one hundred (100) days after the end of each fiscal year of the Companies, commencing with the fiscal year ending February 28, 2002, Borrower shall make a prepayment in an amount of not less than fifty percent (50%) of Excess Cash Flow, if any, based on the financial statements of the Companies for the most recently completed fiscal year (each such prepayment an "Excess Cash Flow Prepayment"). Each Excess Cash Flow Prepayment shall be applied (i) first, to the principal payments of the Term Loan (to be applied in the inverse order of maturity), and (ii) second, on a Pro Rata Basis, to (1) the General Revolving Commitment Exposure (with payments to be made in the following order: General Revolving Loans, Swing Loans, and to be held by the Global Agent in a special account as security for any Letter of Credit Exposure pursuant to subpart (f) hereof) and (2) the 364 Day Exposure. If there shall be Credit Exposure under the General Revolving Commitments or Credit Exposure under the 364 Day Commitments, the then remaining Prepayment Proceeds shall be paid to whichever such General Revolving Commitments or 364 Day Commitments as shall then have Credit Exposure. The General Revolving Commitments and the 364 Day Commitments shall be permanently reduced by the amount of such Prepayment Proceeds allocated thereto, respectively. (c) MANDATORY PREPAYMENT EVENT. (i) INVOLVING A COMPANY PRIOR TO AN EVENT OF DEFAULT. If any Company shall effect a Mandatory Prepayment Event (which Mandatory Prepayment Event shall only be permitted in accordance with the terms of this Agreement), then the Prepayment Proceeds of such Mandatory Prepayment Event shall be paid, on the date of such Mandatory Prepayment Event, by Borrower (or Company) to the Global Agent to be applied, (A) first, to the outstanding principal balance of the Term Loan (to be applied to the principal payments thereof in the inverse order of maturity), and (B) second, on a Pro Rata Basis, to (1) the General Revolving Commitment Exposure (with payments to be made in the following order: General Revolving Loans, Swing Loans, and to be held by the Global Agent in a special account as security for any Letter of Credit Exposure pursuant to subpart (d) hereof) and (2) the 364 Day Exposure. If there shall be Credit Exposure under the General Revolving Commitments or Credit Exposure under the 364 Day Commitments, the then remaining Prepayment Proceeds shall be paid to whichever such General Revolving Commitments or 364 Day Commitments as shall then have Credit Exposure. The General Revolving Commitments and the 364 Day Commitments shall be permanently reduced by the amount of such Prepayment Proceeds allocated thereto, respectively, whether or not there shall be any Credit Exposure thereunder. Any remaining Prepayment Proceeds shall be distributed in accordance with subpart (ii) hereof; (ii) INVOLVING ANY COMPANY AFTER AN EVENT OF DEFAULT. If any Company shall effect a Mandatory Prepayment Event (which Mandatory Prepayment Event shall only be permitted in accordance with the terms of this Agreement) after an Event of Default shall have occurred (and whether or not such Event of Default shall have been waived), then the Prepayment Proceeds of such Mandatory Prepayment Event shall be paid, on the date of such Prepayment Event, by Borrower (or the appropriate Company) to the Global 41 Agent to be applied to the following, on a Pro Rata Basis among the Commitments: (A) the General Revolving Commitment Exposure (with payments to be made in the following order: General Revolving Loans, Swing Loans, and to be held by the Global Agent in a special account as security for any Letter of Credit Exposure pursuant to subpart (d) hereof), (B) the 364 Day Exposure, and (C) the unpaid principal balance of the Term Loan (with any prepayment of the Term Loan to be applied to the principal payments thereof in the inverse order of maturity). The General Revolving Commitments and 364 Day Commitments shall be permanently reduced by the amount of such Prepayment Proceeds allocated thereto, respectively, whether or not there shall not be any Credit Exposure thereunder. If there shall be no Credit Exposure under any Commitment, the then remaining Prepayment Proceeds shall be reallocated among the other Commitments on a Pro Rata Basis. (d) RIGHT OF TERM LOAN LENDERS TO FOREGO PROCEEDS. Each Term Loan Lender shall have the right to forego the application of any mandatory prepayment of the Term Loan required to be made to such Term Loan Lender pursuant to subparts (c) or (d) above in accordance with the following provisions: (i) the Global Agent shall, on or prior to 3:00 P. M. (Cleveland, Ohio time) on the date it shall have received immediately available funds from Borrower in respect of a mandatory prepayment of Loans pursuant to subpart (c) or (d) above, give each Term Loan Lender written or telephonic notice of (A) the amount of such mandatory prepayment, (B) the portion thereof proposed to be paid to such Term Loan Lender, and (C) such Term Loan Lender's right to forego its portion of such mandatory prepayment, which notice shall request such Term Loan Lender to confirm to the Global Agent whether or not such Term Loan Lender shall forego such mandatory prepayment; (ii) If any Term Loan Lender shall indicate its desire to forego its portion of such mandatory prepayment by giving the Global Agent written or telephonic notice to such effect by 5:00 P. M. (Cleveland, Ohio time) on the date that is two (2) Business Days after such Term Loan Lender shall have received such written or telephonic notice from the Global Agent, the amount of the applicable prepayment that would otherwise have been paid to such Term Loan Lender shall, notwithstanding anything in this Section 2.8 to the contrary, be applied, on a Pro Rata Basis, in accordance with subpart (c)(ii) above. The General Revolving Commitments and the 364 Day Commitments shall be permanently reduced by the amount of such prepayment; (iii) the Global Agent may act without liability upon the basis of any such telephonic notice or written notice believed by the Global Agent in good faith to be from an authorized representative of a Term Loan Lender. In the case of each such telephonic notice, the Global Agent's record of the terms of such telephonic notice shall be conclusive absent manifest error; (iv) any Term Loan Lender that shall not have responded to the Global Agent, within the time period specified above, to a notice from the Global Agent requesting such Term Loan Lender to confirm whether or not such Term Loan Lender wishes to exercise its right to forego the application of its portion of such mandatory prepayment pursuant to 42 this Section 2.8, shall be deemed to have waived such right to forego such application; and (v) notwithstanding anything to the contrary contained in this Agreement, the Global Agent may defer, until the next Business Day, the distribution to the Term Loan Lenders of any portion of any mandatory prepayment of Loans received by the Global Agent pursuant to this Section 2.8 as to which the Global Agent shall be determining whether or not the Term Loan Lenders wish to exercise their rights under this subpart (d). (e) APPLICATION OF PROCEEDS. Unless otherwise designated by Borrower, each prepayment pursuant to this Section 2.8 shall be applied in the following order (i) first, on a pro rata basis among all of the outstanding Base Rate Loans of Borrower, and (ii) second, on a pro rata basis among all of the outstanding Fixed Rate Loans of Borrower, provided that if the outstanding principal amount of any Fixed Rate Loan shall reduced to an amount less than the applicable Minimum Borrowing Amount as a result of such prepayment, then such Fixed Rate Loan shall be converted into a Base Rate Loan on the date of such prepayment. Any prepayment of a Fixed Rate Loan or Swing Loan pursuant to this Section 2.8 shall be subject to the prepayment penalties set forth in Section 2.5 hereof. (f) LETTER OF CREDIT EXPOSURE. Any amounts to be distributed for application to a Lender's liabilities with respect to any Letter of Credit Exposure shall be held by the Collateral Agent in an interest bearing trust account (the "SPECIAL TRUST ACCOUNT") as collateral security for such liabilities until a drawing on any Letter of Credit, at which time such amounts, together with interest accrued thereon, shall be released by the Collateral Agent and applied to such liabilities. If any such Letter of Credit shall expire without having been drawn upon in full, the amounts held in the Special Trust Account with respect to the undrawn portion of such Letter of Credit, together with interest accrued thereon, shall be applied by the Collateral Agent in accordance with the provisions of subpart (c) above. Section 2.9. COMPUTATION OF INTEREST AND FEES; DEFAULT RATE. (a) With the exception of Base Rate Loans, interest on Loans, Related Expenses and facility and other fees and charges hereunder shall be computed on the basis of a year having three hundred sixty (360) days and calculated for the actual number of days elapsed. With respect to Base Rate Loans, interest shall be computed on the basis of a year having three hundred sixty-five (365) days or three hundred sixty-six (366) days, as the case may be, and calculated for the actual number of days elapsed. (b) Anything herein to the contrary notwithstanding, if an Event of Default shall have occurred hereunder, at the option of the Required Lenders, (i) the principal of each Loan and the unpaid interest thereon shall bear interest, until paid, at the Default Rate; and (ii) the fees for the aggregate undrawn face amount of all issued and outstanding Letters of Credit shall be increased to two percent (2%) in excess of the rate otherwise applicable thereto; provided, however, that in no event shall the rate of interest hereunder exceed the maximum rate allowable by law. Section 2.10. FIXED CHARGE COVERAGE RATIO CONDITION. Borrower shall provide immediate written notice to the Global Agent and the Lenders at any time that the Fixed Charge Coverage Ratio Condition shall exist or, within the next three months, shall be likely to exist, 43 and, so long as the Fixed Charge Coverage Ratio Condition shall exist, Borrower shall not request any Credit Event, and the Fronting Lender, the Swing Line Lender and any Lender shall not be obligated to make or participate in any Credit Event, unless (a) the proceeds of such Credit Event shall constitute, in the sole opinion of the Global Agent, Designated Senior Indebtedness (as defined in the Subordinated Indenture), and (b) upon request of the Global Agent, Borrower shall have provided to the Global Agent and the Lenders such opinion of counsel with respect to the Subordinated Indenture, as the Global Agent may require in its reasonable discretion. Section 2.11. EXTENSION OF COMMITMENT. Not more than sixty (60) days (but not less than thirty (30) days) prior to the last day of the Commitment Period applicable to the 364 Day Commitments, Borrower may request that the Lenders extend the maturity of the 364 Day Commitments for an additional year. Such request shall be made in writing to the Global Agent and the Lenders shall not respond to such request earlier than thirty (30) days prior to the last day of the Commitment Period applicable to the 364 Day Commitments. Any such extension shall require the unanimous written consent of all of the Lenders with a 364 Day Commitment and shall be upon such terms and conditions as may be agreed to by the Global Agent, Borrower and the Lenders. Borrower shall pay any attorneys' fees or other expenses of the Global Agent in connection with the documentation of any such extension, as well as such other fees as may be agreed upon between Borrower and the Global Agent. ARTICLE III. ADDITIONAL PROVISIONS RELATING TO FIXED RATE LOANS; INCREASED CAPITAL; TAXES. Section 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If, at any time, any law, treaty or regulation (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System) or the interpretation thereof by any governmental authority charged with the administration thereof or any central bank or other fiscal, monetary or other authority shall impose (whether or not having the force of law), modify or deem applicable any reserve or special deposit requirement (other than reserves included in the eurocurrency reserve percentage, the effect of which is reflected in the interest rates of the Fixed Rate Loans in question) against assets held by, or deposits in or for the amount of any Fixed Rate Loan by, any Lender, and the result of the foregoing shall be to increase the cost (whether by incurring a cost or adding to a cost) to such Lender of making or maintaining hereunder such Fixed Rate Loan or to reduce the amount of principal or interest received by such Lender with respect to such Fixed Rate Loan, then, upon demand by such Lender, Borrower shall pay to such Lender from time to time on Interest Adjustment Dates with respect to such Fixed Rate Loan, as additional consideration hereunder, additional amounts sufficient to fully compensate and indemnify such Lender for such increased cost or reduced amount, assuming (which assumption such Lender need not corroborate) such additional cost or reduced amount was allocable to such Fixed Rate Loan. A certificate as to the increased cost or reduced amount as a result of any event mentioned in this Section 3.1, setting forth the calculations therefor, shall be promptly submitted by such Lender to Borrower and shall, in the absence of manifest error, be conclusive and binding as to the amount thereof. Notwithstanding any other provision of this Agreement, after any such demand for compensation by any Lender, Borrower, upon at least three Business Days' prior written notice to such Lender through the Global Agent, may prepay any affected Fixed Rate Loan in full or, if such Fixed Rate Loan shall be a Eurodollar Loan, convert such Eurodollar Loan to a Base Rate 44 Loan regardless of the Interest Period thereof. Any such prepayment or conversion shall be subject to the prepayment fees set forth in Section 2.5 hereof. Each Lender shall notify Borrower as promptly as practicable (with a copy thereof delivered to the Global Agent) of the existence of any event that will likely require the payment by Borrower of any such additional amount under this Section. Section 3.2. TAX LAW, ETC. In the event that, by reason of any law, regulation or requirement or in the interpretation thereof by an official authority, or the imposition of any requirement of any central bank whether or not having the force of law, any Lender shall, with respect to this Agreement or any transaction under this Agreement, be subjected to any tax, levy, impost, charge, fee, duty, deduction or withholding of any kind whatsoever (other than any tax imposed upon the total net income of such Lender) and if any such measures or any other similar measure shall result in an increase in the cost to such Lender of making or maintaining any Fixed Rate Loan or in a reduction in the amount of principal, interest or commitment fee receivable by such Lender in respect thereof, then such Lender shall promptly notify Borrower stating the reasons therefor. Borrower shall thereafter pay to such Lender, upon demand from time to time on Interest Adjustment Dates with respect to such Fixed Rate Loan, as additional consideration hereunder, such additional amounts as shall fully compensate such Lender for such increased cost or reduced amount. A certificate as to any such increased cost or reduced amount, setting forth the calculations therefor, shall be submitted by such Lender to Borrower and shall, in the absence of manifest error, be conclusive and binding as to the amount thereof. If any Lender shall receive such additional consideration from Borrower pursuant to this Section 3.2, such Lender shall use reasonable efforts to obtain the benefits of any refund, deduction or credit for any taxes or other amounts on account of which such additional consideration has been paid and shall reimburse Borrower to the extent, but only to the extent, that such Lender shall have received a refund of such taxes or other amounts together with any interest thereon or an effective net reduction in taxes or other governmental charges (including any taxes imposed on or measured by the total net income of such Lender) of the United States or any state or subdivision thereof (or any applicable foreign jurisdiction) by virtue of any such deduction or credit, after first giving effect to all other deductions and credits otherwise available to such Lender. If, at the time any audit of such Lender's income tax return is completed, such Lender determines, based on such audit, that it was not entitled to the full amount of any refund reimbursed to Borrower as aforesaid or that its net income taxes are not reduced by a credit or deduction for the full amount of taxes reimbursed to Borrower as aforesaid, Borrower, upon demand of such Lender, shall promptly pay to such Lender the amount so refunded to which such Lender was not so entitled, or the amount by which the net income taxes of such Lender were not so reduced, as the case may be. Notwithstanding any other provision of this Agreement, after any such demand for compensation by any Lender, Borrower, upon at least three Business Days' prior written notice to such Lender through the Global Agent, may prepay any affected Fixed Rate Loan in full or, if such Fixed Rate Loan shall be a Eurodollar Loan, convert such Eurodollar Loan to a Base Rate Loan regardless of the Interest Period of any thereof. Any such prepayment or conversion shall be subject to the prepayment fees set forth in Section 2.5 hereof. Section 3.3. EURODOLLAR OR ALTERNATE CURRENCY DEPOSITS UNAVAILABLE OR INTEREST RATE UNASCERTAINABLE. In respect of any Fixed Rate Loan, in the event that the Global Agent shall 45 have determined that Dollar deposits or deposit of the applicable Alternate Currency of the relevant amount for the relevant Interest Period for such Fixed Rate Loan shall not be available to the applicable Lender in the applicable Eurodollar or Alternate Currency market or that, by reason of circumstances affecting such market, adequate and reasonable means shall not exist for ascertaining the Derived Fixed Rate applicable to such Interest Period, as the case may be, the Global Agent shall promptly give notice of such determination to Borrower and (a) any notice of a new Fixed Rate Loan (or conversion of an existing Loan to a Fixed Rate Loan) previously given by Borrower and not yet borrowed (or converted, as the case may be) shall be deemed to be a notice to make a Base Rate Loan, and (b) Borrower shall be obligated either to prepay, or to convert to a Base Rate Loan, any outstanding Eurodollar Loan on the last day of the then current Interest Period applicable thereto. Section 3.4. INDEMNITY. Without prejudice to any other provisions of this Article III, Borrower hereby agrees to indemnify each Lender against any loss or expense that such Lender may sustain or incur as a consequence of any default by Borrower in payment when due of any amount hereunder in respect of any Fixed Rate Loan, including, but not limited to, any loss of profit, premium or penalty incurred by such Lender in respect of funds borrowed by it for the purpose of making or maintaining such Fixed Rate Loan, as determined by such Lender in the exercise of its sole but reasonable discretion. A certificate as to any such loss or expense shall be promptly submitted by such Lender to Borrower and shall, in the absence of manifest error, be conclusive and binding as to the amount thereof. Section 3.5. CHANGES IN LAW RENDERING FIXED RATE LOANS UNLAWFUL. If, at any time, any new law, treaty or regulation, or any change in any existing law, treaty or regulation, or any interpretation thereof by any governmental or other regulatory authority charged with the administration thereof, shall make it unlawful for any Lender to fund any Fixed Rate Loan that it is committed to make hereunder with moneys obtained in the eurodollar market, the commitment of such Lender to fund such Fixed Rate shall, upon the happening of such event forthwith be suspended for the duration of such illegality, and such Lender shall by written notice to the affected Borrowers and the Global Agent declare that its commitment with respect to such Fixed Rate Loan shall have been so suspended and, if and when such illegality shall cease to exist, such suspension shall cease and such Lender shall similarly notify Borrower and the Global Agent. If any such change shall make it unlawful for any Lender to continue in effect the funding in the applicable eurodollar market of any Fixed Rate Loan previously made by it hereunder, such Lender shall, upon the happening of such event, notify Borrower, the Global Agent and the other appropriate Lenders thereof in writing, stating the reasons therefor, and Borrower shall, on the earlier of (a) the last day of the then current Interest Period or (b) if required by such law, regulation or interpretation, on such date as shall be specified in such notice, either convert such Fixed Rate Loan, if such Fixed Rate Loan shall be a Eurodollar Loan, to a Base Rate Loan or prepay such Fixed Rate Loan to the appropriate Lenders in full. Any such prepayment or conversion shall be subject to the prepayment fees described in Section 2.5 hereof. Section 3.6. FUNDING. Each Lender may, but shall not be required to, make Fixed Rate Loans hereunder with funds obtained outside of the United States or, if applicable, outside of the country in which such Lender is located or domiciled. Section 3.7. CAPITAL ADEQUACY. If any Lender shall have determined, after the Closing Date, that the adoption of any applicable law, rule, regulation or guideline regarding capital 46 adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Lender (or its lending office) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's capital (or the capital of its holding company) as a consequence of its obligations hereunder to a level below that which such Lender (or its holding company) could have achieved but for such adoption, change or compliance (taking into consideration such Lender's policies or the policies of its holding company with respect to capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within fifteen (15) days after demand by such Lender (with a copy to the Global Agent), the applicable Borrowers shall pay to such Lender such additional amount or amounts as shall compensate such Lender (or its holding company) for such reduction. Each Lender shall designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Lender, be otherwise disadvantageous to such Lender. A certificate of any Lender claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, such Lender may use any reasonable averaging and attribution methods. Failure on the part of any Lender to demand compensation for any reduction in return on capital with respect to any period shall not constitute a waiver of such Lender's rights to demand compensation for any reduction in return on capital in such period or in any other period. The protection of this Section shall be available to each Lender regardless of any possible contention of the invalidity or inapplicability of the law, regulation or other condition which shall have been imposed. ARTICLE IV. CONDITIONS PRECEDENT The obligation of the Fronting Lender, the Swing Line Lender or the Lenders to make, issue or participate in the first Credit Event shall be subject to Borrower satisfying each of the following conditions: Section 4.1. NOTES. (a) Borrower shall have executed and delivered to each Lender a General Revolving Note and a 364 Day Note and shall have executed and delivered to the Swing Line Lender the Swing Line Note, and (b) Borrower shall have executed and delivered a Term Note to each Term Loan Lender that shall have requested a Term Note. Section 4.2. GUARANTIES OF PAYMENT. Each Guarantor of Payment shall have executed and delivered to the Global Agent a Guaranty of Payment. Section 4.3. SECURITY DOCUMENTS. Borrower and each Guarantor of Payment shall have executed and delivered to the Collateral Agent: (a) a Security Agreement; (b) a Collateral Assignment and Security Agreement; 47 (c) a Pledge Agreement, together with delivery of the share certificates or other evidence of equity interest referenced therein; (d) as appropriate, a Mortgage with respect to the Mortgaged Real Property; (e) a Landlord's Agreement, duly executed by the appropriate lessor or lessors, with respect to such locations as the Global Agent shall request; and (f) such U.C.C. financing statements, in form and substance satisfactory to the Collateral Agent and the Lenders, as the Collateral Agent and the Lenders shall deem necessary or appropriate. Section 4.4. OFFICER'S CERTIFICATE, RESOLUTIONS, ORGANIZATIONAL DOCUMENTS. Borrower and each Guarantor of Payment shall have delivered to the Global Agent an officer's certificate certifying the names of the officers of Borrower or such Guarantor of Payment authorized to sign the Loan Documents to which Borrower or such Guarantor of Payment is a party, together with the true signatures of such officers and certified copies of (a) the resolutions (or other authorization documents) of the board of directors (or equivalent governing body) of Borrower and such Guarantor of Payment evidencing approval of the execution and delivery of the Loan Documents and the other Related Writings to which Borrower or such Guarantor of Payment shall be a party, and (b) the Organizational Documents of Borrower and such Guarantor of Payment. Section 4.5. LEGAL OPINIONS. Borrower shall have delivered to the Global Agent and the Lenders the following opinions of counsel (each of which shall be in form and substance satisfactory to the Global Agent and the Lenders and shall contain such opinions as the Global Agent shall deem necessary or appropriate): (a) an opinion of Brouse McDowell LPA as special counsel to Borrower and each other Company; and (b) an opinion of special local counsel acceptable to the Global Agent with respect to each Mortgage. Section 4.6. GOOD STANDING CERTIFICATES AND ARTICLES OF INCORPORATION. Borrower shall have delivered to the Global Agent and the Lenders (a) a good standing certificate or full force and effect certificate (or foreign equivalent) for Borrower and each Guarantor of Payment, issued on or about the Closing Date by the Secretary of State (or other appropriate governmental authority) in the state or jurisdiction where Borrower or such Guarantor of Payment is incorporated, organized or formed and in each state or other jurisdiction where Borrower or such Guarantor of Payment is qualified or authorized to do business as a foreign entity and where the failure to so qualify would have a Material Adverse Effect, and (b) a copy of the current Articles (or Certificate) of Incorporation or Organization (or equivalent formation documents), together with all amendments thereto, for each Domestic Company, certified by the Secretary of State of the appropriate jurisdiction, on or about the Closing Date, as being true and correct. Section 4.7. CLOSING AND LEGAL FEES; FEE LETTERS. Borrower shall have (a) executed and delivered to the Global Agent, the Global Agent Fee Letter and paid to the Global Agent, for its sole benefit, the fees set forth therein, (b) executed and delivered to the Global Agent, for the benefit of the Lenders, the Closing Fee Letter and paid to each of the Lenders the fees set forth therein, and (c) paid all legal fees and expenses of the Lead Arrangers in connection with the preparation and negotiation of the Loan Documents. 48 Section 4.8. LIEN SEARCHES. With respect to the property owned or leased by each Domestic Company, Borrower shall have caused to be delivered to the Global Agent (a) the results of U.C.C. lien searches, satisfactory to the Global Agent and the Lenders; (b) the results of federal and state tax lien and judicial lien searches, satisfactory to the Global Agent and the Lenders; and (c) U.C.C. termination statements or other appropriate releases reflecting the termination or release of all U.C.C. financing statements or other evidence of a Lien previously filed or recorded by any Person having a security interest or Lien in any part of the Collateral and not expressly permitted pursuant to Section 5.9 hereof. Section 4.9. INSURANCE CERTIFICATES. Borrower shall have delivered to the Global Agent and the Lenders evidence of insurance on ACORD 27 form, and otherwise satisfactory to the Global Agent, of adequate personal and real property and liability insurance of each Company, with the Collateral Agent listed as loss payee and additional insured and with a standard mortgagee's endorsement in favor of the Collateral Agent. Section 4.10. SENIOR INDENTURE. With respect to the Senior Indenture, Borrower shall have provided to the Global Agent and the Lenders (a) a copy of the Senior Indenture, together with any amendments or supplements thereto, certified by an officer of Borrower as being true and complete; and (b) an officer's certificate, signed by a Financial Officer, and otherwise in form and substance satisfactory to the Global Agent and the Lenders, certifying that no Event of Default (as defined in the Senior Indenture), or event or condition that, with the passage of time or giving of notice or both, would constitute an Event of Default (as defined in the Senior Indenture), exists under the Senior Indenture, nor will exist after the first Credit Event occurs hereunder. Section 4.11. SUBORDINATED INDENTURE. With respect to the Subordinated Indenture, Borrower shall have provided to the Global Agent and the Lenders (a) a copy of the Subordinated Indenture, together with any amendments or supplements thereto, certified by an officer of Borrower as being true and complete; and (b) an officer's certificate, signed by a Financial Officer, and otherwise in form and substance satisfactory to the Global Agent and the Lenders, certifying (i) that no Default (as defined in the Subordinated Indenture) or Event of Default (as defined in the Subordinated Indenture) exists under the Indenture, nor will exist after the making of the first Credit Event hereunder, (ii) the Fixed Charge Coverage Ratio Condition does not exist, nor will it exist after the first Credit Event occurs hereunder, (iii) that all of the Debt constitutes Senior Indebtedness (as defined in the Subordinated Indenture), Designated Senior Indebtedness (as defined in the Subordinated Indenture), and Permitted Debt (as defined in the Subordinated Indenture), and (iv) as to such other matters with respect to the Subordinated Indenture as the Global Agent shall deem necessary or appropriate. Section 4.12. SUBORDINATED CONVERTIBLE INDENTURE. With respect to the Subordinated Convertible Indenture, Borrower shall have provided to the Global Agent and the Lenders (a) a copy of the Subordinated Convertible Indenture, together with any amendments or supplements thereto, certified by an officer of Borrower as being true and complete; and (b) an officer's certificate, signed by a Financial Officer, and otherwise in form and substance satisfactory to the Global Agent and the Lenders, certifying (i) that no Default (as defined in the Subordinated Convertible Indenture) or Event of Default (as defined in the Subordinated Convertible Indenture) exists under the Subordinated Convertible Indenture, nor will exist after the making of 49 the first Credit Event hereunder, (ii) that all of the Debt constitutes Senior Indebtedness (as defined in the Subordinated Convertible Indenture), Designated Senior Indebtedness (as defined in the Subordinated Convertible Indenture), and Permitted Debt (as defined in the Subordinated Convertible Indenture), and (iii) as to such other matters with respect to the Subordinated Convertible Indenture as the Global Agent shall deem necessary or appropriate. Section 4.13. PERMITTED RECEIVABLES FACILITY. With respect to the Permitted Receivables Facility, Borrower shall have (a) provided to the Global Agent and the Lenders a copy of the Receivables Facility Documents, certified by an officer of Borrower as being true and complete; and (b) provided to the Global Agent and the Lenders an officer's certificate, signed by a Financial Officer, and otherwise in form and substance satisfactory to the Global Agent and the Lenders, certifying that (i) Borrower shall have satisfied all conditions precedent to funding as set forth in the Receivables Facility Documents, and (ii) no default or event of default, or event or condition that, with the passage of time or giving of notice or both, would constitute a default or event of default, shall exist under the Receivables Facility Documents, nor will exist after the making of the first Credit Event hereunder. Section 4.14. EXISTING CREDIT AGREEMENT. Borrower shall have delivered to the Global Agent evidence, in form and substance satisfactory to the Global Agent, that, after giving effect to the first Credit Events hereunder, that Borrower shall have terminated the Second Amended and Restated Credit Agreement among Borrower, the other borrowers named therein, the financial institutions named therein, and Bank of America, N.A., as Global Agent, dated as of August 3, 2000. Section 4.15. FINANCIAL PROJECTIONS. Borrower shall have delivered to the Global Agent and the Lenders the Financial Projections which shall be in form and substance satisfactory to the Lead Arrangers. Section 4.16. REGULATORY APPROVALS. Borrower shall have delivered to the Global Agent and the Lenders a certificate of an officer, in form and substance satisfactory to the Global Agent, that (a) Borrower have obtained any necessary regulatory approvals and licenses in connection with the transactions contemplated by this Agreement and the other Loan Documents, and (b) there exists no legal, regulatory or other restrictions or prohibitions to the Companies entering into the Loan Documents to which each is a party and consummating the transactions contemplated by this Agreement and the other Loan Documents. Section 4.17. CLOSING CERTIFICATE. Borrower shall have delivered to the Global Agent and the Lenders an officer's certificate certifying that, as of the Closing Date, (a) all conditions precedent set forth in this Article IV have been satisfied, (b) no Default or Event of Default exists nor immediately after the occurrence of the first Credit Event will exist, and (c) each of the representations and warranties contained in Article VI hereof are true and correct as of the Closing Date. Section 4.18. NO MATERIAL ADVERSE CHANGE. No material adverse change, in the opinion of the Global Agent, shall have occurred in the financial condition, operations or prospects of the Companies since May 31, 2001. 50 Section 4.19. MISCELLANEOUS. Borrower shall have provided to the Global Agent and the Lenders such other items and shall have satisfied such other conditions as may be reasonably required by the Global Agent or the Lenders. ARTICLE V. COVENANTS Borrower agrees that, so long as the Commitment remains in effect and thereafter until all of the Debt shall have been paid in full, Borrower shall perform and observe, and shall cause each other Company to perform and observe, each of the following provisions: Section 5.1. INSURANCE. Each Company shall at all times maintain insurance upon its real and personal property in such form, written by such companies, in such amounts, for such period, and against such risks as may be acceptable to the Global Agent, with provisions (with respect to each Domestic Company) satisfactory to the Global Agent for payment of all losses thereunder to the Collateral Agent and such Company as their interests may appear (loss payable endorsement in favor of the Collateral Agent). Any such policies of insurance shall provide for no fewer than thirty (30) days prior written notice of cancellation to the Collateral Agent. Any sums received by the Collateral Agent in payment of insurance losses, returns, or unearned premiums under the policies shall be applied in accordance with the terms of this Agreement. The Collateral Agent is hereby authorized to act as attorney-in-fact for each Domestic Company in obtaining, adjusting, settling and canceling such insurance and indorsing any drafts. In the event of failure to provide such insurance as herein provided, the Collateral Agent, acting at the direction of the Global Agent, may provide such insurance and Borrower shall pay to the Collateral Agent, upon demand, the cost thereof. Should Borrower fail to pay such sum to the Collateral Agent upon demand, interest shall accrue thereon, from the date of demand until paid in full, at the Default Rate. Within ten (10) days of the Global Agent's written request, Borrower shall furnish to the Global Agent such information about any Company's insurance as the Global Agent may from time to time reasonably request, which information shall be prepared in form and detail satisfactory to the Global Agent and certified by a Financial Officer of Borrower or Company. Section 5.2. MONEY OBLIGATIONS. Each Company shall pay in full (a) prior in each case to the date when penalties would attach, all taxes, assessments and governmental charges and levies (except only those so long as and to the extent that the same shall be contested in good faith by appropriate and timely proceedings and for which adequate reserves have been established in accordance with GAAP) for which it may be or become liable or to which any or all of its properties may be or become subject; (b) all of its wage obligations to its employees in compliance with the Fair Labor Standards Act (29 U.S.C. 206-207) or any comparable provisions; and (c) all of its other obligations calling for the payment of money (except only those so long as and to the extent that the same shall be contested in good faith and for which adequate reserves have been established in accordance with GAAP) before such payment becomes overdue. Section 5.3. FINANCIAL STATEMENTS. Borrower shall furnish to each Lender or, with respect to subpart (a) below, only to the Global Agent: 51 (a) within twenty (20) days after the end of each month, monthly balance sheets, a statement of cash flow and an income statement for the month then ended (and including the appropriate adjusted financial statements to reflect the Restructuring Charges), in form and substance satisfactory to the Global Agent, prepared on a year-to-date basis and on a comparative basis to the previous year, and on a Consolidated basis; the Global Agent shall provide copies of the foregoing information to any Lender upon such Lender's written request; (b) within sixty (60) days after the end of each of the first three quarter-annual periods of each fiscal year of the Companies, balance sheets of the Companies as of the end of such period and statements of income (loss), stockholders' equity and cash flow for the quarter and fiscal year to date periods, all prepared on a Consolidated and consolidating basis, in accordance with GAAP, and in form and detail satisfactory to the Lenders (and including the appropriate adjusted financial statements to reflect the Restructuring Charges) and certified by a Financial Officer; (c) within one hundred (100) days after the end of each fiscal year of the Companies, an annual audit report of the Companies for that year prepared on a Consolidated and consolidating basis, in accordance with GAAP, and in form and detail satisfactory to the Global Agent and certified by an independent public accountant satisfactory to the Required Lenders, which report shall include balance sheets and statements of income (loss), stockholders' equity and cash-flow for that period, together with a certificate by the accountant setting forth the Defaults or Events of Default coming to its attention during the course of its audit or, if none, a statement to that effect; (d) concurrently with the delivery of the financial statements set forth in (b) and (c) above, a Compliance Certificate; (e) with the delivery of the quarterly and annual financial statements in (b) and (c) above, a copy of any management report, letter or similar writing furnished to the Companies by the accountants in respect of the Companies' systems, operations, financial condition or properties; (f) within one hundred (100) days after the end of each fiscal year of the Companies, annual pro-forma projections of the Companies for the then current fiscal year and the next two succeeding fiscal years, to be in form acceptable to the Global Agent; (g) as soon as available, copies of all notices, reports, definitive proxy or other statements and other documents sent by Borrower to its shareholders, to the holders of any of its debentures or bonds or the trustee of any indenture securing the same or pursuant to which they are issued, or sent by Borrower (in final form) to any securities exchange or over the counter authority or system, or to the SEC or any similar federal agency having regulatory jurisdiction over the issuance of Borrower's securities; and (h) within ten (10) days of the written request of the Global Agent or any Lender, such other information about the financial condition, properties and operations of any Company as the Global Agent or Lender may from time to time reasonably request, which information shall be submitted in form and detail satisfactory to the Global Agent or any Lender and certified by a Financial Officer of the Company or Companies in question. 52 Section 5.4. FINANCIAL RECORDS. Each Company shall at all times maintain true and complete records and books of account, including, without limiting the generality of the foregoing, appropriate reserves for possible losses and liabilities, all in accordance with GAAP (except with respect to certain Foreign Subsidiaries, which shall maintain such records in accordance with generally accepted accounting principles of the country in which such Foreign Subsidiary has its principal place of business), and at all reasonable times (during normal business hours and upon notice to such Company) permit the Global Agent or any Lender, or any representative of the Global Agent or such Lender, to examine that Company's books and records and to make excerpts therefrom and transcripts thereof. Section 5.5. FRANCHISES. Each Company shall preserve and maintain at all times its existence, rights and franchises, except as otherwise permitted pursuant to Section 5.12 hereof. Section 5.6. ERISA COMPLIANCE. No Company shall incur any material accumulated funding deficiency within the meaning of ERISA, or any material liability to the PBGC, established thereunder in connection with any ERISA Plan. Borrower shall furnish to the Lenders (a) as soon as possible and in any event within thirty (30) days after any Company knows or has reason to know that any Reportable Event with respect to any ERISA Plan has occurred, a statement of the Financial Officer of such Company, setting forth details as to such Reportable Event and the action that such Company proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the PBGC if a copy of such notice is available to such Company, and (b) promptly after receipt thereof a copy of any notice such Company, or any member of the Controlled Group may receive from the PBGC or the Internal Revenue Service with respect to any ERISA Plan administered by such Company; provided, that this latter clause shall not apply to notices of general application promulgated by the PBGC or the Internal Revenue Service. Borrower shall promptly notify the Lenders of any material taxes assessed, proposed to be assessed or that Borrower has reason to believe may be assessed against a Company by the Internal Revenue Service with respect to any ERISA Plan. As used in this Section "material" means the measure of a matter of significance that shall be determined as being an amount equal to five percent (5%) of the Consolidated Net Worth of Borrower. As soon as practicable, and in any event within twenty (20) days, after any Company becomes aware that an ERISA Event shall have occurred, such Company shall provide the Global Agent with notice of such ERISA Event with a certificate by a Financial Officer of such Company setting forth the details of the event and the action such Company or another Controlled Group member proposes to take with respect thereto. Borrower shall, at the request of the Global Agent or any Lender, deliver or cause to be delivered to the Global Agent or such Lender, as the case may be, true and correct copies of any documents relating to the ERISA Plan of any Company. Section 5.7. FINANCIAL COVENANTS. (a) CAPITALIZATION RATIO. The Companies shall not suffer or permit at any time the Capitalization Ratio to exceed (i) 0.55 to 1.00 on the Closing Date through August 31, 2001, (ii) 0.60 to 1.00 on September 1, 2001 through November 30, 2001, and (iii) 0.55 to 1.00 on December 1, 2001 and thereafter. 53 (b) INTEREST COVERAGE RATIO. The Companies shall not suffer or permit at any time the Interest Coverage Ratio to be less than (i) 2.70 to 1.00 on the Closing Date through February 28, 2002, (ii) 3.20 to 1.00 on March 1, 2002 through August 31, 2002, (iii) 3.40 to 1.00 on September 1, 2002 through November 30, 2002, (iv) 4.00 to 1.00 on December 1, 2002 through February 28, 2003, and (v) 4.20 to 1.00 on March 1, 2003 and thereafter. (c) NET WORTH. The Companies shall not suffer or permit at any time the Consolidated Adjusted Net Worth, for the most recently completed fiscal quarter of the Companies, to be less than (i) Six Hundred Twenty Million Dollars ($620,000,000) for the period from the Closing Date through August 31, 2001, (ii) Six Hundred Thirty-Five Million Dollars ($635,000,000) on September 1, 2001 through November 30, 2001, (iii) Six Hundred Fifty Million Dollars ($650,000,000) on December 1, 2001 through February 28, 2002, (iv) Seven Hundred Twenty Million Dollars ($720,000,000) on March 1, 2002 through May 31, 2002, and (v) Six Hundred Fifty Million Dollars ($650,000,000) on June 1, 2002 and thereafter, with each such amount to be positively increased on a cumulative basis, by the Increase Amount on November 30, 2002, and by an additional Increase Amount on the last day of each succeeding fiscal quarter thereafter. As used herein, the term "Increase Amount" shall mean an amount equal to (i) fifty percent (50%) of positive Consolidated Net Earnings for the fiscal quarter then ended (with no deduction for losses), plus (ii) one hundred percent (100%) of the proceeds of any equity offering by the Companies, or any debt offering of the Companies, to the extent converted into equity, plus (iii) one hundred percent (100%) of the incremental net worth associated with any Acquisition made by the Companies during such period. (d) MINIMUM EBITDA. The Companies shall not suffer or permit at any time Consolidated EBITDA, for the most recently completed four fiscal quarters of the Companies, to be less than (i) One Hundred Eighty-Eight Million Dollars ($188,000,000) for the period from the Closing Date through August 31, 2001, (ii) One Hundred Ninety-Seven Million Dollars ($197,000,000) on September 1, 2001, through November 30, 2001, (iii) Two Hundred Twenty-One Million Dollars ($221,000,000) on December 1, 2001 through February 28, 2002, (iv) Two Hundred Fifty-Four Million Dollars ($254,000,000) on March 1, 2002 through May 31, 2002, (v) Two Hundred Forty-Five Million Dollars ($245,000,000) on June 1, 2002 through August 31, 2002, (vi) Two Hundred Seventy-Five Million Dollars ($275,000,000) on September 1, 2002 through November 30, 2002, (vii) Three Hundred Twenty-Three Million Dollars ($323,000,000) on December 1, 2002 through February 28, 2003, and (viii) Three Hundred Fifty Million Dollars ($350,000,000) on March 1, 2003 and thereafter. (e) LEVERAGE RATIO. The Companies shall not suffer or permit at any time the Leverage Ratio to be greater than (i) 5.00 to 1.00 on the Closing Date through August 31, 2001, (ii) 5.90 to 1.00 on September 1, 2001 through November 30, 2001, (iii) 4.00 to 1.00 on December 1, 2001 through November 30, 2002, (iv) 3.20 to 1.00 on December 1, 2002 through November 30, 2003, and (v) 2.50 to 1.00 on December 1, 2003 and thereafter. Section 5.8. BORROWING. No Company shall create, incur or have outstanding any obligation for borrowed money or any Indebtedness of any kind; provided, that this Section shall not apply to: (a) the Loans, Letters of Credit or any other Indebtedness under this Agreement; 54 (b) in addition to the Indebtedness permitted pursuant to the other subparts of this Section, the Indebtedness that shall exist as of the Closing Date as set forth in SCHEDULE 5.8 hereto, but not any extensions, renewals or replacements of such Indebtedness except (i) renewals and extensions expressly provided for in the agreements evidencing any such Indebtedness as the same are in effect on the date of this Agreement and (ii) refinancings and extensions of any such Indebtedness if the terms and conditions thereof are not less favorable to the obligor thereon or to the Global Agent and the Lenders taken as a whole in the reasonable judgment of the Global Agent than the Indebtedness being refinanced or extended and the average life to maturity thereof shall be greater than or equal to that of the Indebtedness being refinanced or extended; provided that such Indebtedness permitted under the immediately preceding clause (i) or (ii) above shall not (A) include Indebtedness of an obligor that was not an obligor with respect to the Indebtedness being extended, renewed or refinanced (other than the Companies), (B) exceed in a principal amount the Indebtedness being renewed, extended or refinanced plus the costs of refinancing (including consent fees), accrued interest and premiums or (C) be incurred, created or assumed if any Default or Event of Default shall have occurred and be continuing or would result therefrom); (c) the unsecured Indebtedness of Borrower in connection with the notes (including any replacement notes) issued pursuant to the Subordinated Indenture, so long as (i) all of such Indebtedness shall be Subordinated at all times to the Debt, and (ii) the aggregate principal amount of such Indebtedness shall not exceed Two Hundred Sixty Million Dollars ($260,000,000) at any time; (d) the unsecured Indebtedness of Borrower in connection with the notes issued pursuant to the Subordinated Convertible Indenture, so long as (i) all of such Indebtedness shall be Subordinated at all times to the Debt, and (ii) the aggregate principal amount of such Indebtedness shall not exceed One Hundred Seventy-Five Million Dollars ($175,000,000) at any time; (e) the Indebtedness of Borrower in connection with the notes or securities issued pursuant to the Senior Indenture, so long as the aggregate principal amount of such Indebtedness shall not exceed Three Hundred Million Dollars ($300,000,000) at any time; (f) loans or capital leases to any Company for the purchase or lease of fixed assets, which loans or leases shall be secured by the assets being purchased or leased, so long as the aggregate principal amount of all such loans and leases for all Companies shall not exceed Twenty-Five Million Dollars ($25,000,000) at any time; (g) loans by a Domestic Company (other than the Receivables Subsidiary) to another Domestic Company (other than the Receivables Subsidiary) so long as each such Company shall be Borrower or a Guarantor of Payment; (h) loans by a Foreign Subsidiary to a Domestic Company (other than the Receivables Subsidiary); (i) Permitted Foreign Subsidiary Loans and Investments; 55 (j) Indebtedness under any Hedge Agreement, so long as such Hedge Agreement shall have been entered into in the ordinary course of business and not for speculative purposes; (k) the Indebtedness of Borrower with respect to the Other Lender Obligations, as defined in Article X hereof, listed on SCHEDULE 10.1 hereto; (l) (i) Indebtedness of the Receivables Subsidiary under the Permitted Receivables Facility, so long as the funded amount shall not exceed Two Hundred Fifty Million Dollars ($250,000,000) at any time, or (ii) Indebtedness of the Receivables Subsidiary or AGSC to any other Company in connection with the Permitted Receivables Facility in accordance with the Receivables Facility Documents; (m) the Indebtedness of Borrower to AGSC pursuant to the AGSC Note so long as (i) all of such Indebtedness is Subordinated, and (ii) the aggregate principal amount of such Indebtedness shall not exceed One Hundred Thirty Million Dollars ($130,000,000) at any time; or (n) in addition to the Indebtedness permitted pursuant to subparts (a) through (m) above, other unsecured Indebtedness of Borrower so long as (i) all of such Indebtedness is Subordinated, (ii) no Default or Event of Default shall then exist or immediately after incurring any of such Indebtedness will exist, (iii) the documentation with respect to such Indebtedness shall be in form and substance satisfactory to the Global Agent, and (iv) the Companies shall be in compliance with the financial covenants set forth in Section 5.7 hereof both immediately before and after giving pro forma effect to the incurrence of such Indebtedness. Section 5.9. LIENS. No Company shall create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired; provided that this Section shall not apply to the following: (a) Liens for taxes not yet due or that are being actively contested in good faith by appropriate proceedings and for which adequate reserves shall have been established in accordance with GAAP; (b) other statutory Liens incidental to the conduct of its business or the ownership of its property and assets that (i) were not incurred in connection with the borrowing of money or the obtaining of advances or credit, and (ii) do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business; (c) Liens on property or assets of a Subsidiary to secure obligations of such Subsidiary to Borrower or a Guarantor of Payment; (d) purchase money Liens on fixed assets securing the loans and capital leases pursuant to Section 5.8(f) hereof, provided that such Lien shall be limited to the purchase (or lease) price and only attaches to the property being acquired or leased; (e) the Liens existing on the Closing Date as set forth in SCHEDULE 5.9 hereto; 56 (f) easements or other minor defects or irregularities in title of real property not interfering in any material respect with the use of such property in the business of any Company; or (g) any Lien granted to the Global Agent or the Collateral Agent securing the Debt or Liens granted to the Collateral Agent to secure the Obligations, as defined in Article X hereof, so long as any such Lien granted to the Collateral Agent that secures any obligations of any Person (other than the Global Agent and the Lenders in connection with this Agreement) shall be at all times subject to the intercreditor provisions set forth in Article X hereof. No Company shall enter into any contract or agreement that would prohibit the Global Agent or the Lenders from acquiring a security interest, mortgage or other Lien on, or a collateral assignment of, any of the property or assets of a Company. Section 5.10. REGULATIONS U AND X. No Company shall take any action that would result in any non-compliance of the Loans with Regulations U and X, or any other applicable regulation, of the Board of Governors of the Federal Reserve System. Section 5.11. INVESTMENTS AND LOANS. No Company shall (a) create, acquire or hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or securities of any kind, (c) be or become a party to any joint venture or other partnership, (d) make or keep outstanding any advance or loan to any Person, or (e) be or become a Guarantor of any kind; provided, that this Section shall not apply to: (i) investments by the Companies in Cash Equivalents; (ii) any endorsement of a check or other medium of payment for deposit or collection through normal banking channels or similar transaction in the normal course of business; (iii) the holding of Subsidiaries listed on SCHEDULE 6.1 hereto and the creation, acquisition and holding of any new Subsidiary (other than by the Receivables Subsidiary) after the Closing Date so long as such new Subsidiary shall be created, acquired or held in accordance with the terms and conditions of this Agreement and, if required, shall comply with Section 5.21 hereof; (iv) loans to or investments in a Domestic Company by another Domestic Company so long as each such Company shall be Borrower or a Guarantor of Payment; (v) loans to or investments in a Domestic Company by a Foreign Subsidiary; (vi) Permitted Foreign Subsidiary Loans and Investments; (vii) any advance or loan to an officer or employee of a Company made in the ordinary course of such Company's business, so long as all such advances and loans from all Companies shall aggregate not more than the maximum principal sum of Five Hundred Thousand Dollars ($500,000) at any time outstanding; (viii) any Permitted Investment; 57 (ix) guarantees of Indebtedness of the Companies incurred or permitted pursuant to this Agreement; (x) Indebtedness of the Receivables Subsidiary to Borrower or AGSC and Indebtedness of AGSC to Borrower in connection with Permitted Receivables Facility in accordance with the Receivables Facility Documents; or (xi) the Indebtedness of Borrower to AGSC pursuant to the AGSC Note so long as (i) all of such Indebtedness is Subordinated, and (ii) the aggregate principal amount of such Indebtedness shall not exceed One Hundred Thirty Million Dollars ($130,000,000) at any time. Section 5.12. MERGER AND SALE OF ASSETS. No Company shall merge or consolidate with any other Person, or effect any Disposition other than in the ordinary course of business, except that, if no Default or Event of Default shall then exist or immediately thereafter shall begin to exist: (a) any Subsidiary (other than the Receivables Subsidiary) may merge with (i) Borrower (provided that Borrower shall be the continuing or surviving Person), or (ii) any one or more Guarantors of Payment; (b) any Subsidiary (other than the Receivables Subsidiary) may sell, lease, transfer or otherwise dispose of any of its assets to (i) Borrower, or (ii) any one or more Guarantors of Payment; (c) in addition to any merger permitted pursuant to subpart (a) above, any Foreign Subsidiary may merge with any one or more Foreign Subsidiaries; (d) in addition to any Disposition permitted pursuant to subpart (b) above, any Foreign Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to any one or more Foreign Subsidiaries; (e) in addition to any Disposition permitted pursuant to subparts (a) through (d) above, AGSC or any Receivables Facility Participant may sell the Receivables Related Assets in connection with the Permitted Receivables Facility; and (f) in addition to any Disposition permitted pursuant to subparts (a) through (e) above, any Company may effect a Disposition so long as (i) the Companies shall be in full compliance with the Loan Documents both prior to and subsequent to the transaction, (ii) no Default or Event of Default shall then exist or immediately after such Disposition will exist, (iii) the Companies shall be in compliance with the financial covenants set forth in Section 5.7 hereof both immediately before and after giving pro forma effect to such Disposition, (iv) the Companies shall receive consideration equivalent to the fair market value (as determined by the Board of Directors of Borrower) of the assets disposed of in connection with such Disposition, (v) at least seventy-five percent (75%) of the consideration received in connection with such Disposition shall be in the form of cash (other than the Disposition of substantially all of the non-core greeting card assets comprising the party goods and candle business of Borrower, the non-cash portion of which shall not at any one time exceed Fifty Million Dollars ($50,000,000)), (vi) 58 an amount equal to at least fifty percent (50%) of the proceeds in excess of Ten Million Dollars ($10,000,000) in the aggregate with respect to all such Dispositions shall have been applied in accordance with Section 2.8(c) hereof, and (vii) unless the Companies shall use the remaining proceeds of such Disposition to effect an Acquisition permitted pursuant to Section 5.13 hereof within one hundred eighty (180) days after the receipt of the proceeds of such Disposition, then such remaining proceeds of such Disposition shall be applied in accordance with Section 2.8(c) hereof. Section 5.13. ACQUISITIONS. No Company shall effect any Acquisition; provided, however, that, subject to Section 5.27 hereof, Borrower or a Guarantor of Payment may effect an Acquisition so long as: (a) Borrower or such Guarantor of Payment, as the case may be, shall be the surviving entity in the case of a merger or other consolidation; (b) the business to be acquired shall be similar to the lines of business of the Companies; (c) the Companies shall be in full compliance with the Loan Documents both prior to and subsequent to the transaction, including, but not limited to the requirements set forth in Section 5.21 hereof; (d) Borrower shall have provided to the Global Agent and the Lenders, at least twenty (20) days prior to such Acquisition, historical financial statements of the target entity and a pro forma financial statement of the Companies accompanied by a certificate of a Financial Officer showing (i) pro forma compliance with Section 5.7 hereof, both before and after giving effect to the proposed Acquisition, and (ii) that, on a pro forma basis, such Acquisition will not result in any negative financial impact with respect to the financial ratios set forth in Section 5.7(a), and (b) and (e) hereof; (e) the Fixed Charge Coverage Ratio Condition shall not exist nor shall it exist after giving effect to such Acquisition; (f) commencing with the fiscal quarter ending August 31, 2001, the aggregate Consideration paid by the Companies in connection with such Acquisition, when added to all other Acquisitions (including, without limitation, the one time Acquisition described in subpart (g) below) for all Companies, during any period of four consecutive fiscal quarters (calculated without regard to any Acquisition that shall have occurred prior to the Closing Date), shall not exceed the Maximum Acquisition Amount; and (g) the aggregate Consideration paid by the Companies in connection with the one time Acquisition of internet related businesses on and after the Closing Date shall not exceed the Maximum Acquisition Amount. Section 5.14. CAPITAL EXPENDITURES. The Companies shall not invest in Consolidated Capital Expenditures (a) more than an aggregate amount equal to Sixty-Five Million Dollars ($65,000,000) during the 2002 fiscal year of the Companies, (b) more than an amount equal to Fifty-Seven Million Five Hundred Thousand Dollars ($57,500,000) during the 2003 fiscal year 59 of the Companies, and (c) more than an amount equal to Sixty-Nine Million Dollars ($69,000,000) during the 2004 fiscal year of the Companies and during each fiscal year of the Companies thereafter. Section 5.15. NOTICE. (a) Borrower shall cause a Financial Officer of Borrower to promptly notify the Global Agent and the Lenders in writing whenever any Default or Event of Default may occur hereunder or any representation or warranty made in Article VI hereof or elsewhere in this Agreement or in any Related Writing may for any reason cease in any material respect to be true and complete. (b) Borrower shall provide written notice to the Global Agent, contemporaneously with any notice being provided by any Company or to any Company in connection with the Senior Indenture, the Subordinated Indenture or the Subordinated Convertible Indenture. (c) Borrower shall provide the Global Agent and the Lenders with immediate written notice upon any change in the S&P Rating, the S&P Senior Rating, the Moody's Rating or the Moody's Senior Rating. Section 5.16. ENVIRONMENTAL COMPLIANCE. Each Company shall comply in all respects with any and all Environmental Laws including, without limitation, all Environmental Laws in jurisdictions in which any Company owns or operates a facility or site, arranges for disposal or treatment of hazardous substances, solid waste or other wastes, accepts for transport any hazardous substances, solid waste or other wastes or holds any interest in real property or otherwise. Borrower shall furnish to the Lenders, promptly after receipt thereof, a copy of any notice any Company may receive from any governmental authority or private Person or otherwise that any material litigation or proceeding pertaining to any environmental, health or safety matter has been filed or is threatened against such Company, any real property in which such Company holds any interest or any past or present operation of such Company. No Company shall allow the release or disposal of hazardous waste, solid waste or other wastes on, under or to any real property in which any Company holds any interest or performs any of its operations, in violation of any Environmental Law. As used in this Section, "litigation or proceeding" means any demand, claim, notice, suit, suit in equity action, administrative action, investigation or inquiry whether brought by any governmental authority or private Person or otherwise. Borrower shall defend, indemnify and hold the Global Agent and the Lenders harmless against all costs, expenses, claims, damages, penalties and liabilities of every kind or nature whatsoever (including attorneys' fees) arising out of or resulting from the noncompliance of any Company with any Environmental Law. Such indemnification shall survive any termination of this Agreement. Section 5.17. AFFILIATE TRANSACTIONS. No Company shall, or shall permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of a Company on terms that are less favorable to such Company or such Subsidiary, as the case may be, than those that might be obtained at the time in a transaction with a non-Affiliate; provided, however, that the foregoing shall not prohibit (a) the payment of customary and reasonable directors' fees to directors who are not employees of a Company or 60 employees of any Affiliate of a Company, (b) any transaction between Borrower and an Affiliate (if Borrower or a Guarantor of Payment) that Borrower reasonably determines in good faith is beneficial to Borrower and its Affiliates as a whole and that is not entered into for the purpose of hindering the exercise by the Global Agent or the Lenders of their rights or remedies under this Agreement, (c) the transactions pursuant to the Permitted Receivables Facility, or (d) the transactions pursuant to the AGSC Note. Section 5.18. USE OF PROCEEDS. Borrower's use of the proceeds of the Notes shall be solely for the refinancing of existing Indebtedness, working capital and other general corporate purposes of the Companies. Section 5.19. CORPORATE NAMES; LOCATION OF COLLATERAL. Borrower shall, and shall cause each other Company to, comply with the following provisions: (a) no Company shall change its corporate name, unless, in each case, such Company shall have provided the Global Agent and the Lenders with at least thirty (30) days prior written notice thereof; (b) except as set forth on SCHEDULE 6.19 hereto, no Company shall use trade names, assumed names or fictitious names, unless, in each case, such Company shall have provided the Global Agent and the Lenders with at least thirty (30) days prior written notice thereof; (c) Borrower shall provide the Global Agent with written notification no later than ten (10) days after (i) any change in the location of the office where any records of any Company pertaining to its accounts shall be kept; (ii) the closing of any existing places of business; and (iii) any change in the chief executive office of any Company; (d) Borrower shall provide the Global Agent with at least twenty (20) days prior written notice of any new location where any inventory or equipment of any Domestic Company is to be maintained; and (e) in the event of any of the foregoing, the appropriate Company shall promptly execute and deliver to the Collateral Agent (and each Company agrees that the Collateral Agent may execute and deliver the same as such Company's irrevocable attorney-in-fact) new U.C.C. financing or other registration statements describing any collateral securing the Debt and otherwise in form and substance sufficient for recordation wherever necessary or appropriate, as determined in the Global Agent's sole discretion, to perfect or continue perfected the security interest of the Collateral Agent in such collateral, based upon such new places of business or names, and Borrower shall pay all filing and recording fees and taxes in connection with the filing or recordation of such U.C.C financing or other registration statements and shall immediately reimburse the Global Agent or the Collateral Agent therefor if the Global Agent or the Collateral Agent pays the same. Such amounts shall be Related Expenses hereunder. Section 5.20. RESTRICTED PAYMENTS. No Company shall make or commit itself to make any Restricted Payment, except that: (a) subject to Section 5.27 hereof, Borrower may make Cash Dividends so long as (i) no Default or Event of Default shall then exist or immediately thereafter shall begin to exist, (ii) 61 at all times prior to February 28, 2003, the Companies shall have achieved the Minimum Required Consolidated EBITDA Amount, and (iii) the aggregate amount of all Cash Dividends made during any fiscal quarter of Borrower shall not exceed the Maximum Quarterly Dividend Amount for such fiscal quarter; provided, however, that, if the Companies shall have failed to achieve the Minimum Required Consolidated EBITDA Amount for any fiscal quarter, then Borrower shall not be permitted to make any Cash Dividends for such fiscal quarter and shall make no further Cash Dividends unless and until the Companies shall have achieved the Minimum Required Consolidated EBITDA Amount for a fiscal quarter, in which case Borrower shall be permitted to make Cash Dividends at the end of such fiscal quarter in an amount equal to the Maximum Quarterly Dividend Amount for such fiscal quarter, but not the fiscal quarter or fiscal quarters in which the Companies shall have failed to achieve the Minimum Required Consolidated EBITDA Amount; (b) if no Event of Default shall then exist or immediately thereafter shall begin to exist, Borrower may make regularly scheduled payments of interest with respect to the Indebtedness outstanding under the Subordinated Indenture; (c) if no Event of Default shall then exist or immediately thereafter shall begin to exist, Borrower may make regularly scheduled payments of interest with respect to the Indebtedness outstanding under the Subordinated Convertible Indenture; (d) Borrower may make regularly scheduled payments of interest with respect to the Indebtedness outstanding under the Senior Indenture; and (e) any Company may pay or commit itself to pay a Capital Distribution at any time to Borrower or a Guarantor of Payment. Section 5.21. SUBSIDIARIES ACQUIRED OR HELD SUBSEQUENT TO THE CLOSING DATE. (a) Subject to subpart (b) of this Section, each Subsidiary created, acquired or held subsequent to the Closing Date (i) shall immediately execute and deliver to the Global Agent a Guaranty of Payment and such Security Documents as the Global Agent shall require, and shall deliver to the Global Agent and the Lenders certified copies of such Organizational Documents and authorization documents, and an opinion of counsel, as may be deemed necessary or appropriate by the Global Agent; and (ii) the appropriate Company shall deliver to the Collateral Agent the share certificates, or other evidence of equity interest, of such Subsidiary pursuant to the terms of the Pledge Agreement executed by such Company; provided, however, that (A) no Company shall be required to pledge more than sixty-five percent (65%) of the outstanding shares of stock or other equity interest of any first tier Foreign Subsidiary as security for the obligations of Borrower under this Agreement and no Company shall be obligated to pledge any of the outstanding shares of stock or other equity interest in any Foreign Subsidiary other than a first tier Foreign Subsidiary, and (B) neither the Receivables Subsidiary nor American Greetings Service Corp. shall be required to be a Guarantor of Payment hereunder (and no Company shall be obligated to pledge the shares of stock of the Receivables Subsidiary) so long as the Permitted Receivables Facility shall not have been terminated. (b) Notwithstanding anything in subpart (a) above to the contrary, a Subsidiary shall not be required to execute and deliver a Guaranty of Payment or any Security Documents to the 62 Global Agent and the Lenders so long as (i) the total assets of such Subsidiary shall be less than the amount of One Hundred Thousand Dollars ($100,000), and (ii) the aggregate of the total assets of all such Subsidiaries with total asset values of less than One Hundred Thousand Dollars ($100,000) shall not exceed the aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000); provided that, in the event that the total assets of any Subsidiary that shall not have complied with the requirements of Section 5.21(a) above shall be at any time equal to or greater than One Hundred Thousand Dollars ($100,000), Borrower shall provide the Global Agent and the Lenders with prompt written notice of such asset value and comply with Section 5.21(a) above with respect to such Subsidiary. Section 5.22. AMENDMENT OF ORGANIZATIONAL DOCUMENTS. No Company shall amend its Organizational Documents without the prior written consent of the Global Agent; provided, however, that any Company that is not Borrower or a Guarantor of Payment may amend its Organizational Documents so long as any such amendment shall not have a material impact on the rights or remedies of the Global Agent or the Lenders hereunder. Section 5.23. REAL PROPERTY MATTERS. (a) At the request of the Global Agent, Borrower or a Guarantor of Payment shall, with respect to any Real Property acquired or held by a Company subsequent to the Closing Date with a fair market value in excess of One Hundred Thousand Dollars ($100,000), provide, or cause such Company to provide, to the Collateral Agent (i) a Mortgage, (ii) such other information, documents or agreements as may be deemed necessary or advisable by the Global Agent in connection with such Mortgage, including, but not limited to, the items set forth in subpart (b) hereof, and (iii) such corporate governance and authorization documents and an opinion of counsel as may be deemed necessary or appropriate by the Global Agent. (b) With respect to each Mortgaged Real Property, within thirty (30) days of the Global Agent's written request, Borrower shall deliver to the Collateral Agent: (i) a Loan Policy of title insurance, ALTA 1970 Form B (amended 10/17/70 and 10/17/84) (unless such form is unavailable in any particular state, in which case Borrower shall have provided such other form of a Loan Policy of title insurance as may reasonably requested by the Global Agent) issued by a title company satisfactory to the Global Agent and the Required Lenders (collectively, the "Loan Policies" and individually, a "Loan Policy") in an amount equal to the fair market value of such Mortgaged Real Property insuring each Mortgage to be a valid first priority Lien on such Mortgaged Real Property, free and clear of all defects and encumbrances except such matters of record as permitted pursuant to this Agreement, with such endorsements and affirmative insurance as the Global Agent and the Required Lenders, in their reasonable discretion, may require; (ii) environmental reports or studies prepared by environmental engineering firms acceptable to the Global Agent and the Required Lenders (the "Reports"), which Reports shall be in form acceptable to the Global Agent and the Required Lenders; (iii) a current (certified not more than sixty (60) days prior to the date of such request) "as-built" survey of the such Mortgaged Real Property, prepared by a licensed 63 surveyor acceptable to the Global Agent and the Required Lenders, certified to the Global Agent, the Collateral Agent and the Lenders and the title company pursuant to certificate of survey acceptable to the Global Agent and the Required Lenders; such survey shall be in form and substance acceptable to the Global Agent and the Required Lenders, in their sole discretion, shall be made in accordance with the "Minimum Standard Detail Requirements for Land Title Surveys" adopted by the American Land Title Association in 1999; (iv) a copy of the certificate of occupancy for each building located on each such Mortgaged Real Property; (v) evidence of compliance with all building and zoning codes applicable to the Mortgaged Real Property and evidence of the availability and adequacy of utilities for the buildings located on the Mortgaged Real Property; and (vi) evidence, satisfactory to the Global Agent and the Required Lenders, that no portion of any of the Mortgaged Real Property is located in a Special Flood Hazard Area or is otherwise classified as Class A or Class BX on the Flood Maps maintained by the Federal Emergency Management Agency. Section 5.24. RESTRICTIVE AGREEMENTS; MATERIAL INDEBTEDNESS AGREEMENTS. (a) Except as set forth in this Agreement or the Receivables Facility Documents, Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (i) make, directly or indirectly, any Capital Distribution to Borrower; (ii) make, directly or indirectly, loans or advances or capital contributions to Borrower; or (iii) transfer, directly or indirectly, any of the properties or assets of such Subsidiary to Borrower, except for such encumbrances or restrictions existing under or by reason of (A) applicable law, (B) customary non-assignment provisions in leases or other agreements entered in the ordinary course of business and consistent with past practices, or (C) customary restrictions in security agreements or mortgages securing Indebtedness of a Company to the extent such restrictions only restrict the transfer of the property subject to such security agreement or mortgage. (b) No Company shall amend, restate, supplement or otherwise modify or replace in any respect the Senior Indenture, the Subordinated Indenture, the Subordinated Convertible Indenture, the Receivables Facility Documents or any other Material Indebtedness Agreement without the prior written consent of the Required Lenders; provided, however, that any Company may amend, supplement or otherwise modify any of the foregoing agreements with the prior written consent of the Global Agent, so long as any such amendment or modification does not, in the opinion of the Global Agent, materially impact the rights or remedies of the Global Agent and the Lenders hereunder. (c) No Company shall be or become a Guarantor of the Indebtedness incurred pursuant to the Subordinated Indenture, the Subordinated Convertible Indenture, the Senior Indenture or any other Material Indebtedness Agreement (other than this Agreement). 64 Section 5.25. OTHER COVENANTS In the event that any Company shall enter into, or shall have entered into, any Material Indebtedness Agreement, wherein the covenants and agreements contained therein shall be more restrictive than the covenants and agreements set forth herein, then such Company shall be bound hereunder by such covenants and agreements with the same force and effect as if such covenants and agreements were written herein. Section 5.26. PARI PASSU RANKING. The Debt shall, and Borrowers shall take all necessary action to ensure that the Debt shall, at all times rank at least pari passu in right of payment (to the fullest extent permitted by law) with all other senior Indebtedness of the Companies (other than the Indebtedness incurred in connection with the Permitted Receivables Facility). Section 5.27. PERMITTED RECEIVABLES FACILITY CERTIFICATION. Notwithstanding anything to the contrary set forth in this Agreement, (a) unless and until Borrower shall have delivered a Permitted Receivables Facility Certificate to the Global Agent pursuant to which Borrower shall have certified that the Permitted Receivables Facility is in effect providing for not less than Two Hundred Fifty Million Dollars ($250,000,000) of aggregate permitted borrowings by the Receivables Subsidiary thereunder and that the Prior Seasonal Peak Drawing Level as of the most recent November 30 is at least Two Hundred Twenty-Five Million Dollars ($225,000,000), Borrower shall not make any Cash Dividends or effect any Acquisitions; (b) in the event Borrower shall have delivered a Permitted Receivables Facility Certificate to the Global Agent pursuant to which Borrower shall have certified that a Permitted Receivables Facility is in effect providing for not less than Two Hundred Fifty Million Dollars ($250,000,000) of aggregate permitted borrowings thereunder and that the Prior Seasonal Peak Drawing Level as of the most recent November 30 is at least Two Hundred Twenty-Five Million Dollars ($225,000,000) but less than Two Hundred Fifty Million Dollars ($250,000,000), Borrower may either (i) make any Cash Dividend otherwise permitted to be made under Section 5.20(a) hereof or, (ii) in lieu of making such Cash Dividend, effect Acquisitions in accordance with Section 5.13 hereof; provided, however, that any election by Borrower not to pay Cash Dividends pursuant to this Section 5.27, shall not be calculated as part of the Dividend Reduction Amount; and (c) at any time that Borrower shall have delivered to the Global Agent a Permitted Receivables Facility Certificate pursuant to which Borrower shall have certified that a Permitted Receivables Facility is in effect providing for not less than Two Hundred Fifty Million Dollars ($250,000,000) of aggregate permitted borrowings thereunder and that the Prior Seasonal Peak Drawing Level as of the most recent November 30 is at least Two Hundred Fifty Million Dollars ($250,000,000), the foregoing provisions of this Section 5.27 shall not apply. ARTICLE VI. REPRESENTATIONS AND WARRANTIES Borrower represents and warrants that the statements set forth in this Article VI are true, correct and complete. Section 6.1. CORPORATE EXISTENCE; SUBSIDIARIES; FOREIGN QUALIFICATION. Each Company is a corporation duly organized, validly existing, and in good standing under the laws of its state of incorporation and is duly qualified and authorized to do business and is in good standing as a 65 foreign corporation in the jurisdictions set forth opposite its name on SCHEDULE 6.1 hereto, which are all of the states or jurisdictions where the character of its property or its business activities makes such qualification necessary, except where the failure to so qualify will not cause or result in a Material Adverse Effect. SCHEDULE 6.1 hereto sets forth each Subsidiary of Borrower, its state of incorporation, its relationship to Borrower, including the percentage of each class of stock owned by a Company or the percentage of stock of Borrower owned by it, the location of its chief executive offices and its principal place of business. Except as set forth on SCHEDULE 6.1 hereto, Borrower owns all of the capital stock of each of its Subsidiaries. Section 6.2. CORPORATE AUTHORITY. Borrower has the right and power and is duly authorized and empowered to enter into, execute and deliver the Loan Documents to which it is a party and to perform and observe the provisions of the Loan Documents. The Loan Documents to which Borrower is a party have been duly authorized and approved by Borrower's Board of Directors and are the valid and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms. The execution, delivery and performance of the Loan Documents will not conflict with nor result in any breach in any of the provisions of, or constitute a default under, or result in the creation of any Lien (other than Liens permitted under Section 5.9 of this Agreement) upon any assets or property of any Company under the provisions of, such Company's Organizational Documents or any agreement. Section 6.3. COMPLIANCE WITH LAWS. Each Company: (a) holds permits, certificates, licenses, orders, registrations, franchises, authorizations, and other approvals from federal, state, local, and foreign governmental and regulatory bodies necessary for the conduct of its business and is in compliance with all applicable laws relating thereto, except where the failure to do so would not have or result in a Material Adverse Effect; (b) is in compliance with all federal, state, local, or foreign applicable statutes, rules, regulations, and orders including, without limitation, those relating to environmental protection, occupational safety and health, and equal employment practices except where the failure to do so would not have or result in a Material Adverse Effect; and (c) is not in violation of or in default under any agreement to which it is a party or by which its assets are subject or bound, except where such violation or default would not have or result in a Material Adverse Effect. Section 6.4. LITIGATION AND ADMINISTRATIVE PROCEEDINGS. There are (a) no lawsuits, actions, investigations, or other proceedings pending or threatened against any Company, or in respect of which any Company may have any liability, in any court or before any governmental authority, arbitration board, or other tribunal, (b) no orders, writs, injunctions, judgments, or decrees of any court or government agency or instrumentality to which any Company is a party or by which the property or assets of any Company are bound, and (c) no grievances, disputes, or controversies outstanding with any union or other organization of the employees of any Company, or threats of work stoppage, strike, or pending demands for collective bargaining, that, as to subparts (a) through (c) above, if determined adversely, would have a Material Adverse Effect. 66 Section 6.5. TITLE TO ASSETS. Each Company has good title to and ownership of all property it purports to own, which property is free and clear of all Liens, except those permitted under Section 5.9 hereof. Section 6.6. LIENS AND SECURITY INTERESTS. On and after the Closing Date, except for Liens permitted pursuant to Section 5.9 hereof, (a) there is no financing statement, registration statement or other evidence of a Lien outstanding covering any personal property of any Company, other than a financing statement in favor of the Collateral Agent; (b) there is no mortgage, deed of trust or other encumbrance with respect to any Real Property outstanding covering any such Real Property, other than a mortgage in favor of the Collateral Agent; and (c) no real or personal property of any Company is subject to any security interest or Lien of any kind other than any security interest or Lien that may be granted to the Collateral Agent. No Company has entered into any contract or agreement that exists on or after the Closing Date that would prohibit the Collateral Agent, the Global Agent or the Lenders from acquiring a security interest, mortgage or other Lien on, or a collateral assignment of, any of the property or assets of any Company. Section 6.7. TAX RETURNS. Except as set forth on SCHEDULE 6.7 hereto, all federal, state, local and foreign tax returns and other reports required by law to be filed in respect of the income, business, properties and employees of each Company have been filed and all taxes, assessments, fees and other governmental charges which are due and payable have been paid, except as otherwise permitted herein or the failure to do so does not and will not cause or result in a Material Adverse Effect. The provision for taxes on the books of each Company is adequate for all years not closed by applicable statutes and for the current fiscal year. Section 6.8. ENVIRONMENTAL LAWS. Each Company is in compliance with any and all Environmental Laws, including, without limitation, all Environmental Laws in all jurisdictions in which any Company owns or operates, or has owned or operated, a facility or site, arranges or has arranged for disposal or treatment of hazardous substances, solid waste or other wastes, accepts or has accepted for transport any hazardous substances, solid waste or other wastes or holds or has held any interest in real property or otherwise. No litigation or proceeding arising under, relating to or in connection with any Environmental Law is pending or, to the best knowledge of each Company, threatened, against any Company, any real property in which any Company holds or has held an interest or any past or present operation of any Company. No release, threatened release or disposal of hazardous waste, solid waste or other wastes is occurring, or has occurred (other than those that are currently being cleaned up in accordance with Environmental Laws), on, under or to any real property in which any Company holds any interest or performs any of its operations, in violation of any Environmental Law. As used in this Section, "litigation or proceeding" means any demand, claim, notice, suit, suit in equity, action, administrative action, investigation or inquiry whether brought by any governmental authority or private Person or otherwise. Section 6.9. CONTINUED BUSINESS. There exists no actual, pending, or, to Borrower's knowledge, any threatened termination, cancellation or limitation of, or any modification or change in the business relationship of any Company and any customer or supplier, or any group of customers or suppliers, whose purchases or supplies, individually or in the aggregate, are material to the business of any Company, and there exists no present condition or state of facts or circumstances that would have a Material Adverse Effect or prevent a Company from conducting 67 such business or the transactions contemplated by this Agreement in substantially the same manner in which it was previously conducted. Section 6.10. EMPLOYEE BENEFITS PLANS. No ERISA Event has occurred or is expected to occur with respect to an ERISA Plan. Full payment has been made of all amounts which a Controlled Group member is required, under applicable law or under the governing documents, to have been paid as a contribution to or a benefit under each ERISA Plan. The liability of each Controlled Group member with respect to each ERISA Plan has been fully funded based upon reasonable and proper actuarial assumptions, has been fully insured, or has been fully reserved for on its financial statements. No changes have occurred or are expected to occur that would cause a material increase in the cost of providing benefits under the ERISA Plan. With respect to each ERISA Plan that is intended to be qualified under Code Section 401(a), (a) the ERISA Plan and any associated trust operationally comply with the applicable requirements of Code Section 401(a); (b) the ERISA Plan and any associated trust have been amended to comply with all such requirements as currently in effect, other than those requirements for which a retroactive amendment can be made within the "remedial amendment period" available under Code Section 401(b) (as extended under Treasury Regulations and other Treasury pronouncements upon which taxpayers may rely); (c) the ERISA Plan and any associated trust have received a favorable determination letter from the Internal Revenue Service stating that the ERISA Plan qualifies under Code Section 401(a), that the associated trust qualifies under Code Section 501(a) and, if applicable, that any cash or deferred arrangement under the ERISA Plan qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at a time for which the above-described "remedial amendment period" has not yet expired; (d) the ERISA Plan currently satisfies the requirements of Code Section 410(b), without regard to any retroactive amendment that may be made within the above-described "remedial amendment period"; and (e) no contribution made to the ERISA Plan is subject to an excise tax under Code Section 4972. With respect to any Pension Plan, the "accumulated benefit obligation" of Controlled Group members with respect to the Pension Plan (as determined in accordance with Statement of Accounting Standards No. 87, "Employers' Accounting for Pensions") does not exceed the fair market value of Pension Plan assets. Section 6.11. CONSENTS OR APPROVALS. No consent, approval or authorization of, or filing, registration or qualification with, any governmental authority or any other Person is required to be obtained or completed by any Company in connection with the execution, delivery or performance of any of the Loan Documents, that has not already been obtained or completed, except where the failure to so would not have or result in a Material Adverse Effect. Section 6.12. SOLVENCY. Borrower has received consideration that is the reasonable equivalent value of the obligations and liabilities that Borrower has incurred to the Lenders. Borrower is not insolvent as defined in any applicable state or federal statute, nor will Borrower be rendered insolvent by the execution and delivery of the Loan Documents to the Global Agent and the Lenders. Borrower is not engaged or about to engage in any business or transaction for which the assets retained by it are or will be an unreasonably small amount of capital, taking into consideration the obligations to the Global Agent and the Lenders incurred hereunder. Borrower does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature. 68 Section 6.13. FINANCIAL STATEMENTS. The Consolidated financial statements of the Companies for the fiscal year ended February 28, 2001, furnished to the Global Agent and the Lenders, are true and complete, have been prepared in accordance with GAAP, and fairly present the financial condition of the Companies as of the date of such financial statements and the results of their operations for the period then ending. Since the Closing Date there has been no material adverse change in any Company's financial condition, properties or business nor any change in any Company's accounting procedures. Section 6.14. REGULATIONS. Borrower is not engaged principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any "margin stock" (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States of America). Neither the granting of any Loan (or any conversion thereof) or the issuance of any Letter of Credit nor the use of the proceeds of any Loan or Letter of Credit will violate, or be inconsistent with, the provisions of Regulation U or X or any other Regulation of such Board of Governors. Section 6.15. MATERIAL AGREEMENTS. Except as disclosed on SCHEDULE 6.15 hereto, no Company is a party to any (a) debt instrument; (b) lease (capital, operating or otherwise), whether as lessee or lessor thereunder; (c) contract, commitment, agreement, or other arrangement involving the purchase or sale of any inventory by it, or the license of any right to or by it; (d) contract, commitment, agreement, or other arrangement with any of its "Affiliates" (as such term is defined in the Securities Exchange Act of 1934, as amended); (e) management or employment contract or contract for personal services with any of its Affiliates which is not otherwise terminable at will or on less than ninety (90) days' notice without liability; (f) collective bargaining agreement; or (g) other contract, agreement, understanding, or arrangement which, as to subsections (a) through (g), above, if violated, breached, or terminated for any reason, would have or would be reasonably expected to have a Material Adverse Effect. Section 6.16. INTELLECTUAL PROPERTY. Each Company owns, possesses or has the right to use all of such Company's Intellectual Property, and the rights with respect to such Intellectual Property necessary for the conduct of its business without any known conflict with the rights of any other Person. SCHEDULE 1 to each Collateral Assignment and Security Agreement sets forth all of the Intellectual Property of each Domestic Company. Section 6.17. INSURANCE. Each Company maintains with financially sound and reputable insurers insurance with coverage and limits as required by law and as is customary with Persons engaged in the same businesses as the Companies. SCHEDULE 6.17 hereto sets forth all insurance carried by the Companies, describing in detail the amount and type of such insurance. Section 6.18. ACCURATE AND COMPLETE STATEMENTS. Neither the Loan Documents nor any written statement made by any Company in connection with any of the Loan Documents contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or in the Loan Documents not misleading. After due inquiry by Borrower, there is no known fact which any Company has not disclosed to the Global Agent and the Lenders that has or would have a Material Adverse Effect. Section 6.19. LOCATION; TRADE NAMES. SCHEDULE 6.19 hereto sets forth all of the following with respect to Borrower and each Domestic Subsidiary: (a) the places of business of 69 Borrower and such Domestic Subsidiary and the locations where Borrower and such Domestic Subsidiary maintains any inventory or equipment or other fixed assets, (b) the chief executive office of Borrower and such Domestic Subsidiary, and (c) the office where Borrower and such Domestic Subsidiary keeps records of its accounts. Except as set forth on SCHEDULE 6.19, or otherwise permitted pursuant to this Agreement, no Domestic Company uses any trade name, assumed name or fictitious name. Section 6.20. INVESTMENT COMPANY; HOLDING COMPANY. No Company is (a) an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (ii) subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, each as amended, or any foreign, federal, state or local statute or regulation limiting its ability to incur Indebtedness. Section 6.21. SENIOR INDENTURE. No Event of Default (as defined in the Senior Indenture) or event or condition that, with the passage of time or giving of notice or both, would constitute an Event of Default (as defined in the Senior Indenture), exists under the Senior Indenture, nor will any such Event of Default or event or condition that, with the passage of time or giving of notice or both, would constitute an Event of Default, exist under the Senior Indenture immediately after the occurrence of any Credit Event. Section 6.22. SUBORDINATED INDENTURE AND SUBORDINATED CONVERTIBLE INDENTURE. (a) (i) no Event of Default (as defined in the Subordinated Indenture) or Default (as defined in the Subordinated Indenture) exists, nor will any such Event of Default or Default exist under the Subordinated Indenture (or note or other agreement executed in connection therewith) immediately after the occurrence of any Credit Event; (ii) SCHEDULE 6.22 hereto sets forth all Indebtedness of any Company that constitutes Indebtedness under Credit Facilities (as defined in the Subordinated Indenture); and (iii) all of the Debt constitutes Senior Indebtedness (as defined in the Subordinated Indenture), Designated Senior Indebtedness (as defined in the Subordinated Indenture) and Permitted Debt (as defined in the Subordinated Indenture). (b) (i) no Event of Default (as defined in the Subordinated Convertible Indenture) or Default (as defined in the Subordinated Convertible Indenture) exists, nor will any such Event of Default or Default exist under the Subordinated Convertible Indenture (or note or other agreement executed in connection therewith) immediately after the occurrence of any Credit Event; and (ii) all of the Debt constitutes Senior Indebtedness (as defined in the Subordinated Convertible Indenture), Designated Senior Indebtedness (as defined in the Subordinated Convertible Indenture) and Permitted Debt (as defined in the Subordinated Convertible Indenture). Section 6.23. DEFAULTS. No Default or Event of Default exists hereunder, nor will any Default or Event of Default begin to exist immediately after the execution and delivery hereof. ARTICLE VII. EVENTS OF DEFAULT Each of the following shall constitute an Event of Default hereunder: 70 Section 7.1. PAYMENTS. If the principal of or interest on any Note or any facility or other fee shall not be paid in full punctually when due and payable. Section 7.2. SPECIAL COVENANTS. If any Company or Obligor shall fail or omit to perform and observe Sections 5.7, 5.8, 5.9, 5.11, 5.12, 5.13, 5.14, 5.18, 5.19, 5.20, 5.21, 5.22, 5.23, 5.24, 5.25 or 5.26 hereof. Section 7.3. OTHER COVENANTS. If any Company or Obligor shall fail or omit to perform and observe any agreement or other provision (other than those referred to in Sections 7.1 or 7.2 hereof) contained or referred to in this Agreement or any Related Writing that is on such Company's or Obligor's part, as the case may be, to be complied with, and that Default shall not have been fully corrected within fifteen (15) days after the giving of written notice thereof to Borrower by the Global Agent or any Lender that the specified Default is to be remedied. Section 7.4. REPRESENTATIONS AND WARRANTIES. If any representation, warranty or statement made in or pursuant to this Agreement or any Related Writing or any other material information furnished by any Company or Obligor to the Global Agent or the Lenders, or any thereof, or any other holder of any Note, shall be false or erroneous. Section 7.5. CROSS DEFAULT. If any Company or Obligor shall default in the payment of principal or interest due and owing upon any other obligation for borrowed money in excess of the aggregate, for all such obligations for all such Companies and Obligors, of Ten Million Dollars ($10,000,000) beyond any period of grace provided with respect thereto or in the performance or observance of any other agreement, term or condition contained in any agreement under which such obligation is created, if the effect of such default is to allow the acceleration of the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity. Section 7.6. ERISA DEFAULT. The occurrence of one or more ERISA Events which (a) the Required Lenders determine in good faith could have a Material Adverse Effect, or (b) results in a Lien on any of the assets of any Company. Section 7.7. CHANGE IN CONTROL. If any Change in Control shall occur. Section 7.8. MONEY JUDGMENT. A final judgment or order for the payment of money shall be rendered against any Company or Obligor by a court of competent jurisdiction, which remains unpaid or unstayed and undischarged for a period (during which execution shall not be effectively stayed) of thirty (30) days after the date on which the right to appeal shall have expired, provided that the aggregate of all such judgments, for all such Companies and Obligors, shall exceed Ten Million Dollars ($10,000,000). Section 7.9. MATERIAL ADVERSE CHANGE. There shall have occurred any condition or event that the Global Agent or the Required Lenders shall determine in good faith has or is reasonably likely to have a Material Adverse Effect. Section 7.10. SENIOR INDENTURE. If any Event of Default (as defined in the Senior Indenture) shall occur under the Senior Indenture. 71 Section 7.11. SUBORDINATED INDENTURE AND SUBORDINATED CONVERTIBLE INDENTURE. If (a) (i) any Event of Default (as defined in the Subordinated Indenture) shall occur under the Subordinated Indenture; (ii) without the prior written consent of the Global Agent and the Required Lenders, any Company shall incur any Indebtedness that shall constitute, in whole or in part, Credit Facilities (as defined in the Subordinated Indenture) other than the Indebtedness set forth on SCHEDULE 6.22 hereto; or (iii) the Debt, or any part thereof, shall cease to constitute Senior Indebtedness (as defined in the Subordinated Indenture), Designated Senior Indebtedness (as defined in the Subordinated Indenture) or Permitted Debt (as defined in the Subordinated Indenture); or (b) (i) any Event of Default (as defined in the Subordinated Convertible Indenture) shall occur under the Subordinated Convertible Indenture; (ii) the Debt, or any part thereof, shall cease to constitute Senior Indebtedness (as defined in the Subordinated Convertible Indenture), Designated Senior Indebtedness (as defined in the Subordinated Convertible Indenture) or Permitted Debt (as defined in the Subordinated Convertible Indenture); or (iii) Borrower shall designate any Indebtedness as Designated Senior Indebtedness (as defined in the Subordinated Convertible Indenture) without the prior written consent of the Global Agent. Section 7.12. VALIDITY OF LOAN DOCUMENTS. If (a) any material provision, in the sole opinion of the Global Agent, of any Loan Document shall at any time for any reason cease to be valid, binding and enforceable against Borrower or any Guarantor of Payment; (b) the validity, binding effect or enforceability of any Loan Document against Borrower or any Guarantor of Payment shall be contested by any Company or Obligor; (c) Borrower or any Guarantor of Payment shall deny that it has any or further liability or obligation thereunder; or (d) any Loan Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to the Global Agent and the Lenders the benefits purported to be created thereby. Section 7.13. SOLVENCY. If any Company with total assets the market value of which shall exceed One Million Dollars ($1,000,000) shall (a) except as permitted pursuant to Section 5.12 hereof, discontinue business, (b) generally not pay its debts as such debts become due, (c) make a general assignment for the benefit of creditors, (d) apply for or consent to the appointment of a receiver, a custodian, a trustee, an interim trustee or liquidator of all or a substantial part of its assets, (e) be adjudicated a debtor or have entered against it an order for relief under Title 11 of the United States Code, as the same may be amended from time to time, (f) file a voluntary petition in bankruptcy, or have an involuntary proceeding filed against it and the same shall continue undismissed for a period of thirty (30) days from commencement of such proceeding or case or file a petition or an answer seeking reorganization or an arrangement with creditors or seeking to take advantage of any other law (whether federal or state) relating to relief of debtors, or admit (by answer, by default or otherwise) the material allegations of a petition filed against it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal or state) relating to relief of debtors, (g) suffer or permit to continue unstayed and in effect for thirty (30) consecutive days any judgment, decree or order entered by a court of competent jurisdiction, which approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator of all or a substantial part of its assets, or (h) take, or omit to take, any action in order thereby to effect any of the foregoing. ARTICLE VIII. REMEDIES UPON DEFAULT 72 Notwithstanding any contrary provision or inference herein or elsewhere, Section 8.1. OPTIONAL DEFAULTS. If any Event of Default referred to in Section 7.1, 7.2., 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11 or 7.12 hereof shall occur, the Global Agent may, with the consent of the Required Lenders, and shall, at the request of Required Lenders, give written notice to Borrower, to: (a) terminate the Commitment and the credits hereby established, if not previously terminated, and, immediately upon such election, the obligations of the Global Agent and the Lenders, and each thereof, to make any further Loan and the obligation of the Fronting Lender to issue any Letter of Credit hereunder immediately shall be terminated, and/or (b) accelerate the maturity of all of the Debt (if the Debt shall not already be due and payable), whereupon all of the Debt shall become and thereafter be immediately due and payable in full without any presentment or demand and without any further or other notice of any kind, all of which are hereby waived by Borrower. Section 8.2. AUTOMATIC DEFAULTS. If any Event of Default referred to in Section 7.13 hereof shall occur: (a) all of the Commitment and the credits hereby established shall automatically and immediately terminate, if not previously terminated, and neither the Global Agent nor any Lender thereafter shall be under any obligation to grant any further Loan, nor shall the Fronting Lender be obligated to issue any Letter of Credit hereunder, and (b) the principal of and interest then outstanding on all of the Notes, and all of the other Debt, shall thereupon become and thereafter be immediately due and payable in full (if the Debt is not already due and payable), all without any presentment, demand or notice of any kind, which are hereby waived by Borrower. Section 8.3. LETTERS OF CREDIT. If the maturity of the Notes shall be accelerated pursuant to Sections 8.1 or 8.2 hereof, Borrower shall immediately deposit with the Collateral Agent, as security for the obligations of Borrower to reimburse the Fronting Lender and the Lenders for any then outstanding Letters of Credit, cash (in Dollars or the relevant Alternate Currency) equal to the sum of the aggregate undrawn (or unpaid) balance of any then outstanding Letters of Credit. The Global Agent and the Lenders are hereby authorized, at their option, to deduct any and all such amounts from any deposit balances then owing by any Lender to or for the credit or account of any Company, as security for the obligations of Borrower to reimburse the Fronting Lender and the Lenders for any then outstanding Letters of Credit. Section 8.4. OFFSETS. If there shall occur or exist any Event of Default referred to in Section 7.13 hereof or if the maturity of the Notes shall have been accelerated pursuant to Section 8.1 or 8.2 hereof, each Lender shall have the right at any time to set off against, and to appropriate and apply toward the payment of, any and all Debt then owing by Borrower to that Lender (including, without limitation, any participation purchased or to be purchased pursuant to Section 2.1 or 8.5 hereof), whether or not the same shall then have matured, any and all deposit balances and all other indebtedness then held or owing by that Lender to or for the credit or 73 account of Borrower or a Guarantor of Payment, all without notice to or demand upon Borrower or any other Person, all such notices and demands being hereby expressly waived by Borrower and each Guarantor of Payment. Section 8.5. EQUALIZATION PROVISION. (a) EQUALIZATION WITHIN COMMITMENTS. Subject to subpart (b) below, each Lender agrees with the other Lenders that if it, at any time, shall obtain any Advantage over the other Lenders, or any thereof, in respect of the Applicable Debt (except under Article III hereof), it shall purchase from the other Lenders, for cash and at par, such additional participation in the Applicable Debt as shall be necessary to nullify the Advantage. (b) EQUALIZATION AMONG COMMITMENTS. After the occurrence of a Sharing Event, as defined in Section 10.1 hereof, each Lender agrees with each other Lender that if it, at any time, shall obtain any Advantage over the other Lenders, or any thereof, in respect of the Debt (except under Article III hereof) then outstanding (as calculated, with respect to any amounts outstanding in an Alternate Currency, using the Dollar Equivalent in effect on the Equalization Date, as hereinafter defined), then such Lender having an Advantage shall purchase from the other Lenders, for cash and at par, such additional participation in the Debt as shall be necessary to nullify the Advantage. For purposes of determining whether or not, after a Sharing Event, an Advantage shall exist, the Global Agent shall, as of the date that the Sharing Event occurs (the "EQUALIZATION DATE"): (i) add the General Revolving Commitment Exposure, the 364 Day Commitment Exposure and the Term Loan Exposure to determine the equalization maximum amount (the "EQUALIZATION MAXIMUM AMOUNT"); and (ii) determine an equalization percentage (the "EQUALIZATION PERCENTAGE") for each Lender by dividing the aggregate amount of its Lender Credit Exposure by the Equalization Maximum Amount. (c) RECOVERY OF AMOUNT. If any such Advantage resulting in the purchase of an additional participation as set forth in subparts (a) or (b) hereof shall be recovered in whole or in part from the Lender receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (but without interest unless the Lender receiving the Advantage is required to pay interest on the Advantage to the Person recovering the Advantage from such Lender) ratably to the extent of the recovery. (d) APPLICATION AND SHARING OF SET-OFF AMOUNTS. Each Lender further agrees with the other Lenders that if it at any time shall receive any payment for or on behalf of Borrower or any Guarantor of Payment on any Indebtedness owing by Borrower or such Guarantor of Payment to that Lender by reason of offset of any deposit or other Indebtedness, it shall apply such payment first to any and all Indebtedness owing by Borrower or such Guarantor of Payment to that Lender pursuant to this Agreement (including, without limitation, any participation purchased or to be purchased pursuant to this Section or any other Section of this Agreement). Borrower and each Guarantor of Payment agree that any Lender so purchasing a participation from the other Lenders, or any thereof, pursuant to this Section may exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such 74 Lender were a direct creditor of Borrower or such Guarantor of Payment in the amount of such participation. ARTICLE IX. THE GLOBAL AGENT The Lenders authorize National City Bank, and National City Bank hereby agrees, to act as the administrative agent for the Lenders in respect of this Agreement. The Global Agent agrees to act in such capacity upon the terms and conditions set forth elsewhere in this Agreement, and upon the following terms and conditions: Section 9.1. APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably appoints and authorizes the Global Agent to take such action, as agent, on such Lender's behalf, and to exercise such powers hereunder as are delegated to the Global Agent by the terms hereof, together with such powers as are reasonably incidental thereto. Neither the Global Agent nor any of its respective affiliates, directors, officers, attorneys or employees shall have any implied duties or any shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, respectively, except for its or their own respective gross negligence or willful misconduct. As of the Closing Date, Goldman Sachs, in its capacity as joint Lead Arranger, shall not have any obligations, but shall be entitled to all benefits of this Article IX. Section 9.2. NOTE HOLDERS. The Global Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with it, signed by such payee and in form satisfactory to the Global Agent. Section 9.3. CONSULTATION WITH COUNSEL. The Global Agent may consult with legal counsel selected by it and shall not be liable for any action taken or suffered in good faith by it in accordance with the opinion of such counsel. Section 9.4. DOCUMENTS. The Global Agent shall be under no duty to examine into or pass upon the validity, effectiveness, genuineness or value of any Loan Documents or any other Related Writing furnished pursuant hereto or in connection herewith or the value of any collateral obtained hereunder, and the Global Agent shall be entitled to assume that the same are valid, effective and genuine and what they purport to be. Section 9.5. THE GLOBAL AGENT AND AFFILIATES. With respect to the Loans and Letters of Credit, the Global Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not the Global Agent, and the Global Agent and its respective affiliates may accept deposits from, lend money to and generally engage in any kind of trust, debt, equity or other business with any Company or any affiliate thereof. Section 9.6. KNOWLEDGE OF DEFAULT. It is expressly understood and agreed that the Global Agent shall be entitled to assume that no Default or Event of Default shall have occurred, unless the Global Agent shall have been notified by a Lender in writing that such Lender believes that a Default or Event of Default shall have occurred and be continuing and specifying the nature thereof. 75 Section 9.7. ACTION BY THE GLOBAL AGENT. Subject to the other terms and conditions hereof, so long as the Global Agent shall be entitled, pursuant to Section 9.6 hereof, to assume that no Default or Event of Default shall have occurred and be continuing, the Global Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights that may be vested in it by, or with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement. The Global Agent shall incur no liability under or in respect of this Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or which may seem to it to be necessary or desirable in the premises. Section 9.8. NOTICES; DEFAULT. In the event that the Global Agent shall have acquired actual knowledge of any Default or Event of Default, the Global Agent shall promptly notify the Lenders and shall take such action and assert such rights under this Agreement as the Required Lenders shall direct and the Global Agent shall inform the other Lenders in writing of the action taken. Subject to the other terms and conditions hereof, the Global Agent may take such action and assert such rights as it shall deem to be advisable, in its discretion, for the protection of the interests of the holders of the Notes. Section 9.9. INDEMNIFICATION OF THE GLOBAL AGENT. The Lenders agree to indemnify the Global Agent (to the extent not reimbursed by Borrower) ratably, according to their respective Applicable Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against the Global Agent as agent in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted by the Global Agent with respect to this Agreement or any Loan Document, provided that no Lender shall be liable to the Global Agent for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements resulting from the Global Agent's gross negligence or willful misconduct, as determined by a court of competent jurisdiction, or from any action taken or omitted by the Global Agent in any capacity other than in its agency capacity under this Agreement. Section 9.10. SUCCESSOR AGENT. The Global Agent may resign from its respective agency capacity hereunder by giving not fewer than thirty (30) days prior written notice to Borrower and the Lenders. If the Global Agent (the "Resigning Agent") shall resign under this Agreement, then either (a) the Required Lenders shall appoint from among the Lenders a successor agent (a "Successor Agent") for the Lenders (with the consent of Borrower so long as an Event of Default shall not have occurred and which consent shall not be unreasonably withheld), or (b) if a Successor Agent shall not be so appointed and approved within the thirty (30) day period following the Resigning Agent's notice to the Lenders of its resignation, then the Resigning Agent, with the approval of the Global Agent, shall appoint a Successor Agent that shall serve in the same agency capacity as the Resigning Agent until such time as the Required Lenders shall appoint a Successor Agent. Upon its appointment, such Successor Agent shall succeed to the rights, powers and duties of the Resigning Agent, and all references to the Resigning Agent shall mean the Successor Agent, effective upon its appointment, and the 76 Resigning Agent's rights, powers and duties as agent shall be terminated without any other or further act or deed on the part of such Resigning Agent or any of the parties to this Agreement. ARTICLE X. INTERCREDITOR PROVISIONS Section 10.1. DEFINITIONS. For the purposes of this Article, the following terms shall have the following meanings: "Acceleration Event" shall have occurred if (a) after the occurrence of a Default Event with respect to the Lender Obligations, the maturity of the Lender Obligations shall have been accelerated, or (b) after the occurrence of a Default Event with respect to the Senior Indenture Obligations, the maturity of any of the Senior Indenture Obligations shall have been accelerated. "Administrative Expenses" shall mean (a) any and all reasonable costs, liabilities and expenses (including, without limitation, losses, damages, penalties, claims, actions, reasonable attorneys' fees, legal expenses, judgments, suits and disbursements) incurred by, imposed upon, or asserted against, the Collateral Agent in the performance of its duties under or otherwise in connection with this Agreement or the Collateral Documents, or in any attempt by the Collateral Agent to (i) obtain, preserve, perfect or enforce any security interest evidenced by this Agreement, any other Collateral Document or any other Lending Party Document; (ii) obtain payment, performance or observance of any and all of the Obligations; or (iii) maintain, insure, audit, collect, preserve, repossess or dispose of any of the Creditor Collateral or any other collateral securing the Obligations, including, without limitation, costs and expenses for appraisals, assessments, and audits of any Company, or any such Creditor Collateral; (b) to the extent not covered in subpart (a) hereof, all costs and expenses payable to the Collateral Agent pursuant to Section 10.20 of this Agreement; or (c) all costs, liabilities and expenses incidental or related to (a) or (b) above, including, without limitation, interest thereupon from the date incurred, imposed or asserted until paid at the Default Rate. "Administrative Obligations" shall mean, collectively, all Administrative Expenses and all other Indebtedness or other obligations now owing or hereafter incurred by Borrower or any other Company to the Collateral Agent pursuant to this Agreement or any Collateral Document. "Collateral Documents" shall mean the Security Documents, together with all other documents, instruments or agreements executed in connection with the Security Documents, or in connection with any security interest or Lien granted, or otherwise obtained, on or in connection with the Creditor Collateral, or any part thereof. "Creditor" shall mean any Lender, Securities Holder or Other Lender. "Creditor Collateral" shall mean, collectively, (a) all of the Collateral, as defined in each of the respective Security Documents executed by any Company, (b) all of the Mortgaged Real Property, and (c) any other property, whether tangible or intangible, at any time securing the Obligations, or any part thereof, whether such Lien securing any of the Obligations shall have been granted to, or otherwise obtained by, the Collateral Agent or any Creditor. 77 "Default Event" shall mean the occurrence of (a) an Event of Default, or (b) an "Event of Default", as defined in the Senior Indenture. "Hedge Agreement Obligations" shall mean the aggregate amount of Indebtedness under any Hedge Agreement entered into by Borrower with a Lender (or any of such Lender's affiliates) in connection with the Debt or any part thereof, provided that, in determining the amount of the Indebtedness under any Hedge Agreement, such amount shall be based upon the net termination obligation of Borrower under such Hedge Agreement, calculated as of any date as if such Hedge Agreement shall have been terminated as of such date. "Insolvency Event" shall mean (a) the pendency of any case against Borrower or any Guarantor of Payment arising under the United States Bankruptcy Code of 1978, as amended, or any successor statute, (b) the pendency of any case against Borrower or any Guarantor of Payment arising under any other bankruptcy, reorganization, compromise, arrangement, insolvency, readjustment of debt, dissolution, liquidation or other similar law of any jurisdiction, (c) the appointment of, or taking possession by, a trustee, receiver, custodian, liquidator or similar official of Borrower or any Guarantor of Payment or any substantial assets of any of them, (d) any assignment for the benefit of creditors of Borrower or any Guarantor of Payment, or (e) the failure of Borrower or any Guarantor of Payment generally to pay its debts as they become due. "Lender Obligations" shall mean, collectively, (a) the Debt, and (b) all other Indebtedness or other obligations incurred by any Company to the Global Agent and the Lenders pursuant to this Agreement or any other Loan Document, whether for principal, interest, fees, premiums, costs or indemnities, and whether now existing or hereafter arising. "Lending Parties" shall mean, collectively, (a) the Global Agent, on behalf of the Lenders, (b) each Securities Holder, and (c) each Other Lender. "Lending Party" shall mean (a) the Global Agent, on behalf of the Lenders, (b) any Securities Holder, or (c) any Other Lender. "Lending Party Documents" shall mean, collectively, (a) the Loan Documents, (b) the Senior Indenture and the Senior Securities, together with all other documents, instruments or agreements executed and delivered in connection with the foregoing, and (c) the Other Lender Documents. "Lending Party Pro Rata Share" shall mean, at the time of determination, with respect to any Lending Party, the percentage that shall be determined by dividing: (a) (i) for the Global Agent and the Lenders, the Loan and Reimbursement Obligations, (ii) for each Securities Holder, the aggregate principal amount then outstanding to such Securities Holder pursuant to the Senior Indenture, and (iii) for each Other Lender, (A) the aggregate principal amount of the Other Lender Obligations (other than the Hedge Agreement Obligations owing to such Other Lender) then outstanding from such Other Lender, plus (B) the Hedge Agreement Obligations, if any, owing to such Other Lender; by 78 (b) the sum of (i) the aggregate outstanding principal Dollar Equivalent amount of all of the Obligations (other than the Administrative Obligations), (ii) the Letter of Credit Exposure, and (iii) the Hedge Agreement Obligations. For all purposes under this Agreement or any of the Collateral Documents, Lending Party Pro Rata Share shall be determined on the date of the occurrence of the first Sharing Event. "Loan and Reimbursement Obligations" shall mean, at the time of determination, with respect to the Lender Obligations, the sum of (a) the aggregate principal Dollar Equivalent amount of the Loans then outstanding, plus (b) the Letter of Credit Exposure. "Obligations" shall mean, collectively, (a) the Lender Obligations, (b) the Securities Holder Obligations, (c) the Other Lender Obligations, and (d) the Administrative Obligations. "Other Lender" shall mean (a) the financial institution set forth on SCHEDULE 10.1 hereto; or (b) any Lender that shall have entered (or in the future enters) into a Hedge Agreement with Borrower; provided that, if any such Lender shall cease to be a Lender under this Agreement, then the Other Lender Obligations owing to such Lender shall no longer be secured by the Creditor Collateral. "Other Lender Documents" shall mean the promissory notes and other agreements evidencing or relating to the Other Lender Obligations. "Other Lender Obligations" shall mean (a) the Indebtedness and other obligations incurred by Borrower arising under the Other Lender Documents as described on SCHEDULE 10.1 hereto; provided, however, that the amount owing to such Other Lender with respect to such obligations and secured pursuant to the provisions of this Article X (other than with respect to Hedge Agreement Obligations) shall not exceed the amount set forth opposite such Other Lender's name on SCHEDULE 10.1 hereto, and (b) the Hedge Agreement Obligations. "Securities Holder" shall mean each Holder, as defined in the Senior Indenture, under the Senior Indenture. "Securities Holder Obligations" shall mean all Indebtedness or other obligations incurred by Borrower to the Securities Holders pursuant to the Senior Securities and the Senior Indenture, whether for principal, interest, fees, costs or indemnities, and whether now existing or hereafter arising. "Senior Securities" shall mean the securities or other instruments issued pursuant to the Senior Indenture, as the same may from time to time be amended, supplemented, restated or otherwise modified or replaced. "Sharing Event" shall mean the earlier of (a) the occurrence of an Insolvency Event, or (b) the occurrence of an Acceleration Event. Section 10.2. CREDITOR OBLIGATIONS TO BE RATABLY SECURED. In order to comply with the provisions of Section 1008 of the Senior Indenture, Borrower, the Global Agent and the Lenders agree that all of the Obligations shall be secured equally and ratably pursuant to the 79 provisions of this Article X. In the event that the Securities Holders (or any trustee or designee acting on behalf of the Securities Holders) shall request the Global Agent, the Lenders, and the Collateral Agent to enter into a separate intercreditor agreement with respect to the Creditor Collateral, then (a) Borrower, (b) the Global Agent, acting on behalf of the Lenders (and each of the Lenders hereby authorizes the Global Agent to so act upon its behalf), (c) the Other Lenders, and (d) the Collateral Agent shall enter into an intercreditor agreement (containing terms and conditions substantially similar to those set forth in this Article X with the Securities Holders (or any trustee or designee acting on their behalf) to facilitate the terms and conditions of this Article X. The Global Agent is hereby authorized to sign any such intercreditor agreement on behalf of the Lenders, and the Lenders shall be bound by the terms of such intercreditor agreement as if they were parties thereto. Section 10.3. APPOINTMENT OF THE COLLATERAL AGENT. Each Creditor hereby appoints National City Bank (together with its successors and assigns) as the Collateral Agent under this Agreement and each Collateral Document, with such powers as are specifically delegated to the Collateral Agent by the terms of this Agreement and the Collateral Documents, together with such other powers as are reasonably incidental thereto in order to carry out the intent of this Agreement and the Collateral Documents, in the opinion of the Collateral Agent, and National City Bank hereby accepts such appointment as the Collateral Agent under this Agreement and the Collateral Documents. Neither the Collateral Agent nor any of its directors, officers, attorneys or employees shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct, as determined by a court of competent jurisdiction. Section 10.4. PRO RATA DISTRIBUTION OF THE CREDITOR COLLATERAL. The Collateral Agent shall be the secured party, beneficiary or mortgagee, as applicable, under the Collateral Documents. The Creditor Collateral shall be held for the benefit of the Lending Parties on a pari passu basis and shall serve as security for the Obligations. Subject to the terms of this Agreement, the Collateral Agent shall receive, hold, administer and enforce the Collateral Documents, and foreclose upon, collect, dispose of all or any part of the Creditor Collateral, for the benefit of the respective Lending Parties based upon the Lending Party Pro Rata Share of each such Lending Party, and deliver to the Lending Parties, the proceeds therefrom for the benefit of the respective Lending Parties, based upon the Lending Party Pro Rata Share of each respective Lending Party, in accordance with the terms of this Agreement. Each Creditor agrees that any security interest or Lien granted to any Creditor with respect to the Creditor Collateral, or any part thereof, whether granted prior to, or on or after, the date of this Agreement, shall be deemed to be held by such Creditor for the benefit of the Lending Parties pursuant to the terms of this Agreement. Each Creditor further agrees that, notwithstanding the relative priority or time of granting, creation, attachment or perfection under applicable law of any security interest or lien, if any, of the Collateral Agent or any Creditor, whether such security interest or lien shall arise now or hereafter be acquired, such security interest or lien shall be first a first priority security interest or lien in favor of the Collateral Agent to secure the Obligations on a pari passu basis for the benefit of the respective Lending Parties in accordance with the provisions of this Article X. Section 10.5. PAYMENTS OR PROCEED RECEIVED BY A CREDITOR PRIOR TO A SHARING EVENT. Prior to the occurrence of a Sharing Event, the Creditors agree that any Creditor may accept and apply payments made from any source (including proceeds of the Creditor Collateral) on or in 80 respect of the Obligations owing to such Creditor without any responsibility to turn over to the Collateral Agent or share with any other Creditor such payments, except as otherwise specifically provided in this Agreement with respect to sharing among the Lenders. Section 10.6. PAYMENTS OR PROCEEDS RECEIVED BY THE COLLATERAL AGENT PRIOR TO A SHARING EVENT. If the Collateral Agent (in its capacity as the Collateral Agent and not in any other capacity) shall receive any payments from any source (including proceeds of the Creditor Collateral) on or in respect of the Obligations at any time prior to the occurrence of a Sharing Event, such payment or proceeds shall be delivered to the appropriate Lending Party or, so long as no Event of Default shall exist, to the appropriate Company, as the case may be. If an Event of Default shall have occurred, the Collateral Agent shall not deliver the proceeds of any of the Creditor Collateral to any Company unless the Required Lenders so direct. Section 10.7. PAYMENTS OR PROCEEDS RECEIVED AFTER A SHARING EVENT. After the occurrence of a Sharing Event, (a) any payment received (whether from the proceeds of the Creditor Collateral or otherwise) from any Company by any Creditor, shall be immediately forwarded to the Collateral Agent to be distributed in accordance with the provisions of Section 10.8 hereof, and (b) any payment received (whether from the proceeds of the Creditor Collateral or otherwise) by the Collateral Agent shall be distributed in accordance with the provisions of Section 10.8 hereof. Section 10.8. DISTRIBUTION OF PROCEEDS. Except as set forth in Section 10.6 hereof, any proceeds received by the Collateral Agent at any time shall be applied by the Collateral Agent as follows: (a) first, to the payment of any Administrative Obligations, including, but not limited to, the costs and expenses of the Collateral Agent in connection with any sale, collection or other realization incurred by the Collateral Agent under the provisions of this Agreement, or any other fees (including attorneys' fees, accountants fees and other fees for special advisors or consultants retained by the Collateral Agent), expenses, liabilities (including rights to indemnification) or advances made or incurred by the Collateral Agent in connection with the administration or enforcement of the Collateral Documents; (b) second, to each Lending Party in an amount equal to the Lending Party Pro Rata Share of the amount to be distributed, until all of the Obligations shall have been satisfied in full; and (c) third, after all of the Obligations shall have been irrevocably satisfied in full, to Borrower or a Guarantor of Payment, as appropriate, or as a court of competent jurisdiction may direct or as otherwise required by law. Notwithstanding the foregoing, any amounts to be distributed for application to a Creditor's liabilities with respect to any issued but undrawn (or unpaid) Letter of Credit shall be held by the Collateral Agent in an interest bearing trust account (the "COLLATERAL TRUST ACCOUNT") as collateral security for such liabilities until a drawing on such Letter of Credit, at which time such amounts, together with interest accrued thereon, shall be released by the Collateral Agent and applied to such liabilities. If any such Letter of Credit shall expire without having been drawn 81 upon (or paid) in full, the amounts held in the Collateral Trust Account with respect to the undrawn (or unpaid) portion of such Letter of Credit, together with interest accrued thereon, shall be applied by the Collateral Agent in accordance with this Section 10.8. Section 10.9. DELIVERY OF CREDITOR COLLATERAL TO THE COLLATERAL AGENT. If any Creditor receives possession of any portion of the Creditor Collateral, or any proceeds thereof, whether prior to or after the occurrence of a Sharing Event, such Creditor shall receive and hold the same in trust for the Collateral Agent and shall deliver such Creditor Collateral or proceed to the Collateral Agent, wherein the Collateral Agent shall hold or dispose of such Creditor Collateral in accordance with the provisions of this Article X. Section 10.10. RETURN OF PAYMENTS. If any payment or other proceeds received by any Creditor shall be required to be repaid or returned, in whole or in part, by such Creditor to the payor thereof, or to any trustee, agent or other representative, or such payment shall be otherwise rescinded, in whole or in part, pursuant to applicable law, each other Creditor that shall have received all or any part of such payment or proceeds shall promptly, upon written demand, return all or the ratable part, as the case may be, of the portion of such payment or proceeds so received by such other Creditor (and any interest thereon to the extent the same is required to be paid by the Creditor originally receiving such payment or proceeds in respect of the return of such payment or proceeds) in order to equitably adjust for the return of all or part of such payment or proceeds. Section 10.11. LENDING PARTY RIGHTS AND REMEDIES. (a) Except as set forth in subpart (c) below, each Lending Party shall have the rights and remedies available to it under its respective Lending Party Documents, other than rights specifically reserved for the Collateral Agent under any of the Collateral Documents, upon the occurrence of a Default Event or otherwise, including, but not limited to, the right to (i) accelerate any of the Obligations owing to such Lending Party, (ii) institute suit against any Company, (iii) take any other enforcement action with respect to any Default Event, and (iv) take any other enforcement action with respect to any Default Event; provided, however, that each Lending Party agrees that it shall have recourse under or by virtue of the Collateral Documents to the Creditor Collateral only through the Collateral Agent and that no Creditor Party shall have any independent recourse to the liens and security interests created by the Collateral Documents or otherwise, except that any Creditor may set-off any amount of any balances held by it for the account of any Company or any other property held or owing by such Creditor to or for the credit or the account of any Company (provided that the amount set-off shall be delivered to the Collateral Agent for application pursuant the terms of this Agreement). (b) Upon the occurrence of a Sharing Event, the appropriate Lending Party shall promptly, and in any event within one Business Day thereafter, provide notice to the Collateral Agent of the occurrence of such Sharing Event, and, upon receipt of such notice, the Collateral Agent shall promptly, and in any event within one Business Day of receipt thereof, deliver a copy to all of the Creditors; provided, however, that the failure to provide any of the foregoing notices shall not affect, in any way, any of the rights or obligations of any Person under this Agreement. 82 (c) Upon receipt of a notice of a Sharing Event and at all times thereafter, no Creditor shall institute suit against any Company or otherwise take any other enforcement action with respect to the Creditor Collateral. (d) By accepting any proceeds of the Creditor Collateral pursuant to this Article X or the benefits of any Collateral Document, a Lending Party shall be deemed to be bound by the terms and conditions set forth herein. Section 10.12. RIGHTS AND REMEDIES OF THE COLLATERAL AGENT UPON SHARING EVENT. Upon the occurrence of a Sharing Event, the Required Lenders may notify and direct the Collateral Agent to enforce the rights of the Creditors in and to the Creditor Collateral through such remedies as may be available pursuant to the terms and conditions of any Collateral Document, at law or in equity, or otherwise. The Collateral Agent shall act as the Required Lenders may, in their reasonable discretion, direct, provided that the Collateral Agent shall have no liability for acting in accordance with such request and no Creditor shall have any liability to any other Creditor in connection with any such request. The Collateral Agent shall not release any Liens or Creditor Collateral without the direction or consent of the Required Lenders, except as expressly permitted pursuant to Section 10.15 hereof. Section 10.13. APPOINT OF POWER OF ATTORNEY. Each Creditor irrevocably authorizes, appoints, and empowers the Collateral Agent to act as such Creditor's attorney-in-fact with respect to the Creditor Collateral, or any part thereof, or under or with respect to any of the Collateral Documents, as the Collateral Agent may deem necessary or advisable for the enforcement of the provisions of this Article X or the Collateral Documents, or to otherwise carry out the intent of the provisions of this Article X. Each Creditor shall execute and deliver to the Collateral Agent such powers of attorney, assignments, or other instruments as may be reasonably requested by the Collateral Agent to enable the Collateral Agent to enforce any and all of the Collateral Agent's rights or duties under this Agreement and the Collateral Documents. Section 10.14. OBLIGATIONS UNAFFECTED; MODIFICATION OF LENDING DOCUMENTS. Except for the agreements made pursuant to this Article X, the Lending Party Documents shall be unaffected hereby. Each Lending Party shall be entitled to amend, restate or otherwise modify any of their respective Lending Party Documents in accordance with the respective terms of such Lending Party Documents; provided, however, that, in the event that any Lending Party shall receive any additional Creditor Collateral or other security for any of their respective Obligations or file any additional financing statement, mortgage or other lien with respect thereto, such collateral or other security shall become part of the Creditor Collateral hereunder and shall be held in trust for the benefit of the Lending Parties, subject to the terms and conditions of this Article X. Section 10.15. RELEASE OF CREDITOR COLLATERAL. Each Lending Party hereby authorizes the Collateral Agent to execute and deliver such releases and termination statements as may be necessary to permit the release of any Creditor Collateral, so long as such release is made in connection with the sale, lease, transfer or other disposition of assets specifically permitted pursuant to this Agreement. Section 10.16. ACCOUNTING. Each Lending Party agrees to render to the Collateral Agent, at any time upon request of the Collateral Agent, an accounting of the amounts of the 83 Obligations owing to such Lending Party and such other information with respect to the Obligations owing to such Lending Party as the Collateral Agent may reasonably request in order to give effect to the terms and conditions of this Article X. Section 10.17. CONTESTING LIENS OR SECURITY INTERESTS. No Creditor shall contest the validity, perfection, priority or enforceability of any Lien or security interest granted to the Collateral Agent or any Creditor (provided that such Lien or security interest shall be held for the benefit of the Collateral Agent and the Lending Parties and shall be subject to the terms of this Article X). Section 10.18. ACTIONS BY THE COLLATERAL AGENT. Each Creditor acknowledges that (a) such Creditor has performed and shall continue to perform its own credit analysis of the Companies, and its own investigations of the risks involved in the transactions contemplated in connection with the Obligations and in entering into this Agreement and the Collateral Documents, (b) such Creditor has reviewed and approved the form and substance of each of the Collateral Documents, including any U.C.C. financing statements filed in connection with any of the Collateral Documents, and (c) the Collateral Agent, by executing this Agreement, has not nor at any time shall the Collateral Agent be deemed to have, made any representation or warranty, express or implied, with respect to the (i) due execution, authenticity, legality, accuracy, completeness, validity or enforceability of any of the Collateral Documents or as to the financial condition or creditworthiness of Borrower or any other Company, or the collectability of the Obligations, or (ii) validity, perfection, priority, enforceability, value or sufficiency of, or title to any of the Creditor Collateral, or the filing or recording, or taking of any other action with respect to the Creditor Collateral. Although the Collateral Agent shall endeavor to exercise the same care in administering the Creditor Collateral as if the Collateral Agent were acting for its own account, the Collateral Agent shall be fully protected in relying upon any document that appears to it to be genuine and upon the advice of legal counsel, independent accountants and other appropriate experts (including those retained by any Company). Neither the Collateral Agent nor any of its affiliates, directors, officers, attorneys or employees shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct, as determined by a court of competent jurisdiction. Section 10.19. BANKRUPTCY FILING. The provisions of this Article X shall be applicable both before and after the filing of any petition by or against Borrower or any other Company under the United States Bankruptcy Code or, if applicable, under the laws of any foreign jurisdiction, and all references in this Agreement to Borrower or any other Company shall be deemed to apply to Borrower or such Company as debtor-in-possession. All postpetition distributions of the proceeds of any of the Creditor Collateral shall, subject to any court order approving the financing of Borrower or any other Company as debtor-in-possession (i.e. this Article X shall not limit any Creditor's right to provide postpetition financing, or any Creditor's right to object to any such financing, in accordance with Section 364 of the United States Bankruptcy Code and any such financing, and any liens or security interests granted in connection with such financing, shall be on such terms and conditions as approved by the Bankruptcy Court), continue to be made after the filing of any such petition on the same basis that the Creditor Collateral was to be distributed prior to the date of such petition. 84 Section 10.20. INDEMNIFICATION BY CREDITORS. To the extent not indemnified or reimbursed by Borrower, the Lending Parties agree to indemnify the Collateral Agent, on the basis of the Lending Party Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against the Collateral Agent in its capacity as collateral agent in any way relating to or arising out of this Agreement or any Collateral Document or any action taken or omitted by the Collateral Agent with respect to this Agreement or any Collateral Document, provided that no Creditor shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements resulting from the Collateral Agent's gross negligence or willful misconduct, as determined by a court of competent jurisdiction, or from any action taken or omitted by the Collateral Agent in any capacity other than as collateral agent under this Agreement. Section 10.21. RIGHT TO OPT OUT. Any Lending Party shall be entitled to opt out of the sharing provisions of this Article X by giving written notice to the Collateral Agent and each Lending Party (a "Disclaiming Creditor"). Effective upon receipt by the Collateral Agent of such notice from any Disclaiming Creditor, such Disclaiming Creditor (a) shall have no interest in any of the Creditor Collateral, nor shall such Disclaiming Creditor be entitled to its Lending Party Pro Rata Share of the proceeds of any of the Creditor Collateral, and (b) shall not be liable for any indemnification obligations with respect to the Collateral Agent or any of the Creditor Collateral, except with respect to any such obligations that relate to claims arising or occurring prior to the date such Creditor shall have become a Disclaiming Creditor under this Section 10.21. Section 10.22. THIRD PARTIES. The provisions of this Article X shall be solely for the benefit of the Collateral Agent and the Creditors and are not intended to grant any rights, benefits or defenses to or for the benefit of Borrower, any other Company or any other Person. No Company shall have any rights under this Article X. Section 10.23. SUCCESSOR COLLATERAL AGENT. The Collateral Agent may resign as collateral agent hereunder by giving not fewer than thirty (30) days prior written notice to the Global Agent and the Lenders. If the Collateral Agent shall resign under this Agreement, then either (a) the Required Lenders shall appoint a successor collateral agent hereunder, or (b) if a successor collateral agent shall not have been so appointed and approved within the thirty (30) day period following the Collateral Agent's notice to the Global Agent and the Lenders of its resignation, then the Collateral Agent shall appoint a successor collateral agent that shall serve as collateral agent until such time as the Required Lenders appoint a successor collateral agent. Upon its appointment, such successor collateral agent shall succeed to the rights, powers and duties as collateral agent, and the term "Collateral Agent" under this Agreement and any other Collateral Document shall mean such successor, effective upon its appointment, and the former collateral agent's rights, powers and duties as collateral agent shall be terminated without any other or further act or deed on the part of such former collateral agent or any of the parties to this Agreement. Section 10.24. TERMINATION. The provisions of this Article X shall remain in full force and effect until all of the Lender Obligations shall have been indefeasibly paid in full, and 85 this Agreement terminated and not replaced by any other credit facility with the Global Agent and the Lenders. ARTICLE XI. MISCELLANEOUS Section 11.1. LENDERS' INDEPENDENT INVESTIGATION. Each Lender, by its signature to this Agreement, acknowledges and agrees that the Global Agent has not made any representation or warranty, express or implied, with respect to the creditworthiness, financial condition, or any other condition of any Company or with respect to the statements contained in any information memorandum furnished in connection herewith or in any other oral or written communication between the Global Agent and such Lender. Each Lender represents that it has made and shall continue to make its own independent investigation of the creditworthiness, financial condition and affairs of the Companies in connection with the extension of credit hereunder, and agrees that the Global Agent shall not have any duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than such notices as may be expressly required to be given by the Global Agent to the Lenders hereunder), whether coming into its possession before the first Credit Event hereunder or at any time or times thereafter. Section 11.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of dealing on the part of the Global Agent, any Lender or the holder of any Note in exercising any right, power or remedy hereunder or under any of the Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under any of the Loan Documents. The remedies herein provided are cumulative and in addition to any other rights, powers or privileges held by operation of law, by contract or otherwise. Section 11.3. AMENDMENTS, CONSENTS. No amendment, modification, termination, or waiver of any provision of any Loan Document nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given (with the understanding, however, that, with respect to the application of the mandatory prepayment provisions set forth in Section 2.8 hereof to the Term Loan, the consent of Term Lenders holding at least fifty-one percent (51%) of the aggregate amount outstanding under the Term Notes shall be required to amend or waive such provisions). Anything herein to the contrary notwithstanding, the prior written consent of all of the Lenders affected thereby shall be required with respect to (a) any increase in the Commitment (or any part thereof), except pursuant Section 2.7(c) hereof, (b) the extension of maturity of the Notes, the payment date of interest or principal thereunder, or the payment of commitment or other fees or amounts payable hereunder, (c) any reduction in the rate of interest on the Notes, or in any amount of principal or interest due on any Note, or reimbursement obligations with respect to any Letter of Credit, or the payment of facility or other fees hereunder or any change in the manner of pro rata application of any payments made by Borrower or the Collateral Agent to the Lenders hereunder, (d) any change in any percentage voting requirement, voting rights, or the Required Lenders definition in this Agreement, (e) the release of any Guarantor of Payment or of any Collateral in excess of Five Million Dollars ($5,000,000) during any fiscal year of Borrower (other than the release of any Collateral in connection with a transaction that shall be expressly permitted 86 pursuant to the terms of this Agreement), or (f) any amendment to this Section 11.3 or Section 8.5 hereof. Notice of amendments or consents ratified by the Lenders hereunder shall immediately be forwarded by the Global Agent to all Lenders. Each Lender or other holder of a Note shall be bound by any amendment, waiver or consent obtained as authorized by this Section, regardless of its failure to agree thereto. In addition, Section 11.11 hereof may not be amended without the prior written consent of any Designating Lender, as defined in Section 11.11 hereof, affected thereby. Section 11.4. NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to Borrower, mailed or delivered to it, addressed to it at the address specified on the signature pages of this Agreement, if to the Global Agent or any Lender, mailed or delivered to it, addressed to the address of the Global Agent or such Lender specified on the signature pages of this Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be deemed to be given or made when delivered or forty-eight (48) hours after being deposited in the mails with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile with telephonic confirmation of receipt, except that notices pursuant to any of the provisions hereof shall not be effective until received. Section 11.5. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on demand all costs and expenses of the Global Agent, and all Related Expenses, including but not limited to, (a) syndication, administration, travel and out-of-pocket expenses, including but not limited to attorneys' fees and expenses, of the Global Agent in connection with the preparation, negotiation and closing of the Loan Documents and the administration of the Loan Documents, the collection and disbursement of all funds hereunder and the other instruments and documents to be delivered hereunder, (b) extraordinary expenses of the Global Agent and the Collateral Agent in connection with the administration of the Loan Documents and the other instruments and documents to be delivered hereunder, and (c) the reasonable fees and out-of-pocket expenses of special counsel for the Global Agent and the Collateral Agent, with respect to the foregoing, and of local counsel, if any, that may be retained by such special counsel with respect thereto. Borrower agrees to pay on demand all costs and expenses of the Global Agent, the Collateral Agent and the Lenders, including reasonable attorneys' fees, in connection with the restructuring or enforcement of the Debt, this Agreement or any Related Writing. In addition, Borrower shall pay any and all stamp and other taxes and fees payable or determined to be payable in connection with the execution and delivery of the Loan Documents, and the other instruments and documents to be delivered hereunder, and agree to hold the Global Agent, the Collateral Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees. Section 11.6. INDEMNIFICATION. Borrower agrees to defend, indemnify and hold harmless the Global Agent, the Collateral Agent and the Lenders (and their respective affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys' fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against the Global Agent, the Collateral Agent or Lender in connection with any investigative, administrative or judicial proceeding (whether or not such Lender or the Global Agent or the Collateral Agent shall be designated a party thereto) or any other claim by 87 any Person relating to or arising out of any Loan Document or any actual or proposed use of proceeds of the Loans or any of the Debt, or any activities of any Company or any Obligor or any of their respective affiliates; provided that the Global Agent, the Collateral Agent or any Lender shall not have the right to be indemnified under this Section for its own gross negligence or willful misconduct, as determined by a court of competent jurisdiction. All obligations provided for in this Section 11.6 shall survive any termination of this Agreement. Section 11.7. OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS. The obligations of the Lenders hereunder are several and not joint. Nothing contained in this Agreement and no action taken by the Global Agent or the Lenders pursuant hereto shall be deemed to constitute the Global Agent or the Lenders a partnership, association, joint venture or other entity. No default by any Lender hereunder shall excuse the other Lenders from any obligation under this Agreement; but no Lender shall have or acquire any additional obligation of any kind by reason of such default. The relationship among Borrower and the Lenders with respect to the Loan Documents and the Related Writings is and shall be solely that of debtors and creditors, respectively, and neither the Global Agent nor any Lender shall have any fiduciary obligation toward Borrower with respect to any such documents or the transactions contemplated thereby. Section 11.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. Section 11.9. BINDING EFFECT; BORROWERS' ASSIGNMENT. This Agreement shall become effective when it shall have been executed by Borrower, the Global Agent and each Lender and thereafter shall be binding upon and inure to the benefit of Borrower, the Global Agent and each Lender and their respective successors and assigns, except that Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Global Agent and all of the Lenders. Section 11.10. LENDER ASSIGNMENTS/PARTICIPATIONS. (a) ASSIGNMENTS OF COMMITMENTS. Each Lender shall have the right at any time or times to assign to an Eligible Transferee, without recourse, all or a percentage of all of the following: (a) that Lender's Commitment, (b) all Loans made by that Lender, (c) that Lender's Notes, and (d) that Lender's interest in any Letter of Credit and any participation purchased pursuant to Section 2.1 or 8.5 hereof; provided, however, in each such case, that the assignor and the assignee shall have complied with the following requirements: (i) PRIOR CONSENT. No assignment may be consummated pursuant to this Section 11.10 without the prior written consent of the Global Agent (other than an assignment by any Lender to any affiliate of such Lender which affiliate is either wholly-owned by such Lender or is wholly-owned by a Person that wholly owns, either directly or indirectly, such Lender), which consent of the Global Agent shall not be unreasonably withheld. Anything herein to the contrary notwithstanding, any Lender may at any time make a collateral assignment of all or any portion of its rights under the Loan Documents to a Federal Reserve Bank, and no such assignment shall release such assigning Lender from its obligations hereunder; 88 (ii) MINIMUM AMOUNT. Each such assignment shall be in a minimum amount of the lesser of One Million Dollars ($1,000,000) of the assignor's Commitment and interest herein or the entire amount of the assignor's Commitment and interest herein; (iii) ASSIGNMENT FEE; ASSIGNMENT AGREEMENT. Unless the assignment shall be to an affiliate of the assignor or the assignment shall be due to merger of the assignor or for regulatory purposes, either the assignor or the assignee shall remit to the Global Agent, for its own account, an administrative fee (which fee may be waived by the Global Agent, in its sole discretion) of Three Thousand Five Hundred Dollars ($3,500). Unless the assignment shall be due to merger of the assignor or a collateral assignment for regulatory purposes, the assignor shall (A) cause the assignee to execute and deliver to Borrowers and the Global Agent an Assignment Agreement, and (B) execute and deliver, or cause the assignee to execute and deliver, as the case may be, to the Global Agent such additional amendments, assurances and other writings as the Global Agent may reasonably require; and (iv) NON-U.S. ASSIGNEE. If the assignment is to be made to an assignee that is organized under the laws of any jurisdiction other than the United States or any state thereof, the assignor Lender shall cause such assignee, at least five (5) Business Days prior to the effective date of such assignment, (A) to represent to the assignor Lender (for the benefit of the assignor Lender, the Global Agent and Borrower) that under applicable law and treaties no taxes will be required to be withheld by the Global Agent, Borrower or the assignor with respect to any payments to be made to such assignee in respect of the Loans hereunder, (B) to furnish to the assignor (and, in the case of any assignee registered in the Register (as defined below), the Global Agent and Borrower) either (1) U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 or (2) United States Internal Revenue Service Form W-8 or W-9, as applicable (wherein such assignee claims entitlement to complete exemption from U.S. federal withholding tax on all interest payments hereunder), and (C) to agree (for the benefit of the assignor, the Global Agent and Borrower) to provide the assignor Lender (and, in the case of any assignee registered in the Register, the Global Agent and Borrower) a new Form 4224 or Form 1001 or Form W-8 or W-9, as applicable, upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. Upon satisfaction of the requirements specified in subparts (i) through (iv) above, Borrower shall execute and deliver (A) to the Global Agent, the assignor and the assignee, any consent or release (of all or a portion of the obligations of the assignor) required to be delivered by Borrower in connection with the Assignment Agreement, and (B) to the assignee, an appropriate Note or Notes. After delivery of the new Note or Notes, the assignor's Note or Notes being replaced shall be returned to Borrower marked "replaced". Upon satisfaction of the requirements set forth in subparts (i) through (iv) above, and any other condition contained in this Section 11.12(a), (A) the assignee shall become and thereafter be deemed to be a "Lender" for the purposes of this Agreement, (B) in the event that the 89 assignor's entire interest has been assigned, the assignor shall cease to be and thereafter shall no longer be deemed to be a "Lender", and (C) the signature pages hereto and SCHEDULE 1 hereto shall be automatically amended, without further action, to reflect the result of any such assignment. The Global Agent shall maintain at its address referred to in Section 11.4 hereof a copy of each Assignment Agreement delivered to it and a register (the "REGISTER") for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and Borrower, the Global Agent and the Lenders may treat each financial institution whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice. (b) SALE OF PARTICIPATIONS. Each Lender shall have the right at any time or times, without the consent of the Global Agent, Borrower or any other Lender, to sell one or more participations or sub-participations to an Eligible Transferee, as the case may be, in all or any part of (a) that Lender's Commitment, (b) that Lender's Commitment Percentage, (c) any Loan made by that Lender, (d) any Note delivered to that Lender pursuant to this Agreement, and (e) that Lender's interest in any Letter of Credit and any participation, if any, purchased pursuant to Section 2.1 or 8.5 hereof or this Section 11.10(b). The provisions of Article III and Section 11.6 shall inure to the benefit of each purchaser of a participation or sub-participation and the Global Agent shall continue to distribute payments pursuant to this Agreement as if no participation has been sold. If any Lender shall sell any participation or sub-participation, that Lender shall, as between itself and the purchaser, retain all of its rights (including, without limitation, rights to enforce against Borrower the Loan Documents and the Related Writings) and duties pursuant to the Loan Documents and the Related Writings, including, without limitation, that Lender's right to approve any waiver, consent or amendment pursuant to Section 11.3, except if and to the extent that any such waiver, consent or amendment would: (i) reduce any fee or commission allocated to the participation or sub-participation, as the case may be; (ii) reduce the amount of any principal payment on any Loan allocated to the participation or sub-participation, as the case may be, or reduce the principal amount of any Loan so allocated or the rate of interest payable thereon; or (iii) extend the time for payment of any amount allocated to the participation or sub-participation, as the case may be. No participation or sub-participation shall operate as a delegation of any duty of the seller thereof. Under no circumstance shall any participation or sub-participation be deemed a novation in respect of all or any part of the seller's obligations pursuant to this Agreement. 90 Section 11.11. DESIGNATION. (a) Notwithstanding anything in this Agreement to the contrary, any Lender (a "Designating Lender") may grant to one or more special purpose funding vehicles (each an "SPV"), identified in writing from time to time by such Designating Lender to the Global Agent and Borrower, the option to provide to Borrower all or any part of any Loan that such Designating Lender would otherwise be obligated to make to Borrower pursuant to this Agreement; provided that (i) nothing in this Section shall constitute a commitment by any SPV to make any Loan, and (ii) if an SPV designated by a Designating Lender to make Loans elects not to exercise such option or otherwise fails to provide all or any part of such Loan, such Designating Lender shall still be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPV hereunder shall reduce the availability under the commitment of the Designating Lender to the same extent, and as if, such Loan were made by such Designating Lender. (b) As to any Loans or portion thereof made by an SPV, each such SPV shall have all of the rights that a Lender making such Loans or portion thereof would have under this Agreement; provided, however, that each SPV shall have granted its Designating Lender an irrevocable power of attorney to deliver and receive all communications and notices under this Agreement and any other Loan Document and to exercise, in its reasonable discretion, on behalf of such SPV, all of such SPV's voting rights under this Agreement. No additional Note shall be required to evidence the Loans or portion thereof made by an SPV and the Designating Lender shall be deemed to hold its Note as agent for such SPV to the extent of the Loans or portion thereof funded by such SPV. In addition, any payments for the account of any SPV shall be paid to its respective Designating Lender as agent for such SPV. (c) The Global Agent, Borrower and the Lenders agree that no SPV shall be liable for an indemnity or payment under this Agreement for which a Lender would otherwise be liable and the Designating Lender shall remain liable for its Commitment Percentage of such indemnity or payment to the extent such Designating Lender would otherwise be liable. In furtherance of the foregoing, the Global Agent, Borrower and each of the Lenders hereby agree (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all of the outstanding commercial paper or other senior indebtedness of any SPV, none of the Global Agent, Borrower or any Lender shall institute against, or join any other Person in instituting against, such SPV any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding under the laws of the United States or any State thereof. (d) In addition, notwithstanding anything to the contrary contained in this Section 11.11, or otherwise in this Agreement, any SPV may (i) at any time and without paying any processing fee therefor, assign (or grant a participation in) all or a portion of its interest in any Loans to its Designating Lender or to any financial institution providing liquidity and/or credit support to or for the account of such SPV to support the funding or maintenance of Loans, and (ii) disclose on a confidential basis any non-public information relating to the Loans made by such SPV to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancements to such SPV. This Section 11.11 may not be amended without the prior written consent of any Designating Lender affected thereby. 91 Section 11.12. SEVERABILITY OF PROVISIONS; CAPTIONS; ATTACHMENTS. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to Sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof. Section 11.13. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement, each of the Notes and any Related Writing shall be governed by and construed in accordance with the laws of the State of Ohio and the respective rights and obligations of Borrower, the Global Agent and the Lenders shall be governed by Ohio law, without regard to principles of conflict of laws. Borrower hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this Agreement, the Debt or any Related Writing, and Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Ohio state or federal court. Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of FORUM NON CONVENIENS or otherwise. Borrower agrees that a final, nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Section 11.14. LEGAL REPRESENTATION OF PARTIES. The Loan Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other Loan Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. Section 11.15. JUDGMENT CURRENCY. If the Global Agent or the Collateral Agent, on behalf of the Lenders, obtains a judgment or judgments against Borrower in an Alternate Currency, the obligations of Borrower in respect of any sum adjudged to be due to the Global Agent or the Lenders hereunder or under the Notes (the "JUDGMENT AMOUNT") shall be discharged only to the extent that, on the Business Day following receipt by the Global Agent or the Collateral Agent, as the case may be, of the Judgment Amount in the Alternate Currency, the Global Agent, in accordance with normal banking procedures, purchases Dollars with the Judgment Amount in such Alternate Currency. If the amount of Dollars so purchased is less than the amount of Dollars that could have been purchased with the Judgment Amount on the date or dates the Judgment Amount (excluding the portion of the Judgment Amount that has accrued as a result of the failure of Borrower to pay the sum originally due hereunder or under the Notes when it was originally due hereunder or under the Notes) was originally due and owing to the Global Agent or the Lenders hereunder or under the Notes (the "ORIGINAL DUE DATE") (the "LOSS"), Borrower agrees, as a separate obligation and notwithstanding any such judgment, to indemnify the Global Agent or such Lender, as the case may be, against the Loss, and, if the amount of Dollars so purchased exceeds the amount of Dollars that could have been purchased 92 with the Judgment Amount on the Original Due Date, the Global Agent or such Lender agrees to remit such excess to Borrower. Section 11.16. DESIGNATED SENIOR INDEBTEDNESS. THE INDEBTEDNESS EVIDENCED BY THIS AGREEMENT, EACH OF THE NOTES, EACH OF THE SECURITY DOCUMENTS AND EACH OTHER LOAN DOCUMENT IS AND SHALL AT ALL TIMES CONSTITUTE "DESIGNATED SENIOR INDEBTEDNESS" UNDER THE PROVISIONS OF THE SUBORDINATED CONVERTIBLE INDENTURE. [Remainder of page left intentionally blank] 93 Section 11.17. JURY TRIAL WAIVER. BORROWER, THE GLOBAL AGENT AND EACH OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, THE GLOBAL AGENT AND THE BANKS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. Address: One American Road AMERICAN GREETINGS Cleveland, Ohio 44144 CORPORATION Attention: ------------ By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- Address: 1900 East Ninth Street NATIONAL CITY BANK, as the Global Cleveland, Ohio 44114 Agent, a Lead Arranger and a Lender Attention: Large Corporate Banking By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- Address: ------------------------ GOLDMAN SACHS CREDIT PARTNERS ------------------------ L.P., as a Lead Arranger and Attention: a Lender -------------- By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- Address: 127 Public Square KEYBANK NATIONAL ASSOCIATION Cleveland, Ohio 44114 Attention: Large Corporate By: Banking ---------------------------------- Name: -------------------------------- Title: ------------------------------- S-1 Address: BANK ONE, NA ------------------------ ------------------------ By: Attention: ---------------------------------- -------------- Name: -------------------------------- Title: ------------------------------- Address: LASALLE BANK NATIONAL ASSOCIATION ------------------------ ------------------------ By: Attention: ---------------------------------- -------------- Name: -------------------------------- Title: ------------------------------- Address: PNC BANK, NATIONAL ASSOCIATION ------------------------ ------------------------ By: Attention: ---------------------------------- -------------- Name: -------------------------------- Title: ------------------------------- S-2 EX-4.V 4 l94460aexv4wv.txt EX-4(V) Exhibit 4(v) EXECUTION COPY ================================================================================ RECEIVABLES PURCHASE AGREEMENT dated as of August 7, 2001 among AGC FUNDING CORPORATION, AMERICAN GREETINGS CORPORATION, as Servicer THE MEMBERS OF VARIOUS PURCHASER GROUPS FROM TIME TO TIME PARTY HERETO and PNC BANK, NATIONAL ASSOCIATION, as Administrator ================================================================================ TABLE OF CONTENTS PAGE ---- ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES Section 1.1 Purchase Facility ..............................................1 Section 1.2 Making Purchases ...............................................2 Section 1.3 Purchased Interest Computation .................................4 Section 1.4 Settlement Procedures ..........................................4 Section 1.5 Fees ..........................................................10 Section 1.6 Payments and Computations, Etc ................................10 Section 1.7 Increased Costs ...............................................11 Section 1.8 Requirements of Law ...........................................12 Section 1.9 Inability to Determine Euro-Rate ..............................12 Section 1.10 Extension of Termination Date .................................13 ARTICLE II REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS Section 2.1 Representations and Warranties; Covenants .....................14 Section 2.2 Termination Events ............................................14 ARTICLE III INDEMNIFICATION Section 3.1 Indemnities by the Seller .....................................14 Section 3.2 Indemnities by the Servicer ...................................16 ARTICLE IV ADMINISTRATION AND COLLECTIONS Section 4.1 Appointment of the Servicer ...................................17 Section 4.2 Duties of the Servicer ........................................18 Section 4.3 Lock-Box Account Arrangements .................................19 Section 4.4 Enforcement Rights ............................................19 Section 4.5 Responsibilities of the Seller ................................21 Section 4.6 Servicing Fee .................................................21 i ARTICLE V THE AGENTS Section 5.1 Appointment and Authorization .................................21 Section 5.2 Delegation of Duties ..........................................23 Section 5.3 Exculpatory Provisions ........................................23 Section 5.4 Reliance by Agents ............................................23 Section 5.5 Notice of Termination Events ..................................24 Section 5.6 Non-Reliance on Administrator, Purchaser Agents and Other Purchasers ....................................................25 Section 5.8 Indemnification ...............................................25 Section 5.9 Successor Administrator .......................................25 ARTICLE VI MISCELLANEOUS Section 6.1 Amendments, Etc ...............................................26 Section 6.2 Notices, Etc ..................................................27 Section 6.3 Successors and Assigns; Participations; Assignments ...........27 Section 6.4 Costs, Expenses and Taxes .....................................29 Section 6.5 No Proceedings; Limitation on Payments ........................29 Section 6.6 GOVERNING LAW AND JURISDICTION ................................30 Section 6.7 Execution in Counterparts .....................................30 Section 6.8 Survival of Termination .......................................30 Section 6.9 WAIVER OF JURY TRIAL ..........................................30 Section 6.10 Sharing of Recoveries .........................................31 Section 6.11 Right of Setoff ...............................................31 Section 6.12 Entire Agreement ..............................................31 Section 6.13 Headings ......................................................31 Section 6.14 Purchaser Groups' Liabilities .................................31 Section 6.15 Call Option ...................................................32 EXHIBIT I Definitions EXHIBIT II Conditions of Purchases EXHIBIT III Representations and Warranties EXHIBIT IV Covenants EXHIBIT V Termination Events SCHEDULE I Credit and Collection Policy SCHEDULE II Lock-Box Banks and Lock-Box Accounts SCHEDULE III Trade Names ii ANNEX A Form of Information Package ANNEX B Form of Purchase Notice ANNEX C Form of Assumption Agreement ANNEX D Form of Transfer Supplement ANNEX E Form of Paydown Notice iii This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or otherwise modified from time to time, this "AGREEMENT ") is entered into as of August 7, 2001, among AGC FUNDING CORPORATION, a Delaware corporation, as seller (the "SELLER"), American Greetings Corp., an Ohio Corporation ("Greetings"), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the "SERVICER"), MARKET STREET FUNDING CORPORATION ("MARKET STREET "), a Delaware corporation, as a Conduit Purchaser, PNC BANK, NATIONAL ASSOCIATION ("PNC"), as agent for Market Street, and as Administrator for each Purchaser Group (in such capacity, the "ADMINISTRATOR "), and each of the other members of each Purchaser Group party hereto or that become parties hereto by executing an Assumption Agreement or a Transfer Supplement. PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in EXHIBIT I. References in the Exhibits hereto to the "Agreement" refer to this Agreement, as amended, supplemented or otherwise modified from time to time. The Seller desires to sell, transfer and assign an undivided variable percentage interest in a pool of receivables, and the Purchasers desire to acquire such undivided variable percentage interest, as such percentage interest shall be adjusted from time to time based upon, in part, reinvestment payments that are made by such Purchasers. In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows: ARTICLE I AMOUNTS AND TERMS OF THE PURCHASES Section 1.1. PURCHASE FACILITY. (a) On the terms and subject to the conditions hereof, the Seller may, from time to time before the Facility Termination Date, request that the Conduit Purchasers, or, only if a Conduit Purchaser denies such request or is unable to fund (and provides notice of such denial or inability to the Seller, the Administrator and its Purchaser Agent), ratably request that the Related Committed Purchasers, make purchases of and reinvestments in undivided percentage ownership interests with regard to the Purchased Interest from the Seller from time to time from the date hereof to the Facility Termination Date. Subject to SECTION 1.4(b), concerning reinvestments, at no time will a Conduit Purchaser that is not also a Related Committed Purchaser have any obligation to make a purchase. Each Related Committed Purchaser severally hereby agrees, on the terms and subject to the conditions hereof, to make Purchases before the Facility Termination Date, based on the applicable Purchaser Group's Ratable Share of each purchase requested pursuant to SECTION 1.2(a) (each a "PURCHASE ") (and, in the case of each Related Committed Purchaser, its Commitment Percentage of its Purchaser Group's Ratable Share of such Purchase) to the extent its Investment would not thereby exceed its Commitment and the Aggregate Investment would not (after giving effect to all Purchases on such date) exceed the Purchase Limit. (b) The Seller may, upon at least 60 days' written notice to the Administrator and each Purchaser Agent terminate the purchase facility provided for in this Section in whole or, upon 30 days' written notice to the Administrator and each Purchaser Agent, from time to time, irrevocably reduce in part the unfunded portion of the Purchase Limit (but not below the amount which would cause the Group Investment of any Purchaser Group to exceed its Group Commitment (after giving effect to such reduction)); provided that each partial reduction shall be in the amount of at least $10,000,000, or an integral multiple of $1,000,000 in excess thereof and unless terminated in whole, the Purchase Limit shall in no event be reduced below $50,000,000. Such reduction shall at the option of the Seller be applied either (i) ratably to reduce the Group Commitment of each Purchaser Group or (ii) to terminate the Group Commitment of any one Purchaser Group. Section 1.2. MAKING PURCHASES. (a) Each purchase (but not reinvestment) of undivided percentage ownership interests with regard to the Purchased Interest hereunder shall be made upon the Seller's irrevocable written notice in the form of Annex B delivered to the Administrator and each Purchaser Agent in accordance with SECTION 6.2 (which notice must be received by the Administrator and each Purchaser Agent before 11:00 a.m., New York City time) at least three Business Days before the requested Purchase Date, which notice shall specify: (A) the amount requested to be paid to the Seller (such amount, which shall not be less than $1,000,000, or an integral multiple of $100,000 in excess thereof with respect to each Purchaser Group, being the aggregate of the Investments of each Purchaser within such Purchaser Group, relating to the undivided percentage ownership interest then being purchased), (B) the date of such purchase (which shall be a Business Day), and (C) a pro forma calculation of the Purchased Interest after giving effect to the increase in the Aggregate Investment. If the Purchase is requested from a Conduit Purchaser and such Conduit Purchaser determines, in its sole discretion, to make the requested Purchase, such Conduit Purchaser shall transfer to the account of the Seller described in SECTION 1.2(b), below (the "DISBURSEMENT ACCOUNT "), an amount equal to such Conduit Purchaser's Purchaser Group Ratable Share of such Purchase on the requested Purchase Date. If the Purchase is requested from the Related Committed Purchasers for a Purchaser Group (in the case where the related Conduit Purchaser determined not to or was unable to make such Purchase), subject to the terms and conditions hereof, such Related Committed Purchasers for a Purchaser Group shall transfer the applicable Purchaser Group's Ratable Share of each Purchase (and, in the case of each Related Committed Purchaser, its Commitment Percentage of its Purchaser Group's Ratable Share of such Purchase) into the Disbursement Account by no later than 4:00 p.m. (New York time) on the Purchase Date. 2 (b) On the date of each Purchase, each Purchaser (or the related Purchaser Agent on its behalf), shall make available to the Seller in same day funds, at National City Bank, Cleveland, Ohio, account number 657364116, ABA #041000124, an amount equal to the proceeds of such Purchase. (c) Effective on the date of each Purchase pursuant to this SECTION 1.2 and each reinvestment pursuant to SECTION 1.4, the Seller hereby sells and assigns to the Administrator for the benefit of the Purchasers (ratably, according to each such Purchaser's Investment) an undivided percentage ownership interest in: (i) each Pool Receivable then existing, (ii) all Related Security with respect to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. (d) To secure all of the Seller's obligations (monetary or otherwise) under this Agreement and the other Transaction Documents to which it is a party, whether now or hereafter existing or arising, due or to become due, direct or indirect, absolute or contingent, the Seller hereby grants to the Administrator, for the benefit of the Purchasers, a security interest in all of the Seller's right, title and interest (including any undivided interest of the Seller) in, to and under all of the following, whether now or hereafter owned, existing or arising: (i) all Pool Receivables, (ii) all Related Security with respect to such Pool Receivables, (iii) all Collections with respect to such Pool Receivables, (iv) the Lock-Box Accounts and all amounts on deposit therein, and all certificates and instruments, if any, from time to time evidencing such Lock-Box Accounts and amounts on deposit therein, (v) all books and records of each Receivable, and all Transaction Documents to which the Seller is a party, together with all rights (but none of the obligations) of the Seller thereunder and (vi) all proceeds and products of, and all amounts received or receivable under any or all of, the foregoing (collectively, the "POOL ASSETS"). The Administrator, for the benefit of the Purchasers, shall have, with respect to the Pool Assets, and in addition to all the other rights and remedies available to the Administrator and the Purchasers, all the rights and remedies of a secured party under any applicable UCC. (e) The Seller may, with the written consent of the Administrator and each Purchaser, add additional Persons as Purchasers (either to an existing Purchaser Group or by creating new Purchaser Groups) or cause an existing Purchaser to increase its Commitment in connection with a corresponding increase in the Purchase Limit; PROVIDED, HOWEVER, that the Commitment of any Purchaser may only be increased with the consent of such Purchaser. Each new Purchaser (or Purchaser Group) and each Purchaser increasing its Commitment shall become a party hereto or increase its Commitment, as the case may be, by executing and delivering to the Administrator and the Seller an Assumption Agreement in the form of Annex C hereto (which Assumption Agreement shall, in the case of any new Purchaser or Purchasers be executed by each Person in such new Purchaser's Purchaser Group). (f) Each Related Committed Purchaser's obligation hereunder shall be several, such that the failure of any Related Committed Purchaser to make a payment in connection 3 with any purchase hereunder shall not relieve any other Related Committed Purchaser of its obligation hereunder to make payment for any Purchase. Further, in the event any Related Committed Purchaser fails to satisfy its obligation to make a purchase as required hereunder, upon receipt of notice of such failure from the Administrator (or any relevant Purchaser Agent), subject to the limitations set forth herein, the non-defaulting Related Committed Purchasers in such defaulting Related Committed Purchaser's Purchaser Group shall purchase the defaulting Related Committed Purchaser's Commitment Percentage of the related Purchase PRO RATA in proportion to their relative Commitment Percentages (determined without regard to the Commitment Percentage of the defaulting Related Committed Purchaser; it being understood that a defaulting Related Committed Purchaser's Commitment Percentage of any Purchase shall be first put to the Related Committed Purchasers in such defaulting Related Committed Purchaser's Purchaser Group and thereafter if there are no other Related Committed Purchasers in such Purchaser Group or if such other Related Committed Purchasers are also defaulting Related Committed Purchasers, then such defaulting Related Committed Purchaser's Commitment Percentage of such Purchase shall be put to each other Purchaser Group ratably and applied in accordance with this paragraph (f)). Notwithstanding anything in this paragraph (f) to the contrary, no Related Committed Purchaser shall be required to make a Purchase pursuant to this paragraph for an amount which would cause (i) the aggregate Investment of such Related Committed Purchaser (after giving effect to such Purchase) to exceed its Commitment or (ii) the sum of the aggregate Investments of all Purchasers in the Purchaser Group of such Related Committed Purchaser (after giving effect to such Purchase) to exceed the sum of the Commitments of all of the Purchasers in such Purchaser Group. Section 1.3. PURCHASED INTEREST COMPUTATION. The Purchased Interest shall be initially computed on the date of the initial Purchase hereunder. Thereafter, until the Facility Termination Date, such Purchased Interest shall be automatically recomputed (or deemed to be recomputed) on each Business Day other than a Termination Day. From and after the occurrence of any Termination Day, the Purchased Interest shall (until the event(s) giving rise to such Termination Day are satisfied or are waived by the Administrator and a Simple Majority of the Purchasers) be deemed to be 100%. The Purchased Interest shall become zero when the Aggregate Investment thereof and Aggregate Discount thereon shall have been paid in full, all the amounts owed by the Seller, each Originator, AGSC, Greetings and the Servicer hereunder or under any other Transaction Document to each Purchaser, the Administrator and any other Indemnified Party or Affected Person are paid in full, and the Servicer shall have received the accrued Servicing Fee thereon. Section 1.4. SETTLEMENT PROCEDURES. (a) The collection of the Pool Receivables shall be administered by the Servicer in accordance with this Agreement. The Seller shall provide to the Servicer on a timely basis all information needed for such administration, including notice of the occurrence of any Termination Day and current computations of the Purchased Interest. 4 (b) The Servicer shall, on each day on which Collections of Pool Receivables are received (or deemed received) by the Seller or the Servicer: (i) set aside and hold in trust (and shall, at the request of the Administrator (with the consent or at the direction of the Majority Purchasers), segregate in a separate account approved by the Administrator if, at the time of such request, there exists an Unmatured Termination Event or a Termination Event (or if the failure to so segregate reasonably could be expected to cause a Material Adverse Effect)) for the benefit of each Purchaser Group, out of the Purchasers' Share of such Collections, first, an amount equal to the Aggregate Discount accrued through such day for each Portion of Investment and not previously set aside, second, an amount equal to the fees set forth in each Purchaser Group Fee Letter accrued and unpaid through such day, and third, to the extent funds are available therefor, an amount equal to the aggregate of each Purchaser Group's Ratable Share of the Purchasers' Share of the Servicing Fee accrued through such day and not previously set aside, (ii) subject to SECTION 1.4(f), if such day is not a Termination Day, remit to the Seller, ratably, on behalf of each Purchaser Group, the remainder of the Purchasers' Share of such Collections. Such remainder shall, to the extent representing a return on the Aggregate Investment, ratably, according to each Purchaser's Investment, be automatically reinvested in Pool Receivables, and in the Related Security, Collections and other proceeds with respect thereto; PROVIDED, HOWEVER, that if the Purchased Interest would exceed 100%, then the Servicer shall not reinvest, but shall set aside and hold in trust for the benefit of the Purchasers (and shall, at the request of the Administrator (with the consent or at the direction of the Majority Purchasers), segregate in a separate account approved by the Administrator if, at the time of such request, there exists an Unmatured Termination Event or a Termination Event (or if the failure to so segregate reasonably could be expected to cause a Material Adverse Effect)) a portion of such Collections that, together with the other Collections set aside pursuant to this paragraph, shall equal the amount necessary to reduce the Purchased Interest to 100%; PROVIDED, FURTHER, that in the case of any Purchaser that has provided notice (an "EXITING NOTICE") to its Purchaser Agent of its refusal, pursuant to SECTION 1.10, to extend its Commitment hereunder (an "EXITING PURCHASER "), then such Purchaser's ratable share of such Collections based on its Investment shall not be reinvested and shall instead be held in trust for the benefit of such Purchaser and applied in accordance with CLAUSE (iii) below, (iii) if such day is a Termination Day (or any day following the provision of an Exiting Notice), set aside, segregate and hold in trust (and shall, at the request of the Administrator (with the consent or at the direction of a Simple Majority of the Purchasers), segregate in a separate account approved by the Administrator) for the benefit of each Purchaser Group the entire remainder of the Purchasers' Share of the Collections (or in the case of an Exiting Purchaser an amount equal to such 5 Purchaser's ratable share of such Collections based on its Investment; provided, that solely for the purpose of determining such Purchaser's ratable share of such Collections, such Purchaser's Investment shall be deemed to remain constant from the date of the provision of an Exiting Notice until the date such Purchaser's Investment has been paid in full; it being understood that if such day is also a Termination Day, such Exiting Purchaser's Investment shall be recalculated taking into account amounts received by such Purchaser in respect of this parenthetical and thereafter Collections shall be set aside for such Purchaser ratably in respect of its Investment (as recalculated)); provided, that if amounts are set aside and held in trust on any Termination Day of the type described in clause (a) of the definition of "Termination Day" (or any day following the provision of an Exiting Notice) and, thereafter, the conditions set forth in SECTION 2 of EXHIBIT II are satisfied or waived by the Administrator and a Simple Majority of the Purchasers (or in the case of an Exiting Notice, such Exiting Notice has been revoked by the related Exiting Purchaser, and written notice thereof has been provided to the Administrator, the related Purchaser Agent and the Servicer), such previously set-aside amounts shall, to the extent representing a return on Aggregate Investment (or the Investment of the Exiting Purchaser) and ratably in accordance with each Purchaser's Investment, be reinvested in accordance with CLAUSE (ii) on the day of such subsequent satisfaction or waiver of conditions or revocation of Exiting Notice, and (iv) release to the Seller (subject to SECTION 1.4(f)) for its own account any Collections in excess of: (x) amounts required to be reinvested in accordance with CLAUSE (ii) or the proviso to CLAUSE (iii) plus (y) the amounts that are required to be set aside pursuant to CLAUSE (i), the proviso to CLAUSE (ii) and CLAUSE (iii) plus (z) the Seller's Share of the Servicing Fee accrued and unpaid through such day and all reasonable and appropriate out-of-pocket costs and expenses of the Servicer for servicing, collecting and administering the Pool Receivables. (c) The Servicer shall, in accordance with the priorities set forth in SECTION 1.4(d), below, deposit into each applicable Purchaser's account (or such other account designated by such applicable Purchaser or its Purchaser Agent), on each Settlement Date, Collections held for each Purchaser with respect to such Purchaser's Portion(s) of Investment pursuant to CLAUSE (b)(i) or (f) of Section 1.4 plus the amount of Collections then held for such Purchaser pursuant to CLAUSES (b)(ii) and (iii) of SECTION 1.4; PROVIDED, that if Greetings, any Originator, AGSC or an Affiliate thereof is the Servicer, such day is not a Termination Day and the Administrator has not notified Greetings, AGSC or such Originator (or such Affiliate) that such right is revoked, Greetings, AGSC or such Originator (or such Affiliate) may retain the portion of the Collections set aside pursuant to CLAUSE (b)(i) that represents the aggregate of each Purchaser Group's Ratable Share of the Purchasers' Share of the Servicing Fee. On or before the last day of each Yield Period with respect to any Portion of Investment, the applicable Purchaser Agent will notify the Servicer by facsimile 6 of the amount of the Discount accrued with respect to each such Portion of Investment during the related Yield Period then ending. (d) The Servicer shall distribute the amounts described (and at the times set forth) in SECTION 1.4(c), as follows: (i) if such distribution occurs on a day that is not a Termination Day and the Purchased Interest does not exceed 100%, first to each Purchaser Agent ratably according to the Discount accrued during such Yield Period (for the benefit of the relevant Purchasers within such Purchaser Agent's Purchaser Group) in payment in full of all accrued Discount and fees (other than Servicing Fees) with respect to each Portion of Investment maintained by such Purchasers; it being understood that each Purchaser Agent shall distribute such amounts to the Purchasers within its Purchaser Group ratably according to Discount, and second, if the Servicer has set aside amounts in respect of the Servicing Fee pursuant to CLAUSE (b)(i) and has not retained such amounts pursuant to CLAUSE (c), to the Servicer's own account (payable in arrears on each Settlement Date) in payment in full of the aggregate of each Purchaser Group's Ratable Share of the Purchasers' Share of accrued Servicing Fees so set aside, and (ii) if such distribution occurs on a Termination Day or on a day when the Purchased Interest exceeds 100%, FIRST if Greetings, AGSC or any Originator or an Affiliate thereof is not the Servicer, to the Servicer's own account in payment in full of all accrued Servicing Fees, SECOND to each Purchaser Agent ratably according to Discount (for the benefit of the relevant Purchasers within such Purchaser Agent's Purchaser Group) in payment in full of all accrued Discount with respect to each Portion of Investment funded or maintained by the Purchasers within such Purchaser Agent's Purchaser Group, THIRD to each Purchaser Agent ratably according to the aggregate of the Investment of each Purchaser in each such Purchaser Agent's Purchaser Group (for the benefit of the relevant Purchasers within such Purchaser Agent's Purchaser Group) in payment in full of each Purchaser's Investment (or, if such day is not a Termination Day, the amount necessary to reduce the Purchased Interest to 100%); it being understood that each Purchaser Agent shall distribute the amounts described in the first and second clauses of this SECTION 1.4(d)(ii) to the Purchasers within its Purchaser Group ratably according to Discount and Investment, respectively, FOURTH, if the Aggregate Investment and accrued Aggregate Discount with respect to each Portion of Investment for all Purchaser Groups have been reduced to zero or if such day is not a Termination Day, the Purchased Interest is reduced to 100%, and all accrued Servicing Fees payable to the Servicer (if other than Greetings, AGSC or any Originator or an Affiliate thereof) have been paid in full, to each Purchaser Group ratably (for the benefit of the Purchasers within such Purchaser Group) in accordance with its Ratable Share, the Administrator and any other Indemnified Party or Affected Person in payment in full of any other amounts owed 7 thereto by the Seller or Servicer hereunder and, FIFTH, to the Servicer's own account (if the Servicer is Greetings, AGSC or any Originator or an Affiliate thereof) in payment in full of the Aggregate of each Purchaser Group's Ratable Share of all accrued Servicing Fees. After the Aggregate Investment, Aggregate Discount, fees payable pursuant to each Purchaser Group Fee Letter and Servicing Fees with respect to the Purchased Interest, and any other amounts payable by the Seller and the Servicer to each Purchaser Group, the Administrator or any other Indemnified Party or Affected Person hereunder, have been paid in full, all additional Collections with respect to the Purchased Interest shall be paid to the Seller for its own account. (e) For the purposes of this SECTION 1.4: (i) if on any day the Outstanding Balance of any Pool Receivable is reduced or adjusted as a result of any defective, rejected, returned, repossessed or foreclosed goods or services, or any revision, cancellation, allowance, discount or other adjustment made by the Seller or any Affiliate of the Seller, or the Servicer or any Affiliate of the Servicer, or any setoff or dispute between the Seller or any Affiliate of the Seller, or the Servicer or any Affiliate of the Servicer and an Obligor, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in the amount of such reduction or adjustment; PROVIDED THAT Seller shall be deemed to have received a Collection due to a reduction or adjustment made to the Outstanding Balance of a Seasonal Receivable in connection with the return of unsold goods only to the extent Seller shall have a claim under SECTION 3.3(c) of the Sale and Contribution Agreement in connection with such Seasonal Receivable. (ii) if on any day any of the representations or warranties in SECTION 1(g) or (n) of EXHIBIT III is not true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a Collection of such Pool Receivable in full; (iii) except as provided in CLAUSE (i) or (ii), or as otherwise required by applicable law or the relevant Contract, all Collections received from an Obligor of any Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates in writing its payment for application to specific Receivables; and (iv) if and to the extent the Administrator, any Purchaser Agent or any Purchaser shall be required for any reason to pay over to an Obligor (or any trustee, receiver, custodian or similar official in any Insolvency Proceeding) any amount received by it hereunder, such amount shall be deemed not to have been so received by such Person but rather to have been retained by the Seller and, accordingly, such Person shall have a claim against the Seller for such amount, payable when and to the 8 extent that any distribution from or on behalf of such Obligor is made in respect thereof. (f) If at any time the Seller shall wish to cause the reduction of Aggregate Investment (but not to commence the liquidation, or reduction to zero, of the entire Aggregate Investment), the Seller may do so as follows: (i) the Seller shall give the Administrator, each Purchaser Agent and the Servicer (A) at least two Business Days' prior written notice thereof for any reduction of Aggregate Investment less than or equal to $10,000,000 and (B) at least ten Business Days' prior written notice thereof for any reduction of Aggregate Investment greater than $10,000,000 (in each case such notice shall include the amount of such proposed reduction and the proposed date on which such reduction will commence); (ii) on the proposed date of commencement of such reduction and on each day thereafter, the Servicer shall cause Collections not to be reinvested until the amount thereof not so reinvested shall equal the desired amount of reduction; and (iii) the Servicer shall hold such Collections in trust for the benefit of each Purchaser ratably according to its Investment, for payment to each such Purchaser (or its related Purchaser Agent for the benefit of such Purchaser) on the (i) next Settlement Date with respect to any Portions of Investment maintained by such Purchaser immediately following the related current Yield Period or (ii) such other date approved by the Administrator, and the Aggregate Investment (together with the Investment of any related Purchaser) shall be deemed reduced in the amount to be paid to such Purchaser (or its related Purchaser Agent for the benefit of such Purchaser) only when in fact finally so paid; PROVIDED, that: (A) the amount of any such reduction shall be not less than $1,000,000 for each Purchaser Group and shall be an integral multiple of $100,000, and the entire Aggregate Investment after giving effect to such reduction shall be not less than $50,000,000 and shall be in an integral multiple of $1,000,000 (unless the Aggregate Investment shall have been reduced to zero); and (B) with respect to any Portion of Investment, the Seller shall choose a reduction amount, and the date of commencement thereof, so that to the extent practicable such reduction shall commence and conclude in the same Yield Period. Section 1.5. FEES. The Seller shall pay to each Purchaser Agent for the benefit of the related Purchasers certain fees in the amounts and on the dates set forth in letters, dated the date 9 hereof, each such letter (as amended, supplemented, or otherwise modified from time to time, a "PURCHASER GROUP FEE LETTER") in each case among the Seller, the Servicer, the Administrator and the related Purchaser Agent. Section 1.6. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be made without reduction for offset or counterclaim and shall be paid or deposited no later than noon (New York City time) on the day when due in same day funds to the applicable Purchaser's account (as such account is identified in the related Purchaser Group Fee Letter). All amounts received after noon (New York City time) will be deemed to have been received on the next Business Day. (a) The Seller or the Servicer, as the case may be, shall, to the extent permitted by law, pay interest on any amount not paid or deposited by the Seller or the Servicer, as the case may be, when due hereunder, at an interest rate equal to the Base Rate, payable on demand. (b) All computations of interest under CLAUSE (b) and all computations of Discount, fees and other amounts hereunder shall be made on the basis of a year of 360 (or 365 or 366, as applicable, with respect to Discount or other amounts calculated by reference to the Base Rate) days for the actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next Business Day and such extension of time shall be included in the computation of such payment or deposit. (c) Each Affected Person will notify Seller and the applicable Purchaser Agent promptly after it has actual knowledge of any event which will entitle such Affected Person to such additional amounts as compensation pursuant to this SECTION 1.7. Such additional amounts shall accrue from the date as to which such Affected Person becomes subject to such additional costs as a result of such event (or if such notice of such event is not given to Seller by such Affected Person within 90 days after such Affected Person has actual knowledge of such event, from the date which is 90 days prior to the date such notice is given to Seller by such Affected Person). Section 1.7. INCREASED COSTS. (a) If any Purchaser Agent, Purchaser, Liquidity Provider, the Administrator or any other Program Support Provider or any of their respective Affiliates (each an "AFFECTED PERSON") reasonably determines that the existence of or compliance with: (i) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (ii) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Affected Person, and such Affected 10 Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make purchases of (or otherwise to maintain the investment in) Pool Receivables related to this Agreement or any related liquidity facility, credit enhancement facility or other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Administrator), the Seller shall promptly pay to the Administrator, for the account of such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (b) If, due to either: (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance with any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of, the Purchased Interest or any portion thereof in respect of which Discount is computed by reference to the Euro-Rate, then, upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person, from time to time as specified by such Affected Person, additional amounts sufficient to compensate such Affected Person for such increased costs. A certificate as to such amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error. (c) If such increased costs affect the related Affected Person's portfolio of financing transactions, such Affected Person shall use reasonable averaging and attribution methods to allocate such increased costs to the transactions contemplated by this Agreement. Section 1.8. REQUIREMENTS OF LAW. If any Affected Person reasonably determines that the existence of or compliance with: (a) any law or regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (b) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after the date of this Agreement: (i) does or shall subject such Affected Person to any tax of any kind whatsoever with respect to this Agreement, any increase in the Purchased Interest or any portion thereof or in the amount of such Person's Investment relating thereto, or does or shall change the basis of taxation of payments to such Affected Person on account of Collections, Discount or any other amounts payable hereunder (excluding taxes imposed on the overall pre-tax net income of such Affected Person, and franchise taxes imposed on such Affected Person, by the 11 jurisdiction under the laws of which such Affected Person is organized or a political subdivision thereof), (ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, purchases, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Affected Person that are not otherwise included in the determination of the Euro-Rate or the Base Rate hereunder, or (iii) does or shall impose on such Affected Person any other condition, and the result of any of the foregoing is: (A) to increase the cost to such Affected Person of acting as Administrator or as a Purchaser Agent, or of agreeing to purchase or purchasing or maintaining the ownership of undivided percentage ownership interests with regard to the Purchased Interest (or interests therein) or any Portion of Investment, or (B) to reduce any amount receivable hereunder (whether directly or indirectly), then, in any such case, upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person additional amounts necessary to compensate such Affected Person for such additional cost or reduced amount receivable. All such amounts shall be payable as incurred. A certificate from such Affected Person to the Seller and the Administrator certifying, in reasonably specific detail, the basis for, calculation of, and amount of such additional costs or reduced amount receivable shall be conclusive and binding for all purposes, absent manifest error; PROVIDED, HOWEVER, that no Affected Person shall be required to disclose any confidential or tax planning information in any such certificate. Section 1.9. INABILITY TO DETERMINE EURO-RATE. (a) If the Administrator (or any Purchaser Agent) determines before the first day of any Yield Period (which determination shall be final and conclusive) that, by reason of circumstances affecting the interbank eurodollar market generally, deposits in dollars (in the relevant amounts for such Yield Period) are not being offered to banks in the interbank eurodollar market for such Yield Period, or adequate means do not exist for ascertaining the Euro-Rate for such Yield Period, then the Administrator shall give notice thereof to the Seller. Thereafter, until the Administrator or such Purchaser Agent notifies the Seller that the circumstances giving rise to such suspension no longer exist, (a) no Portion of Investment shall be funded at the Yield Rate determined by reference to the Euro-Rate and (b) the Discount for any outstanding Portions of Investment then funded at the Yield Rate determined by reference to the Euro-Rate shall, on the last day of the then current Yield Period, be converted to the Yield Rate determined by reference to the Base Rate. (b) If, on or before the first day of any Yield Period, the Administrator shall have been notified by any Purchaser, Purchaser Agent or Liquidity Provider that, such Person has determined (which determination shall be final and conclusive) that, any enactment, promulgation or adoption of or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof by a governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Person with any guideline, request 12 or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for such Person to fund or maintain any Portion of Investment at the Yield Rate and based upon the Euro-Rate, the Administrator shall notify the Seller thereof. Upon receipt of such notice, until the Administrator notifies the Seller that the circumstances giving rise to such determination no longer apply, (a) no Portion of Investment shall be funded at the Yield Rate determined by reference to the Euro-Rate and (b) the Discount for any outstanding Portions of Investment then funded at the Yield Rate determined by reference to the Euro-Rate shall be converted to the Yield Rate determined by reference to the Base Rate either (i) on the last day of the then current Yield Period if such Person may lawfully continue to maintain such Portion of Investment at the Yield Rate determined by reference to the Euro-Rate to such day, or (ii) immediately, if such Person may not lawfully continue to maintain such Portion of Investment at the Yield Rate determined by reference to the Euro-Rate to such day. Section 1.10. EXTENSION OF TERMINATION DATE. The Seller may advise the Administrator and each Purchaser Agent in writing of its desire to extend the Facility Termination Date for an additional 364 days, provided such request is made not more than 90 days prior to, and not less than 60 days prior to, the then current Facility Termination Date. In the event that the Purchaser Agents are all agreeable to such extension, the Administrator shall so notify the Seller in writing (it being understood that the Purchaser Agents may accept or decline such a request in their sole discretion and on such terms as they may elect) not less than 30 days prior to the then current Facility Termination Date and the Seller, the Administrator, the Purchaser Agents and the Purchasers shall enter into such documents as the Purchasers may deem necessary or appropriate to reflect such extension, and all reasonable costs and expenses incurred by the Purchasers, the Administrator and the Purchaser Agents in connection therewith (including reasonable Attorneys' Costs) shall be paid by the Seller. In the event the Purchaser Agents decline the request for such extension, the Administrator shall so notify the Seller of such determination; provided, however, that the failure of the Administrator to notify the Seller of the determination to decline such extension shall not affect the understanding and agreement that the Purchaser Agents shall be deemed to have refused to grant the requested extension in the event the Administrator fails to affirmatively notify the Seller, in writing, of their agreement to accept the requested extension. ARTICLE II REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS Section 2.1. REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of the Seller, Greetings and the Servicer hereby makes the representations and warranties, and hereby agrees to perform and observe the covenants, applicable to it set forth in EXHIBITS III and IV, respectively. Section 2.2. TERMINATION EVENTS. If any of the Termination Events set forth in EXHIBIT V shall occur, the Administrator may (with the consent of a Simple Majority of the Purchasers) or shall 13 (at the direction of a Simple Majority of the Purchasers), by notice to the Seller, declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred); PROVIDED, that automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice) described in PARAGRAPH (f) of EXHIBIT V, the Facility Termination Date shall occur. Upon any such declaration, occurrence or deemed occurrence of the Facility Termination Date, the Administrator, each Purchaser Agent and each Purchaser shall have, in addition to the rights and remedies that they may have under this Agreement, all other rights and remedies provided after default under the New York UCC and under other applicable law, which rights and remedies shall be cumulative. ARTICLE III INDEMNIFICATION Section 3.1. INDEMNITIES BY THE SELLER. Without limiting any other rights that the any Purchaser Agent, Purchaser, Liquidity Provider, the Administrator or any Program Support Provider or any of their respective Affiliates, employees, officers, directors, agents, counsel, successors, transferees or assigns (each, an "INDEMNIFIED PARTY ") may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all claims, damages, expenses, costs, losses and liabilities (including Attorney Costs) (all of the foregoing being collectively referred to as "INDEMNIFIED AMOUNTS ") arising out of or resulting from this Agreement (whether directly or indirectly), the use of proceeds of purchases or reinvestments, the ownership of the Purchased Interest, or any interest therein, or in respect of any Receivable, Related Security or Contract, excluding, however: (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party or its officers, directors, agents or counsel, (b) recourse with respect to any Receivable to the extent that such Receivable is uncollectible on account of the insolvency, bankruptcy or lack of credit worthiness of the related Obligor, or (c) any overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified Party is organized or otherwise is considered doing business (unless the Indemnified Party would not be considered doing business in such jurisdiction, but for having entered into, or engaged in the transactions in connection with this Agreement or any other Transaction Document) or any political subdivision thereof. Without limiting or being limited by the foregoing, and subject to the exclusions set forth in the preceding sentence, the Seller shall pay on demand (which demand shall be accompanied by documentation of the Indemnified Amounts, in reasonable detail) to each Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts relating to or resulting from any of the following: (i) the failure of any Receivable included in the calculation of the Net Receivables Pool Balance as an Eligible Receivable to be an Eligible Receivable, the failure of any information contained in an Information Package to be true and correct, or the failure of any other information provided to such Indemnified Party by the 14 Seller or Servicer with respect to Receivables or this Agreement to be true and correct, (ii) the failure of any representation, warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement to have been true and correct as of the date made or deemed made in all respects when made, (iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation, (iv) the failure to vest in the Administrator (for the benefit of the Purchasers) a valid and enforceable: (A) perfected undivided percentage ownership interest, to the extent of the Purchased Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, or (B) first priority perfected security interest in the Pool Assets, in each case, free and clear of any Adverse Claim, (v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time, (vi) any dispute, claim, offset or defense (other than any reduction, revision or discharge in bankruptcy of or other Insolvency Event in respect of the Obligor) of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool (including a defense (not connected with any Insolvency Event) based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the goods or services related to such Receivable or the furnishing or failure to furnish such goods or services or relating to collection activities with respect to such Receivable, (vii) any failure of the Seller, any Affiliate of the Seller or the Servicer to perform its duties or obligations in accordance with the provisions hereof or under the Contracts, (viii) any products liability or other claim, investigation, litigation or proceeding arising out of or in connection with merchandise, insurance or services that are the subject of any Contract, 15 (ix) the commingling of Collections at any time with other funds, (x) the use of proceeds of purchases or reinvestments, or (xi) any reduction in the Aggregate Investment as a result of the distribution of Collections pursuant to SECTION 1.4(d), if all or a portion of such distributions shall thereafter be rescinded or otherwise must be returned for any reason. Section 3.2. INDEMNITIES BY THE SERVICER. Without limiting any other rights that any Indemnified Party may have hereunder or under applicable law, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all Indemnified Amounts arising out of or resulting from (whether directly or indirectly): (a) the failure of any information contained in an Information Package to be true and correct, or the failure of any other information provided to such Indemnified Party by, or on behalf of, the Servicer to be true and correct, (b) the failure of any representation, warranty or statement made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement or any other Transaction Document to which it is a party to have been true and correct as of the date made or deemed made in all respects when made, (c) the failure by the Servicer to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract, (d) any dispute, claim, offset or defense of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool resulting from or related to the collection activities with respect to such Receivable, (e) any failure of the Servicer to perform its duties or obligations in accordance with the provisions hereof or any other Transaction Document to which it is a party, (f) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time, or (g) any commingling by the Servicer of Collections at any time with other funds. ARTICLE IV ADMINISTRATION AND COLLECTIONS Section 4.1. APPOINTMENT OF THE SERVICER. (a) The servicing, administering and collection of the Pool Receivables shall be conducted by the Person so designated from time to time as the Servicer in accordance with this Section. Until the Administrator gives notice to Greetings (in accordance with this SECTION 4.1) of the designation of a new Servicer, Greetings is hereby designated as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. Upon the occurrence of a Termination Event, the Administrator may (with the consent of the Majority Purchasers) or shall (at the direction of the Majority Purchasers) 16 designate as Servicer any Person (including itself) to succeed Greetings or any successor Servicer, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof. (b) Upon the designation of a successor Servicer as set forth in CLAUSE (a), Greetings agrees that it will terminate its activities as Servicer hereunder in a manner that the Administrator determines will facilitate the transition of the performance of such activities to the new Servicer, and Greetings shall cooperate with and assist such new Servicer. Such cooperation shall include access to and transfer of related records (including all Contracts) and use by the new Servicer of all licenses, hardware or software necessary or desirable to collect the Pool Receivables and the Related Security. (c) Greetings acknowledges that, in making their decision to execute and deliver this Agreement, the Administrator and each Purchaser Group have relied on Greetings's agreement to act as Servicer hereunder. Accordingly, Greetings agrees that it will not voluntarily resign as Servicer without the consent of the Majority Purchasers. (d) The Servicer may delegate its duties and obligations hereunder to any subservicer (each a "SUB-SERVICER "); PROVIDED, that, in each such delegation: (i) such Sub- Servicer shall agree in writing to perform the duties and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer shall remain primarily liable for the performance of the duties and obligations so delegated, (iii) the Seller, the Administrator and each Purchaser Group shall have the right to look solely to the Servicer for performance, and (iv) the terms of any agreement with any Sub-Servicer shall provide that the Administrator may terminate such agreement upon the termination of the Servicer hereunder by giving notice of its desire to terminate such agreement to the Servicer (and the Servicer shall provide appropriate notice to each such Sub-Servicer); PROVIDED, HOWEVER, that if any such delegation is to any Person other than an Originator or an Affiliate thereof, the Administrator and the Majority Purchasers shall have consented in writing in advance to such delegation; PROVIDED FURTHER that the parties agree that AGSC and each Originator shall serve as initial Sub-Servicers. Section 4.2. DUTIES OF THE SERVICER. (a) The Servicer shall take or cause to be taken all such action as may be necessary or advisable to administer and collect each Pool Receivable from time to time, all in accordance with this Agreement and all applicable laws, rules and regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policies. The Servicer shall set aside, for the account of each Purchaser Group, the amount of the Collections to which each such Purchaser Group is entitled in accordance with ARTICLE I. The Servicer may, in accordance with the applicable Credit and Collection Policy, take such action as the Servicer may determine to be appropriate to maximize Collections thereof or reflect adjustments required under the applicable Contract; PROVIDED, HOWEVER, that: (i) such action shall not change the number of days such Pool Receivable has remained unpaid from 17 the date of the original due date related to such Pool Receivable and (ii) such action shall not alter the status of such Pool Receivable as a Delinquent Receivable or a Defaulted Receivable or limit the rights of the Administrator or any Purchaser Group under this Agreement. The Seller shall deliver to the Servicer and the Servicer shall hold for the benefit of the Seller and the Administrator (individually and for the benefit of each Purchaser Group), in accordance with their respective interests, all records and documents (including computer tapes or disks) with respect to each Pool Receivable. Notwithstanding anything to the contrary contained herein, the Administrator may direct the Servicer (whether the Servicer is Greetings, AGSC, any Originator or any other Person) to commence or settle any legal action to enforce collection of any Pool Receivable or to foreclose upon or repossess any Related Security; PROVIDED, HOWEVER, that no such direction may be given unless either: (A) a Termination Event has occurred or (B) the Administrator believes in good faith that failure to commence, settle or effect such legal action, foreclosure or repossession could adversely affect Receivables constituting a material portion of the Pool Receivables. (b) The Servicer shall, as soon as practicable following actual receipt of collected funds, turn over to the Seller the collections of any indebtedness that is not a Pool Receivable, less, if Greetings, AGSC, any Originator or an Affiliate thereof is not the Servicer, all reasonable and appropriate out-of-pocket costs and expenses of such Servicer of servicing, collecting and administering such collections. The Servicer, if other than Greetings, AGSC, any Originator or an Affiliate thereof, shall, as soon as practicable upon demand, deliver to the Seller all records in its possession that evidence or relate to any indebtedness that is not a Pool Receivable, and copies of records in its possession that evidence or relate to any indebtedness that is a Pool Receivable. (c) The Servicer's obligations hereunder shall terminate on the later of: (i) the Facility Termination Date and (ii) the date on which all amounts required to be paid to the Purchaser Agents, each Purchaser, the Administrator and any other Indemnified Party or Affected Person hereunder shall have been paid in full. After such termination, if Greetings, AGSC, any Originator or an Affiliate thereof was not the Servicer on the date of such termination, the Servicer shall promptly deliver to the Seller all books, records and related materials that the Seller previously provided to the Servicer, or that have been obtained by the Servicer, in connection with this Agreement. Section 4.3. LOCK-BOX ACCOUNT ARRANGEMENTS. On the Closing Date (or, solely in the case of Lock-Box Banks used solely for Plus Mark, Inc. Receivables, the Plus Mark Addition Date), the Seller shall have entered into Lock-Box Agreements with all of the Lock-Box Banks and delivered original counterparts of each to the Administrator and each Purchaser Agent. Upon the occurrence of a Termination Event, the Administrator may (with the consent of a Simple Majority of the Purchasers) or shall (upon the direction of a Simple Majority of the Purchasers) at any time thereafter give notice to each Lock-Box Bank that the Administrator is exercising its rights under the Lock-Box Agreements to do any or all of the following: (a) to have the exclusive ownership and control of the 18 Lock-Box Accounts transferred to the Administrator (for the benefit of the Purchasers) and to exercise exclusive dominion and control over the funds deposited therein, (b) to have the proceeds that are sent to the respective Lock-Box Accounts redirected pursuant to the Administrator's instructions rather than deposited in the applicable Lock-Box Account, and (c) to take any or all other actions permitted under the applicable Lock-Box Agreement. The Seller hereby agrees that if the Administrator at any time takes any action set forth in the preceding sentence, the Administrator shall have exclusive control (for the benefit of the Purchasers) of the proceeds (including Collections) of all Pool Receivables and the Seller hereby further agrees to take any other action that the Administrator or any Purchaser Agent may reasonably request to transfer such control. Any proceeds of Pool Receivables received by the Seller or the Servicer thereafter shall be sent immediately to the Administrator. The parties hereto hereby acknowledge that if at any time the Administrator takes control of any Lock-Box Account, the Administrator shall not have any rights to the funds therein in excess of the unpaid amounts due to the Administrator, the Purchaser Groups, any Indemnified Party or any other Person hereunder, and the Administrator shall distribute or cause to be distributed such funds in accordance with SECTION 4.2(b) and ARTICLE I (in each case as if such funds were held by the Servicer thereunder). Section 4.4. ENFORCEMENT RIGHTS. (a) At any time following the occurrence of a Termination Event: (i) the Administrator may (with the consent or at the direction of the Majority Purchasers) direct the Obligors that payment of all amounts payable under any Pool Receivable is to be made directly to the Administrator or its designee, (ii) the Administrator may (with the consent or at the direction of the Majority Purchasers) instruct the Seller or the Servicer to give notice of the Purchaser Groups' interest in Pool Receivables to each Obligor, which notice shall direct that payments be made directly to the Administrator or its designee (on behalf of such Purchaser Groups), and the Seller or the Servicer, as the case may be, shall give such notice at the expense of the Seller or the Servicer, as the case may be; PROVIDED, that if the Seller or the Servicer, as the case may be, fails to so notify each Obligor, the Administrator (at the Seller's or the Servicer's, as the case may be, expense) may so notify the Obligors, and (iii) the Administrator may (with the consent or at the direction of the Majority Purchasers) request the Servicer to, and upon such request the Servicer shall: (A) assemble all of the records necessary or desirable to collect the Pool Receivables and the Related Security, and transfer or license to a successor Servicer the use of all software necessary or desirable to collect the Pool Receivables and the Related Security, and make the same available to the Administrator or its designee (for the benefit of the Purchasers) at a place selected by the Administrator, and (B) segregate all cash, checks and other instruments received by it from time to time 19 constituting Collections in a manner acceptable to the Administrator and, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrator or its designee. (b) The Seller hereby authorizes the Administrator (on behalf of each Purchaser Group), and irrevocably appoints the Administrator as its attorney-in-fact with full power of substitution and with full authority in the place and stead of the Seller, which appointment is coupled with an interest, to take any and all steps in the name of the Seller and on behalf of the Seller necessary or desirable, in the determination of the Administrator, after the occurrence of a Termination Event, to collect any and all amounts or portions thereof due under any and all Pool Assets, including endorsing the name of the Seller on checks and other instruments representing Collections and enforcing such Pool Assets. Notwithstanding anything to the contrary contained in this subsection, none of the powers conferred upon such attorney-in-fact pursuant to the preceding sentence shall subject such attorney-in-fact to any liability if any action taken by it shall prove to be inadequate or invalid, nor shall they confer any obligations upon such attorney-in-fact in any manner whatsoever. Section 4.5. RESPONSIBILITIES OF THE SELLER. (a) Anything herein to the contrary notwithstanding, the Seller shall: (i) perform all of its obligations, if any, under the Contracts related to the Pool Receivables to the same extent as if interests in such Pool Receivables had not been transferred hereunder, and the exercise by the Administrator, the Purchaser Agents or the Purchasers of their respective rights hereunder shall not relieve the Seller from such obligations, and (ii) pay when due any taxes, including any sales taxes payable in connection with the Pool Receivables and their creation and satisfaction. The Administrator, the Purchaser Agents or any of the Purchasers shall not have any obligation or liability with respect to any Pool Asset, nor shall any of them be obligated to perform any of the obligations of the Seller, Servicer, Greetings, AGSC, or the Originators thereunder. (b) Greetings hereby irrevocably agrees that if at any time it shall cease to be the Servicer hereunder, it shall act, and shall cause any former or current Sub-Servicers to act, (if the then-current Servicer so requests) as the data-processing agent of the Servicer and, in such capacity, Greetings shall conduct, and shall cause the former or current Sub-Servicers to conduct, the data-processing functions of the administration of the Receivables and the Collections thereon in substantially the same way that Greetings conducted such data- processing functions while it acted as the Servicer. Section 4.6. SERVICING FEE. (a) Subject to CLAUSE (b), the Servicer shall be paid a fee (the "SERVICING FEE") equal to the lesser of (i) 1.50% PER ANNUM of the daily average aggregate Outstanding Balance of the Pool Receivables and (ii) 110% of the aggregate reasonable costs and expenses incurred by Servicer in connection with performance of its obligations as Servicer. The Aggregate of each Purchaser Group's Ratable Share of such fee shall be paid through the 20 distributions contemplated by SECTION 1.4(d), and the Seller's Share of such fee shall be paid by the Seller. (b) If the Servicer ceases to be Greetings or an Affiliate thereof, the servicing fee shall be the greater of: (i) the amount calculated pursuant to CLAUSE (a), and (ii) an alternative amount specified by the successor Servicer not to exceed 110% of the aggregate reasonable costs and expenses incurred by such successor Servicer in connection with the performance of its obligations as Servicer. ARTICLE V THE AGENTS Section 5.1. APPOINTMENT AND AUTHORIZATION. (a) Each Purchaser and Purchaser Agent hereby irrevocably designates and appoints PNC as the "Administrator" hereunder and authorizes the Administrator to take such actions and to exercise such powers as are delegated to the Administrator hereby and to exercise such other powers as are reasonably incidental thereto. The Administrator shall hold, in its name, for the benefit of each Purchaser, ratably, the Purchased Interest. The Administrator shall not have any duties other than those expressly set forth herein or any fiduciary relationship with any Purchaser or Purchaser Agent, and no implied obligations or liabilities shall be read into this Agreement, or otherwise exist, against the Administrator. The Administrator does not assume, nor shall it be deemed to have assumed, any obligation to, or relationship of trust or agency with, the Seller or Servicer. Notwithstanding any provision of this Agreement or any other Transaction Document to the contrary, in no event shall the Administrator ever be required to take any action which exposes the Administrator to personal liability or which is contrary to the provision of any Transaction Document or applicable law. (b) Each Purchaser hereby irrevocably designates and appoints the respective institution identified as the Purchaser Agent for such Purchaser's Purchaser Group on the signature pages hereto or in the Assumption Agreement or Transfer Supplement pursuant to which such Purchaser becomes a party hereto, and each authorizes such Purchaser Agent to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to such Purchaser Agent by the terms of this Agreement, if any, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement, no Purchaser Agent shall have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Purchaser or other Purchaser Agent or the Administrator, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of such Purchaser Agent shall be read into this Agreement or otherwise exist against such Purchaser Agent. (c) Except as otherwise specifically provided in this Agreement, the provisions of this Article V are solely for the benefit of the Purchaser Agents, the Administrator and the Purchasers, 21 and none of the Seller or Servicer shall have any rights as a third-party beneficiary or otherwise under any of the provisions of this ARTICLE V, except that this ARTICLE V shall not affect any obligations which any Purchaser Agent, the Administrator or any Purchaser may have to the Seller or the Servicer under the other provisions of this Agreement. Furthermore, no Purchaser shall have any rights as a third-party beneficiary or otherwise under any of the provisions hereof in respect of a Purchaser Agent which is not the Purchaser Agent for such Purchaser. (d) In performing its functions and duties hereunder, the Administrator shall act solely as the agent of the Purchasers and the Purchaser Agents and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Seller or Servicer or any of their successors and assigns. In performing its functions and duties hereunder, each Purchaser Agent shall act solely as the agent of its respective Purchaser and does not assume nor shall be deemed to have assumed any obligation or relationship of trust or agency with or for the Seller, the Servicer, any other Purchaser, any other Purchaser Agent or the Administrator, or any of their respective successors and assigns. Section 5.2. DELEGATION OF DUTIES. The Administrator may execute any of its duties through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrator shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. Section 5.3. EXCULPATORY PROVISIONS. None of the Purchaser Agents, the Administrator or any of their directors, officers, agents or employees shall be liable for any action taken or omitted (i) with the consent or at the direction of the Majority Purchasers (or in the case of any Purchaser Agent, the Purchasers within its Purchaser Group that have a majority of the aggregate Commitment of such Purchaser Group) or (ii) in the absence of such Person's gross negligence or willful misconduct. The Administrator shall not be responsible to any Purchaser, Purchaser Agent or other Person for (i) any recitals, representations, warranties or other statements made by the Seller, Servicer, or any of their Affiliates, (ii) the value, validity, effectiveness, genuineness, enforceability or sufficiency of any Transaction Document, (iii) any failure of the Seller, AGSC, any Originator, Greetings or any of their Affiliates to perform any obligation or (iv) the satisfaction of any condition specified in EXHIBIT II. The Administrator shall not have any obligation to any Purchaser or Purchaser Agent to ascertain or inquire about the observance or performance of any agreement contained in any Transaction Document or to inspect the properties, books or records of the Seller, Greetings, Servicer, AGSC, any Originator or any of their Affiliates. Section 5.4. RELIANCE BY AGENTS. Each Purchaser Agent and the Administrator shall in all cases be entitled to rely, and shall be fully protected in relying, upon any document or other writing or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person and upon advice and statements of legal counsel (including counsel to the Seller), independent accountants and other experts selected by the Administrator. Each Purchaser Agent and the Administrator shall in all cases be fully justified in failing or refusing to take any action under any Transaction Document unless it shall first receive such advice or concurrence of the Majority 22 Purchasers (or in the case of any Purchaser Agent, the Purchasers within its Purchaser Group that have a majority of the aggregate Commitment of such Purchaser Group), and assurance of its indemnification, as it deems appropriate. (b) The Administrator shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of the Majority Purchasers or the Purchaser Agents, and such request and any action taken or failure to act pursuant thereto shall be binding upon all Purchasers, the Administrator and Purchaser Agents. (c) The Purchasers within each Purchaser Group with a majority of the Commitment of such Purchaser Group shall be entitled to request or direct the related Purchaser Agent to take action, or refrain from taking action, under this Agreement on behalf of such Purchasers. Such Purchaser Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement in accordance with a request of such majority Purchasers, and such request and any action taken or failure to act pursuant thereto shall be binding upon all of such Purchaser Agent's Purchasers. (d) Unless otherwise advised in writing by a Purchaser Agent or by any Purchaser on whose behalf such Purchaser Agent is purportedly acting, each party to this Agreement may assume that (i) such Purchaser Agent is acting for the benefit of each of the Purchasers in respect of which such Purchaser Agent is identified as being the "Purchaser Agent" in the definition of "Purchaser Agent" hereto, as well as for the benefit of each assignee or other transferee from any such Person, and (ii) each action taken by such Purchaser Agent has been duly authorized and approved by all necessary action on the part of the Purchasers on whose behalf it is purportedly acting. Each Purchaser Agent and its Purchaser(s) shall agree amongst themselves as to the circumstances and procedures for removal, resignation and replacement of such Purchaser Agent. Section 5.5. NOTICE OF TERMINATION EVENTS. Neither any Purchaser Agent nor the Administrator shall be deemed to have knowledge or notice of the occurrence of any Termination Event or Unmatured Termination Event unless such Administrator has received notice from any Purchaser, Purchaser Agent, the Servicer or the Seller stating that a Termination Event or Unmatured Termination Event has occurred hereunder and describing such Termination Event or Unmatured Termination Event. In the event that the Administrator receives such a notice, it shall promptly give notice thereof to each Purchaser Agent whereupon each such Purchaser Agent shall promptly give notice thereof to its Purchasers. In the event that a Purchaser Agent receives such a notice (other than from the Administrator), it shall promptly give notice thereof to the Administrator. The Administrator shall take such action concerning a Termination Event or Unmatured Termination Event as may be directed by the Majority Purchasers unless such action otherwise requires the consent of all Purchasers), but until the Administrator receives such directions, the Administrator may (but shall not be obligated to) take such action, or refrain from taking such action, as the Administrator deems advisable and in the best interests of the Purchasers and Purchaser Agents. 23 Section 5.6. NON-RELIANCE ON ADMINISTRATOR, PURCHASER AGENTS AND OTHER PURCHASERS. Each Purchaser expressly acknowledges that none of the Administrator, the Purchaser Agents nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrator, or any Purchaser Agent hereafter taken, including any review of the affairs of the Seller, Greetings, Servicer, AGSC, or any Originator, shall be deemed to constitute any representation or warranty by the Administrator or such Purchaser Agent, as applicable. Each Purchaser represents and warrants to the Administrator and the Purchaser Agents that, independently and without reliance upon the Administrator, Purchaser Agents or any other Purchaser and based on such documents and information as it has deemed appropriate, it has made and will continue to make its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Seller, Greetings, AGSC, Servicer or the Originators, and the Receivables and its own decision to enter into this Agreement and to take, or omit, action under any Transaction Document. Except for items specifically required to be delivered hereunder, the Administrator shall not have any duty or responsibility to provide any Purchaser Agent with any information concerning the Seller, Greetings, AGSC, Servicer or the Originators or any of their Affiliates that comes into the possession of the Administrator or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. Section 5.7. ADMINISTRATORS AND AFFILIATES. Each of the Purchasers and the Administrator and their Affiliates may extend credit to, accept deposits from and generally engage in any kind of banking, trust, debt, equity or other business with the Seller, Greetings, AGSC, Servicer or any Originator or any of their Affiliates and PNC may exercise or refrain from exercising its rights and powers as if it were not the Administrator. With respect to the acquisition of the Eligible Receivables pursuant to this Agreement, each of the Purchaser Agents and the Administrator shall have the same rights and powers under this Agreement as any Purchaser and may exercise the same as though it were not such an agent, and the terms "Purchaser" and "Purchasers" shall include each of the Purchaser Agents and the Administrator in their individual capacities. Section 5.8. INDEMNIFICATION. Each Purchaser Group shall indemnify and hold harmless the Administrator (but solely in its capacity as Administrator) and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Seller, Greetings AGSC, or Servicer and without limiting the obligation of the Seller, Greetings, AGSC, or Servicer to do so), ratably in accordance with its Ratable Share from and against any and all liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses and disbursements of any kind whatsoever (including in connection with any investigative or threatened proceeding, whether or not the Administrator or such Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Administrator or such Person as a result of, or related to, any of the transactions contemplated by the Transaction Documents or the execution, delivery or performance of the Transaction Documents or any other document furnished in connection therewith (but excluding any such liabilities, obligations, losses, damages, penalties, judgments, settlements, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Administrator or such Person as finally determined by a court of competent jurisdiction); PROVIDED, that in the case of each Purchaser that is a commercial paper conduit, such 24 indemnity shall be provided solely to the extent of amounts received by such Purchaser under this Agreement which exceed the amounts required to repay such Purchaser's outstanding Notes. Notwithstanding anything in this SECTION 5.8 to the contrary, each of the Administrator, each Purchaser Agent and each Purchaser hereby covenants and agrees that it shall not institute against, or join any other Person in instituting against, any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding or other proceedings under any federal or state bankruptcy or similar law, for one year and a day after the latest maturing Note issued by such Conduit Purchaser is paid in full. Section 5.9. SUCCESSOR ADMINISTRATOR. The Administrator may, upon at least five (5) days notice to the Seller and each Purchaser and Purchaser Agent, resign as Administrator. Such resignation shall not become effective until a successor agent is appointed by the Majority Purchasers and has accepted such appointment. Upon such acceptance of its appointment as Administrator hereunder by a successor Administrator, such successor Administrator shall succeed to and become vested with all the rights and duties of the retiring Administrator, and the retiring Administrator shall be discharged from its duties and obligations under the Transaction Documents. After any retiring Administrator's resignation hereunder, the provisions of SECTIONS 3.1 and 3.2 and this Article V shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrator. ARTICLE VI MISCELLANEOUS Section 6.1. AMENDMENTS, ETC. No amendment or waiver of any provision of this Agreement or any other Transaction Document, or consent to any departure by the Seller or the Servicer therefrom, shall be effective unless in a writing signed by the Administrator and each of the Majority Purchasers, and, in the case of any amendment, by the other parties thereto; and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; PROVIDED, HOWEVER, that, if required by any Conduit Purchaser, no such material amendment shall be effective until both Moody's and Standard & Poor's have notified the related Purchaser Agent in writing that such action will not result in a reduction or withdrawal of the rating of any Notes; PROVIDED, FURTHER that no such amendment or waiver shall, without the consent of each affected Purchaser, (A) extend the date of any payment or deposit of Collections by the Seller or the Servicer, (B) reduce the rate or extend the time of payment of Yield, (C) reduce any fees payable to the Administrator, any Purchaser Agent or any Purchaser pursuant to the applicable Purchaser Group Fee Letter, (D) change (except as contemplated by Section 1.4) the amount of Investment of any Purchaser, any Purchaser's pro rata share of the Purchased Interest or (except as contemplated by Section 1.10) any Related Committed Purchaser's Commitment, (E) amend, modify or waive any provision of the definition of "Majority Purchaser" or this SECTION 6.1, (F) consent to or permit the assignment or transfer by the Seller of any of its rights and obligations under this Agreement, (G) change the definition of "Concentration Percentage," "Specifically Reserved Dilution Amount," "Sales Based Loss Reserve 25 Percentage," "Receivables Based Loss Reserve Percentage, "Eligible Receivable," "Loss Reserve," "Loss Reserve Percentage," "Dilution Reserve," "Dilution Reserve Percentage," "Termination Event," "Total Reserve," "Yield Reserve," or "Yield Reserve Percentage", (H) amend or modify any defined term (or any defined term used directly or indirectly in such defined term) used in clauses (A) through (G) above in a manner that would circumvent the intention of the restrictions set forth in such clauses, or (I) otherwise materially and adversely affect the rights of any such Purchaser hereunder. No failure on the part of the Purchasers or the Administrator to exercise, and no delay in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. Section 6.2. NOTICES, ETC. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing (which shall include facsimile communication) and be sent or delivered to each party hereto at its address set forth under its name on the signature pages hereof (or in any Assumption Agreement pursuant to which it became a party hereto) or at such other address as shall be designated by such party in a written notice to the other parties hereto. Notices and communications by facsimile shall be effective when sent (and shall be followed by hard copy sent by first class mail), and notices and communications sent by other means shall be effective when received. Section 6.3. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; ASSIGNMENTS. (a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Except as otherwise provided herein, the Seller may not assign or transfer any of its rights or delegate any of its duties hereunder or under any Transaction Document without the prior consent of the Administrator, the Purchaser Agents and the Purchasers. (b) PARTICIPATIONS. Any Purchaser may sell to one or more Persons (each a "PARTICIPANT ") participating interests in the interests of such Purchaser hereunder; provided, however, that no Purchaser shall grant any participation under which the Participant shall have rights to approve any amendment to or waiver of this Agreement or any other Transaction Document. Such Purchaser shall remain solely responsible for performing its obligations hereunder, and the Seller, each Purchaser Agent and the Administrator shall continue to deal solely and directly with such Purchaser in connection with such Purchaser's rights and obligations hereunder. A Purchaser shall not agree with a Participant to restrict such Purchaser's right to agree to any amendment hereto, except amendments that require the consent of all Purchasers. (c) ASSIGNMENTS BY CERTAIN RELATED COMMITTED PURCHASERS. Any Related Committed Purchaser may assign to one or more Persons (each a "PURCHASING RELATED COMMITTED PURCHASER "), reasonably acceptable to the related Purchaser Agent in its sole discretion, any portion of its Commitment pursuant to a supplement hereto, substantially in the form of ANNEX D with any changes as have been approved by the parties thereto (a "TRANSFER SUPPLEMENT "), executed by each such Purchasing Related Committed Purchaser, such selling Related Committed Purchaser, such 26 related Purchaser Agent. Any such assignment by Related Committed Purchaser cannot be for an amount less than $10,000,000. Upon (i) the execution of the Transfer Supplement, (ii) delivery of an executed copy thereof to the Seller, such related Purchaser Agent and the Administrator and (iii) payment by the Purchasing Related Committed Purchaser to the selling Related Committed Purchaser of the agreed purchase price, such selling Related Committed Purchaser shall be released from its obligations hereunder to the extent of such assignment and such Purchasing Related Committed Purchaser shall for all purposes be a Related Committed Purchaser party hereto and shall have all the rights and obligations of a Related Committed Purchaser hereunder to the same extent as if it were an original party hereto. The amount of the Commitment of the selling Related Committed Purchaser allocable to such Purchasing Related Committed Purchaser shall be equal to the amount of the Commitment of the selling Related Committed Purchaser transferred regardless of the purchase price paid therefor. The Transfer Supplement shall be an amendment hereof only to the extent necessary to reflect the addition of such Purchasing Related Committed Purchaser as a "Related Committed Purchaser" and any resulting adjustment of the selling Related Committed Purchaser's Commitment. (d) REPLACEABLE RELATED COMMITTED PURCHASER. If any Related Committed Purchaser (a "REPLACEABLE RELATED COMMITTED PURCHASER ") shall (i) petition the Seller for any amounts under SECTION 1.7 or 1.8 or (ii) cease to have a short-term debt rating of "A-1" by Standard & Poor's and "P-1" by Moody's (if such a rating is required by the related Purchaser's securitization program), the related Purchaser Agent or the Administrator may designate a replacement financial institution (a "REPLACEMENT RELATED COMMITTED PURCHASER "), to which such Replaceable Related Committed Purchaser shall, subject to its receipt of an amount equal to the aggregate outstanding principal balance of its Investment and accrued and unpaid Discount thereon (and, if applicable, its receipt (unless a later date for the remittance thereof shall be agreed upon by the Seller and such Replaceable Related Committed Purchaser) of all amounts claimed under SECTION 1.7 and/or 1.8) promptly assign all of its rights, obligations and Commitment hereunder, together with all of its right, title and interest in, to and under the Purchased Interest allocable to it, to the Replacement Related Committed Purchaser in accordance with SECTION 6.3(c), above. Once such assignment becomes effective, the Replacement Related Committed Purchaser shall be deemed to be a "Related Committed Purchaser" for all purposes hereof and such Replaceable Related Committed Purchaser shall cease to be "Related Committed Purchaser" for all purposes hereof and shall have no further rights or obligations hereunder. (e) ASSIGNMENT BY CONDUIT PURCHASERS. Each party hereto agrees and consents (i) to any Conduit Purchaser's assignment, participation, grant of security interests in or other transfers of any portion of, or any of its beneficial interest in, the Purchased Interest (or portion thereof), including without limitation to any Liquidity Provider or to any collateral agent in connection with its commercial paper program and (ii) to the complete assignment by any Conduit Purchaser of all of its rights and obligations hereunder to any other Person, and upon such assignment such Conduit Purchaser shall be released from all obligations and duties, if any, hereunder; provided, however, that such Conduit Purchaser may not, without the prior consent of its Related Committed Purchasers, make any such transfer of its rights hereunder unless the assignee (i) is principally engaged in the 27 purchase of assets similar to the assets being purchased hereunder, (ii) has as its Purchaser Agent the Purchaser Agent of the assigning Conduit Purchaser and (iii) issues commercial paper or other Notes with credit ratings substantially comparable to the ratings of the assigning Conduit Purchaser. Any assigning Conduit Purchaser shall deliver to any assignee a supplement hereto, substantially in the form of ANNEX D with any changes as have been approved by the parties thereto (also, a "TRANSFER SUPPLEMENT "), duly executed by such Conduit Purchaser, assigning any portion of its interest in the Purchased Interest to its assignee. Such Conduit Purchaser shall promptly (i) notify each of the other parties hereto of such assignment and (ii) take all further action that the assignee reasonably requests in order to evidence the assignee's right, title and interest in such interest in the Purchased Interest and to enable the assignee to exercise or enforce any rights of such Conduit Purchaser hereunder. Upon the assignment of any portion of its interest in the Purchased Interest, the assignee shall have all of the rights hereunder with respect to such interest (except that the Discount therefor shall thereafter accrue at the rate, determined with respect to the assigning Conduit Purchaser unless the Seller, the related Purchaser Agent and the assignee shall have agreed upon a different Discount). (f) OPINIONS OF COUNSEL. If required by the Administrator or the applicable Purchaser Agent or to maintain the ratings of any Conduit Purchaser, each Transfer Supplement must be accompanied by an opinion of counsel of the assignee as to such matters as the Administrator or such Purchaser Agent may reasonably request. Section 6.4. COSTS, EXPENSES AND TAXES. In addition to the rights of indemnification granted under SECTION 3.1, the Seller agrees to pay on demand (which demand shall be accompanied by documentation thereof in reasonable detail) all reasonable costs and expenses in connection with the preparation, execution, delivery and administration (including periodic internal audits by the Administrator of Pool Receivables) of this Agreement, the other Transaction Documents and the other documents and agreements to be delivered hereunder (and all reasonable costs and expenses in connection with any amendment, waiver or modification of any thereof), including: (i) Attorney Costs for the Administrator, each Purchaser Group and their respective Affiliates and agents with respect thereto and with respect to advising the Administrator, each Purchaser Group and their respective Affiliates and agents as to their rights and remedies under this Agreement and the other Transaction Documents, and (ii) all reasonable costs and expenses (including Attorney Costs), if any, of the Administrator, each Purchaser Group and their respective Affiliates and agents in connection with the enforcement of this Agreement and the other Transaction Documents. (a) In addition, the Seller shall pay on demand any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. Section 6.5. NO PROCEEDINGS; LIMITATION ON PAYMENTS. Each of the Seller, Greetings, the Servicer, the Administrator, the Purchaser Agents, the Purchasers, each assignee of the Purchased Interest or any interest therein, and each Person that enters into a commitment to purchase the 28 Purchased Interest or interests therein, hereby covenants and agrees that it will not institute against, or join any other Person in instituting against, any Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing Note issued by such Conduit Purchaser is paid in full. The provision of this SECTION 6.5 shall survive any termination of this Agreement. Section 6.6. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY 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) EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW. Section 6.7. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same agreement. Section 6.8. SURVIVAL OF TERMINATION. The provisions of SECTIONS 1.7, 1.8, 3.1, 3.2, 6.4, 6.5, 6.6, 6.9 and 6.14 shall survive any termination of this Agreement. Section 6.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF 29 ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT. Section 6.10. SHARING OF RECOVERIES. Each Purchaser agrees that if it receives any recovery, through set-off, judicial action or otherwise, on any amount payable or recoverable hereunder in a greater proportion than should have been received hereunder or otherwise inconsistent with the provisions hereof, then the recipient of such recovery shall purchase for cash an interest in amounts owing to the other Purchasers (as return of Investment or otherwise), without representation or warranty except for the representation and warranty that such interest is being sold by each such other Purchaser free and clear of any Adverse Claim created or granted by such other Purchaser, in the amount necessary to create proportional participation by the Purchaser in such recovery. If all or any portion of such amount is thereafter recovered from the recipient, such purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. Section 6.11. RIGHT OF SETOFF. During a Termination Event, each Purchaser is hereby authorized (in addition to any other rights it may have) to setoff, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by such Purchaser (including by any branches or agencies of such Purchaser) to, or for the account of, the Seller against amounts owing by the Seller hereunder (even if contingent or unmatured). Section 6.12. ENTIRE AGREEMENT. This Agreement and the other Transaction Documents embody the entire agreement and understanding between the parties hereto, and supersede all prior or contemporaneous agreements and understandings of such Persons, verbal or written, relating to the subject matter hereof and thereof. Section 6.13. HEADINGS. The captions and headings of this Agreement and any Exhibit, Schedule or Annex hereto are for convenience of reference only and shall not affect the interpretation hereof or thereof. Section 6.14. PURCHASER GROUPS' LIABILITIES. The obligations of each Purchaser Agent and each Purchaser under the Transaction Documents are solely the corporate obligations of such Person. 30 Except with respect to any claim arising out of the willful misconduct or gross negligence of the Administrator, any Purchaser Agent or any Purchaser, no claim may be made by the Seller or the Servicer or any other Person against the Administrator, any Purchaser Agent or any Purchaser or their respective Affiliates, directors, officers, employees, attorneys or agents for any special, indirect, consequential or punitive damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by the Agreement or any other Transaction Document, or any act, omission or event occurring in connection therewith; and each of Seller and Servicer hereby waives, releases, and agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor. Section 6.15. CALL OPTION. The Seller shall have the right to repurchase the Purchased Interest from the Purchasers on any Settlement Date on the terms hereinafter set forth in this SECTION 6.15. The Seller shall give the Administrator at least ten Business Days' prior written notice of such repurchase and upon payment of the repurchase price for the Purchased Interest, as hereinafter provided, the Purchasers shall be deemed to have reconveyed the Purchased Interest to the Seller without recourse, representation or warranty except for a representation from each Purchaser that the Purchased Interest assigned is (or concurrently with the Administrator's receipt of such repurchase price shall become) free of any Adverse Claim created by such Purchaser. The Seller shall pay such repurchase price for the Purchased Interest in immediately available funds to the Administrator (for the benefit of the Purchasers or the Administrator, as the case may be) in an amount equal to the sum of (i) the aggregate of the Aggregate Discount accrued for each Portion of Investment for each Purchaser accrued to and including the repurchase date, (ii) the Aggregate Investment for each Purchaser, (iii) the amounts payable pursuant to SECTIONS 1.5, 1.7 and 1.8, or Article III (of which the Seller has notice) related to the Purchased Interest accrued to and including the repurchase date, (iv) all other obligations that are then due and payable and (v) if Greetings is not the Servicer, the Servicing Fee allocated to the Purchased Interest that has accrued to and including the repurchase date. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 31 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. AGC FUNDING CORPORATION, as Seller By: /s/ William S. Meyer ---------------------------------- Name: William S. Meyer Title: President Address: Attention: Telephone: Facsimile: AMERICAN GREETINGS CORPORATION, as Servicer By: William S. Meyer ---------------------------------- Name: William S. Meyer Title: Senior Vice President & CFO Address: Attention: Telephone: Facsimile: S-1 PNC BANK, NATIONAL ASSOCIATION, as Administrator By: /s/ John T. Smathers ---------------------------------- Name: John T. Smathers Title: Vice President Address: PNC Bank, National Association One PNC Plaza 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Attention: John Smathers Telephone: (412) 762-6440 Facsimile: (412) 762-9184 S-2 PURCHASER MARKET STREET FUNDING CORPORATION, as a Conduit Purchaser and as a Related Committed Purchaser By: /s/ Douglas K. Johnson ---------------------------------- Name: Douglas K. Johnson Title: President Address: Market Street Funding Corporation c/o AMACAR Group, L.L.C. 6525 Morrison Blvd., Suite 318 Charlotte, North Carolina 28211 Attention: Douglas K. Johnson Telephone: (704) 365-0569 Facsimile No.: (704) 365-1362 With a copy to: PNC Bank, National Association One PNC Plaza 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Attention: John Smathers Telephone: (412) 762-6440 Facsimile: (412) 762-9184 Commitment $250,000,000 S-3 PNC BANK, NATIONAL ASSOCIATION, as Purchaser Agent for Market Street Funding Corporation By: /s/ John T. Smathers ---------------------- Name: John T. Smathers Title: Vice President Address: PNC Bank, National Association One PNC Plaza 249 Fifth Avenue Pittsburgh, Pennsylvania 15222-2707 Attention: John Smathers Telephone No.: (412) 762-6440 Facsimile No.: (412) 762-9184 S-4 EXHIBIT I DEFINITIONS As used in the Agreement (including its Exhibits, Schedules and Annexes), the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule references in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the Agreement. "ADMINISTRATOR" has the meaning set forth in the preamble to the Agreement. "ADMINISTRATOR'S ACCOUNT" means the account (account number 1002422076 ABA 043000096) of the Administrator maintained at the office of PNC at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, or such other account as may be so designated in writing by the Administrator to the Servicer. "ADVERSE CLAIM" means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement; it being understood that any thereof in favor of the Administrator (for the benefit of the Purchasers ) shall not constitute an Adverse Claim. "AFFECTED PERSON" has the meaning set forth in SECTION 1.7 of the Agreement. "AFFILIATE" means, as to any Person: (a) any Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person, or (b) who is a director or officer: (i) of such Person or (ii) of any Person described in CLAUSE (a), except that, in the case of each Conduit Purchaser, Affiliate shall mean the holder of its capital stock. For purposes of this definition, control of a Person shall mean the power, direct or indirect: (x) to vote 25% or more of the securities having ordinary voting power for the election of directors of such Person, or (y) to direct or cause the direction of the management and policies of such Person, in either case whether by ownership of securities, contract, proxy or otherwise. "AGGREGATE DISCOUNT" at any time, means the sum of the aggregate for each Purchaser of the accrued and unpaid Discount with respect to each such Purchaser's Investment at such time. "AGGREGATE INVESTMENT" means the amount paid to the Seller in respect of the Purchased Interest or portion thereof by each Purchaser pursuant to the Agreement, as reduced from time to time by Collections distributed and applied on account of such Aggregate Investment pursuant to SECTION 1.4(d) of the Agreement; PROVIDED, that if such Aggregate Investment shall have been reduced by any distribution, and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Aggregate Investment shall be increased by the amount of such rescinded or returned distribution as though it had not been made. I-1 "AGREEMENT" has the meaning set forth in the preamble to the Agreement. "AGSC" means American Greetings Services Corp., a Delaware corporation. "AGSC ASSIGNMENT CERTIFICATE" has the meaning set forth in the Sale and Contribution Agreement. "ASSUMPTION AGREEMENT" means an agreement substantially in the form set forth in Annex C to the Agreement. "ATTORNEY COSTS" means and includes all reasonable fees and disbursements of any law firm or other external counsel. "BANKRUPTCY CODE" means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. ss.101, et seq.), as amended from time to time. "BASE RATE" means, for any day, (i) in the case of the Purchaser Group including Market Street, the Market Street Base Rate and (ii) in the case of each other Purchaser Group, shall mean the rate set forth as the Base Rate for such Purchaser Group in the related Purchaser Group Fee Letter. "BBA" means the British Bankers' Association. "BENEFIT PLAN" means any employee benefit pension plan as defined in Section 3(2) of ERISA in respect of which the Seller, any Originator, Greetings, AGSC or any ERISA Affiliate is, or at any time during the immediately preceding six years was, an "employer" as defined in Section 3(5) of ERISA. "BUSINESS DAY" means any day (other than a Saturday or Sunday) on which: (a) banks are not authorized or required to close in New York City, New York or Pittsburgh, Pennsylvania and (b) if this definition of "Business Day" is utilized in connection with the Euro-Rate, dealings are carried out in the London interbank market. "CHANGE IN CONTROL" means (i) with respect to Seller, that at any time Greetings shall fail to own, directly or indirectly through one or more wholly-owned Subsidiaries free and clear of any Adverse Claim, 100% of the shares of outstanding voting stock of the Seller on a fully diluted basis, (ii) with respect to AGSC, that at any time Greetings shall fail to own, directly or indirectly through one or more wholly-owned subsidiaries, free and clear of any Adverse Claim, 100% of the shares of outstanding voting stock of AGSC on a fully diluted basis, (iii) with respect to any Originator other than Greetings, that at any time Greetings shall fail to own, directly or indirectly through one or more wholly-owned Subsidiaries free and clear of any Adverse Claim, 100% of the share of outstanding voting stock of such Originator on a fully diluted basis, and (iv) with respect to Greetings, the acquisition by any Person or its Affiliates of 20% or more of the stock (or equivalent I-2 ownership or controlling interest) having by the terms thereof ordinary voting power to elect a majority of the directors of Greetings (irrespective of whether or not at the time the stock of any class or classes of Greetings will have or might have voting power by reason of the happening or any contingency). "CLOSING DATE" means August 7, 2001. "COLLECTIONS" means, with respect to any Pool Receivable: (a) all funds that are received by any Originator, Greetings, AGSC, the Seller or the Servicer in payment of any amounts owed in respect of such Receivable (including purchase price, finance charges, interest and all other charges), or that are applied to amounts owed in respect of such Receivable (including insurance payments and net proceeds of the sale or other disposition of repossessed goods or other collateral or property of the related Obligor or any other Person directly or indirectly liable for the payment of such Pool Receivable and available to be applied thereon), (b) all amounts deemed to have been received pursuant to SECTION 1.4(e) of the Agreement and (c) all other proceeds of such Pool Receivable. "COMMITMENT" means, with respect to each Related Committed Purchaser, the maximum amount which such Purchaser is obligated to pay hereunder on account of any Purchase, as set forth below its signature to this Agreement or in the Assumption Agreement pursuant to which it became a Purchaser, as such amount may be modified in connection with any subsequent assignment pursuant to SECTION 6.3(c) or in connection with a change in the Purchase Limit pursuant to SECTIONS 1.1(b) or 1.2(e). "COMMITMENT PERCENTAGE" means, for each Related Committed Purchaser in a Purchaser Group, such Related Committed Purchaser's Commitment divided by the total of all Commitments of all Related Committed Purchasers in such Purchaser Group. "CONCENTRATION PERCENTAGE" means for any Obligor which is (i) Target Corporation, 40%, so long as (a) it would be considered a Group A Obligor and (b) the sum of the Loss Reserve Percentage and the Dilution Reserve Percentage is greater than or equal to 40%, (ii) any other Group A Obligor, 30%, (iii) a Group B Obligor, 20%, (iv) a Group C Obligor, 10%, or (v) a Group D Obligor, 5%. "CONDUIT PURCHASERS" means each commercial paper conduit that is a party to the Agreement, as a purchaser, or that becomes a party to the Agreement, as a purchaser pursuant to an Assumption Agreement. "CONTRACT" means, with respect to any Receivable, any and all contracts, instruments, agreements, leases, invoices, notes or other writings pursuant to which such Receivable arises or that evidence such Receivable or under which an Obligor becomes or is obligated to make payment in respect of such Receivable. I-3 "CP RATE" for any Yield Period for any Portion of Investment (i) in the case of the Purchaser Group including Market Street, means the Market Street CP Rate, and (ii) in the case of each other Purchaser Group, shall mean the rate set forth as the CP Rate for such Purchaser Group in the related Purchaser Group Fee Letter. "CREDIT AGREEMENT" means the Credit Agreement dated as August 7, 2001 among American Greetings Corporation, as Borrower, the financial institutions named therein, as Lenders, National City Bank, as US Agent and Global Agent, KeyBank National Association, as Documentation Agent, and National City Bank and Goldman Sachs Credit Partners L.P., as Joint-Lead Arrangers and Co- Syndication Agents, as it may be amended, supplemented or otherwise modified from time to time. "CREDIT AND COLLECTION POLICY" means, as the context may require, those receivables credit and collection policies and practices of AGSC (with respect to Receivables sold to it pursuant to the Purchase and Sale Agreement) and Plus Mark, Inc. (with respect to Receivables originated by it) in effect on the date of the Agreement and described in SCHEDULE I to the Agreement, as modified in compliance with the Agreement. "DAYS' SALES OUTSTANDING" means, at any time, an amount computed as of the last day of each calendar month equal to: (a) the average of the Outstanding Balance of all Pool Receivables as of the last day of each of the three most recent calendar months ended on the last day of such calendar month divided by (b)(i) the aggregate credit sales made by the Originator during the three calendar months ended on or before the last day of such calendar month divided by (ii) 90. "DEBT" means: (a) indebtedness for borrowed money, (b) obligations evidenced by bonds, debentures, notes or other similar instruments, (c) obligations to pay the deferred purchase price of property or services, (d) obligations as lessee under leases that shall have been or should be, in accordance with generally accepted accounting principles, recorded as capital leases, and (e) obligations under direct or indirect guaranties in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in CLAUSES (a) through (d). "DEFAULTED RECEIVABLE" means a Receivable: (a) as to which any payment, or part thereof, remains unpaid for more than 150 days, in each case from the due date for such payment, or (b) without duplication (i) as to which an Insolvency Proceeding shall have occurred with respect to the Obligor thereof or any other Person obligated thereon or owning any Related Security with respect thereto, (ii) that has been charged-off as uncollectible or (iii) that should have been charged-off as uncollectible pursuant to the Credit and Collection Policy. I-4 "DELINQUENCY RATIO" means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that were Delinquent Receivables on such day by (b) the aggregate Outstanding Balance of all Pool Receivables on such day. "DELINQUENT RECEIVABLE" means a Receivable (a) as to which any payment, or part thereof, remains unpaid for more than 90 days from the due date for such payment or (b) without duplication, which has been (or consistent with the Credit and Collection Policy, would be) classified as a Delinquent Receivable by the applicable Originator. "DILUTION RATIO" means the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward), computed as of the last day of each calendar month by dividing: (a) the aggregate amount of payments made or owed by the Seller pursuant to SECTION 1.4(e)(i) of the Agreement (other than Specifically Reserved Dilution Amounts) during such calendar month, by (b) the aggregate credit sales made by the Originators during the calendar months that are two and three months prior to such calendar month. "DILUTION RESERVE" means, on any day, an amount equal to: (a) the Aggregate Investment at the close of business of the Servicer on such date MULTIPLIED BY (b) (i) the Dilution Reserve Percentage on such date, DIVIDED BY (ii) 100% minus the Dilution Reserve Percentage on such date. "DILUTION RESERVE PERCENTAGE" means, on any date, the greater of (a) 10.0%, or (b) the percentage determined by the following formula: (2.0 x ED) + ((DS-ED) x DS/ED)) x DHR + 0.02 x CS ED = the "Expected Dilution," which shall be equal to the 12-month rolling average Dilution Ratio, expressed as a percentage; DS = the "Dilution Spike," which shall be equal to the highest one month Dilution Ratio over the immediately preceding 12 months, expressed as a percentage; and CS = the aggregate credit sales made by the Originators during the most recent calendar month divided by the Net Receivables Pool Balance for such calendar month. DHR = the "Dilution Horizon Ratio," which shall be equal to the aggregate credit sales made by the Originators during the two preceding calendar months divided by the Net Receivables Pool Balance as of the last day of most recent calendar month. I-5 "DISCOUNT" means with respect to any Purchaser: (a) for any Portion of Investment for any Yield Period with respect to any Purchaser to the extent such Portion of Investment will be funded by such Purchaser during such Yield Period through the issuance of Notes: CPR x I x ED/360 (b) for any Portion of Investment for any Yield Period with respect to any Purchaser to the extent such Portion of Investment will not be funded by such Purchaser during such Yield Period through the issuance of Notes: YR x I x ED/Year + TF where: YR = the Yield Rate, as applicable, for such Portion of Investment for such Yield Period with respect to such Purchaser, I = the Investment with respect to such Portion of Investment during such Yield Period with respect to such Purchaser, CPR = the CP Rate for the Portion of Investment for such Yield Period with respect to such Purchaser, ED = the actual number of days during such Yield Period, Year = if such Portion of Investment is funded based upon: (i) the Euro-Rate, 360 days, and (ii) the Base Rate, 365 or 366 days, as applicable, and TF = the Termination Fee, if any, for the Portion of Investment for such Yield Period with respect to such Purchaser; PROVIDED, that no provision of the Agreement shall require the payment or permit the collection of Discount in excess of the maximum permitted by applicable law; and PROVIDED FURTHER, that Discount for any Portion of Investment shall not be considered paid by any distribution to the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason. "DISPUTED DEFAULT RATIO" means the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1% with 5/1000th of 1% rounded upwards) computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables identified by the Seller or Servicer on the most recent Information Package as Receivables relating to amounts I-6 categorized as "deductions" or "recharges" that became Defaulted Receivables during such month, by (b) the aggregate Outstanding Balance of all Pool Receivables six months prior to such month. "ELIGIBLE RECEIVABLE" means, at any time, a Pool Receivable: (a) the Obligor of which is (i) a Person resident in or with a place of business in the United States, (ii) not a government or a governmental subdivision, affiliate or agency, (iii) not subject to any action of the type described in PARAGRAPH (f) of Exhibit V to the Agreement and (iv) not an Affiliate of Greetings, (b) that is denominated and payable only in U.S. dollars in the United States, (c) that is either a Seasonal Sale or a Receivable in which the Obligor is Target Corporation, or does not have a stated maturity which is more than 38 days after the original invoice date of such Receivable; PROVIDED, HOWEVER, that (i) Receivables not related to Seasonal Sales in which the Obligor is K Mart and (ii) up to 25% of the aggregate Outstanding Balance of all Receivables (not including Receivables with respect to which K Mart or Target is the Obligor) may have a stated maturity which is more than 38 days but not more than 68 days from the original invoice date of such Receivable. (d) that arises under a duly authorized Contract for the sale and delivery of goods and services in the ordinary course of an Originator's business, (e) that arises under a duly authorized Contract that is in full force and effect and that is a legal, valid and binding obligation of the related Obligor, enforceable against such Obligor in accordance with its terms, (f) that conforms in all material respects with all applicable laws, rulings and regulations in effect, (g) that is not the subject of any asserted dispute or offset (but only to the extent of the disputed or offset amount, and only to the extent such amount has not been deemed a collection pursuant to Section 1.4(e)) or any hold back defense, Adverse Claim or other similar claim, (h) that satisfies all applicable requirements of the applicable Credit and Collection Policy, (i) that has not been modified, waived or restructured since its creation, except as permitted pursuant to SECTION 4.2 of the Agreement and SECTION 2(d) of EXHIBIT IV to the Agreement, I-7 (j) in which the Seller owns good and marketable title, free and clear of any Adverse Claims, and that is freely assignable by the Seller (including without any consent of the related Obligor), (k) for which the Administrator (for the benefit of each Purchaser) shall have a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest, and a valid and enforceable first priority perfected security interest therein and in the Related Security and Collections with respect thereto, in each case free and clear of any Adverse Claim, (l) that constitutes an account as defined in the UCC, and that is not evidenced by instruments or chattel paper, (m) that is not a Defaulted Receivable or a Delinquent Receivable, (n) for which none of the Originator thereof, the Seller and the Servicer has established any offset arrangements with the related Obligor, (o) for which Defaulted Receivables of the related Obligor do not exceed 35% of the Outstanding Balance of all such Obligor's Receivables; provided that solely for purposes of making such determination, amounts that would otherwise be considered Defaulted Receivables which are the subject of disputes between the Obligor and the Seller or Servicer which continue to be investigated and negotiated, shall not be considered Defaulted Receivables, (p) that represents amounts earned and payable by the Obligor that are not subject to the performance of additional services by the Originator or Servicer thereof, and (q) that was acquired or deemed acquired by AGSC pursuant to the Purchase and Sale Agreement or (at any time on or after a future date to be set by the Administrator and agreed to by the Servicer) was originated by Plus Mark, Inc. and sold by Greetings pursuant to the Sale and Contribution Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any successor sections. "ERISA AFFILIATE" means: (a) any corporation that is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Internal Revenue Code) as the Seller, any Originator, AGSC or Greetings, (b) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Seller, any Originator, AGSC or Greetings, or (c) a member of the same affiliated service group I-8 (within the meaning of Section 414(m) of the Internal Revenue Code) as the Greetings, Seller, any Originator, AGSC any corporation described in CLAUSE (a) or any trade or business described in CLAUSE (b). "EURO-RATE" means with respect to any Yield Period, the interest rate per annum determined by the Administrator by dividing (the resulting quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the rate of interest determined by the applicable Purchaser Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the average of the London interbank market offered rates for U.S. dollars quoted by the BBA as set forth on Dow Jones Markets Service (formerly known as Telerate) (or appropriate successor or, if BBA or its successor ceases to provide display page 3750 (or such other display page on the Dow Jones Markets Service system as may replace display page 3750) at or about 11:00 a.m. (London time) on the Business Day which is two (2) Business Days prior to the first day of such Yield Period for an amount comparable to the Portion of Investment to be funded at the Yield Rate and based upon the Euro-Rate during such Yield Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the following formula: Average of London interbank offered rates quoted by BBA as shown on Dow Jones Markets Service display page 3750 or appropriate successor Euro-Rate = --------------------------------------------------------- 1.00 - Euro-Rate Reserve Percentage where "EURO-RATE RESERVE PERCENTAGE" means, the maximum effective percentage in effect on such day as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including without limitation, supplemental, marginal, and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "EUROCURRENCY LIABILITIES "). The Euro-Rate shall be adjusted with respect to any Portion of Investment funded at the Yield Rate and based upon the Euro-Rate that is outstanding on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The applicable Purchaser Agent shall give prompt notice to the Seller of the Euro-Rate as determined or adjusted in accordance herewith (which determination shall be conclusive absent manifest error). "EVERYDAY DEFAULT RATIO" means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables identified by the Seller or the Servicer on the most recent Information Package as Receivables relating to everyday invoices and manual invoices that became Defaulted Receivables during such month by (b) the aggregate credit sales other than Seasonal Sales made by the Originators during the month that is six months before such month. I-9 "EXCESS CONCENTRATION" means, on any date, the sum of the amounts by which the Outstanding Balance of Eligible Receivables of each Obligor then in the Receivables Pool exceeds an amount equal to: (a) the applicable Concentration Percentage for such Obligor multiplied by (b) the Outstanding Balance of all Eligible Receivables, on such date. "EXCESS RETURN AMOUNT" means, for any calendar month, an amount equal to 106% of the Seasonal Dilution Estimate at the beginning of such calendar month. "EXITING PURCHASER" has the meaning set forth in SECTION 1.4(b)(ii). "FACILITY TERMINATION DATE" means the earliest to occur of: (a) with respect to each Purchaser August 7, 2004, subject to any extension pursuant to SECTION 1.10 of the Agreement (it being understood that if any such Purchaser does not extend its Commitment hereunder then the Purchase Limit shall be reduced ratably with respect to the Purchasers in each Purchaser Group by an amount equal to the Commitment of such Exiting Purchaser and the Commitment Percentages and Group Commitments of the Purchasers within each Purchaser Group shall be appropriately adjusted), (b) the date determined pursuant to SECTION 2.2 of the Agreement, (c) the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the Agreement, (d) with respect to each Purchaser Group, the date that the commitments of all of the Liquidity Providers terminate under the related Liquidity Agreements or the date one or more of such Purchaser Group's Program Support Agreements terminate and (e) with respect to each Purchaser Group, the date that the commitment, of all of the Related Committed Purchasers of such Purchaser Group terminate pursuant to SECTION 1.10. "Federal Funds Rate" means, for any day, the per annum rate set forth in the weekly statistical release designated as H.15(519), or any successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption "Federal Funds (Effective)." If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication, published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotations") for such day under the caption "Federal Funds Effective Rate." If on any relevant day the appropriate rate is not yet published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the applicable Purchaser Agent of the rates for the last transaction in overnight Federal funds arranged before 9:00 a.m. (New York time) on that day by each of three leading brokers of Federal funds transactions in New York City selected by such Purchaser Agent. "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal functions. "FEES" means the fees payable by the Seller to each Purchaser Group pursuant to the applicable Purchaser Group Fee Letter. I-10 "GAAP" means the generally accepted accounting principles and practices in the United States, consistently applied. "GOVERNMENTAL AUTHORITY" means any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, including any court, and any Person owned or controlled, through stock or capital ownership or otherwise, by any of the foregoing. "GREETINGS" has the meaning set forth in the preamble to the Agreement. "GROUP A OBLIGOR" means an Obligor with a short-term senior unsecured indebtedness rating (or, if such Obligor does not have such a short-term rating, a long-term senior unsecured indebtedness rating) of at least "A-1" (or "A+") by Standard & Poor's and "P-1" (or "A1") by Moody's. "GROUP B OBLIGO" means an Obligor with a short-term senior unsecured indebtedness rating (or, if such Obligor does not have such a short-term rating, a long-term senior unsecured indebtedness rating) of at least "A-2" (or "BBB+") by Standard & Poor's and "P-2" (or "Baa1") by Moody's, that is not a Group A Obligor. "GROUP C OBLIGOR" means an Obligor with a short-term senior unsecured indebtedness rating (or, if such Obligor does not have such a short-term rating, a long-term senior unsecured indebtedness rating) of at least "A-3" (or "BBB-") by Standard & Poor's and "P-3" (or "Baa3") by Moody's, that is not a Group A Obligor or a Group B Obligor. "GROUP COMMITMENT" means with respect to any Purchaser Group the aggregate of the Commitments of each Purchaser within such Purchaser Group. "GROUP D OBLIGOR" means an Obligor which is not a Group A Obligor, a Group B Obligor or a Group C Obligor. "GROUP INVESTMENT" means with respect to any Purchaser Group, an amount equal to the aggregate of all Investments of the Purchasers within such Purchaser Group. "INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 3.1 of the Agreement. "INDEMNIFIED PARTY" has the meaning set forth in SECTION 3.1 of the Agreement. "INDEPENDENT DIRECTOR" has the meaning set forth in PARAGRAPH 3(c) of EXHIBIT IV to the Agreement. I-11 "INFORMATION PACKAGE" means a report, in substantially the form of ANNEX A to the Agreement, furnished to the Administrator pursuant to the Agreement. "INSOLVENCY PROCEEDING" means: (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit of creditors of a Person or, composition, marshaling of assets for creditors of a Person, or other, similar arrangement in respect of its creditors generally or any substantial portion of its creditors, in each of cases (a) and (b) undertaken under U.S. Federal, state or foreign law, including the Bankruptcy Code. "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute of similar import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Internal Revenue Code also refer to any successor sections. "INVESTMENT" means with respect to any Purchaser the amount paid to the Seller by such Purchaser pursuant to the Agreement, or such amount divided or combined in accordance with the Agreement, in each case reduced from time to time by Collections distributed and applied on account of such Investment pursuant to SECTION 1.4(d) of the Agreement; provided, that if such Investment shall have been reduced by any distribution and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any reason, such Investment shall be increased by the amount of such rescinded or returned distribution as though it had not been made. "LIQUIDITY AGENT" means each of the banks acting as agent for the various Liquidity Banks under each Liquidity Agreement. "LIQUIDITY AGREEMENT" means any agreement entered into in connection with this Agreement pursuant to which a Liquidity Provider agrees to make purchases or advances to, or purchase assets from, any Conduit Purchaser in order to provide liquidity for such Conduit Purchaser's Purchases. "LIQUIDITY PROVIDER" means each bank or other financial institution that provides liquidity support to any Conduit Purchaser pursuant to the terms of a Liquidity Agreement. "LOCK-BOX ACCOUNT" means an account maintained at a bank or other financial institution for the purpose of, directly or indirectly, receiving Collections. "LOCK-BOX AGREEMENT" means an agreement among the Seller, the applicable Originator, the Servicer, the Administrator and a Lock-Box Bank. "LOCK-BOX BANK" means any of the banks or other financial institutions holding one or more Lock-Box Accounts. I-12 "LOSS RESERVE" means, on any date, an amount equal to (a) the Aggregate Investment at the close of business of the Servicer on such date MULTIPLIED by (b) (i) the Loss Reserve Percentage on such date DIVIDED by (ii) 100% minus the Loss Reserve Percentage on such date. "LOSS RESERVE PERCENTAGE" means, on any date, the greater of 20% or the sum of the Sales Based Loss Reserve Percentage and the Receivables Based Loss Reserve Percentage. "MAJORITY PURCHASERS" means, at any time, Purchasers whose Commitments aggregate 2/3rds or more of the aggregate of the Commitments of all Purchasers; provided, however, that so long as any Purchaser's Commitment is greater than 50% of the aggregate Commitments, then "Majority Purchasers" shall mean a minimum of two Purchasers whose Commitments aggregate more than 50% of the aggregate Commitments. "MARKET STREET" has the meaning set forth in the preamble to the Agreement. "MARKET STREET BASE RATE" means, in the case of Market Street or any Purchaser in its Purchaser Group, for any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by PNC in Pittsburgh, Pennsylvania as its "prime rate." Such "prime rate" is set by PNC based upon various factors, including PNC's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate, and (b) 0.50% per annum above the latest Federal Funds Rate. "MARKET STREET CP RATE" means, with respect to Market Street for any Yield Period with respect to any Portion of Investment, the per annum rate equivalent to the "weighted average cost" (as defined below) related to the issuance of Market Street's Notes that are allocated, in whole or in part, by Market Street (or by its Purchaser Agent) to fund or maintain such Portion of Investment (and which may also be allocated in part to the funding of other Portions of Investment hereunder or of other assets of Market Street); PROVIDED, HOWEVER, that if any component of such rate is a discount rate, in calculating the "MARKET STREET CP RATE" for such Portion of Investment for such Yield Period, Market Street shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. As used in this definition, Market Street's "WEIGHTED AVERAGE COST" shall consist of (x) the actual interest rate (or discount) paid to purchasers of Market Street's Notes, together with the commissions of placement agents and dealers in respect of such Notes, to the extent such commissions are allocated, in whole or in part, to such Notes by Market Street (or by its Purchaser Agent) and (y) any incremental carrying costs incurred with respect to Market Street's Notes maturing on dates other than those on which corresponding funds are received by Market Street. Notwithstanding the foregoing, the "Market Street CP Rate" I-13 for any day while a Termination Event exists shall be an interest rate equal to 2% above the Base Rate in effect on such day. "MARKET STREET YIELD RATE" for any Yield Period for any Portion of Investment of the Purchased Interest in the case of Market Street or any Purchaser in its Purchaser Group, means an interest rate per annum equal to, at Seller's option: (a) the rate set forth as the "Applicable Margin" in the Purchaser Group Fee Letter relating to Market Street above the Euro-Rate for such Yield Period, or (b) the Base Rate for such Yield Period; PROVIDED, HOWEVER, that in the case of: (i) any Yield Period on or before the first day of which the Administrator shall have been notified by any Purchaser or other Program Support Provider that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other Governmental Authority asserts that it is unlawful, for such Person, to fund any Euro-Rate Portion of Investment (and such Person shall not have subsequently notified the Administrator that such circumstances no longer exist), (ii) any Yield Period of one to (and including) 29 days, (iii) any Yield Period as to which the Administrator does not receive notice before noon (New York City time) on the third Business Day preceding the first day of such Yield Period that the Seller desires that the related Portion of Investment be a Euro-Rate Portion of Investment, or (iv) any Yield Period relating to a Portion of Investment that is less than $5,000,000, the "Yield Rate" for each such Yield Period shall be an interest rate per annum equal to the Base Rate in effect on each day of such Yield Period. The "Yield Rate" for any day while a Termination Event exists shall be an interest rate equal to 2% per annum above the applicable Base Rate in effect on such day. "MATERIAL ADVERSE EFFECT" means a material adverse effect on: (a) the assets, operations, business or financial condition of the Seller, the Servicer, AGSC, any Originator or Greetings. (b) the ability of Seller, Servicer, AGSC, Originator or Greetings to perform its obligations under the Agreement or any other Transaction Document to which it is a party, (c) as to Seller, Servicer, AGSC, any Originator or Greetings, the validity or enforceability of any other Transaction Document, or the validity, enforceability or collectibility of a material portion of the Pool Receivables, or I-14 (d) the status, perfection, enforceability or priority of any Purchaser's, AGSC's or the Seller's interest in the Pool Assets. "MOODY'S" means Moody's Investors Service, Inc. "NET RECEIVABLES POOL BALANCE" means, at any time: (a) the Outstanding Balance of Eligible Receivables then in the Receivables Pool minus (b) the Excess Concentration; provided that such calculation shall exclude the Receivables for which the related Obligor has a net credit balance. "NOTES" means short-term promissory notes issued, or to be issued, by each Conduit Purchaser to fund its investments in accounts receivable or other financial assets. "OBLIGOR" means, with respect to any Receivable, the Person obligated to make payments pursuant to the Contract relating to such Receivable. "ORIGINATOR" means the "Originators" party in such capacity to any of the Receivables Sale Agreement, the Purchase and Sale Agreement or the Sale and Contribution Agreement from time to time. "ORIGINATOR ASSIGNMENT CERTIFICATE" means each assignment, (i) in substantially the form of Exhibit C to the Receivables Sale Agreement, (ii) in substantially the form of EXHIBIT C to the Purchase and Sale Agreement, evidencing AGSC's ownership of the Receivables generated by an Originator, (iii) in substantially the form of EXHIBIT C to the Sale and Contribution Agreement, evidencing Seller's ownership of the Receivables generated by an Originator or acquired by AGSC, in each case as the same may be amended, supplemented, amended and restated, or otherwise modified from time to time in accordance with the Purchase and Sale Agreement. "OUTSTANDING BALANCE" of any Receivable at any time means the then outstanding principal balance thereof. "PERMITTED LOCK-BOX BANK" means any of the Banks listed on Schedule II and identified as such. "PERSON" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint venture, limited liability company or other entity, or a government or any political subdivision or agency thereof. "PLUS MARK ADDITION DATE" means a date determined by the Administrator and consented to by the Servicer. "PNC" has the meaning set forth in the preamble to the Agreement. "POOL ASSETS" has the meaning set forth in SECTION 1.2(d) of the Agreement. I-15 "POOL RECEIVABLE" means a Receivable in the Receivables Pool. "PORTION OF INVESTMENT" means, with respect to any Purchaser and its related Investment, the portion of such Investment being funded or maintained by such Purchaser by reference to a particular interest rate basis. "PROGRAM SUPPORT AGREEMENT" means and includes any Liquidity Agreement and any other agreement entered into by any Program Support Provider providing for: (a) the issuance of one or more letters of credit for the account of any Conduit Purchaser, (b) the issuance of one or more surety bonds for which the such Conduit Purchaser is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, (c) the sale by such Conduit Purchaser to any Program Support Provider of the Purchased Interest (or portions thereof) maintained by such Conduit Purchaser and/or (d) the making of loans and/or other extensions of credit to any Conduit Purchaser in connection with such Conduit Purchaser's securitization program contemplated in the Agreement, together with any letter of credit, surety bond or other instrument issued thereunder (but excluding any discretionary advance facility provided by the Administrator). "PROGRAM SUPPORT PROVIDER" means and includes with respect to each Conduit Purchaser any Liquidity Provider and any other Person (other than any customer of such Conduit Purchaser) now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, such Conduit Purchaser pursuant to any Program Support Agreement. "PURCHASE" is defined in SECTION 1.1(a). "PURCHASE AND SALE AGREEMENT" means the Purchase and Sale Agreement, dated as of August 7, among AGSC, the Originators party thereto as amended through the date of the Agreement and as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "PURCHASE AND SALE INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 9.1 of the Purchase and Sale Agreement. "PURCHASE AND SALE INDEMNIFIED PARTY" has the meaning set forth in SECTION 9.1 of the Purchase and Sale Agreement. "PURCHASE AND SALE TERMINATION DATE" has the meaning set forth in SECTION 1.4 of the Purchase and Sale Agreement. "PURCHASE AND SALE TERMINATION EVENT" has the meaning set forth in SECTION 8.1 of the Purchase and Sale Agreement. "PURCHASE DATE" means the date of which a Purchase or a reinvestment is made pursuant to the Agreement. I-16 "PURCHASE LIMIT" means $250,000,000, as such amount may be reduced pursuant to SECTIONS 1.1(b) or 1.10 of the Agreement or increased pursuant to Section 1.2(e) of the Agreement. References to the unused portion of the Purchase Limit shall mean, at any time, the Purchase Limit minus the then outstanding Aggregate Investment. "PURCHASED INTEREST" means, at any time, the undivided percentage ownership interest in: (a) each and every Pool Receivable now existing or hereafter arising, (b) all Related Security with respect to such Pool Receivables and (c) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security. Such undivided percentage interest shall be computed as: Aggregate Investment + Total Reserves ------------------------------------- Net Receivables Pool Balance The Purchased Interest shall be determined from time to time pursuant to SECTION 1.3 of the Agreement. "PURCHASER" means each Conduit Purchaser and/or each Related Committed Purchaser, as applicable. "PURCHASER AGENT" means each Person acting as agent on behalf of a Purchaser Group and designated as a Purchaser Agent for such Purchaser Group on the signature pages to the Agreement or any other Person who becomes a party to this Agreement as a Purchaser Agent pursuant to an Assumption Agreement or a Transfer Supplement. "PURCHASER GROUP" means, for each Conduit Purchaser, such Conduit Purchaser, its Related Committed Purchasers and its related Purchaser Agent. "PURCHASER GROUP FEE LETTER" has the meaning set forth in SECTION 1.5 of the Agreement. "PURCHASERS' SHARE" of any amount means such amount multiplied by the Purchased Interest at the time of determination. "RATABLE SHARE" means, for each Purchaser Group, such Purchaser Group's aggregate Commitments divided by the aggregate Commitments of all Purchaser Groups. "RATING AGENCY CONDITION" means, with respect to any material event or occurrence, receipt by the Administrator (or the applicable Purchaser Agent) of written confirmation from each of Standard & Poor's and Moody's that such event or occurrence shall not cause the rating on the then outstanding Notes of any applicable Purchaser to be downgraded or withdrawn. "RECEIVABLE" means any indebtedness and other obligations owed to the Seller, AGSC or any Originator (excluding, until the Plus Mark Addition Date, Plus Mark, Inc.) by, or any right of the Seller, AGSC or any Originator (excluding, until the Plus Mark Addition Date, Plus Mark, Inc.) to I-17 payment from or on behalf of, an Obligor, whether constituting an account, chattel paper, instrument or general intangible, arising in connection with the sale of goods or the rendering of services by an Originator (excluding until the Plus Mark Addition Date, Plus Mark, Inc.), and includes the obligation to pay any finance charges, fees and other charges with respect thereto. Indebtedness and other obligations arising from any one transaction, including indebtedness and other obligations represented by an individual invoice or agreement, shall constitute a Receivable separate from a Receivable consisting of the indebtedness and other obligations arising from any other transaction; provided that Receivables shall not include obligations in respect of payments denominated in Canadian dollars due and owing from or on behalf of Obligors in respect of businesses located in Canada. "RECEIVABLES BASED LOSS RESERVE PERCENTAGE" means, on any date the percentage determined by the following formula: 2.0 x (DDR x RP) / NRPB DDR = the highest Disputed Default Ratio for any three consecutive calendar months during the twelve most recent calendar months RP = the aggregate Outstanding Balance of all Pool Receivables as of the date of such calculation NRPB = the Net Receivables Pool Balance as of the date of such calculation "RECEIVABLES POOL" means, at any time, all of the then outstanding Receivables purchased by the Seller pursuant to the Sale and Contribution Agreement prior to the Facility Termination Date. "RECEIVABLES SALE AGREEMENT" means the Receivables Sale Agreement, dated as of August 7, 2001, among Greetings and the Originators party thereto as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "RECEIVABLES SALE INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 9.1 of the Receivables and Sale Agreement. "RECEIVABLES SALE INDEMNIFIED PARTY" has the meaning set forth in SECTION 9.1 of the Receivables Sale Agreement. "RECEIVABLES SALE TERMINATION DATE" has the meaning set forth in SECTION 1.4 of the Receivables Sale Agreement. "RECEIVABLES SALE TERMINATION EVENT" has the meaning set forth in SECTION 8.1 of the Receivables Sale Agreement. I-18 "RELATED COMMITTED PURCHASER" means each Person listed as such (and its respective Commitment) for each Conduit Purchaser as set forth on the signature pages of the Agreement or in any Assumption Agreement or Transfer Supplement. "RELATED RIGHTS" has the meaning set forth in SECTION 1.1 of the Sale and Contribution Agreement. "RELATED SECURITY" means, with respect to any Receivable: (a) all of the Seller's, AGSC's and the Originator thereof's interest in any goods (including returned goods), and documentation of title evidencing the shipment or storage of any goods (including returned goods), relating to any sale giving rise to such Receivable, (b) all instruments and chattel paper that may evidence such Receivable, (c) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all UCC financing statements or similar filings relating thereto, and (d) all of the Seller's AGSC's and the Originator thereof's rights, interests and claims under the Contracts and all guaranties, indemnities, insurance and other agreements (including the related Contract) or arrangements of whatever character from time to time supporting or securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the Contract related to such Receivable or otherwise. "SALE AND CONTRIBUTION AGREEMENT" means the Sale and Contribution Agreement dated as of August 7, 2001 between AGSC, and Seller, as amended through the date of the Agreement and as such agreement may be amended, amended and restated, supplemented or otherwise modified from time to time. "SALE AND CONTRIBUTION INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 9.1 of the Sale and Contribution Agreement. "SALE AND CONTRIBUTION INDEMNIFIED PARTY" has the meaning set forth in SECTION 9.1 of the Sale and Contribution Agreement. "SALE AND CONTRIBUTION NOTE" has the meaning set forth in SECTION 3.1 of the Sale and Contribution Agreement. "SALE AND CONTRIBUTION TERMINATION DATE " has the meaning set forth in SECTION 1.4 of the Sale and Contribution Agreement. I-19 "SALE AND CONTRIBUTION TERMINATION EVENT" has the meaning set forth in SECTION 8.1 of the Sale and Contribution Agreement. "SALES BASED LOSS RESERVE PERCENTAGE" means, on any date the percentage determined by the following formula: 2.0 x ((EDR x ESDH) + (SDR x SSDH)) / NRPB EDR = the highest Everyday Default Ratio for any three consecutive calendar months during the twelve most recent calendar months ESDH = the aggregate credit sales, other than Seasonal Sales, made by the Originators during the six most recent calendar months SDR = the highest Seasonal Default Ratio for any three consecutive calendar months during the twelve most recent calendar months SSDH = the aggregate Seasonal Sales made by the Originators during the seven most recent calendar months NRPB = the Net Receivables Pool Balance as of the date of such calculation "SEASONAL DEFAULT RATIO" means the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1% with 5/1000th of 1% rounded upwards) computed as of the last day of each calendar month by dividing (a) the aggregate Outstanding Balance of all Seasonal Sales that became Defaulted Receivables during such month, by (b) the aggregate Outstanding Balance of all Seasonal Sales made by the Originators during the two months that are seven and eight months before such month. "SEASONAL DILUTION ESTIMATE "means, at any time, the balance as of the most recent calendar month-end of reserves or liabilities maintained on the books and records of the Seller or Servicer in the ordinary course of business according to policies consistently applied and reported on the Information Package related to, or in anticipation of, seasonal returns affecting the Receivables. "SEASONAL RECEIVABLE" means a Pool Receivable sold pursuant to the Purchase and Sale Agreement which was included, should have been included or should be included in the calculation of Seasonal Sales. "SEASONAL SALES" means those amounts identified by the Seller or Servicer on the periodic Information Packages as invoices related to specific seasonal shipments. "SELLER" has the meaning set forth in the preamble to the Agreement. I-20 "SELLER'S SHARE" of any amount means the greater of: (a) $0 and (b) such amount minus the product of (i) such amount multiplied by (ii) the Purchased Interest. "SERVICER" has the meaning set forth in the preamble to the Agreement. "SERVICING FEE" shall mean the fee referred to in SECTION 4.6 of the Agreement. "SETTLEMENT DATE" means the 22nd Day of each calendar month or, if such day is not a Business Day, the first Business Day thereafter or such other Business Day as otherwise consented to by the Administrator, the Purchasers, the Seller and the Servicer. "SIMPLE MAJORITY" means, at any time, Purchasers whose Commitments aggregate 51% or more of the aggregate of the Commitments of all Purchasers. "SOLVENT" means, with respect to any Person at any time, a condition under which: (i) the fair value and present fair saleable value of such Person's total assets is, on the date of determination, greater than such Person's total liabilities (including contingent and unliquidated liabilities) at such time; (ii) the fair value and present fair saleable value of such Person's assets is greater than the amount that will be required to pay such Person's probable liability on its existing debts as they become absolute and matured ("debts," for this purpose, includes all legal liabilities, whether matured or unmatured, liquidated or unliquidated, absolute, fixed, or contingent); (iii) such Person is and shall continue to be able to pay all of its liabilities as such liabilities mature; and (iv) such Person does not have unreasonably small capital with which to engage in its current and in its anticipated business. For purposes of this definition: (A) the amount of a Person's contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability; (B) the "fair value" of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such asset at its regular market value; I-21 (C) the "regular market value" of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an interested buyer who is willing to Purchase such asset under ordinary selling conditions; and (D) the "present fair saleable value" of an asset means the amount which can be obtained if such asset is sold with reasonable promptness in an arm's-length transaction in an existing and not theoretical market. "SPECIFICALLY RESERVED DILUTION AMOUNT" means the greater of (A) the sum of (i) $15,000,000 and (ii) 75% of the total credits issued for seasonal returns in the 10th and 11th months prior to the current month or (B) the sum of (i) the balance as of the most recent calendar month-end of reserves or liabilities maintained on the books and records of the Seller or Servicer and reported on the Information Package related to, or in anticipation of, (a) advertising allowances, (b) volume rebates and (c) Plus Mark, Inc. specific factors affecting the Receivables plus (ii) (a) the Seasonal Dilution Estimate times (b) 106%. "STANDARD & POOR'S" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc. "SUBSIDIARY" means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock of each class or other interests having ordinary voting power (other than stock or other interests having such power only by reason of the happening of a contingency) to elect a majority of the Board of Directors or other managers of such entity are at the time owned, or management of which is otherwise controlled: (a) by such Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and one or more Subsidiaries of such Person. "TANGIBLE NET WORTH" means, with respect to any Person, the tangible net worth of such Person as determined in accordance with GAAP. "TERMINATION DAY" means: (a) each day on which the conditions set forth in Section 2 of EXHIBIT II to the Agreement are not satisfied or (b) each day that occurs on or after the Facility Termination Date. "TERMINATION EVENT" has the meaning specified in EXHIBIT V to the Agreement. "TERMINATION FEE" means, for any Yield Period, with respect to any Purchaser, the amount, if any, by which: (a) the additional Discount related to such Purchaser's Investment (calculated without taking into account any Termination Fee or any shortened duration of such Yield Period) that would have accrued during such Yield Period on the reductions of Investment relating to such Yield Period had such reductions not been made, exceeds (b) the income, if any, received by such Purchaser from investing the proceeds of such reductions of Investment, as determined by the such Purchaser's Purchaser Agent, which determination shall be binding and conclusive for all purposes, absent manifest error. I-22 "TOTAL RESERVES" means, at any time, the sum of (a) the Yield Reserve, (b) the sum of the Loss Reserve and the Dilution Reserve and (c) the Specifically Reserved Dilution Amount. "TRANSACTION DOCUMENTS" means the Agreement, the Lock-Box Agreements, each Purchaser Group Fee Letter, the Receivables Sale Agreement, the Purchase and Sale Agreement, the Sale and Contribution Agreement and all other certificates, instruments, UCC financing statements, reports, notices, agreements and documents executed or delivered under or in connection with any of the foregoing, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with the Agreement. "TRANSFER SUPPLEMENT" has the respective meanings set forth in SECTIONS 6.3(c) and 6.3(e). "UCC" means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction. "UNMATURED PURCHASE AND SALE TERMINATION EVENT" means any event which, with the giving of notice or lapse of time, or both, would become a Purchase and Sale Termination Event. "UNMATURED RECEIVABLES SALE TERMINATION EVENT" means any event which, with the giving of notice or lapse of time, or both, would become a Receivables Sale Termination Event. "UNMATURED SALE AND CONTRIBUTION TERMINATION EVENT" means any event which, with the giving of notice or lapse of time, or both, would become a Sale and Contribution Termination Event. "UNMATURED TERMINATION EVENT" means an event that, with the giving of notice or lapse of time, or both, would constitute a Termination Event. "YIELD PERIOD" means, with respect to each Portion of Investment: (a) before the Facility Termination Date: (i) initially the period commencing on the date of the initial Purchase pursuant to SECTION 1.2 of the Agreement (or in the case of any fees payable hereunder, commencing on the Closing Date) and ending on (but not including) the next Settlement Date, and (ii) thereafter, each period commencing on such Settlement Date and ending on (but not including) the next Settlement Date, and (b) on and after the Facility Termination Date, such period (including a period of one day) as shall be selected from time to time by the Administrator or, in the absence of any such selection, each period of 30 days from the last day of the preceding Yield Period. "YIELD RATE" for any Yield Period for any Portion of Investment of the Purchased Interest (i) in the case of the Purchaser Group including Market Street, means the Market Street Yield Rate, and (ii) in the case of each other Purchaser Group, shall mean the rate set forth as the Yield Rate for such Purchaser Group in the related Purchaser Group Fee Letter. "YIELD RESERVE" shall be equal to the Aggregate Investment multiplied by a percentage equal to (i) the Yield Reserve Percentage divided by (ii) 100% minus the Yield Reserve Percentage. I-23 "YIELD RESERVE PERCENTAGE" means, on any date, an amount equal to (i) the sum of the weighted average Base Rate for the most recent period plus 1.5%, multiplied by (ii) the product of 1.5 times the Days Sales Outstanding, divided by (iii) 360. OTHER TERMS. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. Unless the context otherwise requires, "or" means "and/or," and "including" (and with correlative meaning "include" and "includes") means including without limiting the generality of any description preceding such term. I-24 EXHIBIT II CONDITIONS OF PURCHASES 1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial Purchase under this Agreement is subject to the following conditions precedent that the Administrator and each Purchaser Agent shall have received on or before the date of such Purchase (other than with respect to the condition set forth in PARAGRAPH (g), which such condition must be satisfied within 30 days of such Purchase), each in form and substance (including the date thereof) satisfactory to the Administrator and each Purchaser Agent: (a) A counterpart of the Agreement and the other Transaction Documents executed by the parties thereto. (b) Certified copies of: (i) the resolutions of the Board of Directors of each of the Seller, the Originators, AGSC and Greetings authorizing the execution, delivery and performance by the Seller, such Originator, AGSC and Greetings, as the case may be, of the Agreement and the other Transaction Documents to which it is a party; (ii) all documents evidencing other necessary organizational action and governmental approvals, if any, with respect to the Agreement and the other Transaction Documents and (iii) the certificate of incorporation and by-laws or certificate of formation and limited liability company agreement or any other organizational document, as applicable, of the Seller, each Originator, AGSC and Greetings. (c) A certificate of the Secretary or Assistant Secretary of the Seller, the Originators, AGSC and Greetings certifying the names and true signatures of its officers who are authorized to sign the Agreement and the other Transaction Documents. Until the Administrator and each Purchaser Agent receives a subsequent incumbency certificate from the Seller, an Originator, AGSC or Greetings, as the case may be, the Administrator and each Purchaser Agent shall be entitled to rely on the last such certificate delivered to it by the Seller, such Originator, AGSC or Greetings, as the case may be. (d) Acknowledgment copies, or time stamped receipt copies, of proper financing statements, duly filed on or before the date of such initial purchase under the UCC of all jurisdictions that the Administrator may deem necessary or desirable in order to perfect the interests of the Seller, Greetings and the Administrator (on behalf of each Purchaser) contemplated by the Agreement, the Sale and Contribution Agreement, the Receivables Sale Agreement and the Purchase and Sale Agreement. (e) Acknowledgment copies, or time-stamped receipt copies, of proper financing statements, if any, necessary to release all security interests and other rights of any Person II-1 in the Receivables, Contracts or Related Security previously granted by the Originators, AGSC, Greetings or the Seller. (f) Completed UCC search reports, dated on or shortly before the date of the initial purchase hereunder, listing the financing statements filed in all applicable jurisdictions referred to in SUBSECTION (e) above that name the Originators, AGSC or the Seller as debtor, together with copies of such other financing statements, and similar search reports with respect to judgment liens, federal tax liens and liens of the Pension Benefit Guaranty Corporation in such jurisdictions, as the Administrator or any Purchaser Agent may request, showing no Adverse Claims on any Pool Assets. (g) Copies of executed Lock-Box Agreements with each Lock-Box Bank (other than Lock-Box Banks with respect to Plus-Mark, Inc. prior to the Plus-Mark Addition Date). (h) Favorable opinions of Jones Day Reavis & Pogue, counsel for the Seller, the Originators, AGSC, Greetings and the Servicer, in form and substance reasonably satisfactory to the Administrator and each Purchaser Agent. (i) Satisfactory results of a review and audit (performed by representatives of each Purchaser Agent) of the Servicer's collection, operating and reporting systems, the Credit and Collection Policy of each Originator (other than Plus Mark, Inc.) and AGSC, historical receivables data and accounts, including satisfactory results of a review of the Servicer's operating location(s). (j) A pro forma Information Package representing the performance of the Receivables Pool for the calendar month before closing. (k) Evidence of payment by the Seller of all accrued and unpaid fees (including those contemplated by each Purchaser Group Fee Letter), costs and expenses to the extent then due and payable on the date thereof, including any such costs, fees and expenses arising under or referenced in SECTION 6.4 of the Agreement and the Fee Letter. (l) Each Purchaser Group Fee Letter (received only by the related Purchaser Group Agent) duly executed by the Seller and the Servicer. (m) Good standing certificates with respect to each of the Seller, AGSC, the Originators and the Servicer issued by the Secretary of State (or similar official) of the state of each such Person's organization and principal place of business. (n) To the extent required by each Conduit Purchaser's commercial paper program, letters from each of the rating agencies then rating the Notes confirming the rating of such Notes after giving effect to the transaction contemplated by the Agreement. II-2 (o) Each Liquidity Agreement (received only by the related Purchaser Group Agent) and all other Transaction Documents duly executed by the parties thereto. (p) A computer file containing all information with respect to the Receivables as the Administrator or any Purchaser Agent may reasonably request. (q) Such other approvals, opinions or documents as the Administrator or any Purchaser Agent may reasonably request. 2. CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS. Each Purchase (including the initial Purchase) and each reinvestment shall be subject to the further conditions precedent that: (a) in the case of each purchase, the Servicer shall have delivered to the Administrator and each Purchaser Agent on or before such purchase, in form and substance satisfactory to the Administrator and such Purchaser Agent, a completed pro forma Information Package to reflect the level of Investment with respect to each Purchaser Group and related reserves and the calculation of the Purchased Interest after such subsequent purchase and a completed purchase notice in the form of Annex B; and (b) on the date of such purchase or reinvestment the following statements shall be true (and acceptance of the proceeds of such purchase or reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true): (i) the representations and warranties contained in Exhibit III to the Agreement are true and correct in all material respects on and as of the date of such purchase or reinvestment as though made on and as of such date (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); and (ii) no event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes a Termination Event or an Unmatured Termination Event. II-3 EXHIBIT III REPRESENTATIONS AND WARRANTIES 1. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller represents and warrants as follows: (a) The Seller is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. (b) The execution, delivery and performance by the Seller of the Agreement and the other Transaction Documents to which it is a party, including its use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene or result in a default under or conflict with: (A) its charter or by-laws, (B) any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which it is a party have been duly executed and delivered by the Seller. (c) No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for its due execution, delivery and performance by the Seller of the Agreement or any other Transaction Document to which it is a party, other than the Uniform Commercial Code filings referred to in Exhibit II to the Agreement, all of which shall have been filed on or before the date of the first purchase hereunder. (d) Each of the Agreement and the other Transaction Documents to which the Seller is a party constitutes its legal, valid and binding obligation of the Seller enforceable against the Seller 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. (e) There is no pending or, to Seller's best knowledge, threatened action or proceeding affecting Seller or any of its properties before any Governmental Authority or arbitrator. III-1 (f) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934. (g) The Seller is the legal and beneficial owner of the Pool Receivables and Related Security, free and clear of any Adverse Claim. Upon each purchase or reinvestment, Administrator (for the benefit of each Purchaser) shall acquire a valid and enforceable perfected undivided percentage ownership or security interest, to the extent of the Purchased Interest, in each Pool Receivable then existing or thereafter arising and in the Related Security, Collections and other proceeds with respect thereto, free and clear of any Adverse Claim. The Agreement creates a security interest in favor of the Administrator (for the benefit of each Purchaser) in the Pool Assets, and the Administrator (for the benefit of each Purchaser) has a first priority perfected security interest in the Pool Assets, free and clear of any Adverse Claims. No effective financing statement or other instrument similar in effect covering any Pool Asset is on file in any recording office, except those filed in favor of Greetings pursuant to the Receivables Sale Agreement, AGSC pursuant to the Purchase and Sale Agreement, the Seller pursuant to the Sale and Contribution Agreement and the Administrator (for the benefit of each Purchaser) relating to the Agreement, or in respect of which the Administrator has received evidence satisfactory to the Administrator of acknowledgment copies, or time-stamped receipt copies, of proper financing statements releasing or terminating, as applicable, all security interests and other rights of any Person in such Pool Asset. (h) Each Information Package (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by the Seller or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Seller to the Administrator or any Purchaser Agent in connection with the Agreement or any other Transaction Document to which it is a party is or will be complete and accurate in all material respects as of its date or as of the date so furnished, and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not misleading. (i) [RESERVED]. (j) The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Schedule II to the Agreement (or at such other Lock-Box Banks and/or with such other Lock- Box Accounts as have been notified to the Administrator in accordance with the Agreement) and all Lock-Box Accounts are subject to Lock-Box Agreements (except as otherwise agreed to in writing by the Administrator and each Purchaser Agent or as provided in SECTION 4.3). Seller has not granted to any Person, other than the Administrator as contemplated by the III-2 Agreement, dominion and control of any Lock-Box Account, or the right to take dominion and control of any such account at a future time or upon the occurrence of a future event. (k) The Seller is not in violation of any order of any court, arbitrator or Governmental Authority. (l) Neither the Seller nor any of its Affiliates has any direct or indirect ownership or other financial interest in any Purchaser. (m) No proceeds of any purchase or reinvestment will be used for any purpose that violates any applicable law, rule or regulation, including Regulations T, U or X of the Federal Reserve Board. (n) Each Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance is an Eligible Receivable. (o) No event has occurred and is continuing that constitutes a Termination Event or an Unmatured Termination Event and no event would result from a purchase in respect of, or reinvestment in respect of, the Purchased Interest or from the application of the proceeds therefrom that constitutes a Termination Event or an Unmatured Termination Event. (p) The Seller has complied in all material respects with the applicable Credit and Collection Policy. (q) The Seller has complied in all material respects with all of the terms, covenants and agreements contained in the Agreement and the other Transaction Documents that are applicable to it and all laws, rules, regulations and orders that are applicable to it. (r) The Seller's complete corporate name is set forth in the preamble to the Agreement, and it does not use and has not during the last six years used any other corporate name, trade name, doing-business name or fictitious name, except as set forth on Schedule III to the Agreement and except for names first used after the date of the Agreement and set forth in a notice delivered to the Administrator pursuant to SECTION 1(k)(iv) of EXHIBIT IV to the Agreement. (s) The Seller is not an "investment company," or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. In addition, the Seller is not a "holding company," a "subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. III-3 (t) With respect to each Receivable transferred to the Seller under the Sale and Contribution Agreement, Seller has given reasonably equivalent value to AGSC thereof in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by AGSC of any Receivable under the Sale and Contribution Agreement is or may be voidable under any section of the Bankruptcy Code. (u) Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). (v) Since its most recent fiscal year end, there has been no material adverse change in the business, operations, financial condition, properties or assets of the Seller. 2. REPRESENTATIONS AND WARRANTIES OF GREETINGS (INCLUDING IN ITS CAPACITY AS THE SERVICER). Greetings, individually and in its capacity as the Servicer, represents and warrants as follows: (a) Greetings is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Ohio, and is duly qualified to do business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect. (b) The execution, delivery and performance by Greetings, of the Agreement and the other Transaction Documents to which it is a party, including the Servicer's use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all necessary corporate action; (iii) do not contravene or result in a default under or conflict with: (A) its charter or by-laws, (B) any law, rule or regulation applicable to it, (C) any material indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which Greetings is a party have been duly executed and delivered by Greetings. (c) No authorization, approval or other action by, and no notice to or filing with any Governmental Authority or other Person, is required for the due execution, delivery and performance by Greetings of the Agreement or any other Transaction Document to which it is a party. III-4 (d) Each of the Agreement and the other Transaction Documents to which Greetings is a party constitutes the legal, valid and binding obligation of Greetings enforceable against Greetings 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. (e) The balance sheets of Greetings and its consolidated Subsidiaries as at February 28, 2001, and the related statements of income and retained earnings for the fiscal year then ended, copies of which have been furnished to the Administrator and each Purchaser Agent, fairly present the financial condition of Greetings and its consolidated Subsidiaries as at such date and the results of the operations of Greetings and its Subsidiaries for the period ended on such date, all in accordance with generally accepted accounting principles consistently applied, and since February 28, 2001, there has been no event or circumstances which have had a Material Adverse Effect. (f) Except as disclosed in the most recent audited financial statements of Greetings furnished to the Administrator and each Purchaser Agent, there is no pending or, to its best knowledge, threatened action or proceeding affecting it or any of its Subsidiaries before any Governmental Authority or arbitrator that could reasonably be expected to have a Material Adverse Effect. (g) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12 of the Securities Exchange Act of 1934. (h) Each Information Package (if prepared by Greetings or one of its Affiliates, or to the extent that information contained therein is supplied by Greetings or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on behalf of the Servicer to the Administrator, any Purchaser or any Purchaser Agent in connection with the Agreement is or will be complete and accurate in all material respects as of its date or as of the date so furnished and does not and will not contain any material misstatement of fact or omit to state a material fact or any fact necessary to make the statements contained therein not materially misleading. (i) The principal place of business and chief executive office (as such terms are used in the UCC) of Greetings and the office where it keeps its records concerning the Receivables are located at the address referred to in SECTION 2(b) of EXHIBIT IV to the Agreement. III-5 (j) Greetings is not in violation of any order of any court, arbitrator or Governmental Authority, which could have a Material Adverse Effect. (k) Neither Greetings nor any of its Affiliates has any direct or indirect ownership or other financial interest in any Purchaser. (l) The Servicer has complied in all material respects with the applicable Credit and Collection Policy. (m) Greeting has complied in all material respects with all of the terms, covenants and agreements contained in the Agreement and the other Transaction Documents that are applicable to it. (n) Greetings is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended. In addition, Greetings is not a "holding company," a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. (o) Since its most recent fiscal year end, there has been no change in the business, operations, financial condition, properties or assets of the Servicer which would have a Material Adverse Effect on its ability to perform its obligations under the Agreement or any other Transaction Document to which it is a party or materially and adversely affect the transactions contemplated under the Agreement or such other Transaction Documents. (p) No license or approval is required for the Administrator or any successor Servicer to use any program used by the Servicer in the servicing of the Receivables, other than such licenses and approvals that have been obtained and are in full force and effect. III-6 EXHIBIT IV COVENANTS 1. COVENANTS OF THE SELLER. Until the latest of the Facility Termination Date, the date on which no Investment of or Discount in respect of the Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to any Purchaser, Purchaser Agent, the Administrator and any other Indemnified Party or Affected Person shall be paid in full: (a) COMPLIANCE WITH LAWS, ETC. The Seller shall comply with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications and privileges would not have a Material Adverse Effect. (b) OFFICES, RECORDS AND BOOKS OF ACCOUNT, ETC. The Seller: (i) shall not move its principal place of business and chief executive office (as such terms or similar terms are used in the UCC) and the office where it keeps its records concerning the Receivables to an address other than the address of the Seller set forth under its name on the signature page to the Agreement or, pursuant to CLAUSE (k)(iv) below, at any other locations in jurisdictions where all actions reasonably requested by the Administrator to protect and perfect the interest of the Administrator (for the benefit of the Purchasers) in the Receivables and related items (including the Pool Assets) have been taken and completed and (ii) shall provide the Administrator with at least 30 days' written notice before making any change in the Seller's name or making any other change in the Seller's identity or corporate structure (including a Change in Control) that could render any UCC financing statement filed in connection with this Agreement "seriously misleading" as such term (or similar term) is used in the UCC; each notice to the Administrator pursuant to this sentence shall set forth the applicable change and the effective date thereof. The Seller also will maintain and implement (or cause the Servicer to maintain and implement) administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain (or cause the Servicer to keep and maintain) all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). The Seller will (and will cause each Originator and AGSC to) on or prior to the date of the Agreement, mark its master data processing records and other books and records relating to the Purchased Interest (and at all times thereafter (until the latest of the Facility Termination Date or the date all other amounts owed by the Seller under the Agreement shall be paid in full) continue to maintain such records) with a legend, acceptable to the Administrator, describing the Purchased Interest. IV-1 (c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND COLLECTION POLICY. The Seller shall (and shall cause the Servicer to), at its expense, (i) timely perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables unless the failure to so perform or comply does not involve a material portion of such Receivables, and the Seller shall have complied with its obligations with respect to such Receivables set forth in SECTION 1.4(e), and (ii) timely comply in all material respects with the applicable Credit and Collection Policies with regard to each Receivable. (d) OWNERSHIP INTEREST, ETC. The Seller shall (and shall cause the Servicer to), at its expense, take all action necessary or desirable to establish and maintain a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest which shall not be greater than 100%, in the Pool Receivables, the Related Security and Collections with respect thereto, and a first priority perfected security interest in the Pool Assets, in each case free and clear of any Adverse Claim, in favor of the Administrator (for the benefit of the Purchasers), including taking such action to perfect, protect or more fully evidence the interest of the Administrator (for the benefit of the Purchasers) as the Administrator, may reasonably request. (e) SALES, LIENS, ETC. The Seller shall not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any or all of its right, title or interest in, to or under any Pool Assets (including the Seller's undivided interest in any Receivable, Related Security or Collections, or upon or with respect to any account to which any Collections of any Receivables are sent), or assign any right to receive income in respect of any items contemplated by this paragraph. (f) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as provided in the Agreement, the Seller shall not, and shall not permit the Servicer to, extend the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any related Contract in any manner that would modify the terms of any Pool Receivable. (g) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The Seller shall not make (or permit any Originator or AGSC to make) any change in the character of its business or any change in any Credit and Collection Policy that would have a Material Adverse Effect with respect to the Receivables. The Seller shall not make (or permit any Originator or AGSC to make) any other change in any Credit and Collection Policy without giving prior written notice thereof to the Administrator and each Purchaser Agent. (h) AUDITS. The Seller shall (and shall cause each Originator and AGSC to), from time to time during regular business hours, as reasonably requested in advance (unless a Termination Event or Unmatured Termination Event exists) by the Administrator or any Purchaser, permit the Administrator, any Purchaser, any Purchaser Agent, or any agent or IV-2 representatives of the foregoing: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in the possession or under the control of the Seller (or AGSC or any such Originator) relating to Receivables and the Related Security, including the related Contracts, and (ii) to visit the offices and properties of the Seller, AGSC and the Originators for the purpose of examining such materials described in CLAUSE (i) above, and to discuss matters relating to Receivables and the Related Security or the Seller's, Greetings', AGSC's or an Originator's performance under the Transaction Documents or under the Contracts with any of the officers, employees, agents or contractors of the Seller, Greetings, AGSC or an Originator having knowledge of such matters and (iii) without limiting CLAUSES (i) and (ii) above, to engage certified public accountants or other auditors acceptable to the Seller and the Administrator to conduct, at the Seller's expense, a review of the Seller's books and records with respect to such Receivables. (i) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND PAYMENT INSTRUCTIONS TO OBLIGORS. The Seller shall not, and shall not permit the Servicer, AGSC or any Originator to, add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account from those listed in SCHEDULE II to the Agreement, or make any change in its instructions to Obligors regarding payments to be made to the Seller, AGSC the Originators, the Servicer or any Lock-Box Account (or related post office box), unless the Administrator and a Simple Majority shall have consented thereto in writing, which consent shall not be unreasonably withheld or delayed, and the Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may request in connection therewith. Notwithstanding anything contained in this PARAGRAPH (i) to the contrary, the Seller may add an account as a Lock-Box Account at a Lock-Box Bank, without the consent of the Administrator and the Purchasers upon delivery to the Administrator of a Lock-Box Agreement in form and substance reasonably acceptable to the Administrator. (j) DEPOSITS TO LOCK-BOX ACCOUNTS. The Seller shall (or shall cause the Servicer to): (i) mail, wire or otherwise transfer, or cause to be so transferred, any Collections received by it, the Servicer, AGSC or any Originator to Lock-Box Accounts not later than one Business Day after receipt thereof and (ii) instruct all Obligors (other than, for a period no longer than 120 days after the Closing Date, Kinko's) to make payments of all Receivables to one or more Lock-Box Accounts or to post office boxes to which only Lock- Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and amounts relating to such Receivables received in such post office boxes to be removed and deposited into a Lock-Box Account on a daily basis). Except as otherwise agreed to in writing by the Administrator and the Majority Purchasers, each Lock-Box Account shall at all times be subject to a Lock-Box Agreement. The Seller will not (and will not permit the Servicer to) deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections. IV-3 (k) REPORTING REQUIREMENTS. The Seller will provide to the Administrator (in multiple copies, if requested by the Administrator) and each Purchaser Agent the following: (i) as soon as available and in any event within 120 days after the end of each fiscal year of the Seller, unaudited financial statements for such year certified as to accuracy by the president or treasurer of the Seller; (ii) as soon as possible and in any event within five days after the occurrence of each Termination Event or Unmatured Termination Event, a statement of the president or any vice president of the Seller setting forth details of such Termination Event or Unmatured Termination Event and the action that the Seller has taken and proposes to take with respect thereto; (iii) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or any of its Affiliates is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could result in the imposition of liability on the Seller and/or any such Affiliate; (iv) at least 30 days before any change in the Seller's name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof; (v) promptly after the Seller obtains knowledge thereof, notice of any: (A) adverse litigation, investigation or proceeding that may exist at any time between the Seller and any Person or (B) material litigation or proceeding relating to any Transaction Document; (vi) promptly after the occurrence thereof, notice of a Material Adverse Effect in the business, operations, property or financial or other condition of the Seller, the Servicer, any Originator, AGSC or Greetings; and (vii) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller, the Servicer, any Originator, AGSC or any of their Affiliates as the Administrator or any Purchaser Agent may from time to time reasonably request. (l) CERTAIN AGREEMENTS. Without the prior written consent of the Administrator and the Majority Purchasers, the Seller will not (and will not permit any Originator, IV-4 Greetings or AGSC to) amend, modify, waive, revoke or terminate any Transaction Document to which it is a party or any provision of Seller's certificate of incorporation or by- laws. (m) RESTRICTED PAYMENTS. (i) Except pursuant to CLAUSE (ii) below, the Seller will not: (A) purchase or redeem any shares of its capital stock, (B) declare or pay any dividend or set aside any funds for any such purpose, (C) prepay, purchase or redeem any Debt, (D) lend or advance any funds or (E) repay any loans or advances to, for or from any of its Affiliates (the amounts described in CLAUSES (A) through (E) being referred to as "RESTRICTED PAYMENTS "). (ii) Subject to the limitations set forth in CLAUSE (iii) below, the Seller may make Restricted Payments so long as such Restricted Payments are made only in one or more of the following ways: (A) the Seller may make cash payments (including prepayments) on the Sale and Contribution Notes in accordance with their terms, and (B) if no amounts are then outstanding under the Sale and Contribution Notes, the Seller may declare and pay dividends. (iii) The Seller may make Restricted Payments only out of the funds it receives pursuant to SECTIONS 1.4(b)(ii) and (iv) of the Agreement. Furthermore, the Seller shall not pay, make or declare: (A) any dividend if, after giving effect thereto, the Seller's tangible net worth would be less than $10,000,000 or (B) any Restricted Payment (including any dividend) if, after giving effect thereto, any Termination Event or Unmatured Termination Event shall have occurred and be continuing. (n) OTHER BUSINESS. The Seller will not: (i) engage in any business other than the transactions contemplated by the Transaction Documents; (ii) create, incur or permit to exist any Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers' acceptances) other than pursuant to this Agreement or the Sale and Contribution Notes; or (iii) form any Subsidiary or make any investments in any other Person; provided, however, that the Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day operations of the Seller (such as expenses for stationery, audits, maintenance of legal status, etc.). (o) USE OF SELLER'S SHARE OF COLLECTIONS. The Seller shall apply the Seller's Share of Collections to make payments in the following order of priority: (i) the payment of its expenses (including all obligations payable to the Purchaser Groups and the Administrator under the Agreement and under each Purchaser Group Fee Letter); (ii) the payment of accrued and unpaid interest on the Sale and Contribution Notes; and (iii) other legal and valid corporate purposes. (p) TANGIBLE NET WORTH. The Seller will not permit its tangible net worth, at any time, to be less than $10,000,000. IV-5 2. COVENANTS OF THE SERVICER AND GREETINGS. Until the latest of the Facility Termination Date, the date on which no Investment of or Discount in respect of the Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to the Purchaser Agents, the Purchasers, the Administrator and any other Indemnified Party or Affected Person shall be paid in full: (a) COMPLIANCE WITH LAWS, ETC. The Servicer and, to the extent that it ceases to be the Servicer, Greetings shall comply (and shall cause each Originator and AGSC to comply) in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications and privileges would not have a Material Adverse Effect. (b) OFFICES, RECORDS AND BOOKS OF ACCOUNT, ETC. Servicer and, to the extent that it ceases to be the Servicer, Greetings, shall keep (and shall cause each Originator and AGSC to keep) its principal place of business and chief executive office (as such terms or similar terms are used in the applicable UCC) and the office where it keeps its records concerning the Receivables at the address of the Servicer set forth under its name on the signature page to the Agreement or, upon at least 30 days' prior written notice of a proposed change to the Administrator, at any other locations in jurisdictions where all actions reasonably requested by the Administrator to protect and perfect the interest of the Administrator (for the benefit of each Purchaser) in the Receivables and related items (including the Pool Assets) have been taken and completed. The Servicer and, to the extent that it ceases to be the Servicer, Greetings, also will (and will cause each Originator and AGSC to) maintain and implement administrative and operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable). (c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND COLLECTION POLICY. The Servicer and, to the extent that it ceases to be the Servicer, Greetings, shall (and shall cause each Originator and AGSC to), at its expense, (i) timely perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables unless the failure to so perform or comply does not involve a material portion of such Receivables, and the Seller shall have complied with its obligations with respect to such Receivables set forth in SECTION 1.4(e), and (ii) timely comply in all material respects with the applicable Credit and Collection Policies with regard to each Receivable. IV-6 (d) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as provided in the Agreement, the Servicer and, to the extent that it ceases to be the Servicer, Greetings, shall not extend (and shall not permit any Originator or AGSC to extend), the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable, or amend, modify or waive any term or condition of any related Contract in any manner that would modify the terms of any Pool Receivable. (e) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The Servicer and, to the extent that it ceases to be the Servicer, Greetings, shall not make (and shall not permit any Originator to make) any change in the character of its business or in any Credit and Collection Policy that would have a Material Adverse Effect. The Servicer and, to the extent that it ceases to be the Servicer, Greetings, shall not make (and shall not permit any Originator or AGSC to make) any other change in any Credit and Collection Policy without giving prior written notice thereof to the Administrator and each Purchaser Agent. (f) AUDITS. The Servicer and, to the extent that it ceases to be the Servicer, Greetings, shall (and shall cause each Originator and AGSC to), from time to time during regular business hours, (unless a Termination Event or Unmatured Termination Event exists) by the Administrator, Purchaser or any Purchaser Agent, permit (and cause each Originator and AGSC) the Administrator, any Purchaser, any Purchaser Agent or any agent or representative of the foregoing: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks) in its possession or under its control (or the control of AGSC or an Originator) relating to Receivables and the Related Security, including the related Contracts; and (ii) to visit its offices and properties (and the offices and property of AGSC and the Originators) for the purpose of examining such materials described in CLAUSE (i) above, and to discuss matters relating to Receivables and the Related Security or Greetings', AGSC's or any Originator's performance under the Transaction Documents or under the Contracts with any of their respective officers, employees, agents or contractors having knowledge of such matters and (iii) without limiting CLAUSES (i) and (ii) above, to engage certified public accountants or other auditors acceptable to the Servicer and the Administrator to conduct, at the Servicer's expense, a review of the Servicer's books and records with respect to such Receivables. (g) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND PAYMENT INSTRUCTIONS TO OBLIGORS. The Servicer and, to the extent that it ceases to be the Servicer, Greetings, shall not (and shall not permit any Originator or AGSC to) add or terminate any bank as a Lock- Box Bank or any account as a Lock-Box Account from those listed in SCHEDULE II to the Agreement, or make any change in its instructions to Obligors regarding payments to be made to the Servicer or any Lock-Box Account (or related post office box), unless the Administrator and a Simple Majority shall have consented thereto in writing, which consent shall not be unreasonably withheld or delayed, and the Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may request in connection therewith. Notwithstanding anything contained in this PARAGRAPH (g) IV-7 to the contrary, the Servicer may add an account as a Lock-Box Account at a Lock-Box Bank, without the consent of the Administrator and the Purchasers upon delivery to the Administrator of a Lock-Box Agreement in form and substance reasonably acceptable to the Administrator. (h) DEPOSITS TO LOCK-BOX ACCOUNTS. The Servicer shall: (i) mail, wire or otherwise transfer, or cause to be so transferred, any Collections received by it to Lock-Box Accounts not later than one Business Day after receipt thereof and (ii) instruct all Obligors (other than, for a period no longer than 120 days after the Closing Date, Kinko's) to make payments of all Receivables to one or more Lock-Box Accounts or to post office boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and amounts relating to such Receivables received in such post office boxes to be removed and deposited into a Lock-Box Account on a daily basis). Except as otherwise agreed to in writing by the Administrator and the Majority Purchasers, each Lock-Box Account shall at all times be subject to a Lock-Box Agreement. The Servicer will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock- Box Account cash or cash proceeds other than Collections. (i) REPORTING REQUIREMENTS. Greetings shall provide to the Administrator (in multiple copies, if requested by the Administrator) and each Purchaser Agent the following: (i) as soon as available and in any event within 60 days after the end of the first three quarters of each fiscal year of Greetings, balance sheets of Greetings and its consolidated Subsidiaries, each Originator, AGSC and Seller as of the end of such quarter and statements of income, retained earnings and cash flow of Greetings and its consolidated Subsidiaries, each Originator, and AGSC for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by the chief financial officer of such Person; (ii) as soon as available and in any event within 120 days after the end of each fiscal year of Greetings and of Seller, a copy of the annual report for such year for Greetings and its consolidated Subsidiaries, each Originator, and AGSC, containing financial statements for such year audited by independent certified public accountants of nationally recognized standing; (iii) as to the Servicer only, as soon as available and in any event not later than two Business Days prior to the Settlement Date, an Information Package as of the last day of such month or, within 10 Business Days of a request by the Administrator or any Purchaser Agent, an Information Package for such periods as is specified by the Administrator or such Purchaser Agent (including on a semi-monthly, weekly or daily basis); IV-8 (iv) as soon as possible and in any event within five days after becoming aware of the occurrence of each Termination Event or Unmatured Termination Event, a statement of the chief financial officer of Greetings setting forth details of such Termination Event or Unmatured Termination Event and the action that such Person has taken and proposes to take with respect thereto; (v) promptly after the sending or filing thereof, copies of all reports that Greetings sends to any of its security holders, and copies of all reports and registration statements that Greetings or any Subsidiary files with the Securities and Exchange Commission or any national securities exchange; (vi) promptly after the filing or receiving thereof, copies of all reports and notices that Greetings or any of its Affiliate files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that such Person or any of its Affiliates receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which such Person or any of its Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal liability or an event or condition that could result in the imposition of a liability on Greetings and/or any such Affiliate; (vii) at least thirty days before any change in Greetings's, any Originator's or AGSC's name or any other change requiring the amendment of UCC financing statements, a notice setting forth such changes and the effective date thereof; (viii) promptly after Greetings obtains knowledge thereof, notice of any: (A) litigation, investigation or proceeding that may exist at any time between Greetings or any of its Subsidiaries and any Governmental Authority that, if not cured or if adversely determined, as the case may be, would reasonably be expected to result in a Material Adverse Effect; (B) litigation or proceeding adversely affecting such Person or any of its Subsidiaries in which the amount involved is more than $2,000,000 and not covered by insurance or in which injunctive or similar relief is sought; or (C) litigation or proceeding relating to any Transaction Document; (ix) promptly after the occurrence thereof, notice of any Material Adverse Effect; (x) such other information respecting the Receivables or the condition or operations, financial or otherwise, of Greetings, any Originator or AGSC or any of their respective Affiliates as the Administrator or any Purchaser Agent may from time to time reasonably request; and IV-9 (xi) promptly after the occurrence thereof, notice of any material acquisition or investment by Greetings of or in any Person, business or operation. 3. SEPARATE EXISTENCE. Each of the Seller and Greetings hereby acknowledges that the Purchasers, the Purchaser Agents, the Administrator and the Liquidity Providers are entering into the transactions contemplated by this Agreement and the other Transaction Documents in reliance upon the Seller's and AGSC's identity as a legal entity separate from Greetings and its Affiliates. Therefore, from and after the date hereof, each of the Seller and Greetings shall take all steps specifically required by the Agreement or reasonably required by the Administrator to continue the Seller's and AGSC's identity as a separate legal entity and to make it apparent to third Persons that each of the Seller and AGSC is an entity with assets and liabilities distinct from those of Greetings and any other Person, and is not a division of Greetings, its Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the other covenants set forth herein, each of the Seller and Greetings shall take such actions as shall be required in order that: (a) The Seller will be a limited purpose corporation whose primary activities are restricted in its certificate of incorporation to: (i) purchasing or otherwise acquiring from the Originators, owning, holding, granting security interests or selling interests in Pool Assets, (ii) entering into agreements for the selling and servicing of the Receivables Pool, and (iii) conducting such other activities as it deems necessary or appropriate to carry out its primary activities; (b) Seller shall not engage in any business or activity, or incur any indebtedness or liability, other than as expressly permitted by the Transaction Documents; (c) Not less than one member of the Seller's Board of Directors (the "INDEPENDENT DIRECTOR") shall be an individual who is not a direct, indirect or beneficial stockholder, officer, director, employee, affiliate, associate or supplier of Greetings or any of its Affiliates. The certificate of incorporation of the Seller shall provide that: (i) the Seller's Board of Directors shall not approve, or take any other action to cause the filing of, a voluntary bankruptcy petition with respect to the Seller unless the Independent Director shall approve the taking of such action in writing before the taking of such action, and (ii) such provision cannot be amended without the prior written consent of the Independent Director; (d) The Independent Director shall not at any time serve as a trustee in bankruptcy for the Seller, Greetings or any Affiliate thereof; (e) Any employee, consultant or agent of the Seller or AGSC will be compensated from the Seller's or AGSC's (as appropriate) funds for services provided to the Seller or AGSC. Seller will not engage any agents other than its attorneys, auditors and other professionals and a servicer and any other agent contemplated by the Transaction Documents IV-10 for the Receivables Pool, which servicer will be fully compensated for its services by payment of the Servicing Fee; (f) The Seller will contract with the Servicer to perform for the Seller all operations required on a daily basis to service the Receivables Pool. The Seller will pay the Servicer the Servicing Fee pursuant to the Agreement. The Seller will not incur any material indirect or overhead expenses for items shared with Greetings (or any other Affiliate thereof) that are not reflected in the Servicing Fee. To the extent, if any, that the Seller, AGSC (or any Affiliate thereof) shares items of expenses not reflected in the Servicing Fee, such as legal, auditing and other professional services, such expenses will be allocated to the extent practical on the basis of actual use or the value of services rendered, and otherwise on a basis reasonably related to the actual use or the value of services rendered; it being understood that Greetings shall pay all expenses relating to the preparation, negotiation, execution and delivery of the Transaction Documents, including legal, agency and other fees; (g) Neither the Seller's nor AGSC's operating expenses will be paid by Greetings or any other Affiliate thereof; (h) All of the Seller's and AGSC's business correspondence and other communications shall be conducted in their respective names and on their own separate stationery; (i) The Seller's and AGSC's books and records will be maintained separately from those of Greetings and any other Affiliate thereof; (j) All financial statements of Greetings or any Affiliate thereof that are consolidated to include Seller or AGSC will contain detailed notes clearly stating that: (i) each is a special purpose corporation and a Subsidiary of Greetings, and (ii) the Originators have sold receivables and other related assets to AGSC (who has in turn sold receivables and related assets to Seller) or Seller that, in turn, has sold undivided interests therein to certain financial institutions and other entities; (k) The Seller's and AGSC's assets will be maintained in a manner that facilitates their identification and segregation from those of Greetings or any Affiliate thereof; (l) Each of the Seller and AGSC will strictly observe corporate formalities in its dealings with Greetings or any Affiliate thereof, and funds or other assets of the Seller and AGSC will not be commingled with those of Greetings or any Affiliate thereof except as permitted by the Agreement in connection with servicing the Pool Receivables. The Seller shall not maintain joint bank accounts or other depository accounts to which Greetings and/or any Affiliate thereof (other than Greetings in its capacity as the Servicer and any permitted Sub-Servicer) has independent access. Neither the Seller nor AGSC is named, and has entered into any agreement to be named, directly or indirectly, as a direct or contingent IV-11 beneficiary or loss payee on any insurance policy with respect to any loss relating to the property of Greetings or any Subsidiary or other Affiliate of Greetings. Each of the Seller and AGSC will pay to the appropriate Affiliate their respective share of the marginal increase or, in the absence of such increase, the market amount of their respective share of the portion of the premium payable with respect to any insurance policy that covers the Seller and/or AGSC and such Affiliate; (m) The Seller and AGSC will maintain arm's-length relationships with Greetings (and any Affiliate thereof). Any Person that renders or otherwise furnishes services to the Seller and/or AGSC will be compensated by the Seller or AGSC (as appropriate) at market rates for such services it renders or otherwise furnishes to the Seller or AGSC (as appropriate). Neither the Seller, AGSC nor Greetings will be or will hold itself out to be responsible for the debts of the other or the decisions or actions respecting the daily business and affairs of the other. The Seller, AGSC and Greetings will immediately correct any known misrepresentation with respect to the foregoing, and they will not operate or purport to operate as an integrated single economic unit with respect to each other or in their dealing with any other entity; and (n) Greetings shall not pay the salaries of Seller's or AGSC's employees, if any. IV-12 EXHIBIT V TERMINATION EVENTS Each of the following shall be a "TERMINATION EVENT ": (a) (i) the Seller, Greetings, any Originator, AGSC or the Servicer shall fail to perform or observe any term, covenant or agreement under the Agreement or any other Transaction Document, (ii) the Seller or the Servicer shall fail to make when due any payment or deposit to be made by it under the Agreement and such failure shall continue unremedied for one Business Day or (iii) Greetings shall resign as Servicer, and no successor Servicer reasonably satisfactory to the Administrator and the Majority Purchasers shall have been appointed; PROVIDED that at all times when Administrator is not permitted to demand that the Servicer segregate Collections pursuant to SECTION 1.4(b), no Termination Event or Unmatured Termination Event shall arise solely from the Seller's or Servicer's (whether as Greetings or as Servicer) failure to comply with the first sentence of SECTIONS 1(j) or 2(h) of Exhibit IV to this Agreement (respectively) with respect to Collections received as wire transfers, unless and until (A) during the period from the Closing Date until earlier of 120 days following the Closing Date or Kinko's makes payments on Receivables owing from it directly to a Lock-Box Account (the "INTERIM PERIOD '), the aggregate amount of such Collections held by the Servicer shall exceed $300,000, (B) during the Interim Period, the Servicer shall fail to transfer Collections received by it during any calendar week no later than the second Business Day of the next following calendar week, or (C) at all times after the Interim Period, the Servicer shall fail to transfer Collections received by it at any time the aggregate amount of such Collections during any calendar month and not previously transferred shall exceed $100,000 for such calendar month; PROVIDED, FURTHER, that with respect to the failure described in clause (a)(i) hereinabove, if such failure may be cured without any potential or actual detriment to any Purchaser, then the Seller, Greetings, any Originator, AGSC or the Servicer, as applicable, shall have ten days from the earlier of (A) such Person's knowledge of such failure and (B) notice to such Person of such failure to so cure any such failure before a Termination Event shall occur, so long as such Person is diligently attempting to effect such cure. (b) Greetings (or any Affiliate thereof) shall fail to transfer to any successor Servicer when required any rights pursuant to the Agreement that Greetings (or such Affiliate) then has as Servicer; (c) any representation or warranty made or deemed made by the Seller, Greetings, AGSC or any Originator (or any of their respective officers) under or in connection with the Agreement or any other Transaction Document, or any information or report delivered by the Seller, Greetings, AGSC or any Originator or the Servicer pursuant to the Agreement or any other Transaction Document, shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered; PROVIDED, HOWEVER, that if the representation and warranty contained in SECTIONS 1(g), 1(n) or 1(v) of EXHIBIT III to this Agreement shall prove to have been incorrect or V-1 untrue in any material respect when made or deemed made or delivered, such breach shall not constitute a Termination Event if the Seller shall have complied with its obligations with respect to such Receivable set forth in SECTION 1.4(e); PROVIDED, FURTHER, that if such breach may be cured without any potential or actual detriment to any Purchaser, then the Seller, Greetings, AGSC or any Originator, as applicable, shall have ten days from the earlier of (A) such Person's knowledge of such breach and (B) notice to such Person of such breach to so cure any such breach before a Termination Event shall occur, so long as such Person is diligently attempting to effect such cure. (d) the Seller or the Servicer shall fail to deliver the Information Package pursuant to the Agreement, and such failure shall remain unremedied for two Business Days; (e) the Agreement or any purchase or reinvestment pursuant to the Agreement shall for any reason: (i) cease to create, or the Purchased Interest shall for any reason cease to be, a valid and enforceable perfected undivided percentage ownership or security interest to the extent of the Purchased Interest in each Pool Receivable, the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, or (ii) cease to create with respect to the Pool Assets, or the interest of the Administrator (for the benefit of the Purchasers) with respect to such Pool Assets shall cease to be, a valid and enforceable first priority perfected security interest, free and clear of any Adverse Claim; (f) the Seller, Greetings, AGSC or any Originator shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller, Greetings, AGSC or any Originator seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller, Greetings, AGSC or any Originator shall take any organizational action to authorize any of the actions set forth above in this paragraph; (g) (i) (A) the Everyday Default Ratio shall exceed 5.0%, (B) the Disputed Default Ratio shall exceed 3.0%, (C) the Seasonal Default Ratio shall exceed 3.0%, (D) the Delinquency Ratio shall exceed 48% or (ii) the average for three consecutive calendar months of (A) the Everyday Default Ratio shall exceed 4.0%, (B) the Disputed Default Ratio shall exceed 2.5%, (C) the Seasonal Default Ratio shall exceed 2.5%, (D) the Delinquency Ratio shall exceed 44%, or (E) the Dilution Ratio shall exceed 7%; or (iii) Days Sales Outstanding shall exceed 100. V-2 (h) a Change in Control shall occur with respect to Seller, any Originator, AGSC or Greetings; (i) at any time (i) the sum of (A) the Aggregate Investment plus (B) the Total Reserves, exceeds (ii) the sum of (A) the Net Receivables Pool Balance at such time plus (B) the Purchasers' Share of the amount of Collections then on deposit in the Lock-Box Accounts (other than amounts set aside therein representing Discount and Fees), and such circumstance shall not have been cured within two Business Days; (j) (i) Greetings or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any of its Debt that is outstanding in a principal amount of at least $10,000,000 in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement, mortgage, indenture or instrument relating to such Debt (and shall have not been waived); or (ii) any other event shall occur or condition shall exist under any agreement, mortgage, indenture or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement, mortgage, indenture or instrument (and shall have not been waived), if, in either case: (a) the effect of such non-payment, event or condition is to give the applicable debtholders the right (whether acted upon or not) to accelerate the maturity of such Debt, or (b) any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each case before the stated maturity thereof; (k) either: (i) a contribution failure shall occur with respect to any Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA, (ii) the Internal Revenue Service shall file a notice of lien asserting a claim or claims pursuant to the Internal Revenue Code with regard to any of the assets of Seller, any Originator, AGSC, Greetings or any ERISA Affiliate and such lien shall have been filed and not released within 10 days, or (iii) the Pension Benefit Guaranty Corporation shall, or shall indicate its intention in writing to the Seller, any Originator, AGSC, Greetings or any ERISA Affiliate to, either file a notice of lien asserting a claim pursuant to ERISA with regard to any assets of the Seller, any Originator, AGSC, Greetings or any ERISA Affiliate or terminate any Benefit Plan that has unfunded benefit liabilities, or any steps shall have been taken to terminate any Benefit Plan subject to Title IV of ERISA so as to result in any liability in excess of $1,000,000 and such lien shall have been filed and not released within 10 days; (l) one or more final judgments for the payment of money shall be entered against the Seller or (ii) one or more final judgments for the payment of money in an amount in excess of $20,000,000, individually or in the aggregate, shall be entered against the Servicer on claims not covered by insurance or as to which the insurance carrier has denied its responsibility, and such judgment shall continue unsatisfied and in effect for sixty (60) consecutive days without a stay of execution; V-3 (m) the "Receivables Sale Termination Date" under and as defined in the Receivables Sale Agreement shall occur under the Receivables Sale Agreement or any Originator shall for any reason (other than as a result of or in connection with its merger into, or its transfer of all or substantially all of its assets or business to, another Originator) cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to AGSC under the Receivables Sale Agreement; (n) the "Purchase and Sale Termination Date" under and as defined in the Purchase and Sale Agreement shall occur under the Purchase and Sale Agreement or any Originator shall for any reason (other than as a result of or in connection with its merger into, or its transfer of all or substantially all of its assets or business to, another Originator) cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to AGSC under the Purchase and Sale Agreement; (o) the "Sale and Contribution Termination Date" under and as defined in the Sale and Contribution Agreement shall occur under the Sale and Contribution Agreement or AGSC or any Originator shall for any reason (other than as a result of or in connection with its merger into, or its transfer of all or substantially all of its assets or business to, another Originator) cease to transfer, or cease to have the legal capacity to transfer, or otherwise be incapable of transferring Receivables to the Seller under the Sale and Contribution Agreement; (p) Moody's or Standard & Poor's shall request any amendment, supplement or other modification of the Agreement or any other Transaction Document which is not made within 10 Business Days after the applicable Purchaser Agent has provided notice thereof to the parties hereto; or (q) the amount of dilutions recorded on any Information Package (i) with respect to Receivables originated by any Originator other than Plus Mark, Inc., for any of (a) seasonal returns, (b) advertising allowances or (c) volume rebates or (ii) with respect to Receivables originated by Plus Mark, Inc., for any of the Plus Mark, Inc. specific factors, exceeds the reserves or liabilities reported on the immediately prior Information Package related to such dilution category. V-4 SCHEDULE I CREDIT AND COLLECTION POLICY Schedule I-1 SCHEDULE II LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS Lock-Box Bank Lock-Box Account ------------- -------- ------- Schedule II-1 SCHEDULE III TRADE NAMES Organizational Name Trade Names / Fictitious Names - ------------------- ------------------------------ Schedule III-1 ANNEX A TO RECEIVABLES PURCHASE AGREEMENT FORM OF INFORMATION PACKAGE Annex A-1 ANNEX B TO RECEIVABLES PURCHASE AGREEMENT FORM OF PURCHASE NOTICE Annex B-1 ANNEX C TO RECEIVABLES PURCHASE AGREEMENT FORM OF ASSUMPTION AGREEMENT Annex C-1 ANNEX D TO RECEIVABLES PURCHASE AGREEMENT FORM OF TRANSFER SUPPLEMENT Annex D-1 ANNEX E TO RECEIVABLES PURCHASE AGREEMENT FORM OF PAYDOWN NOTICE Annex D-1 EX-10.II.A.I 5 l94460aexv10wiiwawi.txt EX-10(II)(A)(I) Exhibit (10)(ii)(A)(i) SHAREHOLDERS' AGREEMENT This SHAREHOLDERS' AGREEMENT (this "Agreement") dated as of November 19, 1984 among the individuals, fiduciaries and charitable organizations which have become signatories hereto as permitted herein (as "Participating Shareholders" described in Section 1.3 hereof) and American Greetings Corporation, an Ohio corporation (the "Corporation"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Participating Shareholders own of record or beneficially (including as beneficial owners of certain voting trust certificates) Class B Common Shares, par value $1 per share ("Class B Common Shares"), of the Corporation; and WHEREAS, the Participating Shareholders desire to ensure the continued independence of the Corporation by subjecting the Class B Common Shares now owned or hereafter acquired by them to certain mutually agreeable limitations; and WHEREAS, the Board of Directors of the Corporation has approved certain transactions as a result of which the terms of the Class B Common Shares are proposed to be modified to impose certain restrictions on the transfer of such Shares; NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration had and received, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, hereby agree as follows: 2 1. Definitions. ------------ 1.1 The term "Family Member" shall mean Jacob Sapirstein, founder of the Corporation, his lineal descendants by blood or by legal adoption prior to age 18, spouses of such descendants, the lineal descendants of any such spouses, the spouses of any such spouses' lineal descendants and trusts (including voting trusts) exclusively for the benefit of any such persons. In applying the term "exclusively" for purposes of this Agreement, the interest of any Charity that is a Participating Shareholder (or does not fail to become a Participating Shareholder at the time provided in Section 1.3 hereof) or any contingent trust interest having at the time of transfer an actuarial value (under valuation tables then used for federal gift tax purposes for gifts between private individuals) of not more than 5 percent of the value of the assets of the trust or an unexercised power of appointment shall be ignored. 1.2 The term "Charity" shall mean an organization contributions to which are deductible for federal income, estate or gift tax purposes. 1.3 The term "Participating Shareholder" shall mean any Family Member or Charity which has signed or hereafter signs a counterpart of this Agreement, delivered a copy thereof to all other Participating Shareholders (or to the Depository (as defined in Section 7.1 hereof)) and is bound 3 by the terms hereof. No Participating Shareholder shall be deemed to forfeit such status upon divorce, remarriage or adoption. In the case of a trust (other than a voting trust, which is governed by Section 6 hereof) exclusively for the benefit of a Family Member or Members, the Trustee and all adult beneficiaries having a current trust interest (as well as all ascertainable Charitable beneficiaries having a current trust interest) shall sign this Agreement as Participating Shareholders if the trust is to be considered a Participating Shareholder. During his lifetime, the donor of a trust that is revocable by the donor alone shall be considered the only beneficiary thereof so long as such trust is so revocable. At such time, if any, as the trust shall have an adult beneficiary having a current trust interest or an ascertainable Charitable beneficiary having a current trust interest who or which shall fail or be unable to sign this Agreement for a period of 30 days following notification to such beneficiary of the terms of this Agreement by any Participating Shareholders or by the Depository, the trust shall thereupon cease to be a Participating Shareholder and Section 3 of this Agreement shall then apply as if the Class B Common Shares held by the trust were then to be transferred. In the case of a minor or incompetent beneficiary, the Trustee (or a Custodian under the applicable Uniform Gifts to Minors Act or the practical equivalent thereof in the case of Class B Common 4 Shares held under such Act or equivalent) and a parent (in the case of a minor) or legal guardian (in the case of a minor or an incompetent) of the beneficiary shall sign on his behalf if the trust (or custodial arrangement) is to be considered a Participating Shareholder. In the case of a minor or incompetent beneficiary, the Trustee or custodian shall in any event be obligated to secure the beneficiary's legally binding signature (or that of his legal guardian) to this Agreement prior to an actual distribution of Class B Common Shares, and if such signature is not so secured such beneficiary shall not be considered a Participating Shareholder and such distribution shall be subject to Section 3 of this Agreement. 2. Permitted Transfers. -------------------- 2.1 Any Participating Shareholder may at any time sell, give or otherwise transfer Class B Common Shares or any interest therein to any Family Member who is a Participating Shareholder. Any Participating Shareholder may at any time give Class B Common Shares or any interest therein to a Charity that is a Participating Shareholder. Any Class B Common Shares so transferred shall remain subject to this Agreement in the hands of the transferee. 2.2 Any Participating Shareholder may pledge Class B Common Shares as security for a loan if the pledgee (being competent to do so) agrees in writing to be bound by this Agreement and to receive such Class B Common Shares subject 5 to this Agreement and, in the event of default on such loan and levy upon the collateral, to offer such Class B Common Shares to the Participating Shareholders other than the pledgor in accordance with the procedures specified in Section 4 hereof, and to convert into Class A Common Shares, par value $1 per share ("Class A Common Shares"), of the Corporation in accordance with the Articles of Incorporation of the Corporation any Class B Common Shares not accepted by such Participating Shareholders. 3. Transfers for Which First Refusal Procedure is ---------------------------------------------- Required. --------- 3.1 Any Participating Shareholder who desires to sell, give or otherwise transfer Class B Common Shares (or the Class A Common Shares into which they are convertible) or any interest therein otherwise than as provided in Section 2 hereof shall first offer to sell or exchange such Class B Common Shares to or with the other Participating Shareholders and the Corporation. Such offer shall be made, and may be accepted, in accordance with the procedures specified in Section 4 hereof. During a period of 30 days following the last to expire of the rights of the other Participating Shareholders and the Corporation, the Participating Shareholder desiring to transfer such Shares or any interest therein shall have the right, in accordance with the Articles of Incorporation of the Corporation, to convert any Class B Common Shares not acquired by any other Participating Shareholder or the 6 Corporation into Class A Common Shares and may transfer such Class A Common Shares or any interest therein free of the limitations provided for herein, but only to the person to whom such transfer was originally proposed to be made and only on terms (except for price in the case of a gift) no more favorable to such person than those upon which the Class B Common Shares were offered to the other Participating Shareholders. The Participating Shareholder desiring to transfer shares may not transfer the Class B Common Shares not acquired by any other Participating Shareholder without first converting them into Class A Common Shares, and if such conversion is not accomplished within such 30-day period, such Class B Common Shares shall continue to be subject to the provisions of this Agreement. 3.2 Any Participating Shareholder who desires to convert Class B Common Shares to Class A Common Shares (except as required by Section 3.1 or 3.3 hereof) in accordance with the Articles of Incorporation of the Corporation shall first offer to transfer such Class B Common Shares to the other Participating Shareholders and the Corporation in accordance with the procedures specified in Section 4 hereof. During a period of 30 days following the last to expire of the rights of the other Participating Shareholders and the Corporation, the Participating Shareholder desiring to convert Class B Common Shares may do so, but only to the extent such Class B Common Shares 7 were not accepted by any other Participating Shareholder or the Corporation, and the Class A Common Shares into which such Class B Common Shares are converted shall be free from the limitations provided for herein. 3.3 Upon the death of a Participating Shareholder, any Class B Common Shares then owned by such Participating Shareholder may be transferred in accordance with Section 2.1 hereof to any other Participating Shareholder by the personal representative of the estate of such deceased Participating Shareholder (or by the trustee of any trust or by any other person (e.g., the trustee of a profit sharing trust) by reason of the death of such deceased Participating Shareholder). To the extent that any such personal representative, trustee or other person is required or desires to transfer any Class B Common Shares (or the Class A Common Shares into which they are convertible) owned by a deceased Participating Shareholder, or any interest therein, otherwise than as permitted by Section 2.1 hereof, such personal representative, trustee or other person shall offer such Class B Common Shares to the other Participating Shareholders and the Corporation in accordance with the procedures specified in Section 4 hereof. In the case of any Class B Common Shares that are so offered to the other Participating Shareholders and the Corporation, upon completion of the procedures specified in Section 4 hereof, those Class B Common Shares not accepted 8 by any other Participating Shareholder or the Corporation shall, in accordance with the Articles of Incorporation of the Corporation, be converted into Class A Common Shares, and thereafter such Class A Common Shares may be transferred to the designated recipient thereof, free of the limitations provided for herein. Each of the Participating Shareholders who is a natural person shall take all steps appropriate to ensure that testamentary documents providing for implementation upon such Participating Shareholder's death of the foregoing procedures are in effect at all times after the date hereof. 4. First Refusal Procedures. ------------------------- 4.1 A Participating Shareholder, the personal representative of the estate of a deceased Participating Shareholder, the trustee of any trust agreement of which a deceased Participating Shareholder is donor (or any other person in possession of Class B Common Shares which are to pass by reason of the death of a Participating Shareholder), or a pledgee who is required by Section 2.2 or Section 3 hereof to offer Class B Common Shares to other Participating Shareholders and the Corporation (an "Offeror") shall deliver to each of the other participating Shareholders, the Corporation and the Depository a written notice, dated the date on which it is sent, containing the following information: 9 (a) the number of Class B Common Shares proposed to be transferred (after conversion) or converted (the "Offered Shares"); (b) whether the Offeror proposes to transfer under Section 3.1 hereof or convert under Section 3.2 hereof the Offered Shares; (c) if the Offeror proposes to transfer the Offered Shares under Section 3.1 hereof, the name and address of each proposed transferee and the price per share, if any, payable to the Offeror upon such transfer; (d) the date on which the Offeror desires to carry out the proposed transfer or conversion of the Offered Shares, which shall be consistent with the procedures provided for in this Agreement (generally such date should be not less than 20 nor more than 50 business days after the date of such notice). If the Offeror proposes to make a transfer under Section 3.1 hereof, such notice shall be accompanied by written evidence that any price per share payable to the Offeror as specified in such notice is being offered for the Offered Shares in good faith by the proposed transferee. 4.2 The other Participating Shareholders shall thereupon have the right and option to acquire the Offered Shares, or any of them, for the consideration specified in Section 4.3 hereof. Such Participating Shareholders may 10 exercise such right, at any time before the expiration of 7 business days after such written notice and accompanying evidence (if applicable) have been given to the last of such Participating Shareholders and the Corporation, in proportion to the respective holdings of Class B Common Shares of each such Participating Shareholder compared to the aggregate holdings of all such Participating Shareholders; and if any such Participating Shareholder entitled thereto fails to exercise such Participating Shareholder's right to acquire the Offered Shares to its full extent, then such right may be exercised (to the extent that it has not been exercised by such Participating Shareholder) within a further period of 5 business days by the other such Participating Shareholders, in whatever proportion they may agree upon and, if they cannot agree, in proportion to the respective holdings of each compared to the aggregate holdings of all of them; and if the Participating Shareholders fail to exercise their rights to acquire the Offered Shares to their full extent, then such rights may be exercised (to the extent of any Offered Shares remaining) within a further period of 3 business days by the Corporation. The right to acquire Offered Shares may be exercised by a Participating Shareholder or by the Corporation by the delivery of written notice to the Offeror and the Depository, dated the date it is sent, specifying the number of Class B Common Shares such 11 Participating Shareholder or the Corporation will acquire and the consideration such Participating Shareholder or the Corporation will deliver in accordance with Section 4.3 hereof. In applying the term "holdings" in this Section 4.2 in the case of Class B Common Shares owned by a trust (other than a voting trust), the trust shall be considered to own the holding; except that, if the trustee fails to any extent to exercise a right to acquire Offered Shares, beneficiaries of the trust who are Participating Shareholders owning more than 50% of either the then current income or the remainder interest in the trust, and desiring to exercise such right shall be considered to own the holding in such proportions as such beneficiaries shall agree upon. 4.3 Class B Common Shares accepted by a Participating Shareholder or the Corporation in accordance with Section 4.2 hereof may be acquired, at the election of such purchasing Participating Shareholder or the Corporation, as the case may be, for cash, Class A Common Shares or a combination of such considerations as follows: (a) to the extent such purchasing Participating Shareholder or the Corporation elects that the price be paid in Class A Common Shares, the number of Class A Common Shares that shall be delivered in exchange shall be equal to the number of Class B Common Shares to be exchanged, 12 (b) to the extent such purchasing Participating Shareholder or the Corporation elects that the price shall be paid in cash, the cash price for Class B Common Shares shall be equal to the average of the last sale price (if available) or, if not, the midpoints of the bid and asked prices, of the Class A Common Shares in the NASDAQ National Market (or in the principal national securities exchange or market on which the Class A Common Shares may then be traded) on the 5 trading days preceding the date of the Offeror's notice sent pursuant to Section 4.1 hereof, as reported in the Wall Street Journal (or, if such periodical is not then published, the most comparable periodical then being published) or, in the case of a transfer under Section 3.1 hereof, such higher price as may have been specified in such notice. 4.4 The sale or exchange contemplated by these procedures shall be closed at the principal corporate trust office of the Depository, by delivery of a certified, cashier's or bank check for the amount of any cash payable and the delivery of certificates representing the Class B Common Shares and any Class A Common Shares (endorsed in blank with signature guaranteed), on the day which is 19 business days after the date of the notice given pursuant to Section 4.1 hereof or on such later day as all 13 applicable legal requirements pertaining to such sale or exchange shall have been met. 5. Changes in Class B Common Shares. --------------------------------- 5.1 In the event of any change in the terms of the Class B Common Shares, or any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Corporation, or any merger, reorganization, consolidation or other corporate transaction having an effect similar to the foregoing, the provisions of this Agreement shall continue to apply to the Class B Shares of the Corporation or any securities of any corporation issued in lieu thereof or with respect thereto subject, however, to such equitable adjustment, if any, as may be necessary to reflect any change in the relative rights and privileges of the Class A and Class B Common Shares. 5.2 Without limiting the generality of Section 5.1, the Participating Shareholders acknowledge that the Articles of Incorporation of the Corporation may be modified (by amendment or merger) to impose restrictions on transfer and conversion of the Class B Common Shares in terms substantially similar to those set forth in Exhibit A to this Agreement. The Participating Shareholders shall vote the Class A Common Shares and Class B Common Shares held by them (as voting trustee or otherwise) in favor of such modification, and the provisions of this Agreement 14 shall continue to apply without adjustment to the Class B Common Shares of the Corporation (or any shares of any corporation issued in lieu thereof or with respect thereto) owned by them if such modification becomes effective. 6. Reconciliation With Voting Trusts. ---------------------------------- 6.1 Certain of the Participating Shareholders are now holders or beneficial owners of voting trust certificates issued pursuant to a Voting Trust Agreement dated December 9, 1976. The parties to such agreement hereby agree to terminate such agreement effective upon the taking effect of provisions of the Articles of Incorporation of the Corporation substantially to the effect set forth in Exhibit A hereto. Unless and until such provisions become effective, such agreement shall remain in full force and effect. 6.2 Certain of the Participating Shareholders are now holders or beneficial owners of voting trust certificates issued pursuant to a Voting Trust Agreement dated July 22, 1984 between Irving I. Stone, Judith S. Weiss and Morry Weiss. Such agreement shall not be affected by this Agreement and shall remain in full force and effect. 6.3 For purposes of this Agreement, voting trust certificates issued pursuant to the voting trust agreements referred to in Sections 6.1 and 6.2 shall be treated as certificates for Class B Common Shares, and the Class B Common Shares represented thereby shall be included in the 15 Class B Common Shares to which this Agreement relates, so that any Participating Shareholder (or the personal representative of the estate of a deceased Participating Shareholder, the trustee of any trust agreement or any other person in possession of Class B Common Shares which are to pass by reason of the death of a Participating Shareholder) who desires to transfer any of such voting trust certificates (other than as permitted by Section 2.1) or to convert into Class A Common Shares any of the Class B Common Shares represented thereby shall do so only after compliance with the procedures set forth herein. Any notices required to be given pursuant to Section 4.1 and 4.2 hereof by or to an Offeror who is a holder of any of such voting trust certificates shall be given simultaneously, and the periods specified in such Sections shall run concurrently, with the corresponding notices and periods provided for in Section 6 of each such voting trust agreement unless the group of participating Shareholders to whom an offering is required to be made under this Agreement differs from the group to whom such offer is required to be made under either such voting trust agreement, in which case the offering procedures required by this Agreement shall commence only upon completion of the procedures thereunder and shall apply only to Class B Common Shares not theretofore accepted by a Participating 16 Shareholder pursuant to the procedures applicable under such voting trust agreement. 6.4 Nothing herein shall prevent any of the Participating Shareholders from depositing Class B Common Shares pursuant to the above-described voting trust agreements or pursuant to such other voting trust agreements as they may wish to enter into which are consistent with the terms of this Agreement and to which Class B Common Shares are permitted to be transferred pursuant to Section 2.1 of this Agreement. 7. Compliance Provisions. ---------------------- 7.1 Subject to the proviso stated below in this Section 7.1, certificates representing the Class B Common Shares owned of record or beneficially by the Participating Shareholders at the date of this Agreement have been deposited with AmeriTrust Company National Association (the "Depository"), and there has been marked on the face or the back of each such certificate a legend to the following effect: The Class B Common Shares, par value $1 per share, of American Greeting Corporation (the "Corporation") represented by this Certificate are subject to a Shareholders' Agreement dated as of November 19, 1984 and originally entered into by the Corporation and Irving I. Stone, Morris S. Stone, Harry H. Stone, Morry Weiss and other parties. Pursuant to such Agreement, such Shares may not be sold, given or otherwise transferred or converted into Class A Common Shares, par value $1 per share, of the Corporation (except for transfers to certain persons specified in such Agreement) except upon compliance with certain procedures, 17 including, without limitation, offer of such Shares to certain other shareholders of the Corporation and the Corporation and, in certain situations, conversion into Class A Common Shares. The Corporation will mail to the holder hereof a copy of such Agreement without charge within five days after receipt of a written request therefor. Each Participating Shareholder shall, to the extent legally able to do so, forthwith upon becoming a Participating Shareholder by signing this Agreement and thereafter upon becoming the record or beneficial owner of any other Class B Common Shares, cause the certificates representing the same to be deposited with the Depository for application of such legend, and the certificates representing all Class B Common Shares now or hereafter owned (of record or beneficially) by any of the Participating Shareholders shall continue to bear such legend and be held by the Depository until such Class B Common Shares are converted into Class A Common Shares in accordance with this Agreement or, if earlier, the termination of this Agreement in accordance with the terms hereof; PROVIDED, HOWEVER, that any Participating Shareholder may cause possession of such certificates to be given to or retained by any pledgee to be held as security in accordance with Section 2.2 hereof upon delivery to the Depository of the written agreement of the pledgee referred to in such Section; and PROVIDED FURTHER, that any Participating Shareholder owning any Class B Common Shares held by a pledgee at the time such Participating Shareholder becomes a party to this Agreement need only use reasonable 18 efforts to cause such legend to be applied and to cause such pledgee to agree in writing to be bound by the terms of this Agreement, and if such Participating Shareholder is unable to cause such results the certificates representing such Class B Common Shares may be retained by such pledgee without his signing this Agreement and without such legend being applied. Each Participating Shareholder shall at all times keep the Depository advised of the number of Class B Common Shares such Participating Shareholder owns. 7.2 The further rights and duties of the Depository shall be governed by the terms and conditions of escrow contained in Exhibit B attached hereto. 8. Amendment and Termination. -------------------------- This Agreement may be amended or the term thereof extended only by a written instrument referring specifically to this Agreement and signed by all of the Participating Shareholders, provided, however, that (a) any amendment to this Agreement for the purpose of including additional persons among those to whom transfer of Class B Common Shares may be made pursuant to Section 2.1 hereof, (b) any amendment to change the Depository or to change the terms and conditions of escrow set forth in Exhibit B hereto, (c) any other amendment (not extending the term hereof) if no Participating Shareholder files written objection thereto with the Depository within 30 days after notice thereof (which notice shall include a statement that Participating 19 Shareholders have a right to file a written objection) is given to all Participating Shareholders, and (d) any instrument of termination, need only be signed by Participating Shareholders owning beneficially 75% or more of the Class B Common Shares owned by all of the Participating Shareholders. This Agreement, unless extended in accordance with the immediately preceding sentence, shall terminate on December 31, 2014. This Agreement, moreover, shall terminate in any event 21 years after the death of the last to die of the lineal descendants of Jacob Sapirstein living on the date of this Agreement. 9. Miscellaneous. ------------- 9.1 Notwithstanding any provision hereof to the contrary, Class B Common Shares may be sold to the Corporation at any time it may offer to purchase the same, free of the limitations provided for in this Agreement. 9.2 For purposes of this Agreement, ownership of Class B Common Shares shall include ownership through the Employees' Retirement Profit Sharing Plan of the Corporation, but only through the Common Stock Fund held thereunder, and each separate account in which such shares are held shall be considered a separate trust; provided, however, that notwithstanding Section 7.1 hereof, certificates representing Class B Common Shares held by the Trustee for the benefit of participants in such plan shall remain in the custody of such Trustee. 20 9.3 As used herein, the term "spouse" includes a widow or a widower. 9.4 As used herein, the term "current trust interest" means the interest of any beneficiary of a trust to whom interest or principal is currently distributable either in the discretion of the trustee or otherwise. 9.5 As used herein, the term "business day" means any day other than Saturday, Sunday or a federal holiday, and shall consist of the time period from 12:01 a.m. through 12:00 midnight, Eastern Standard Time. In computing any time period for purposes of this Agreement, the date of the event which begins the running of such time period shall be included except that if such event occurs on other than a business day such period shall begin to run on and shall include the first business day thereafter. 9.6 As used herein, the term "personal representative" means the executor, administrator or other personal representative of the estate of a deceased Participating Shareholder. 9.7 All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed given when delivered in hand or 72 hours after being deposited in a United States Post Office, postage prepaid, registered or certified mail, and addressed to the addressee at the address corresponding to such addressee's signature below, or to such other address 21 as may have been specified by such addressee to the Depository. 9.8 This Agreement shall inure to the benefit of and be binding upon the Participating Shareholders and the Corporation, any pledgee who agrees to be bound hereby pursuant to Section 2.2 hereof and their respective successors, heirs, personal representatives, legatees and assigns. All references herein to the Corporation shall include any other corporation to which this Agreement may be assigned, by operation of law or otherwise, in connection with any merger, reorganization, consolidation or other corporate transaction having an effect similar to the foregoing, and all references herein to the Articles of Incorporation of the Corporation shall refer to the Charter of any such other corporation, however denominated. 9.9 If any provision of this Agreement shall be found unenforceable by any court of competent jurisdiction to any extent, such holding shall not invalidate or render unenforceable such provision to any greater extent or to render unenforceable or invalidate any other provision hereof. 9.10 This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument, without production of the others. 22 9.11 This Agreement shall be construed in accordance with the internal substantive laws of the State of Ohio or such other jurisdiction as may at the time of construction be the jurisdiction of incorporation of the issuer of the Class B Common Shares. IN WITNESS WHEREOF, the Participating Shareholders and the Corporation have executed this Agreement or caused this Agreement to be executed in their respective names, as the case may be, all as of the date and year first above written. Signature Address --------- ------- /s/ Irving I. Stone 10500 American Road - ------------------------ Cleveland, Ohio 44144 Irving I. Stone /s/ Morris S. Stone 10500 American Road - ------------------------ Cleveland, Ohio 44144 Morris S. Stone /s/ Harry H. Stone 1540 Leader Building - ------------------------ Cleveland, Ohio 44114 Harry H. Stone /s/ Morry Weiss 10500 American Road - ------------------------ Cleveland, Ohio 44144 Morry Weiss /s/ Judith S. Weiss 4500 University Parkway - ------------------------ University Heights, Ohio 44118 Judith S. Weiss /s/ Judith S. Weiss 4500 University Parkway - ------------------------ University Heights, Ohio 44118 Judith S. Weiss, as Trustee under Revocable Trust Agreement originally dated April 21, 1947 for the benefit of Irving I. Stone 23 AMERITRUST COMPANY Corporate Trust Division NATIONAL ASSOCIATION, 900 Euclid Avenue as Trustee under Cleveland, Ohio 44101 Trust Agreement dated February 16, 1968 for the benefit of Morris S. Stone By /s/ , VP -------------------------------- Title: Vice President And /s/ ------------------------------- Title: Trust Officer /s/ Harry H. Stone 1540 Leader Building - ----------------------------------- Cleveland, Ohio 44114 /s/ Douglas B. Rose - ----------------------------------- Harry H. Stone and Douglas B. Rose, as successor Trustees under Trust Agreement dated April 21, 1947 for the benefit of Harry S. Stone /s/ Irving I. Stone - ----------------------------------- Irving I. Stone, as Trustee under the Voting Trust Agreement referred to in Sections 6.1 and 6.2 hereof /s/ Morris S. Stone - ----------------------------------- Morris S. Stone, as Trustee under the Voting Trust Agreement referred to in Section 6.1 hereof /s/ Morry Weiss - ----------------------------------- Morry Weiss as Trustee under the Voting Trust Agreement referred to in Section 6.2 hereof /s/ Judith S. Weiss - ----------------------------------- Judith S. Weiss, as Trustee under the Voting Trust Agreement referred to in Section 6.2 hereof 24 AMERICAN GREETINGS 10500 American Road Cleveland, Ohio 44144 By /s/ Morry Weiss ------------------------------ Title: President SHAREHOLDERS' AGREEMENT ----------------------- COUNTERPART SIGNATURE PAGE -------------------------- The undersigned, intending to become a party to and to be bound by the Shareholders' Agreement dated as of November 19, 1984 (the "Agreement") pertaining to Class B Common Shares, par value $1 per share, of American Greetings Corporation, an Ohio Corporation, hereby executes this counterpart signature page of the Agreement as of the 19th day of November, 1984. /s/ Jacob Sapirstein ----------------------------- JACOB SAPIRSTEIN, for himself individually and as Trustee under the Voting Trust Agreement referred to in Section 6.1 of the Agreement AmeriTrust Company National Association, by its duly authorized officers, hereby acknowledges receipt of an executed counterpart of the foregoing Shareholders' Agreement and agrees to act as Depository thereunder. AMERITRUST COMPANY NATIONAL ASSOCIATION, as Depository By /s/ --------------------------- Title: Vice President And /s/ -------------------------- Title: Trust Officer Address: Corporate Trust Division 900 Euclid Avenue Cleveland, Ohio 44101 EXHIBIT A --------- FOURTH: The total number of shares of stock which the Corporation shall have authority to issue is 54,500,000, consisting of 50,000,000 shares of Class A Common Stock, par value $1 per share ("Class A Common Stock"), and 4,500,000 shares of Class B Common Stock, par value $1 per share ("Class B Common Stock"). The powers, rights, privileges, qualifications, limitations and restrictions of each class of common stock are as follows: 1. Each share of Class A Common Stock shall be entitled to one vote upon all matters presented to stockholders. Each share of Class B Common Stock shall be entitled to ten votes upon all matters presented to stockholders. Any proposal to amend this Certificate of Incorporation to increase the authorized number of shares of Class A Common Stock or the authorized number of shares of Class B Common Stock shall require for its adoption the affirmative vote of the holders of at least two-thirds of the then outstanding shares of Class A Common Stock, voting as a class, and the affirmative vote of at least two-thirds of the then outstanding shares of Class B Common Stock, voting as a class. 2. (a) Subject to and upon compliance with the provisions of this Article FOURTH, the shares of Class B Common Stock shall be convertible at the option of the holders thereof into shares of Class A Common Stock on the basis of one share of Class A Common Stock for each share of Class B Common Stock so converted. (b) The holders of shares of Class B Common Stock may exercise the conversion privilege in respect thereof by delivering to any Transfer Agent of the Class B Common Stock (i) the certificate for the shares of Class B Common Stock to be converted and (ii) written notice that the holder elects to convert such shares and stating the name or names (with address) in which the certificate for the shares of Class A Common Stock is to be issued. Conversion shall be deemed to have been effected on the date when such delivery is made, and such date is referred to herein as the "conversion date." On the conversion date or as promptly thereafter as practicable the Corporation shall issue and deliver to the holder of the shares of Class B Common Stock surrendered for conversion, or on his written order, a certificate for the number of full shares of Class A Common Stock issuable upon the conversion of such shares of Class B Common Stock. The person in whose name the 2 stock certificate is to be issued shall be deemed to have become a holder of shares of Class A Common Stock of record on the conversion date. The Corporation hereby reserves and shall at all times reserve and keep available, out of its authorized and unissued Class A Common Stock, for the purpose of effecting the conversion of the Class B Common Stock, such number of its duly authorized shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock. Shares of Class B Common Stock which are converted into shares of Class A Common Stock as provided in this Article FOURTH shall not be reissued. 3. (a) No person (other than the Corporation) holding shares of Class B Common Stock (herein referred to as a "Class B Holder") may transfer, and the Corporation shall not register the transfer of, shares of Class B Common Stock, whether by sale, assignment, gift, bequest, appointment or otherwise, except to the Corporation or a Permitted Transferee of such Class B Holder. (b) For purposes of this paragraph (3), the term "Permitted Transferee" shall have the following meaning: (i) in the case of a Class B Holder who is a natural person holding record and beneficial ownership of the shares of Class B Common Stock in question, "Permitted Transferee" means: (A) a grandparent of such Class B Holder, (B) a lineal descendant of a grandparent of such Class B Holder, (C) a spouse of a lineal descendant of a grandparent of such Class B Holder, (D) a lineal descendant of any spouse of a lineal descendent of a grandparent of such Class B Holder or the spouse of any such spouse's lineal descendant, (E) a gratuitous transferee that is an organization contributions to which are deductible for federal income, estate or gift tax purposes (any such gratuitous transferee being herein referred to as a "Charitable Organization"), and (F) the trustee of a trust (including, without limitation, a voting trust) for the exclusive benefit of one or more of the foregoing if such trust by its terms prohibits transfer of shares of Class B Common Stock to persons other than Permitted Transferees referred to in the foregoing subclauses of this clause (i); (ii) in the case of a Class B Holder holding the shares of Class B Common Stock in question as trustee pursuant to a trust other than a trust described in clause (iii) below, "Permitted Transferee" means (A) the person 3 who established such trust, and (B) a Permitted Transferee of such person determined pursuant to clause (i) above; (iii) in the case of a Class B Holder holding the shares of Class B Common Stock in question as trustee pursuant to a trust which was irrevocable on the record date, for determining the persons to whom the Class B Common Stock is first distributed by the Corporation, "Permitted Transferee" means any person to whom or for whose benefit principal may be distributed either during or at the end of the term of such trust whether by power of appointment or otherwise; (iv) in the case of a Class B Holder holding record (but not beneficial) ownership of the shares of Class B Common Stock in question as nominee for the person who was the beneficial owner thereof on the record date, "Permitted Transferee" means such beneficial owner and any Permitted Transferee of such beneficial owner determined pursuant to clause (i), (ii), (iii), (v) or (vi) hereof, as the case may be; (v) in the case of a Class B Holder which is a partnership holding record and beneficial ownership of the shares of Class B Common Stock in question, "Permitted Transferee" means any partner of such partnership; (vi) in the case of a Class B Holder which is a corporation (other than a Charitable Organization described in subclause (E) of clause (i) above) holding record and beneficial ownership of the shares of Class B Common Stock in question, "Permitted Transferee" means any stockholder of such corporation receiving shares of Class B Common Stock through a dividend or redemption or through a distribution made upon liquidation of such corporation, and the survivor of a merger or consolidation of such corporation; and (vii) in the case of a Class B Holder which is the estate of a deceased Class B Holder, or which is the estate of a bankrupt or insolvent Class B Holder, and provided such deceased, bankrupt or insolvent Class B Holder, as the case may be, held record and beneficial ownership of the shares of Class B Common Stock in question, "Permitted Transferee" means a Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder as determined pursuant to clause (i), (v) or (vi) above, as the case may be. (c) Notwithstanding anything to the contrary set forth herein, any Class B Holder may pledge such Holder's shares of Class B Common Stock to a pledgee pursuant to a bona fide pledge of such shares as collateral security for indebtedness due to the pledgee, provided that such shares 4 shall not be transferred to or registered in the name of the pledgee and shall remain subject to the provisions of this paragraph 3. In the event of foreclosure or other similar action by the pledgee, such pledged shares of Class B Common Stock may only be transferred to a Permitted Transferee of the pledgor or converted into shares of Class A Common Stock, as the pledgee may elect. (d) For purposes of this paragraph 3: (i) the relationship of any person that is derived by or through legal adoption prior to age 18 shall be considered a natural one; (ii) the term "spouse" shall include a widow or widower; (iii) each grandparent of any joint owner of particular shares of Class B Common Stock shall be considered a grandparent of all joint owners of such shares; (iv) a minor for whom shares of Class B Common Stock are held pursuant to a Uniform Gifts to Minors Act or similar law shall be considered a Class B Holder of such shares; (v) in applying the term "exclusive benefit," a contingent trust interest having at the time of transfer an actuarial value (under actuarial tables then used for federal gift tax purposes for gifts between private individuals) of not more than five percent of the value of the assets of the trust shall be ignored; and (vi) unless otherwise specified, the term "person" means both natural persons and legal entities. (e) Any purported transfer of shares of Class B Common Stock not permitted by this Article FOURTH shall be void and of no effect and the purported transferee shall have no rights as a stockholder of the Corporation and no other rights against or with respect to the Corporation. The Corporation may, as a condition to the transfer or the registration of transfer of shares of Class B Common Stock to a purported Permitted Transferee, require the furnishing of such affidavits or other proof as it deems necessary to establish that such transferee is a Permitted Transferee. (f) The Corporation shall conspicuously note on the certificates representing shares of Class B Common Stock the restrictions on transfer and registration of transfer imposed by this paragraph (3). 5 4. Subject to and upon compliance with the provisions of this Article FOURTH, authorized and unissued shares of Class B Common Stock may be issued (after the date shares of Class B Common Stock are first issued by the Corporation) only simultaneously with the issuance of shares of Class A Common Stock for cash at the same cash price (without deduction for any commissions payable or discounts allowed) per share; provided, however, that the number of shares of Class B Common Stock so issued shall not exceed the product of (i) the number of shares of Class A Common Stock being so issued and (ii) the ratio of the number of shares of Class B Common Stock issued and outstanding at the record date fixed for determining the holders of Class B Common Stock who have the right as provided below to purchase such shares of Class B Common Stock being issued, to the number of shares of Class A Common Stock issued and outstanding at such date, except that authorized and unissued shares of Class B Common Stock may be issued without regard to the foregoing limitation pursuant to any dividend reinvestment plan approved by the Board of Directors of the Corporation. 5. The holders of shares of Class B Common Stock, upon the sale for cash of additional shares of Class B Common Stock, have the right to purchase such shares in proportion to their respective holdings of shares of Class B Common Stock at the price prescribed in the preceding paragraph (4) during such reasonable time and on such reasonable terms as may be fixed by the Board of Directors of the Corporation. Such terms may include provision for the purchase of shares of Class B Common Stock offered to holders who do not timely exercise such right by the other holders of shares of Class B Common Stock; provided, however, that no shareholder shall have any preemptive right with respect to any shares of Class B Common Stock issued pursuant to any dividend reinvestment plan approved by the Board of Directors of the Corporation. The holders of shares of Class A Common Stock and shares of Class B Common Stock shall have no other preemptive right to purchase or have offered to them for purchase any additional shares of stock of any class of the Corporation. 6. No change of outstanding shares of Class A Common Stock or shares of Class B Common Stock so as to effect a share dividend thereon or a split or combination thereon shall be made unless a corresponding change is made with respect to the shares of the stock of the other class. 7. Except as above provided each share of Class A Common Stock and each share of Class B Common Stock shall be identical and have similar rights, privileges, qualifications, limitations and restrictions. EXHIBIT B --------- TERMS AND CONDITIONS OF ESCROW SECTION 1. Upon receiving certificates representing Class B Common Shares or Voting Trust Certificates representing Class B Common Shares (the "Certificates") to be deposited with AmeriTrust Company National Association (the "Depository") pursuant to the terms and conditions of the Agreement, the Depository shall hold the same in escrow upon the terms and conditions hereinafter set forth. SECTION 2. The Depository shall mark the appropriate legend on the face or the back of each Certificate deposited hereunder in accordance with Section 7.1 of the Agreement. SECTION 3. The Depository shall hold the Certificates until such time as it shall receive written notification, pursuant to the Agreement, that Class B Common Shares are to be converted or transferred. (a) In the event that such written notification states that Class B Common Shares are to be converted or transferred otherwise than as provided under Section 2.1 of the Agreement, then the Depository shall deliver the Certificates and take such further action, as contemplated by the Agreement, in accordance with written instructions executed by the parties to the Agreement who are transferring, converting or acquiring the Class B Common Shares represented by such Certificates; (b) In the event that such written notification states that Class B Common Shares are to be transferred by a Participating Shareholder as provided under Section 2.1 of the Agreement, then the Depository shall deliver the Certificates and take such further action, as contemplated by the Agreement, in accordance with the written instructions of the Participating Shareholder making such transfer. The Depository may, as a condition to taking any such action, require the furnishing of affidavits, or other proof as it deems necessary to establish that such transfer is permitted by such Section 2.1. (c) In no event shall the Depository be required to take any action under this Section 3 until it shall have received proper written instructions as stated herein. 2 SECTION 4. DUTIES AND ADVERSE CLAIMS. The duties and obligations of the Depository shall be determined solely by the express provisions of the Agreement including this Exhibit "B" (hereinafter collectively referred to as the Agreement). In the event of any disagreement or the presentation of any adverse claim or demand in connection with the delivery of Certificates, the Depository shall, at its option, be entitled to refuse to comply with any such claims or demands during the continuance of such disagreement and may refrain from delivering any Certificates affected hereby, and in so doing, the Depository shall not become liable to any party to the Agreement or to any other person due to its failure to comply with such adverse claim or demand. The Depository shall be entitled to continue, without liability, to refrain and refuse to act: (a) Until authorized to act by a court order from a court having jurisdiction of the parties and the property, after which time the Depository shall be entitled to act in conformity with such adjudication; or (b) Until all differences shall have been adjusted by agreement and the Depository shall have been notified thereof and shall have been directed in writing, signed jointly or in counterpart by all persons making adverse claims or demands, at which time the Depository shall be protected in acting in compliance therewith. SECTION 5. DEPOSITORY'S LIABILITY LIMITED. The Depository shall not be liable to anyone whatsoever by reason of any error of judgment or for any act done or step taken or omitted by it in good faith or for any mistake of fact or law or for anything which it may do or refrain from doing in connection herewith unless caused by or arising out of its own gross negligence or willful misconduct. The parties to the Agreement represent to the Depository that they have and shall continue to solicit the advice of their respective counsel regarding compliance with all applicable state and federal securities laws in connection with the transactions contemplated by the Agreement and that they will act in accordance with such advice. The Depository shall have no responsibility to ensure compliance with any such securities laws, and such responsibility rests solely with the parties to the Agreement. SECTION 6. RELIANCE BY DEPOSITORY ON DOCUMENTS, ETC. The Depository shall be entitled to rely and shall be protected in acting in reliance upon any instructions or directions furnished to it in writing pursuant to any provisions of the 3 Agreement and shall be entitled to treat as genuine, and as the document it purports to be, any letter, paper or other document furnished to it and believed by it to be genuine and to have been signed and presented by the proper party or parties. Without limiting the generality of the foregoing, in the absence of written notice received by the Depository to the contrary, the Depository shall be entitled to rely upon its due receipt of any notice under the Agreement as conclusive evidence that such notice was given to all other persons as required by the Agreement if such notice so indicates by its terms. SECTION 7. INDEMNIFICATION AND LEGAL COUNSEL FOR DEPOSITORY. The parties to the Agreement hereby agree to indemnify the Depository and save it harmless from and against all losses, damages, costs, charges, payments, liabilities and expenses, including the costs of litigation, investigation and reasonable legal fees incurred by the Depository and arising directly or indirectly out of its role as Depository pursuant to the Agreement, including such losses, damages, costs, charges, payments, and suits made or asserted, whether groundless or otherwise, against the Depository unless the same arise out of the willful misconduct or gross negligence of the Depository. The parties to the Agreement agree that the Depository does not assume any responsibility for the failure of any of the parties to make payments or perform the conditions of the Agreement, nor shall the Depository be responsible for the collection of any monies provided to be paid to it. The Depository may consult with counsel of its own choice and shall have full and complete authorization and protection for any action taken or suffered by it hereunder in good faith and in accordance with the opinion of such counsel. The provisions of this Section 7 shall survive termination of the escrow arrangement contemplated hereby. SECTION 8. COMPENSATION. The parties to the Agreement agree to pay the Depository reasonable compensation for the services to be rendered hereunder and will pay or reimburse the Depository upon request for all expenses, disbursements and advances, including reasonable attorneys fees, incurred or made by it in connection with carrying out its duties hereunder. SECTION 9. LIENS. The Depository shall have a first lien on all items held by it herewith for its compensation and for any costs, liability, expenses, or fees it may incur and shall not be required to deliver or pay over any instrument, money, or other property deposited with it under this Agreement unless and until it shall have received full payment for its compensation, costs, liability, expenses, or fees. 4 SECTION 10. RESIGNATION. The Depository shall have the right to resign upon giving thirty (30) days written notice by mailing said written notice thereof to the proper party or parties; provided that no such resignation shall become effective until a successor has been duly appointed to act as Depository by amendment to the Agreement and such successor has agreed so to act. EX-10.II.A.II 6 l94460aexv10wiiwawii.txt EX-10(II)(A)(II) Exhibit (10)(ii)(A)(ii) AMERICAN GREETINGS CORPORATION RESOLUTIONS OF BOARD OF DIRECTORS CONSTITUTING EXECUTIVES' BONUS PLAN Resolution Adopted January 27, 1950 - ----------------------------------- RESOLVED that, until further order of this Board of Directors, the basic salaries of the President and Vice Presidents shall be at the following respective annual rates: Jacob Sapirstein, President - $40,000 Irving I. Stone, Vice President - 40,000 Morris S. Stone, Vice President - 40,000 Harry H. Stone, Vice President - 40,000 Joe Zel, Vice President - 23,000 and that, within seventy-five days after the close of each fiscal year of the Corporation, beginning with its present fiscal year, there shall be paid to each of said officers a bonus computed by applying against his basic salary the percentage by which the net profits of the Corporation for that fiscal year exceed the sum of $1,100,000, the net profits, for the purposes of this resolution, being defined to be the net profits before adjustment for capital gains and losses, all taxes based on or measured by net income, all contributions made or to be made to the employees' current and deferred profit sharing plans as such plans now exist or may be amended, and these bonuses; provided, however, that if in any fiscal year the net profits, as above defined, are less than the sum of $1,100,000, then such deficiency shall, for the purpose of computing these bonuses, be carried over to the next succeeding fiscal year and applied to reduce the amount, if any, by which the net profits, as above defined, for that fiscal year exceed the sum of $1,100,000, and if there is no such excess in that year, or if such deficiency is not entirely absorbed by such application, then such deficiency or the unabsorbed remainder thereof, as the case may be, shall, for the purpose of computing these bonuses, be carried over to the second succeeding fiscal year and applied to reduce the amount, if any, by which the net profits, as above defined, for that fiscal year exceed the sum of $1,100,000, and if there is no such excess in that year, or if such deficiency is not entirely absorbed by such application, then such deficiency, or the unabsorbed remainder thereof, as the case may be, shall, for the purpose of computing these bonuses, be similarly carried over successively to the third and following fiscal years until entirely 50 absorbed; provided, further, that no bonus shall be paid to any of said officers with respect to any fiscal year of the Corporation as of the end of which the Corporation does not have an excess of current assets over liabilities, as defined in the notes dated June 28, 1946 by the Corporation to The Cleveland Trust Company and The National City Bank of Cleveland in the amounts of $500,000 each, of at least $1,000,000 and a ratio of current assets to such liabilities of at least 1.75 to 1, all determined as provided in said notes; provided, further, that in no event shall the total of the basic salary and bonus to be paid to any said officer with respect to any fiscal year exceed by more than one-third the total 2 of the basic salary and bonus paid to such officer with respect to the next preceding fiscal year; and also provided, further, that all computations made pursuant to this resolution and all questions arising under this resolution shall be made and decided by Messrs. Ernst & Ernst, or such other firm of certified public accountants as may then be acting as the auditors of the Corporation, whose determination shall be final and conclusive upon all parties. Resolution Adopted February 24, 1950 - ------------------------------------ RESOLVED that, until further order of this Board of Directors, the basic salary of Joe Zel, Vice President, shall be at the rate of $25,000.00 per annum, effective March 1, 1950, and that all other conditions of his compensation remain the same as stipulated in the resolution of the Board of Directors adopted at its January 27, 1950 meeting pertaining to the compensation of the President and the Vice Presidents of the Corporation. Resolution Adopted June 30, 1950 - -------------------------------- RESOLVED that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors of the Corporation held on January 27, 1950 be, and the same hereby is, amended to include, until further order of this Board, Louis F. Salchow, Controller, Assistant Secretary and Assistant Treasurer, at a basic salary at the annual rate of $13,500, such inclusion to begin with the present fiscal year of the Corporation, and such participation to be subject to all the terms, conditions, provisions and limitations of said executives' bonus plan as now or hereafter constituted. Resolution Adopted February 23, 1951 - ------------------------------------ RESOLVED that, until further order of this Board of Directors, the basic salary of Louis F. Salchow, Controller, Assistant Secretary and Assistant Treasurer, shall be at the annual rate of $16,000.00, effective March 1, 1951. FURTHER RESOLVED that the resolution with reference to the participation of Louis F, Salchow in the Executives' Bonus Plan as set forth and adopted at the meeting of the Board of Directors of the Corporation held on June 30, 1950, be and the same is hereby amended to increase, until further order of this Board, the basic salary at the annual rate of $13,500.00 to $16,000.00, effective March 1, 1951. Resolution Adopted March 28, 1952 - --------------------------------- RESOLVED that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, and February 23, 1951, respectively, be; and the same hereby is; 3 further amended to provide that until further order of this Board any bonus payable under said resolution of January 27, 1950 for any fiscal year beginning after February 29, 1952 to any of the following officers, to wit, Jacob Sapirstein, President, Irving I. Stone, Vice President, Morris S. Stone, Vice President, and Harry H. Stone, Vice President, shall in no event exceed such amount which when added to the basic salary of such officer for the fiscal year involved and the amount payable to him for such fiscal year under the employees' current profit sharing plan of the Corporation, as such plan now exists or may be amended, shall constitute a total of $50,000 for such fiscal year. Resolution Adopted February 4, 1953 - ----------------------------------- RESOLVED that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, February 23, 1951, and March 28, 1952, respectively, be, and the same hereby is, further amended to provide that until further order of this Board any bonus payable under said resolution of January 27, 1950, as so amended, for any fiscal year beginning after February 29, 1952 to either of the following officers, to wit, Joe Zel, Vice President, and Louis F. Salchow, Vice President, shall in no event exceed such amount which when added to the basic salary of such officer for the fiscal year involved and the amount payable to him for such fiscal year under the employees' current profit sharing plan of the Corporation, as such plan now exists or may be amended, shall constitute in the case of said Joe Zel a total of $48,000.00, and in the case of said Louis F. Salchow a total of $30,000.00, for such fiscal year. Resolution Adopted June 26, 1953 - -------------------------------- RESOLVED that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952, and February 4, 1953, respectively, be, and the same hereby is, further amended to provide that until further order of this Board the limitations imposed by said resolutions adopted at the meetings of the Board of Directors held on March 28, 1952 and February 4, 1953 with respect to the amount of bonus shall apply only to any bonus payable for a fiscal year for which the net profits of the Corporation as defined in said resolution of January 27, 1950 shall not exceed the sum of $2,500,000, and that if the net profits of the Corporation as so defined shall for any fiscal year beginning after February 28, 1953 exceed said sum of $2,500,000, then any bonus payable for such fiscal year under said resolution of January 27, 1950 as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, and February 23, 1951 shall in no event exceed such amount which when added to the 4 basic salary of such officer for such fiscal year and the amount payable to him for such fiscal year under the employees' current profit sharing plan of the Corporation as such plan now exists or may be amended shall constitute a total sum which shall bear the same ratio in the case of each of Jacob Sapirstein, President, Irving I. Stone, Vice President, Morris S. Stone, Vice President, and Harry H. Stone, Vice President, to the sum of $50,000, and in the case of Joe Zel, Vice President, to the sum of $48,000, and in the case of Louis F. Salchow, Vice President, to the sum of $30,000, as such net profits for such fiscal year shall bear to the sum of $2,500,000. Resolution Adopted August 27, 1954 - ---------------------------------- RESOLVED that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952, February 4, 1953 and June 26, 1953, respectively, be, and the same hereby is, further amended to provide that, until further order of this Board, if the net profits of the Corporation as defined in said resolution of January 27, 1950 shall for any fiscal year beginning after February 28, 1954 exceed the sum of $2,500,000, then any bonus payable to any such officer for such fiscal year under said resolution of January 27, 1950 as amended by said resolutions of February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952, February 4, 1953, and June 26, 1953 shall in no event exceed the greater of (i) an amount which when added to the basic salary of such officer for such year shall equal, in the case of each of Jacob Sapirstein, President, Irving I. Stone, Vice President, Morris S. Stone, Vice President, and Harry H. Stone, Vice President, the sum of $50,000, and in the case of Joe Zel, Vice President, the sum of $48,000, and in the case of Louis F. Salchow, Vice President, the sum of $30,000, or (ii) an amount determined by multiplying the basic salary of such officer for such year by one-half of the ratio which such net profits in excess of $2,500,000 bear to $2,500,000. Resolution Adopted January 27, 1956 - ----------------------------------- RESOLVED that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, February 23, 1951, March 1952, February 1953, June 1953, 28, 4, 26, and August 27, 1954, respectively, be, and the same hereby is, further amended to provide that, until further order of this Board, the basic salary upon which the bonus payable thereunder (other than the bonus determined by applying the maximum limitations prescribed by such resolutions) to any officer for any fiscal year, beginning with the current fiscal year, is computed shall be his annual rate of salary at the end of such fiscal year. 5 Resolution Adopted October 14, 1958 - ----------------------------------- RESOLVED, that the executives' bonus plan as set forth in the resolutions with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, February 23,1951, March 28, 1952, February 4, 1953, June 26, 1953, August 27, 1954 and January 27, 1956 be, and the same hereby is, further amended to provide that, until further order of this Board, (1) the bonus payable to Joe Zel for the current fiscal year of the Corporation shall not exceed the lesser of (a) two-thirds of the amount which would be payable to him under said plan without regard to the limitations on his bonus therein set forth or the limitations of this resolution, or (b) two-thirds of the greater of (i) the amount which when added to his basic salary for such year shall equal the sum of $48,000 or (ii) the amount determined by multiplying his basic salary (as defined in said resolution of January 27, 1956) for such year by one-half the ratio which the net profits of the Corporation for such year (as defined in said resolution of January 27, 1950) in excess of $2,500,000 bear to $2,500,000; and (2) Joe Zel shall not be entitled to receive any bonus under said plan for any subsequent fiscal year of the Corporation. Resolution Adopted May 29, 1959 - ------------------------------- FURTHER RESOLVED, that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at the meetings of the Board of Directors held on February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952, February 4, 1953, June 26,1953, August 27, 1954, January 27, 1956 and October 14, 1958 be and the same hereby is further amended to provide that, until further order of this Board, Jacob Sapirstein and Louis F. Salchow shall not be entitled to receive any bonus under said plan for the current or any subsequent fiscal year of the Corporation. 6 Resolution Adopted August 7, 1959 - --------------------------------- RESOLVED, that the executives' bonus plan as set forth in the resolution with reference thereto adopted at the meeting of the Board of Directors held on January 27, 1950 and as amended by the resolutions with reference thereto adopted at meetings of the Board of Directors held on February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952, February 4, 1953, June 26, 1953, August 27, 1954, January 27, 1956, October 14, 1958 and May 29, 1959 be and the same hereby is further amended so that, until further order of this Board, the clause appearing in said resolution adopted at the meeting of the Board of Directors held on January 27, 1950 that reads as follows: "provided, further, that no bonus shall be paid to any of said officers with respect to any fiscal year of the Corporation as of the end of which the Corporation does not have an excess of current assets over liabilities, as defined in the notes dated June 28, 1946 by the Corporation to The Cleveland Trust Company and The National City Bank of Cleveland in the amounts of $500,000 each, of at least $1,000,000 and a ratio of current assets to such liabilities of at least 1.75 to 1, all determined as provided in said notes" shall be changed to read as follows: "provided, further, that no bonus shall be paid to any of said officers with respect to any fiscal year of the Corporation as of the end of which the Corporation does not have an excess of current assets over current liabilities of at least $1,000,000 and a ratio of current assets to current liabilities of at least 1.75 to 1". Resolution Adopted July 24, 1969 - -------------------------------- RESOLVED, that the Executive Bonus Plan adopted on January 27, 1950 and as amended, be and the same hereby is further amended to provide that Harry H. Stone shall not be entitled to receive any bonus under said Plan for the current or any subsequent fiscal year of the Company. Resolution Adopted January 12, 1979 - ----------------------------------- FURTHER RESOLVED, that the Executive Bonus Plan as set forth in the resolutions with reference thereto adopted at the meeting of the Board of Directors held January 27, 1950 and as subsequently amended, is hereby further amended as follows: "the term 'net profits' as appearing in said Plan shall be defined to mean 'the net profits of American Greetings Corporation before adjustment for equity gains and losses of any subsidiary corporation, any dividend received from any subsidiary corporation, capital gains and losses, all taxes based on or measured by net income, all contributions made or to be made to the American Greetings Corporation Employees' Retirement Profit Sharing Plan as such Plan now exists or may be amended and these bonuses;'" AMERICAN GREETINGS CORPORATION Action by Directors without a Meeting ------------------------------------- The undersigned, constituting all of the directors of the Corporation, acting without a meeting pursuant to Section 1701.54 of the Ohio General Code, hereby adopt, effective April 10, 1980, the following resolution: WHEREAS, in light of limitations applicable to the compensation of other employees of the Corporation, such action is considered necessary and appropriate and in the best interests of the Corporation, RESOLVED, that amounts payable to executives under the Executive Bonus Plan of the Corporation for its fiscal year ended February 29, 1980 shall be limited to the amounts payable under such plan to such executives, respectively, for the fiscal year ended February 28, 1979. FURTHER RESOLVED, that except as above set forth such Plan shall continue in force unchanged. Date: April 28 , 1980 /s/ Frank E. Joseph ------------ ----------------------------- Frank E. Joseph /s/ Albert B. Ratner Date: April 28 , 1980 ---------------------------- ------------ Albert B. Ratner Date: April 28 , 1980 /s/ Jacob Sapirstein ----------- ------------------------------- Jacob Sapirstein Date: April 10 , 1980 /s/ Sy Scheckner ----------- ------------------------------- Sy Scheckner Date: April 10 , 1980 /s/ Harry H. Stone ----------- ------------------------------- Harry H. Stone Date: April 10 , 1980 /s/ Irving I. Stone ----------- ------------------------------- Irving I. Stone Date: April 10 , 1980 /s/ Morris S. Stone ----------- ------------------------------- Morris S. Stone 2 Date: April 10 , 1980 /s/ Morry Weiss ----------- ------------------------------- Morry Weiss Date: April 10 , 1980 /s/ Morton Wyman ----------- ------------------------------- Morton Wyman 1912 AMERICAN GREETINGS CORPORATION Action by Directors without a Meeting ------------------------------------- The undersigned, constituting all of the directors of the Corporation, acting without a meeting pursuant to Section 1701.54 of the Ohio General Code, hereby adopt, effective March 24, 1981, the following resolution: WHEREAS, the participants under the Executive Bonus Plan of the Corporation have agreed to limit the amount of bonus to be paid to them pursuant to such Plan for the fiscal year ended February 28, 1981 and such action is considered acceptable, appropriate and in the best interest of the Corporation, RESOLVED, that the amount payable to executives under the Executive Bonus Plan of the Corporation for its fiscal year ended February 28, 1981 shall be limited to the amount of $210,000. FURTHER RESOLVED, that except as above set forth such Plan shall continue in force unchanged. Date: 4/21/81 /s/ Morry Weiss for Jacob Sapirstein Attorney-in-fact -------------- ------------------------------- Jacob Sapirstein Date: Mar 30/1981 /s/ Irving I. Stone -------------- ------------------------------- Irving I. Stone Date: 4-3-81 /s/ Morris S. Stone -------------- ------------------------------- Morris S. Stone Date: 3/30/81 /s/ Harry H. Stone -------------- ------------------------------- Harry H. Stone Date: 3/30/81 /s/ Morry Weiss -------------- ------------------------------- Morry Weiss Date: 3/30/81 /s/ Morton Wyman -------------- ------------------------------- Morton Wyman Date: 4/13/81 /s/ Frank E. Joseph -------------- ------------------------------- Frank E. Joseph Date: 4/15/81 /s/ Albert B. Ratner -------------- ------------------------------- Albert B. Ratner Date: 4/22/81 /s/ Sy Scheckner -------------- ------------------------------- Sy Scheckner EX-10.II.A.III 7 l94460aexv10wiiwawiii.txt EX-10(II)(A)(III) Exhibit (10)(ii)(A)(iii) EXECUTIVE INCENTIVE COMPENSATION PLAN (AS AMENDED AND RESTATED THROUGH MARCH 6, 1989) BASIC PLAN - ---------- American Greetings Corporation ("Corporation") has established this Executive Incentive Compensation Plan for certain officers and other key management personnel. The plan, as amended, is effective with the fiscal years beginning March 1, 1988, for the Corporation or February 1, 1988, for certain subsidiaries of the Corporation. Under the Plan, the Board of Directors of the Corporation shall, prior to the commencement of each fiscal year, or as promptly as possible thereafter, establish a Profit Goal for each Division or subsidiary of the Corporation and the desired pro forma pre-tax profit of each Division or subsidiary of the Corporation for the fiscal year as determined by the Board of Directors of the Corporation at its absolute discretion. The Consolidated Profit Goal for the Corporation, however, shall be stated in terms of the pre-tax profit of the Consolidated Corporation. One or more of these profit goals are assigned to each Eligible Participant, which becomes the Eligible Participant's target profit goal and on which the participant is assigned a target bonus which in no instance may exceed 60% of the Eligible Participant's base salary. If the target goal or goals are achieved, cash bonuses are to be paid to the achieving Eligible Participants equal to the individual Eligible Participant's target bonus. If actual performance is above the target profit goal by a percentage not more than 10%, or below the target profit goal by a percentage not more than 20%, the bonus is increased or decreased by a percentage equal to twice the excess or shortfall. If actual performance is less than 80% of the target profit goal, no bonus is paid; if it is greater than 110% of the target profit goal, the bonus remains at 120% of the target bonus. For computation purposes, profit goals and actual performance shall be rounded to the nearest thousand dollars or other local currency unit and achievement of profit goals shall be computed with reference to the nearest one-tenth of one percent. All bonuses hereunder will be paid in cash. For each Division or subsidiary corporation, the term "pro forma pre-tax profit" as used herein shall mean its income before investment interest income, income taxes, and actual interest expense, exclusive of: profits and losses on the sale or disposal of assets classified on the Corporation's balance sheet as property, plant and equipment (excluding display cabinets, in the case of greeting card divisions); gains or losses resulting from foreign currency transactions (excluding gains or losses resulting from intra-Divisional transactions); bonus provisions or payments under this Executive Incentive Compensation Plan; and, such other adjustments as may from time to time be established by the Board of Directors of the Corporation in the course of their determination of the Division's or subsidiary corporation's performance goal for such fiscal year, less interest on the Division's or subsidiary corporation's average monthly net capital employed. Net capital employed is defined to be the total assets of a division or subsidiary corporation excluding cash and marketable securities, intercompany balances and investments, and goodwill, less all non-interest bearing liabilities excluding income taxes deferred or payable. All bonus achievement computations shall be determined by the independent accountants of each Division or subsidiary corporation in accordance with generally accepted accounting principles, or in the case of Divisions that are not audited by independent accountants, as determined in accordance with generally accepted accounting principles and as reviewed and approved by the Chief Financial Officer of the Corporation. For the Consolidated Corporation, the term "pre-tax profit" shall mean the "consolidated pre-tax, pre-interest profits" as defined above after adjustment for consolidated investment interest income and actual interest expense. The determination of which officers and key management personnel shall be considered as Eligible Participants and which profit goals and target bonuses they are assigned shall be the responsibility of the Chief Executive Officer of the Corporation, subject, however, to whatever guidelines and policies may be approved by the Board of Directors of the Corporation, or the Executive Committee or Compensation Committee of the Board of Directors of the Corporation. Target bonuses under this Plan shall be based on a percentage of the Eligible Participant's base salary. The term "base salary" as used herein shall mean all compensation (exclusive of fringe benefits, benefits paid under any long-term disability plan, or other forms of indirect compensation) actually paid to a participant during the fiscal year, excluding amounts paid under this Plan. (For purposes of this Plan, base salary is to be determined on the cash rather than the accrual basis.) If an employee becomes an Eligible Participant under this Plan subsequent to the beginning of a fiscal year, his base salary upon which his target bonus is derived shall include his base salary (as defined herein) paid to him from the date of his eligibility, to the end of such fiscal year. If an Eligible Participant ceases to be classified as an Eligible Participant by virtue of a change in his work duties during a fiscal year but remains in the employ of the Corporation, subsidiary of the Corporation, or Division, his base salary and target bonus shall be similarly based on the actual period of his eligibility. In the event an Eligible Participant leaves the employ of the Corporation, subsidiary of the Corporation, or Division during the fiscal year, there shall be no bonus paid to him for that fiscal year. However, if a participant leaves the employ of the Corporation, subsidiary of the Corporation, or Division during the fiscal year as a result of disability or death or upon retirement after achieving at least 60 years of age, his base salary and target bonus shall be based on the actual period of his eligibility as outlined above. All bonuses payable under this Plan shall be paid on the date (or shortly thereafter) that American Greetings Corporation announces its fiscal year end results to the public, such date generally being during the first full week of April. All questions of interpretation and application of this Plan shall be decided by the Chief Executive Officer of the Corporation or the Board of Directors of the Corporation, whose decisions, made in good faith, shall be final and binding on all parties. In the absence of bad faith or gross neglect of duty on their part, neither the Chief Executive Officer of the Corporation or the Board of Directors of the Corporation shall have any liability to the Corporation, subsidiary of the Corporation, or any Division or to any of their employees arising out of or in connection with the administration of this Plan. SUPPLEMENTAL PLAN (FISCAL YEARS 1989, 1990 AND 1991) - ---------------------------------------------------- In addition to the foregoing (but independent of the one year corporate, divisional and subsidiary goals that are established annually under the Basic Plan outlined above, if in the fiscal years ending February 28, 1989, 1990 and 1991, the original Profit Goals for those years as approved at the Board of Directors meetings in January and April, 1988 (the Original Profit Goals) are achieved in whole or in part, then a special supplemental bonus may be payable under this Supplemental Plan. Terms and qualifications for the supplemental bonus are as follows: To qualify for bonus participation in each year, an Eligible Participant's Division or subsidiary must first achieve at least 80% of its Original Profit Goal for that year. Secondly, 100% of the Original Corporate Consolidated Profit Goal must be achieved for that year. If these qualifications are achieved in all three years, then a bonus equal to 100% of the total of the Targeted Bonuses for each of the three years shall be payable. However, if an Eligible Participant qualifies for this supplemental bonus in only two of the three fiscal years, then only 60% of the total of the Targeted Bonuses for each of the three years shall be payable. If an Eligible Participant qualifies in less than two of the three years, then no bonus will be paid under this Supplemental Plan. All bonuses payable under this Supplemental Plan shall be paid on the date (or shortly thereafter) that American Greetings Corporation announces its Fiscal 1991 year end results to the public in April, 1991. EX-10.II.A.IX 8 l94460aexv10wiiwawix.txt EX-10(II)(A)(IX) Exhibit (10)(ii)(A)(ix) AMERICAN GREETINGS CORPORATION Stock Option Agreement 1987 Class B Stock Option Plan ------------------------------ WHEREAS, MORRY WEISS (hereinafter called the "Optionee") is President of American Greetings Corporation, an Ohio corporation (the "Company"); and WHEREAS, the execution of this Stock Option Agreement pursuant to the Company's 1987 Class B Stock Option Plan has been duly authorized by a resolution of the Board of Directors of the Company duly adopted on January 25, 1988; NOW, THEREFORE, the Company hereby grants to the Optionee an option to purchase 425,000 Class B Common Shares, par value $1 per share, of the Company at the price of Fourteen and 5/16 Dollars ($14.3125) per share, and agrees to cause certificates for any shares purchased hereunder to be delivered to the Optionee upon payment of the purchase price in full, all subject, however, to the terms and conditions hereinafter set forth. 1. This option (until terminated as hereinafter provided) shall be exercisable only to the extent of one-quarter of the shares hereinabove specified after the Optionee shall have been in the continuous employ of the Company or any Subsidiary for one full year from the date hereof and to the extent of an additional one-quarter of such shares after each of the next three successive years thereafter during which the Optionee shall have been in the continuous employ of the Company or any Subsidiary. If the Optionee should retire at normal retirement age or at an early retirement age with the consent of the Board of Directors, die or become permanently disabled after having been in the continuous employ of the Company or any Subsidiary for a period of at least ten years, this option shall, notwithstanding the preceding sentence, immediately become exercisable in full. For the purposes of this paragraph, leaves of absence approved by the Board of Directors or Stock Option Committee of the Company for illness, military or governmental service, or other cause, shall be considered as employment. To the extent exercisable, this option may be exercised in whole or in part from time to time. 2. This Option shall terminate on the earliest of the following dates: (A) On the date on which the Optionee ceases to be an employee of the Company or a Subsidiary, unless he ceases to be such employee by reason of retirement as described in Section (1) above, death or permanent disability or in a manner described in (B) below; (B) Three months after the Optionee ceases to be an employee of the Company or a Subsidiary by reason of termination of employment under circumstances determined by the Board of Directors to be for the convenience of the Company; (C) One year after the death or permanent disability of the Optionee if the Optionee dies or becomes permanently disabled while an employee of the Company or a subsidiary or within the three-month period referred to in (B) above; (D) Ten years and three months from the date on which this option was granted. Nothing contained in this Stock Option Agreement shall limit whatever the right the Company or a Subsidiary might otherwise have to terminate the employment of the Optionee. 3. This option is not transferable by the Optionee otherwise than by will or the laws of descent and distribution, and is exercisable, during the lifetime of the Optionee, only by him or his legal representative. The purchase price payable upon exercise of this option may, at the election of the Optionee, be paid (a) in cash or by check acceptable to the Company; (b) if specifically approved at or prior to the time of exercise by the Board of Directors, by the transfer to the Company by the Optionee of Class A or Class B Common Shares of the Company that have been owned by him for at least six months and have a value at the time of exercise equal to the total option price or (c) by a combination of such methods of payment. 4. This option shall not be exercisable if such exercise would involve a violation of any applicable federal or state securities law, and the Company hereby agrees to make reasonable efforts to comply with such securities laws. If the Ohio Securities Act shall be applicable to this option, it shall not be exercisable unless under such Act at the time of exercise the Class B Common Shares or other securities purchasable hereunder are exempt, are the subject matter of an exempt transaction, are registered by description or by qualification, or at such time are the subject matter of a transaction which has been registered by description. 5. The Board of Directors shall make such adjustments in the option price and in the number or kind of Class B Common Shares or other securities covered by this option as such Board in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of the Optionee that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other changes in the capital structure of the Company, or (b) any merger, consolidation, separation, reorganization, partial or complete liquidation, issuance of rights or warrants to purchase stock, or (c) any other corporate transaction or event having an effect similar to any of the foregoing. EXECUTED at Cleveland, Ohio as of the 25th day of January, 1988. AMERICAN GREETINGS CORPORATION By /s/ Henry Lowenthal ---------------------------------- Title: Senior Vice President and Chief Financial Officer The undersigned Optionee hereby acknowledges receipt of an executed original of this Stock Option Agreement and accepts the option granted thereunder. The Optionee acknowledges that he has been advised that the Class B Common Shares covered by such Agreement have not been registered under the Securities Act of 1933 and agrees that he will not make any disposition of such shares unless either (a) such shares have been registered under such Act or (b) an exemption from the registration provisions of such Act is applicable to the Optionee's proposed disposition of such shares. The Optionee understands that the certificates for such shares may bear a legend substantially as follows: The shares evidenced by this Certificate have not been registered under the Securities Act of 1933. Such shares may not be sold or otherwise transferred until the same have been registered under such Act or until the Company shall have received an opinion of legal counsel or a copy of a letter from the Staff of the Division of Corporation Finance of the Securities and Exchange Commission, in either case satisfactory to the Company, that such shares may legally be sold or otherwise transferred without such registration." /s/ Morry Weiss --------------------------- EX-10.II.A.XIV 9 l94460aexv10wiiwawxiv.txt EX-10(II)(A)(XIV) Exhibit (10)(ii)(A)(xiv) APPENDIX A APPROVAL OF 1997 AMERICAN GREETINGS CORPORATION 1997 Equity and Performance Incentive Plan 1. PURPOSE. The purpose of the 1997 Equity and Performance Incentive Plan (the "Plan") is to attract and retain directors, officers and other key employees for American Greetings Corporation (the "Company") and its Subsidiaries and to provide to such persons incentives and rewards for superior performance. 2. DEFINITIONS. As used in this Plan, "Appreciation Right" means a right granted pursuant to Section 5 of this Plan, and shall include both Tandem Appreciation Rights and Free-Standing Appreciation Rights. "Board" means the Board of Directors of the Company and, to the extent of any delegation by the Board to a committee (or subcommittee thereof) pursuant to Section 16 of this Plan, such committee (or subcommittee). "Change in Control" shall have the meaning provided in Section 12 of this Plan. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Class A Common Shares" means Class A Common Shares, par value $1 per share, of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 11 of this Plan. "Class B Common Shares" means Class B Common Shares, par value $1 per share, of the Company or any security into which such Common Shares may be changed by reason of any transaction or event of the type referred to in Section 11 of this Plan. "Common Shares" means Class A Common Shares, Class B Common Shares or both. "Covered Employee" means a Participant who is, or is determined by the Board to be likely to become, a "covered employee" within the meaning of Section 162(m) of the Code (or any successor provision). "Date of Grant" means the date specified by the Board on which a grant of Option Rights, Appreciation Rights, Performance Shares or Performance Units or a grant or sale of Restricted Shares or Deferred Shares shall become effective (which date shall not be earlier than the date on which the Board takes action with respect thereto). "Deferral Period" means the period of time during which Deferred Shares are subject to deferral limitations under Section 7 of this Plan. "Deferred Shares" means an award made pursuant to Section 7 of this Plan of the right to receive Common Shares at the end of a specified Deferral Period. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, as such law, rules and regulations may be amended from time to time. "Exercise Right" means the price payable upon exercise of a Free-Standing Appreciation Right. "Free-Standing Appreciation Right" means an Appreciation Right not granted in tandem with an Option Right. "Incentive Stock Options" means Option Rights that are intended to qualify as "incentive stock options" under Section 422 of the Code or any successor provision. "Management Objectives" means the measurable performance objective or objectives established pursuant to this Plan for Participants who have received grants of Performance Shares or Performance Units or, when so determined by the Board, Option Rights, Appreciation Rights, Restricted Shares and dividend credits pursuant to this Plan. Management Objectives may be described in terms of Company-wide objectives or objectives that are related to the performance of the individual Participant or of the Subsidiary, division, department, region or function within the Company or Subsidiary in which the Participant is employed. The Management Objectives may be made relative to the performance of other corporations. The Management Objectives applicable to any award to a Covered Employee shall be based on specified levels of or growth in one or more of the following criteria: 1. cash flow/net assets ratio; 2. debt/capital ratio; 3. return on total capital; 4. return on equity; 5. earnings per share growth; 6. revenue growth; and 7. total return to shareholders. Except where a modification would result in an award no longer qualifying as performance based compensation within the meaning of Section 162(m) of the Code, the Board may in its discretion modify such Management Objectives or the related minimum acceptable level of achievement, in whole or in part, as the Board deems appropriate and equitable. "Market Value per Share" means, as of any particular date, the fair market value of the Class A Common Shares as listed on NASDAQ as of the close of business on such date or the latest such date in which there is a listing. "Non-Employee Director" means a Director of the Company who is not an employee of the Company or any Subsidiary. "Optionee" means the optionee named in an agreement evidencing an outstanding Option Right. "Option Price" means the purchase price payable on exercise of an Option Right. "Option Right" means the right to purchase Common Shares upon exercise of an option granted pursuant to Section 4 or Section 9 of this Plan. "Participant" means a person who is selected by the Board to receive benefits under this Plan and who is at the time an officer, or other key employee of the Company or any one or more of its Subsidiaries, or who has agreed to commence serving in any of such capacities within 90 days of the Date of Grant, and shall also include each Non-Employee Director who receives an award of Option Rights or Restricted Shares. "Performance Period" means, in respect of a Performance Share or Performance Unit, a period of time established pursuant to Section 8 of this Plan within which the Management Objectives relating to such Performance Share or Performance Unit are to be achieved. "Performance Share" means a bookkeeping entry that records the equivalent of one Common Share awarded pursuant to Section 8 of this Plan. "Performance Unit" means a bookkeeping entry that records a unit equivalent to $1.00 awarded pursuant to Section 8 of this Plan. "Reload Option Rights" means additional Option Rights granted automatically to an Optionee upon the exercise of Option Rights pursuant to Section 4(g) of this Plan. "Restricted Shares" means Common Shares granted or sold pursuant to Section 6 or Section 9 of this Plan as to which neither the substantial risk of forfeiture nor the prohibition on transfers referred to in such Section 6 has expired. "Rule l6b-3" means Rule 16b-3 of the Securities and Exchange Commission (or any successor rule to the same effect) as in effect from time to time. "Spread" means the excess of the Market Value per Share on the date when an Appreciation Right is exercised, or on the date when Option Rights are surrendered in payment of the Option Price of other Option Rights, over the Option Price or Exercise Price provided for in the related Option Right or Free-Standing Appreciation Right, respectively. "Subsidiary" means a corporation, company or other entity (i) more than 50% of whose outstanding shares or securities (representing the right to vote for the election of directors or other managing authority) are, or (ii) which does not have outstanding shares or securities (as may be the case in a partnership, joint venture or unincorporated association), but more than 50% of whose ownership interest representing the right generally to make decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly, by the Company except that for purposes of determining whether any person may be a Participant for purposes of any grant of Incentive Stock Options, "Subsidiary" means any corporation in which at the time the Company owns or controls, directly or indirectly, more than 50% of the total combined voting power represented by all classes of stock issued by such corporation. "Tandem Appreciation Right" means an Appreciation Right granted in tandem with an Option Right. "Voting Power" means at any time, the total votes relating to the then-outstanding securities entitled to vote generally in the election of directors of the Company. 3. SHARES AVAILABLE UNDER THE PLAN. (a) Subject to adjustment as provided in paragraph (b) below and Section 11 of this Plan, the number of Class A Common Shares and Class B Common Shares that may be issued or transferred (i) upon the exercise of Option Rights or Appreciation Rights; (ii) as Restricted Shares and released from substantial risk of forfeiture thereof; (iii) as Deferred Shares; (iv) in payment of Performance Shares or Performance Units that have been earned; (v) as awards to Non-Employee Directors; or (vi) in payment of dividend equivalents paid with respect to awards made under the Plan, shall not exceed in the aggregate 4,500,000 Class A Common Shares and 500,000 Class B Common Shares, respectively, plus any shares described in paragraph (b) below. Such shares may be shares of original issuance or treasury shares or a combination of the foregoing. (b) The number of shares available in paragraph (a) above shall be adjusted to account for shares relating to awards that expire; are forfeited; or are transferred, surrendered, or relinquished upon the payment of any Option Price by the transfer to the Company of Common Shares or upon satisfaction of any withholding amount. (c) Notwithstanding anything in this Section 3 or elsewhere in this Plan to the contrary, the aggregate number of Common Shares actually issued or transferred by the Company upon the exercise of Incentive Stock Options shall not exceed 4,500,000 Class A Common Shares or 500,000 Class B Common Shares, respectively, subject to adjustments as provided in Section 11 of this Plan. Further, no Participant shall be granted Option Rights for more than 500,000 Common Shares during any period of five years, subject to adjustments as provided in Section 11 of this Plan. (d) Upon payment in cash of the benefit provided by any award granted under this Plan, any shares that were covered by that award shall again be available for issue or transfer hereunder. (e) Notwithstanding any other provision of this Plan to the contrary, in no event shall any Participant in any period of five years receive more than 500,000 Appreciation Rights, subject to adjustments as provided in Section 11 of this Plan. (f) Notwithstanding any other provision of this Plan to the contrary, the number of shares issued as Restricted Shares shall not in the aggregate exceed 450,000 Class A Common Shares and 50,000 Class B Common Shares, respectively, subject to adjustments as provided in Section 11 of this Plan; and, in no event shall any Participant in any period of five years receive more than 500,000 Restricted Shares or 500,000 Deferred Shares, subject to adjustments as provided in Section 11 of this Plan. (g) Notwithstanding any other provision of this Plan to the contrary, in no event shall any Participant in any calendar year receive an award of Performance Shares or Performance Units having an aggregate maximum value as of their respective Dates of Grant in excess of $3,000,000. 4. OPTION RIGHTS. The Board may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Participants of options to purchase Common Shares. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each grant shall specify the number of Class A Common Shares or Class B Common Shares to which it pertains subject to the limitations set forth in Section 3 of this Plan. (b) Each grant shall specify an Option Price per share, which may not be less than the Market Value per Share on the Date of Grant. (c) Each grant shall specify whether the Option Price shall be payable (i) in cash or by check acceptable to the Company; (ii) by the actual or constructive transfer to the Company of nonforfeitable, unrestricted Common Shares owned by the Optionee (or other consideration authorized pursuant to subparagraph (d) below) having a value at the time of exercise equal to the total Option Price; or (iii) by a combination of such methods of payment. (d) The Board may determine, at or after the Date of Grant, that payment of the Option Price of any option (other than an Incentive Stock Option) may also be made in whole or in part in the form of Restricted Shares or other Common Shares that are forfeitable or subject to restrictions on transfer, Deferred Shares, Performance Shares (based, in each case, on the Market Value per Share on the date of exercise), other Option Rights (based on the Spread on the date of exercise) or Performance Units. Unless otherwise determined by the Board at or after the Date of Grant, whenever any Option Price is paid in whole or in part by means of any of the forms of consideration specified in this paragraph, the Common Shares received upon the exercise of the Option Rights shall be subject to such risk of forfeiture or restrictions on transfer as may correspond to any that apply to the consideration surrendered, but only to the extent of (i) the number of shares or Performance Shares; (ii) the Spread of any unexercisable portion of Option Rights; or (iii) the stated value of Performance Units surrendered. (e) Any grant may provide for deferred payment of the Option Price from the proceeds of sale through a bank or broker on a date satisfactory to the Company of some or all of the shares to which such exercise relates. (f) Any grant may provide for payment of the Option Price, at the election of the Optionee, in installments, with or without interest, upon terms determined by the Board. (g) Any grant may, at or after the Date of Grant, provide for the automatic grant of Reload Option Rights to an Optionee upon the exercise of Option Rights (including Reload Option Rights) using Common Shares or other consideration specified in paragraph (d) above. Reload Option Rights shall cover up to the number of Common Shares, Deferred Shares, Option Rights or Performance Shares (or the number of Common Shares having a value equal to the value of any Performance Units) surrendered to the Company upon any such exercise in payment of the Option Price or to meet any withholding obligations. Reload Options may have an Option Price that is no less than the applicable Market Value per Share at the time of exercise and shall be on such other terms as may be specified by the Directors, which may be the same as or different from those of the original Option Rights. (h) Successive grants may be made to the same Participant whether or not any Option Rights previously granted to such Participant remain unexercised. (i) Each grant shall specify the period or periods of continuous service by the Optionee with the Company or any Subsidiary following the grant which is necessary before the Option Rights or installments thereof will become exercisable and may provide for the earlier exercise of such Option Rights in the event of a Change in Control or other similar transaction or event. (j) Any grant of Option Rights may specify Management Objectives that must be achieved as a condition to the exercise of such rights. (k) Option Rights granted under this Plan may be (i) options, including, without limitation, Incentive Stock Options, that are intended to qualify under particular provisions of the Code; (ii) options that are not intended to so qualify; or (iii) combinations of the foregoing. (l) The Board may, at or after the Date of Grant of any Option Rights (other than Incentive Stock Options), provide for the payment of dividend equivalents to the Optionee on either a current or deferred or contingent basis or may provide that such equivalents shall be credited against the Option Price. (m) The exercise of an Option Right shall result in the cancellation on a share-for-share basis of any Tandem Appreciation Right authorized under Section 5 of this Plan. (n) No Option Right shall be exercisable more than ten years from the Date of Grant. (o) Each grant of Option Rights shall be evidenced by an agreement executed on behalf of the Company by an officer and delivered to the Optionee and containing such terms and provisions, consistent with this Plan, as the Board may approve. 5. APPRECIATION RIGHTS. (a) The Board may also authorize the granting to any Optionee of Tandem Appreciation Rights in respect of Option Rights granted hereunder at any time prior to the exercise or termination of such related Option Rights; provided, however, that a Tandem Appreciation Right awarded in relation to an Incentive Stock Option must be granted concurrently with such Incentive Stock Option. A Tandem Appreciation Right shall be a right of the Optionee, exercisable by surrender of the related Option Right, to receive from the Company an amount determined by the Board, which shall be expressed as a percentage of the Spread (not exceeding 100%) at the time of exercise. (b) The Board may also authorize the granting to any Participant of Free-Standing Appreciation Rights. A Free-Standing Appreciation Right shall be a right of the Participant to receive from the Company an amount determined by the Board, which shall be expressed as a percentage of the Spread (not exceeding 100%) at the time of exercise. (c) Each grant of Appreciation Rights may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (i) Any grant may specify that the amount payable on exercise of an Appreciation Right may be paid by the Company in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives. (ii) Any grant may specify that the amount payable on exercise of an Appreciation Right may not exceed a maximum specified by the Board at the Date of Grant. (iii) Any grant may specify waiting periods before exercise and permissible exercise dates or periods and shall provide that no Appreciation Right may be exercised except at a time when the related Option Right (if applicable) is also exercisable and at a time when the Spread is positive. (iv) Any grant may specify that such Appreciation Right may be exercised only in the event of a Change in Control or other similar transaction or event. (v) Each grant of Appreciation Rights shall be evidenced by an agreement executed on behalf of the Company by an officer and delivered to and accepted by the Participant, which agreement shall describe such Appreciation Rights, identify the related Option Rights (if applicable), state that such Appreciation Rights are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Board may approve. (vi) Any grant of Appreciation Rights may specify Management Objectives that must be achieved as a condition of the exercise of such rights. 6. RESTRICTED SHARES. The Board may also authorize the grant or sale of Restricted Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each such grant or sale shall constitute an immediate transfer of the ownership of Common Shares to the Participant in consideration of the performance of services, entitling such Participant to voting, dividend and other ownership rights, but subject to the substantial risk of forfeiture and restrictions on transfer hereinafter referred to. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than Market Value per Share at the Date of Grant. (c) Each such grant or sale shall provide that the Restricted Shares covered by such grant or sale shall be subject to a "substantial risk of forfeiture" within the meaning of Section 83 of the Code except (if the Board shall so determine) in the event of a Change in Control or other similar transaction or event, for a period of not less than three years to be determined by the Board at the Date of Grant. (d) Each such grant or sale shall provide that during the period for which such substantial risk of forfeiture is to continue, the transferability of the Restricted Shares shall be prohibited or restricted in the manner and to the extent prescribed by the Board at the Date of Grant (which restrictions may include, without limitation, rights of repurchase or first refusal in the Company or provisions subjecting the Restricted Shares to a continuing substantial risk of forfeiture in the hands of any transferee). (e) Any grant of Restricted Shares may specify Management Objectives which, if achieved, will result in termination or early termination of the restrictions applicable to such shares, and each grant may specify in respect of such specified Management Objectives, a minimum acceptable level of achievement and shall set forth a formula for determining the number of Restricted Shares on which restrictions will terminate if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. (f) Any such grant or sale of Restricted Shares may require that any or all dividends or other distributions paid thereon during the period of such restrictions be automatically deferred and reinvested in additional Restricted Shares, which may be subject to the same restrictions as the underlying award. (g) Each grant or sale of Restricted Shares shall be evidenced by an agreement executed on behalf of the Company by any officer and delivered to and accepted by the Participant and shall contain such terms and provisions, consistent with this Plan, as the Board may approve. Unless otherwise directed by the Board, all certificates representing Restricted Shares shall be held in custody by the Company until all restrictions thereon shall have lapsed, together with a stock power or powers executed by the Participant in whose name such certificates are registered, endorsed in blank and covering such shares. 7. DEFERRED SHARES. The Board may also authorize the granting or sale of Deferred Shares to Participants. Each such grant or sale may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each such grant or sale shall constitute the agreement by the Company to deliver Common Shares to the Participant in the future in consideration of the performance of services, but subject to the fulfillment of such conditions during the Deferral Period as the Board may specify. (b) Each such grant or sale may be made without additional consideration or in consideration of a payment by such Participant that is less than the Market Value per Share at the Date of Grant. (c) Each such grant or sale shall be subject to a Deferral Period of not less than one year, as determined by the Board at the Date of Grant except (if the Board shall so determine) in the event of a Change in Control or other similar transaction or event. (d) During the Deferral Period, the Participant shall have no right to transfer any rights under his or her award and shall have no rights of ownership in the Deferred Shares and shall have no right to vote them, but the Board may, at or after the Date of Grant, authorize the payment of dividend equivalents on such shares on either a current or deferred or contingent basis, either in cash or in additional Common Shares. (e) Each grant or sale of Deferred Shares shall be evidenced by an agreement executed on behalf of the Company by any officer and delivered to and accepted by the Participant and shall contain such terms and provisions, consistent with this Plan, as the Board may approve. 8. PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also authorize the granting of Performance Shares and Performance Units that will become payable to a Participant upon achievement of specified Management Objectives. Each such grant may utilize any or all of the authorizations, and shall be subject to all of the requirements, contained in the following provisions: (a) Each grant shall specify the number of Performance Shares or Performance Units to which it pertains, which number may be subject to adjustment to reflect changes in compensation or other factors; provided, however, that no such adjustment shall be made in the case of a Covered Employee. (b) The Performance Period with respect to each Performance Share or Performance Unit shall be such period of time (not less than three years, except in the event of a Change in Control or other similar transaction or event, if the Board shall so determine) commencing with the Date of Grant (as shall be determined by the Board at the time of grant). (c) Any grant of Performance Shares or Performance Units shall specify Management Objectives which, if achieved, will result in payment or early payment of the award, and each grant may specify in respect of such specified Management Objectives a minimum acceptable level of achievement and shall set forth a formula for determining the number of Performance Shares or Performance Units that will be earned if performance is at or above the minimum level, but falls short of full achievement of the specified Management Objectives. The grant of Performance Shares or Performance Units shall specify that, before the Performance Shares or Performance Units shall be earned and paid, the Board must certify that the Management Objectives have been satisfied. (d) Each grant shall specify a minimum acceptable level of achievement in respect of the specified Management Objectives below which no payment will be made and shall set forth a formula for determining the amount of payment to be made if performance is at or above such minimum but short of full achievement of the Management Objectives. (e) Each grant shall specify the time and manner of payment of Performance Shares or Performance Units which have been earned. Any grant may specify that the amount payable with respect thereto may be paid by the Company in cash, in Common Shares or in any combination thereof and may either grant to the Participant or retain in the Board the right to elect among those alternatives. (f) Any grant of Performance Shares may specify that the amount payable with respect thereto may not exceed a maximum specified by the Board at the Date of Grant. Any grant of Performance Units may specify that the amount payable or the number of Common Shares issued with respect thereto may not exceed maximums specified by the Board at the Date of Grant. (g) The Board may, at or after the Date of Grant of Performance Shares, provide for the payment of dividend equivalents to the holder thereof on either a current or deferred or contingent basis, either in cash or in additional Common Shares. (h) Each grant of Performance Shares or Performance Units shall be evidenced by an agreement executed on behalf of the Company by any officer and delivered to and accepted by the Participant, which agreement shall state that such Performance Shares or Performance Units are subject to all the terms and conditions of this Plan, and contain such other terms and provisions, consistent with this Plan, as the Board may approve. 9. AWARDS TO NON-EMPLOYEE DIRECTORS. The Board may, from time to time and upon such terms and conditions as it may determine, authorize the granting to Non-Employee Directors of Option Rights and may also authorize the grant or sale of Restricted Shares to Non-Employee Directors. (a) Each grant of Option Rights awarded pursuant to this Section 9 shall be upon terms and conditions consistent with Section 4 of this Plan and shall be evidenced by an agreement in such form as shall be approved by the Board. Each grant shall specify an Option Price per share, which shall not be less than the Market Value per Share on the Date of Grant. Each such Option Right granted under the Plan shall expire not more than ten years from the Date of Grant and shall be subject to earlier termination as hereinafter provided. Unless otherwise determined by the Board, such Option Rights shall be subject to the following additional terms and conditions: (i) Each grant shall specify the number of Common Shares to which it pertains, subject to the limitations set forth in Section 3 of this Plan. (ii) Each such Option Right shall become exercisable to the extent of one-fourth of the number of shares covered thereby one year after the Date of Grant and to the extent of an additional one-fourth of such shares after each of the next three successive years thereafter. Such Option Rights shall become exercisable in full immediately in the event of a Change in Control or other similar transaction or event. (iii) In the event of the termination of service on the Board by the holder of any such Option Rights, other than by reason of disability or death, the then-outstanding Option Rights of such holder may be exercised to the extent that they would be exercisable on the date that is six months and one day after the date of such termination and shall expire six months and one day after such termination, or on their stated expiration date, whichever occurs first. (iv) In the event of the death or disability of the holder of any such Option Rights, each of the then-outstanding Option Rights of such holder may be exercised at any time within one year after such death or disability, but in no event after the expiration date of the term of such Option Rights. (v) If a Non-Employee Director subsequently becomes an employee of the Company or a Subsidiary while remaining a member of the Board, any Option Rights held under the Plan by such individual at the time of such commencement of employment shall not be affected thereby. (vi) Option Rights may be exercised by a Non-Employee Director only upon payment to the Company in full of the Option Price of the Common Shares to be delivered. Such payment shall be made in cash or in Common Shares then-owned by the Optionee for at least six months, or in a combination of cash and such Common Shares. (vii) Common Shares acquired upon the exercise of these Option Rights may not be transferred for one year except in the case of the director's death, disability or other termination of service as a director. (b) Each grant or sale of Restricted Shares pursuant to this Section 9 shall be upon terms and conditions consistent with Section 6 of this Plan. 10. TRANSFERABILITY. (a) Except as otherwise determined by the Board on a case-by-case basis, no Option Right, Appreciation Right or other derivative security granted under the Plan shall be transferable by an Optionee other than by will or the laws of descent and distribution. Except as otherwise determined by the Board on a case-by-case basis, Option Rights and Appreciation Rights shall be exercisable during the Optionee's lifetime only by him or her or by his or her guardian or legal representative. (b) The Board may specify at the Date of Grant that part or all of the Common Shares that are (i) to be issued or transferred by the Company upon the exercise of Option Rights or Appreciation Rights, upon the termination of the Deferral Period applicable to Deferred Shares or upon payment under any grant of Performance Shares or Performance Units or (ii) no longer subject to the substantial risk of forfeiture and restrictions on transfer referred to in Section 6 of this Plan, shall be subject to further restrictions on transfer. 11. ADJUSTMENTS. The Board may make or provide for such adjustments in the numbers of Common Shares covered by outstanding Option Rights, Appreciation Rights, Deferred Shares, and Performance Shares granted hereunder, in the prices per share applicable to such Option Rights and Appreciation Rights and in the kind of shares covered thereby, as the Board, in its sole discretion, exercised in good faith, may determine is equitably required to prevent dilution or enlargement of the rights of Participants or Optionees that otherwise would result from (a) any stock dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company; or (b) any merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization, partial or complete liquidation or other distribution of assets, issuance of rights or warrants to purchase securities; or (c) any other corporate transaction or event having an effect similar to any of the foregoing. Moreover, in the event of any such transaction or event, the Board, in its discretion, may provide in substitution for any or all outstanding awards under this Plan such alternative consideration as it, in good faith, may determine to be equitable in the circumstances and may require in connection therewith the surrender of all awards so replaced. The Board may also make or provide for such adjustments in the numbers of shares specified in Section 3 of this Plan as the Board, in its sole discretion, exercised in good faith, may determine is appropriate to reflect any transaction or event described in this Section 11. 12. CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control" shall mean if at any time any of the following events shall have occurred: (a) The Company is merged or consolidated or reorganized into or with another corporation or other legal person, and as a result of such merger, consolidation or reorganization less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such transaction is held in the aggregate by the holders of Common Shares immediately prior to such transaction; (b) The Company sells or otherwise transfers all or substantially all of its assets to any other corporation or other legal person, and less than a majority of the combined voting power of the then-outstanding securities of such corporation or person immediately after such sale or transfer is held in the aggregate by the holders of Common Shares immediately prior to such sale or transfer; (c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any successor schedule, form or report), each as promulgated pursuant to the Exchange Act, disclosing that any person (as the term "person" is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial owner (as the term "beneficial owner" is defined under Rule 13d-3 or any successor rule or regulation promulgated under the Exchange Act) of securities representing 20% or more of the Voting Power; (d) The Company files a report or proxy statement with the Securities and Exchange Commission pursuant to the Exchange Act disclosing in response to Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) that a change in control of the Company has or may have occurred or will or may occur in the future pursuant to any then-existing contract or transaction; or (e) If during any period of two consecutive years, individuals who at the beginning of any such period constitute the directors of the Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by the Company's shareholders, of each director of the Company first elected during such period was approved by a vote of at least two-thirds of the directors of the Company then still in office who were directors of the Company at the beginning of any such period. Notwithstanding the foregoing provisions of Section 12(c) and (d) above, a "Change in Control" shall not be deemed to have occurred for purposes of this Plan (i) solely because (A) the Company; (B) a Subsidiary; (C) any Company-sponsored employee stock ownership plan or other employee benefit plan of the Company; or (D) any family member of Jacob Sapirstein (including lineal descendants, spouses of such descendants, the lineal descendants of any such spouses, the spouses of any such spouses' lineal descendants and trusts [including voting trusts]) either files or becomes obligated to file a report or proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or report or item therein) under the Exchange Act, disclosing beneficial ownership by it of shares, whether in excess of 20% of the Voting Power or otherwise, or because the Company reports that a Change in Control of the Company has or may have occurred or will or may occur in the future by reason of such beneficial ownership or (ii) solely because of a Change in Control of any Subsidiary. 13. FRACTIONAL SHARES. The Company shall not be required to issue any fractional Common Shares pursuant to this Plan. The Board may provide for the elimination of fractions or for the settlement of fractions in cash. 14. WITHHOLDING TAXES. To the extent that the Company is required to withhold federal, state, local or foreign taxes in connection with any payment made or benefit realized by a Participant or other person under this Plan, and the amounts available to the Company for such withholding are insufficient, it shall be a condition to the receipt of such payment or the realization of such benefit that the Participant or such other person make arrangements satisfactory to the Company for payment of the balance of such taxes required to be withheld, which arrangements (in the discretion of the Board) may include relinquishment of a portion of such benefit. The Company and a Participant or such other person may also make similar arrangements with respect to the payment of any taxes with respect to which withholding is not required. 15. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or combination of grants under this Plan, the Board may provide for such special terms for awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America as the Board may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Board may approve such supplements to or amendments, restatements or alternative versions of this Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of this Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as this Plan. No such special terms, supplements, amendments or restatements, however, shall include any provisions that are inconsistent with the terms of this Plan as then in effect unless this Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Company. 16. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the Board, which may from time to time delegate all or any part of its authority under this Plan to a committee of the Board (or subcommittee thereof) consisting of not less than three Non-Employee Directors appointed by the Board. A majority of the committee (or subcommittee) shall constitute a quorum, and the action of the members of the committee (or subcommittee) present at any meeting at which a quorum is present, or acts unanimously approved in writing, shall be the acts of the committee (or subcommittee). To the extent of any such delegation, references in this Plan to the Board shall be deemed to be references to any such committee or subcommittee. (b) The interpretation and construction by the Board of any provision of this Plan or of any agreement, notification or document evidencing the grant of Option Rights, Appreciation Rights, Restricted Shares, Deferred Shares, Performance Shares or Performance Units and any determination by the Board pursuant to any provision of this Plan or of any such agreement, notification or document shall be final and conclusive. No member of the Board shall be liable for any such action or determination made in good faith. 17. AMENDMENTS, ETC. (a) The Board may at any time and from time to time amend this Plan in whole or in part; provided, however, that any amendment which must be approved by the shareholders of the Company in order to comply with applicable law or the rules of the NASD or, if the Common Shares are not traded on NASDAQ, the principal national securities exchange upon which the Common Shares are traded or quoted, shall not be effective unless and until such approval has been obtained. Presentation of this Plan or any amendment hereof for shareholder approval shall not be construed to limit the Company's authority to offer similar or dissimilar benefits under other plans without shareholder approval. (b) The Board shall not, without the further approval of the shareholders of the Company, authorize the amendment of any outstanding Option Right to reduce the Option Price. Furthermore, no Option Right shall be cancelled and replaced with awards having a lower Option Price without further approval of the shareholders of the Company. This section 17(b) is intended to prohibit the repricing of "underwater" Option Rights and shall not be construed to prohibit the adjustments provided for in Section 11 of this Plan. (c) The Board also may permit Participants to elect to defer the issuance of Common Shares or the settlement of awards in cash under the Plan pursuant to such rules, procedures or programs as it may establish for purposes of this Plan. The Board also may provide that deferred issuances and settlements include the payment or crediting of dividend equivalents or interest on the deferral amounts. (d) The Board may condition the grant of any award or combination of awards authorized under this Plan on the surrender or deferral by the Participant of his or her right to receive a cash bonus or other compensation otherwise payable by the Company or a Subsidiary to the Participant. (e) In case of termination of employment by reason of death, disability or normal or early retirement, or in the case of hardship or other special circumstances, of a Participant who holds an Option Right or Appreciation Right not immediately exercisable in full, or any Restricted Shares as to which the substantial risk of forfeiture or the prohibition or restriction on transfer has not lapsed, or any Deferred Shares as to which the Deferral Period has not been completed, or any Performance Shares or Performance Units which have not been fully earned, or of a Participant who holds Common Shares subject to any transfer restriction imposed pursuant to Section 10(b) of this Plan, the Board may, in its sole discretion, accelerate the time at which such Option Right or Appreciation Right may be exercised or the time at which such substantial risk of forfeiture or prohibition or restriction on transfer will lapse or the time when such Deferral Period will end or the time at which such Performance Shares or Performance Units will be deemed to have been fully earned or the time when such transfer restriction will terminate or may waive any other limitation or requirement under any such award. (f) This Plan shall not confer upon any Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor shall it interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate such Participant's employment or other service at any time. (g) To the extent that any provision of this Plan would prevent any Option Right that was intended to qualify as an Incentive Stock Option from qualifying as such, that provision shall be null and void with respect to such Option Right. Such provision, however, shall remain in effect for other Option Rights and there shall be no further effect on any provision of this Plan. 18. TERMINATION. No grant shall be made under this Plan more than ten years after the date on which this Plan is first approved by the shareholders of the Company, but all grants made on or prior to such date shall continue in effect thereafter subject to the terms thereof and of this Plan. EX-10.XVI 10 l94460aexv10wxvi.txt EX-10(XVI) Exhibit (10)(xvi) AGREEMENT This Agreement ("Agreement") is made this 26th day of March 2002, between William S. Meyer ("Meyer") and American Greetings Corporation ("AG" or "Company"). In consideration of the mutual promises contained herein, the parties agree as follows: 1. TERM. This Agreement will be in effect from March 26, 2002, until March 31, 2006. 2. POSITION. Meyer is employed by AG as the Company's Senior Vice President and Chief Financial Officer. Meyer will perform any and all duties commensurate with that position, including without limitation, assisting in the hiring of a new Chief Financial Officer and orderly transition following that hiring. 3. END OF ACTIVE EMPLOYMENT. It is understood that Meyer's employment with AG, whether pursuant to this Agreement or otherwise, is terminable at-will, and may be terminated by either party at any time for any reason or for no reason. If not sooner terminated, on April 1, 2003, Meyer will end his active employment with AG ("End Date"). As of the End Date, Meyer will not be entitled to or receive any benefits or privileges of employment or post-employment, except for those specifically provided herein. 4. COMPENSATION AND BENEFITS. a. PRE-END DATE. For the period March 26, 2002, through March 31, 2003, or until Meyer voluntarily resigns or is terminated for cause prior to March 31, 2003, the Company will pay Meyer as compensation for his services: i. ANNUAL BASE. An annual base salary of $335,000, less payroll taxes and other withholdings, which amount will be reviewed and may be adjusted to an annual base salary of $350,000 by Morry Weiss on September 1, 2002, based on Meyer's performance; 1 ii. BONUS. Meyer will participate in the FY03 bonus plan, the actual pay out amount, if any, will be based upon a Senior Vice-President level in enterprise management, and the individual performance component, if any, will be calculated at 100% of the FY03 target bonus for Senior Vice Presidents. The actual pay out to Meyer will be less payroll taxes and other withholdings; iii. OPTIONS. Meyer will receive as of March 1, 2002, a grant of options equal to the number of stock options granted to Tier 3 Senior Vice Presidents. If a grant of stock options is made generally to Senior Vice Presidents between the date of this Agreement and July 1, 2003, Meyer will be granted such number as are granted to other Senior Vice Presidents. If the number of options granted depends in whole or in part on Meyer's performance, he will receive such number of options as are granted to Senior Vice Presidents who are eligible for 100% of their target bonus (currently these would be Tier 3 Senior Vice Presidents); and iv. OTHER BENEFITS. The other regular benefits offered to Senior Vice Presidents, including but not limited to, health, life and disability, profit-sharing and 40l(k) benefits, 401(k) maximizer and profit-sharing restoration benefits. If Meyer voluntarily resigns or is terminated "for cause," as defined herein, between March 26, 2002, and March 31, 2003, he will no longer receive the compensation and benefits set forth under subparagraph 4.a. as of the effective date of such resignation or termination. b. POST-END DATE. If Meyer has not voluntarily resigned or been terminated for cause before April 1, 2003, the Company will pay Meyer or ensure that he will participate in the following: i. SALARY CONTINUATION. From April 1, 2003, through March 31, 2006, an amount equal to Meyer's annual base salary as of March 31, 2003, which shall not be lower than $335,000 annually, for each April 1-March 31 period through March 31, 2006, payable twice a month in the regular payroll cycle; ii. HEALTH CARE. From April 1, 2003, through Meyer's 65th birthday, AG will make available to Meyer and his wife, if any, those health 2 care alternatives made available by AG to active associates in Meyer's then current area of residence. For this coverage, Meyer will pay the full rate that would be paid by a pre-age 65 retiree who has Meyer's years of service as of March 31, 2003, and Meyer's actual age, for the health care coverage chosen by Meyer. AG will pay to Meyer this same amount, less the amount that an actively employed associate would pay for this same coverage, grossed up by 40% to cover applicable taxes. Following his 65th birthday, Meyer and his wife, if any, will be eligible to participate in AG's health care plans for AG retirees, if any, by paying the full amount for such coverage for post age 65 retirees. These obligations by both parties will be made as adjustments to the amounts paid to Meyer hereunder. If these obligations cannot be satisfied by such payments, Meyer shall promptly pay AG the balance due; iii. OTHER PLANS. From April 1, 2003, through March 31, 2006, participation in the life insurance coverages, including but not limited to, the current basic and executive life coverages, if and to the extent that any is available to Senior Vice Presidents generally, with AG paying the full cost of such coverages; iv. SERP. Supplemental Executive Retirement Plan benefits accorded participants who have vested and are age 55 or older when they retire, payable pursuant to the terms of the plan as of March 31, 2006; and v. CAR. From April 1, 2003, until February 18, 2005, Meyer will be entitled to use his existing company car. During this time, AG will make all lease payments, insure the car and make material repairs, and Meyer will pay for all gas and other routine maintenance. On or before February 18, 2005, Meyer may purchase the car from AG, free and clear of all liens and encumbrances, upon payment of $28,574.00. If between April 1, 2003, and March 31, 2006, Meyer breaches the provisions in paragraphs 5. and/or 6. below, the payments and benefits set forth in paragraph 4.b.(i) and (ii) shall cease and any such future payments and benefits shall be forfeited. 3 The compensation and benefits set forth above in subparagraphs 4.b.i.-v. constitutes the complete list of post-End Date compensation and benefits due, payable and available to Meyer. Meyer will not be deemed to have "voluntarily resigned" should he consent to a written request by AG to cease performing the duties and obligations of his position prior to April 1, 2003. c. STOCK OPTIONS VESTING AND EXERCISABILITY. All options in Company stock granted prior to and on July 1, 2003, shall vest on April 1, 2006, if they have not already vested by April 1, 2006. All such vested options shall be exercisable for ten (10) years from the date of grant, unless the plan under which they were granted provides for a shorter period of exercisability after April 1, 2006. d. FOR CAUSE. "For cause" as used in this Agreement is defined as termination as a result of Meyer's personal dishonesty, gross incompetence, willful misconduct, breach of fiduciary duty involving personal profit, material and willful violation of any law, rule, regulation or AG policy (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of this Agreement. 5. CONFIDENTIAL AND TRADE SECRET INFORMATION. Meyer acknowledges that in the course of his employment with AG, he has and will have access to confidential information and trade secrets, oral or written ("Confidential Information"), misuse or disclosure of which could adversely affect AG's business. Meyer agrees that he will not, either during his employment with AG or at any time thereafter, use for himself or others, or disclose or convey to others (except as is necessary in the ordinary course of his employment) any of AG's Confidential Information. This paragraph shall not prohibit disclosure of information, which has become public, unless it became public through Meyer's breach of this Agreement. 6. NON-COMPETITION; NON-DISPARAGEMENT. In consideration of AG's agreement to employ Meyer under the terms of this Agreement, Meyer agrees that he will not for the following periods engage anywhere in the United States or Canada, directly or indirectly, in any business activities, either as principal, agent or consultant or through any corporation, firm or organization in which he may be an officer, director, employee, substantial shareholder, partner, member or be otherwise affiliated that are in competition with AG's businesses at such time: 4 (i) for the period of his active employment from March 26, 2002, until March 31, 2003, and (ii) during the period he is receiving monies under paragraph 4.b.(i). Further, Meyer agrees that at no time during or following his employment with AG will he directly or indirectly disparage AG, its affiliates and subsidiaries or any of AG's directors, officers, employees, agents and representatives. Notwithstanding the provisions of subparagraph 8.d., AG may seek injunctive or other equitable relief in any court of competent jurisdiction if Meyer breaches the provisions of this paragraph 6. 7. CONFLICT OF INTEREST. Meyer represents and warrants that he has no interest or obligation that is inconsistent with or in conflict with this Agreement or that would prevent, limit or impair his performance of any part of this Agreement. 8. MISCELLANEOUS. a. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement constitutes the entire understanding between Meyer and AG relating to the subject matter contained herein and effective March 26, 2002, this Agreement supersedes any previous oral or written agreement(s) and understandings, including without limitation, the employment agreement, dated December 1, 1987, between AG and Meyer. This Agreement may not be changed, modified, or altered without the express written consent of Meyer and AG. b. NO WAIVER. Either party's failure to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive the other party of his/its rights thereafter to insist upon strict adherence to that term or any other term of this Agreement. c. SEVERABILITY. If any part or section of this Agreement is found to be contrary to law or unenforceable, the remainder shall remain in force and effect. d. GOVERNING LAW; DISPUTES. This Agreement will be governed by and construed in accordance with the law of the State of Ohio. Any disputes regarding this Agreement that cannot be resolved amicably shall be resolved through AG's "Solutions" alternative dispute resolution program or its successor, if any. If such dispute cannot be resolved through mediation under that program, it shall be resolved by binding arbitration in Cleveland in accordance with the applicable rules of the American Arbitration Association. 5 e. RETURN OF AG PROPERTY. Upon Meyer's retirement or termination, regardless of the reason, Meyer will promptly surrender to AG any of its property, except for his company car, in Meyer's possession including, but not limited to, all correspondence, memoranda, notes, records, reports, plans, computer printouts, reproductions, slides, electronic data, and any other papers or items, and copies thereof, received or made by Meyer in connection with his employment with AG. 9. REVIEW BY ADVISORS. Meyer acknowledges that he has had ample opportunity to consult with his legal and financial advisors, has carefully considered this Agreement, and fully understands its provisions. He has not relied on any other representations or statements, written or oral. 10. SURVIVAL. The following paragraphs shall survive the expiration or termination of this Agreement: subparagraphs 4.b.ii, 4.b.iv. and paragraphs 5, 6, and 8. AMERICAN GREETINGS CORPORATION WILLIAM S. MEYER BY: _______________________________ __________________________________ NAME: ____________________________ TITLE: ____________________________ 6 EX-10.XVII 11 l94460aexv10wxvii.txt EX-10(XVII) Exhibit (10)(xvii) C O N F I D E N T A L --------------------- EMPLOYMENT AGREEMENT This Agreement ("Agreement") is made this 1st day of March 2001, between William R. Mason ("Mason") and American Greetings Corporation ("AG" or "Company"). In consideration of the mutual promises contained herein, the parties agree as follows: 1. POSITION: Mason is employed by AG as the Company's Senior Vice President, Sales. Mason will perform any and all duties commensurate with that position. 2. TERM: This Agreement will be in effect for "rolling" three (3) year terms commencing March 1, 2001; successive three (3) year terms will commence on March 2, 2001, and on each day thereafter, and will terminate three (3) years from each commencement date. 3. TERMINATION: It is understood that Mason's employment with AG, whether pursuant to this Agreement or otherwise, is terminable at-will, and may be terminated by either party at any time for any reason or for no reason. This Agreement will end on the date that Mason ends his employment with AG ("Termination Date"). As of the Termination Date, Mason will no longer be an employee of AG and will not be entitled to or receive any benefits or privileges of employment, except for those provided herein and those post-employment benefits generally afforded such former employees under AG's then current policies and procedures. 4. COMPENSATION: During the term of this Agreement, in addition to the other regular benefits offered to Executive Officers (as designated by the AG Board of Directors or otherwise), including but not limited to, profit sharing, 40l(k), stock option plans, health benefits and life insurance, Mason will receive the following salary and benefits: a. Beginning on March 1, 2001, Mason will be paid an annual base salary of $299,304, plus an annual payment of $25,000, for a total of 1 $324,304 considered base pay for purposes of determining AG's contribution to Mason's account in the Retirement Profit Sharing and Savings Plan and for purposes of his Supplemental Executive Retirement Plan account, but is not considered base pay for purposes of determining the one year bonus and three year bonus under the one and three year bonus plans referenced in subparagraphs 4.b. and 4.c. below or other bonuses under successor or additional plans, less payroll taxes and other withholdings as required by law ("Base Salary"). Such Base Salary will be reviewed at or around the end of each AG fiscal year thereafter and at that time may be changed at the discretion of AG's President. Unless Mason voluntarily resigns or is terminated "for cause," the then current Base Salary will be paid for three years from the Termination Date payable in installments on the same dates as Mason's Base Salary was paid immediately before the Termination Date, but Mason will not be eligible for bonuses under subparagraphs 4.b. or 4.c. below. Notwithstanding the foregoing, if Mason either breaches the non-competition provisions in paragraph 6 below or otherwise engages in any business activities that are in competition with AG's businesses as defined in paragraph 6 below during such three year payment period, payments of his Base Salary hereunder shall cease and any future payments shall be forfeited. If Mason voluntarily resigns, he will receive no further Base Salary or bonuses under subparagraphs 4.b. or 4.c. below after the Termination Date. "For Cause" is defined as termination as a result of Mason's personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or material breach of paragraphs 5, 6, 7, or 8(e) of this Agreement. b. For each AG fiscal year in which AG pays its officers and certain key employees a one year cash bonus pursuant to the Company's regular Executive Incentive Compensation Plan, Mason will receive such a bonus based upon a target bonus of 35% of his then current annual base salary excluding the annual payment of $25,000 set forth in the first sentence of this subparagraph and the terms of such plan. c. Mason shall further be eligible to receive a cash bonus, if and when paid, under the terms of AG's current three year Special Bonus Plan or other future long-term executive incentive compensation plans for officers and certain key employees, in accordance with its/their terms. If the Special Bonus Plan is not renewed or a similar plan is not instituted at the end of the current three year Special Bonus Plan period, AG agrees to review, but not necessarily act upon, the need for such a bonus as an element of Mason's compensation 2 package. d. During the term of this Agreement, Mason shall own at least 5,000 shares of AG Common Stock. 5. CONFIDENTIAL AND TRADE SECRET INFORMATION: Mason acknowledges that in the course of his employment with AG he has and will have access to confidential information and trade secrets, oral or written which a reasonable person would believe to be confidential to or a trade secret of AG ("Confidential Information"), misuse or disclosure of which could adversely affect AG's business. Mason agrees that he will not, either during his employment with AG or at any time thereafter, use for himself or others, or disclose or convey to others (except as is necessary in the ordinary course of his employment) any of AG's Confidential Information. This paragraph shall not prohibit disclosure of information which has become public, unless it became public through Mason's breach of this Agreement. 6. NON-COMPETITION; NON-DISPARAGEMENT: In consideration of AG's agreement to employ Mason under the terms of this Agreement, Mason agrees that he will not for the following periods engage anywhere in the United States or Canada, directly or indirectly, in any business activities, either as principal, agent or consultant or through any corporation, firm or organization in which he may be an officer, director, employee, substantial shareholder, partner, member or be otherwise affiliated that are in competition with AG's businesses at such time: (i) for the period of his employment hereunder, (ii) and for a period of one (1) year after the Termination Date; provided, however, that unless Mason voluntarily resigns or is terminated "For Cause" in which case the one (1) year period runs from the Termination Date, the one (1) year period in subparagraph (ii) above shall lapse on the thirtieth (30th) day after the date that Mason gives written notice to AG that a payment is due Mason under paragraph 4.a. above which remains unpaid on such thirtieth (30th) day. Further, Mason agrees that at no time during or following his employment with AG will he directly or indirectly disparage AG, its affiliates and subsidiaries or any of AG's directors, officers, employees, agents and representatives. 7. CONFLICT OF INTEREST: Mason represents and warrants that he has no interest or obligation that is inconsistent with or in conflict with this Agreement or that would prevent, limit or impair his performance of any part of this Agreement. 8. MISCELLANEOUS: 3 a. This Agreement constitutes the entire understanding between Mason and AG relating to the subject matter contained herein and effective March 1, 2001, this Agreement supersedes any previous oral or written agreement(s) and understandings, including without limitation, the employment agreement, dated July 1, 1984, between AG and Mason. This Agreement may not be changed, modified, or altered without the express written consent of Mason and AG. b. Either party's failure to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver or deprive the other party of his/its rights thereafter to insist upon strict adherence to that term or any other term of this Agreement. c. If any part or section of this Agreement is found to be contrary to law or unenforceable, the remainder shall remain in force and effect. d. This Agreement will be governed by and construed in accordance with the law of the State of Ohio. Any disputes regarding this Agreement that cannot be resolved amicably shall be resolved through AG's "Solutions" alternative dispute resolution program or its successor, if any. If such dispute cannot be resolved through mediation under that program, except as otherwise provided under the terms of the Solutions program, it shall be resolved by binding arbitration in Cleveland in accordance with the applicable rules of the American Arbitration Association. e. Upon Mason's termination, regardless of the reason, Mason will promptly surrender to AG any of its property in Mason's possession including, but not limited to, all correspondence, memoranda, notes, records, reports, plans, computer printouts, reproductions, slides, and any other papers or items, and copies of papers and other items, received or made by Mason in connection with his employment with AG. 9. REVIEW BY ADVISORS: Mason acknowledges that he has had ample opportunity to consult with his legal and financial advisors, has carefully considered this Agreement, and fully understands its provisions. He has not relied on any other representations or statements, written or oral. 4 10. SURVIVAL: The following paragraphs shall survive the expiration or termination of this Agreement; 3, 4.a., 5, 6, 7 and 8. AMERICAN GREETINGS CORPORATION WILLIAM R. MASON BY: _______________________________ __________________________________ NAME: ____________________________ __________________________________ TITLE: ____________________________ __________________________________ DATE: _____________________________ __________________________________ 5 EX-21 12 l94460aexv21.txt EX-21 EXHIBIT 21 AMERICAN GREETINGS CORPORATION Subsidiaries of the Registrant State / Jurisdiction Subsidiary of Incorporation - ---------------------------------------- ------------------------------- A.G. Industries, Inc. North Carolina American Greetings Service Corp. Delaware AGC Funding Corporation Delaware Carlton Cards (Canada) Limited Canada Carlton Cards (United Kingdom) Limited United Kingdom Carlton Cards Retail, Inc. Connecticut AmericanGreetings.com Ohio Gibson Greetings, Inc. Ohio Hanson White Ltd. United Kingdom John Sands (Australia) Ltd. Delaware John Sands (New Zealand) Ltd. Delaware Magnivision, Inc. Delaware Plus Mark, Inc. Ohio EX-23 13 l94460aexv23.txt EX-23 EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in (i) Post-Effective Amendment Number 1 dated May 27, 1986 to Registration Statement No. 2-89471 on Form S-3, (ii) Post-Effective Amendment Number 1 dated May 31, 1984 to Registration Statement No. 2-84911 on Form S-8, (iii) Registration Statement No. 33-975 on Form S-8 dated November 7, 1985, (iv) Registration Statement No. 33-16180 on Form S-8 dated July 31, 1987, (v) Registration Statement No. 33-45673 on Form S-8 dated February 4, 1992, (vi) Registration Statement No. 33-58582 on Form S-8 dated February 22, 1993, (vii) Registration Statement No. 33-61037 on form S-8 dated July 14, 1995, (viii) Registration Statement No. 33-08123 on Form S-8 dated July 15, 1996, (ix) Registration Statement No. 333-41912 on Form S-8 dated July 21, 2000, (x) Registration Statement No. 333-65534 dated July 20, 2001 on Form S-8 and (xi) Amendment No. 1 dated October 19, 2001 to Registration Statement No. 333-68526 on Form S-3 of our report dated March 26, 2002, with respect to the consolidated financial statements and schedule of American Greetings Corporation included in its Annual Report (Form 10-K) for the fiscal year ended February 28, 2002. /s/ Ernst & Young LLP Cleveland, Ohio May 22, 2002 10-K 14 l94460ae10vkxpdfy.pdf PDF COURTESY COPY OF THE AMERICAN GREETINGS 10-K begin 644 l94460ae10vkxpdfy.pdf M)5!$1BTQ+C(-)>+CS],-"C(V-R`P(&]B:@T\/"`-+TQI;F5A7!E M("]#871A;&]G(`TO4&%G97,@,C0X(#`@4B`-+TI4(#(V-2`P(%(@#3X^(`UE M;F1O8FH-,C]K472R%KYG!I*79:LVB;85J"PA'1))>3BJ\ZMA\R:-BPH3&A M[`+')3T)E@J>0RYAC3<+,C=T1TS=YO"`]:6N+598Y7C)T=-/B%UD1(-E5 MXNK9T"LBL[*A;>G.#AV?STN2FGI"Y)0"3J7(&@A<>:9PM/OI.3Y8UI':.:&PT]7P@N(J7AV?YDYGS0F%&@6922ER7!EM$3/9 MLQ8H+@':!I'MR&KV%E9X%/#@TI$3%D<6S7@A<)4-:,H14\>E0%.T>"634F2< M0Z2`V@(67-S9IJ7T^:"OP&EAA0_!+D9'3E@M4-F2IN/7H;D(I"XIT*?$TDE: MX8K$\N[+C+R^R1.2YG[T7J"XLM>Q6WRN9T$[V\8,0W]QD'.3%GP,83'9`G3& M"H[,S*[FHWH-;YE/`>`:@`"#`#9;^>2#65N9'-T7!E("]&;VYT(`TO M4W5B='EP92`O5'EP93$@#2]&:7)S=$-H87(@,S(@#2],87-T0VAA&%C="!N86UE(&]F(')E9VES M=')A;G0@87,@65R*51J"BTP+C,P M.38@+3$N,3$Y,B!41`HH261E;G1I9FEC871I;VX@3F\N7"DI5&H*,3(@,"`P M(#$R(#$U,2XX.2`W,38N.32!O2!R969E2!A;65N9&UE;G0@=&\@=&AI'D@4W1A M=&5M96YT(&9I;&5D('=I=&@@=&AE(%-E8W5R:71I97,@86YD($5X8VAA;F=E M($-O;6UI2!R969EW>:ZNBY:K8_=HE!&[ M=-)_[)@E=7-?_-F<][CH`[J_1W=7J4^X>KM"NFZ/5J=0::4!,3O4FEBU1JY3 MA,^32GVBHZ5KWU_02M$NZ@U4J69I]V]7:L,5\HU2H7V+^X'FQ^^?[>-\

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M]URY[QF!.4,,O"[,;1EJ=GH)'>1)=0ESNT+.>D.%U;""RI%:U3E;$G29IG1N MKP,*A`61_BF$K'B>Q"_U0\A''$QWX**IJ,A<04ZJ]CAL&0_AGAI#@7]^^5/C M.(K0MTRN/HH-#5+P5$]I*U%ADY!8!\JF,'S((6AJ8`;W`N.)S7_I^_`7@'W1 M$1XAV&=-+J+^`_Y^7G(*96YD7!E("]086=E7!E("]086=E7!E("]086=EF4@,C8W#2]) M1%L\,3DY8S1E,6,T.# -----END PRIVACY-ENHANCED MESSAGE-----

EX-4.II

                                                                   Exhibit 4(ii)

================================================================================
================================================================================

                                CREDIT AGREEMENT

                                      AMONG

                         AMERICAN GREETINGS CORPORATION,
                                   AS BORROWER

                     THE FINANCIAL INSTITUTIONS NAME HEREIN,
                                   AS LENDERS

                               NATIONAL CITY BANK,
                                       AND
                       GOLDMAN SACHS CREDIT PARTNERS L.P.,
                           AS JOINT-LEAD ARRANGERS AND
                              CO-SYNDICATION AGENTS

                               NATIONAL CITY BANK,
                               AS THE GLOBAL AGENT



                          KEYBANK NATIONAL ASSOCIATION,
                             AS DOCUMENTATION AGENT

                              ---------------------

                                   DATED AS OF
                                 AUGUST 7, 2001
                              ---------------------

================================================================================
================================================================================





                                TABLE OF CONTENTS

                                                                                                              
ARTICLE I. DEFINITIONS............................................................................................ 1

ARTICLE II. AMOUNT AND TERMS OF CREDIT............................................................................27

   Section 2.1. Amount and Nature of Credit.......................................................................27
   Section 2.2. Conditions to Credit Events.......................................................................34
   Section 2.3. Payment on Notes, Etc.............................................................................35
   Section 2.4. Payments Net of Taxes.............................................................................36
   Section 2.5. Voluntary Prepayment; Prepayment Fees.............................................................37
   Section 2.6. Facility and Other Fees...........................................................................38
   Section 2.7. Modification of Commitment........................................................................39
   Section 2.8. Mandatory Payment.................................................................................40
   Section 2.9. Computation of Interest And Fees; Default Rate....................................................43
   Section 2.10. Fixed Charge Coverage Ratio Condition............................................................43
   Section 2.11. Extension of Commitment..........................................................................44

ARTICLE III.  ADDITIONAL PROVISIONS RELATING TO FIXED RATE........................................................44

   Section 3.1. Reserves or Deposit Requirements, Etc.............................................................44
   Section 3.2. Tax Law, Etc......................................................................................45
   Section 3.3. Eurodollar or Alternate Currency Deposits Unavailable or Interest Rate Unascertainable............45
   Section 3.4. Indemnity.........................................................................................46
   Section 3.5. Changes in Law Rendering Fixed Rate Loans Unlawful................................................46
   Section 3.6. Funding...........................................................................................46
   Section 3.7. Capital Adequacy..................................................................................46

ARTICLE IV.  CONDITIONS PRECEDENT.................................................................................47

   Section 4.1. Notes.............................................................................................47
   Section 4.2. Guaranties of Payment.............................................................................47
   Section 4.3. Security Documents................................................................................47
   Section 4.4. Officer's Certificate, Resolutions, Organizational Documents......................................48
   Section 4.5. Legal Opinions....................................................................................48
   Section 4.6. Good Standing Certificates and Articles of Incorporation..........................................48
   Section 4.7. Closing and Legal Fees; Fee Letters...............................................................48
   Section 4.8. Lien Searches.....................................................................................49
   Section 4.9. Insurance Certificates............................................................................49
   Section 4.10. Senior Indenture.................................................................................49
   Section 4.11. Subordinated Indenture...........................................................................49
   Section 4.12. Subordinated Convertible Indenture...............................................................49
   Section 4.13. Permitted Receivables Facility...................................................................50
   Section 4.14. Existing Credit Agreement........................................................................50
   Section 4.15. Financial Projections............................................................................50
   Section 4.16. Regulatory Approvals.............................................................................50
   Section 4.17. Closing Certificate..............................................................................50





                                      -i-




                                                                                                              
   Section 4.18. No Material Adverse Change.......................................................................50
   Section 4.19. Miscellaneous....................................................................................51

ARTICLE V.  COVENANTS.............................................................................................51

   Section 5.1. Insurance.........................................................................................51
   Section 5.2. Money Obligations.................................................................................51
   Section 5.3. Financial Statements..............................................................................51
   Section 5.4. Financial Records.................................................................................51
   Section 5.5. Franchises........................................................................................53
   Section 5.6. ERISA Compliance..................................................................................53
   Section 5.7. Financial Covenants...............................................................................53
   Section 5.8. Borrowing.........................................................................................53
   Section 5.9. Liens.............................................................................................54
   Section 5.10. Regulations U and X..............................................................................56
   Section 5.11. Investments and Loans............................................................................57
   Section 5.12. Merger and Sale of Assets........................................................................57
   Section 5.13. Acquisitions.....................................................................................58
   Section 5.14. Capital Expenditures.............................................................................59
   Section 5.15. Notice...........................................................................................59
   Section 5.16. Environmental Compliance.........................................................................60
   Section 5.17. Affiliate Transactions...........................................................................60
   Section 5.18. Use of Proceeds..................................................................................60
   Section 5.19. Corporate Names; Location of Collateral..........................................................61
   Section 5.20. Restricted Payments..............................................................................61
   Section 5.22. Amendment of Organizational Documents............................................................61
   Section 5.23. Real Property Matters............................................................................63
   Section 5.24. Restrictive Agreements; Material Indebtedness Agreements.........................................63
ARTICLE VI. REPRESENTATIONS AND WARRANTIES........................................................................64

   Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification..........................................65
   Section 6.2. Corporate Authority...............................................................................65
   Section 6.3. Compliance With Laws..............................................................................66
   Section 6.4. Litigation and Administrative Proceedings.........................................................66
   Section 6.5. Title to Assets...................................................................................66
   Section 6.6. Liens and Security Interests......................................................................67
   Section 6.7. Tax Returns.......................................................................................67
   Section 6.8. Environmental Laws................................................................................67
   Section 6.9. Continued Business................................................................................67
   Section 6.10. Employee Benefits Plans..........................................................................67
   Section 6.11. Consents or Approvals............................................................................68
   Section 6.12. Solvency.........................................................................................68
   Section 6.13. Financial Statements.............................................................................68
   Section 6.14. Regulations......................................................................................69
   Section 6.15. Material Agreements..............................................................................69
   Section 6.16. Intellectual Property............................................................................69
   Section 6.17. Insurance........................................................................................69





                                      -ii-


                                                                                                              
   Section 6.18. Accurate And Complete Statements.................................................................69
   Section 6.19. Location; Trade Names............................................................................69
   Section 6.20. Investment Company; Holding Company..............................................................70
   Section 6.21. Senior Indenture.................................................................................70
   Section 6.22. Subordinated Indenture and Subordinated Convertible Indenture....................................70
   Section 6.23. Defaults.........................................................................................70

ARTICLE VII. EVENTS OF DEFAULT....................................................................................70

   Section 7.1. Payments..........................................................................................71
   Section 7.2. Special Covenants.................................................................................71
   Section 7.3. Other Covenants...................................................................................71
   Section 7.4. Representations And Warranties....................................................................71
   Section 7.5. Cross Default.....................................................................................71
   Section 7.6. ERISA Default.....................................................................................71
   Section 7.7. Change in Control.................................................................................71
   Section 7.8. Money Judgment....................................................................................71
   Section 7.9. Material Adverse Change...........................................................................71
   Section 7.10. Senior Indenture.................................................................................71
   Section 7.11. Subordinated Indenture and Subordinated Convertible Indenture....................................72
   Section 7.12. Validity of Loan Documents.......................................................................72
   Section 7.13. Solvency.........................................................................................72

ARTICLE VIII. REMEDIES UPON DEFAULT...............................................................................72

   Section 8.1. Optional Defaults.................................................................................73
   Section 8.2. Automatic Defaults................................................................................73
   Section 8.3. Letters of Credit.................................................................................73
   Section 8.4. Offsets...........................................................................................73
   Section 8.5. Equalization Provision............................................................................74

ARTICLE IX. THE GLOBAL AGENT......................................................................................75

   Section 9.1. Appointment And Authorization.....................................................................75
   ection 9.2. Note Holders.......................................................................................75
   Section 9.3. Consultation With Counsel.........................................................................75
   Section 9.4. Documents.........................................................................................75
   Section 9.5. The Global Agent And Affiliates...................................................................75
   Section 9.6. Knowledge of Default..............................................................................75
   Section 9.7. Action by the Global Agent........................................................................76
   Section 9.8. Notices; Default..................................................................................76
   Section 9.9. Indemnification of the Global Agent...............................................................76
   Section 9.10. Successor Agent..................................................................................76

ARTICLE X. INTERCREDITOR PROVISIONS...............................................................................77

   Section 10.1. Definitions......................................................................................77
   Section 10.2. Creditor Obligations to be Ratably Secured.......................................................79
   Section 10.3. Appointment of the Collateral Agent..............................................................80
   Section 10.4. Pro Rata Distribution of the Creditor Collateral.................................................80





                                     -iii-



                                                                                                              
   Section 10.5. Payments or Proceed Received by a Creditor Prior to a Sharing Event..............................80
   Section 10.6. Payments or Proceeds Received by the Collateral Agent Prior to a
                        Sharing Event.............................................................................81
   Section 10.7. Payments or Proceeds Received After a Sharing Event..............................................81
   Section 10.8. Distribution of Proceeds.........................................................................81
   Section 10.9. Delivery of Creditor Collateral to the Collateral Agent..........................................82
   Section 10.10. Return of Payments..............................................................................82
   Section 10.11. Lending Party Rights and Remedies...............................................................82
   Section 10.12. Rights and Remedies of the Collateral Agent Upon Sharing Event..................................83
   Section 10.13. Appoint of Power of Attorney....................................................................83
   Section 10.14. Obligations Unaffected; Modification of Lending Documents.......................................83
   Section 10.15. Release of Creditor Collateral..................................................................83
   Section 10.16. Accounting......................................................................................83
   Section 10.17. Contesting Liens or Security Interests..........................................................84
   Section 10.18. Actions by the Collateral Agent.................................................................84
   Section 10.19. Bankruptcy Filing...............................................................................84
   Section 10.20. Indemnification by Creditors....................................................................85
   Section 10.21. Right to Opt Out................................................................................85
   Section 10.22. Third Parties...................................................................................85
   Section 10.23. Successor Collateral Agent......................................................................85
   Section 10.24. Termination.....................................................................................85

ARTICLE XI. MISCELLANEOUS.........................................................................................86

   Section 11.1. Lenders' Independent Investigation...............................................................86
   Section 11.2. No Waiver; Cumulative Remedies...................................................................86
   Section 11.3. Amendments, Consents.............................................................................86
   Section 11.4. Notices..........................................................................................87
   Section 11.5. Costs, Expenses And Taxes........................................................................87
   Section 11.6. Indemnification..................................................................................87
   Section 11.7. Obligations Several; No Fiduciary Obligations....................................................88
   Section 11.8. Execution in Counterparts........................................................................88
   Section 11.9. Binding Effect; Borrowers' Assignment............................................................88
   Section 11.10. Lender Assignments/Participations...............................................................88
   Section 11.11. Designation.....................................................................................91
   Section 11.12. Severability of Provisions; Captions; Attachments...............................................92
   Section 11.13. Governing Law; Submission to Jurisdiction.......................................................92
   Section 11.14. Legal Representation of Parties.................................................................92
   Section 11.15. Judgment Currency...............................................................................92
   Section 11.16. Designated Senior Indebtedness..................................................................93
   Section 11.17. Jury Trial Waiver..............................................................................S-1





                                      -iv-



         This CREDIT AGREEMENT (as the same may from time to time be amended,
restated or otherwise modified, this "Agreement") is made effective as of the
7th day of August, 2001, among:

               (a) AMERICAN GREETINGS CORPORATION, an Ohio corporation
          ("Borrower");

               (b) the financial institutions named in SCHEDULE 1 hereto
          (collectively, the "Lenders", and individually each a "Lender");

               (c) KEYBANK NATIONAL ASSOCIATION, as documentation agent (the
          "Documentation Agent");

               (d) NATIONAL CITY BANK and GOLDMAN SACHS CREDIT PARTNERS L.P.
          ("Goldman Sachs"), as joint-lead arrangers and co-syndication agents
          (collectively, the "Lead Arrangers", and individually each a "Lead
          Arranger"); and

               (e) NATIONAL CITY BANK, as administrative agent for all of the
          Lenders (together with any successor appointed pursuant to Section
          9.10 hereof, the "Global Agent").


                                   WITNESSETH:

         WHEREAS, Borrower and the Lenders desire to contract for the
establishment of credits in the aggregate principal amounts hereinafter set
forth, to be made available to Borrower upon the terms and subject to the
conditions hereinafter set forth;

         NOW, THEREFORE, it is mutually agreed as follows:


                             ARTICLE I. DEFINITIONS

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

         "364 Day Commitment" shall mean the obligation hereunder, during the
applicable Commitment Period, of each 364 Day Lender to participate in the
making of 364 Day Revolving Loans up to the aggregate amount set forth opposite
such Lender's name under the column headed "364 Day Commitment Amount" as set
forth on SCHEDULE 1 hereto (or such other amount as shall be determined pursuant
to Section 2.7 hereof).

         "364 Day Exposure" shall mean, at any time, the aggregate principal
amount of all 364 Day Revolving Loans outstanding.

         "364 Day Lender" shall mean a Lender with a 364 Day Commitment.

         "364 Day Note" shall mean a 364 Day Revolving Credit Note in the form
of the attached EXHIBIT C, executed and delivered pursuant to Section 2.1(b)
hereof.



                                       1



         "364 Day Revolving Loan" shall mean a loan granted to Borrower by the
364 Day Lenders in accordance with Section 2.1(b) hereof.

         "Acquisition" shall mean any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in (a) the
acquisition of all or substantially all of the assets of any Person, or any
business or division of any Person (other than the purchase of Receivables
Related Assets by the Receivables Subsidiary from AGSC in connection with the
Permitted Receivables Facility), (b) the acquisition of in excess of fifty
percent (50%) of the stock (or other equity interest) of any Person, or (c) the
acquisition of another Person (other than a Company) by a merger or
consolidation or any other combination with such Person.

         "Additional Commitment" shall have the meaning given to such term in
Section 2.7(c) hereof.

         "Additional Convertible Proceeds Amount" shall mean the Convertible
Excess Proceeds used by Borrower within one hundred eighty (180) days of the
Closing Date to effect an Acquisition permitted pursuant to Section 5.13 hereof.

         "Additional Lender" shall mean a financial institution that shall
become a Lender hereunder during the Commitment Increase Period pursuant to
Section 2.7(c) hereof.

         "Additional Lender Assumption Agreement" shall mean an Assumption
Agreement in form and substance satisfactory to the Global Agent, wherein an
Additional Lender shall become a Lender hereunder.

         "Adjusted Consolidated Cash Flow" shall mean, for any period,
Consolidated Net Earnings plus: (a) an amount equal to any extraordinary loss
plus any net loss realized by the Companies in connection with any Disposition,
to the extent such losses were deducted in computing such Consolidated Net
Earnings; plus (b) provision for taxes based on income or profits of the
Companies, to the extent such provision for taxes was deducted in computing such
Consolidated Net Earnings; plus (c) Consolidated Interest Expense whether paid
or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with capital lease
obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net of the
effect of all payments made or received pursuant to Hedge Agreements), to the
extent that any such expense was deducted in computing such Consolidated Net
Earnings; plus (d) non-recurring and special charges deducted in computing
Consolidated Net Earnings; plus (e) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of the Companies to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Earnings; minus (f) non-cash items
increasing such Consolidated Net Earnings, other than the accrual of revenue in
the ordinary course of business, in each case, on a Consolidated basis and in
accordance with GAAP.


                                       2



         "Advantage" shall mean any payment (whether made voluntarily or
involuntarily, by offset of any deposit or other indebtedness or otherwise)
received by any Lender in respect of the Applicable Debt, if such payment
results in that Lender having less than its Pro Rata Share (based upon its
Applicable Commitment Percentage and, in the case of a Sharing Event pursuant to
the terms of Section 8.5 hereof, based upon its Equalization Percentage, as
defined in Section 8.5 hereof) of the Applicable Debt then outstanding, than was
the case immediately before such payment.

         "Affiliate" shall mean any Person, directly or indirectly, controlling,
controlled by or under common control with a Company and "control" (including
the correlative meanings, the terms "controlling", "controlled by" and "under
common control with") shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management and policies of a
Company, whether through the ownership of voting securities, by contract or
otherwise.

         "AGSC" shall mean American Greetings Service Corp.

         "AGSC Note" shall mean the Subordinated Promissory Note, dated as of
August 7, 2001, by Borrower to AGSC, as the same may, with the prior written
consent of the Global Agent, from time to time be amended, restated or otherwise
modified.

         "Alternate Currency" shall mean Australian Dollars, Euros and Pounds
Sterling, or any other foreign currency, other than Eurodollars, agreed to by
the Global Agent, in consultation with the General Revolving Lenders, that shall
be freely transferable and convertible into Dollars.

         "Alternate Currency Loan" shall mean a General Revolving Loan that is
denominated in an Alternate Currency and on which Borrower shall pay interest at
a rate based on the applicable LIBO Pre-Margin Rate.

         "Alternate Currency Exposure" shall mean, at any time, the sum of (a)
the aggregate principal amount of all Alternate Currency Loans outstanding, and
(b) the Alternate Currency Letter of Credit Exposure.

         "Alternate Currency Letter of Credit Exposure" shall mean, at any time,
the sum of (a) the Dollar Equivalent of the aggregate undrawn face amount of all
issued and outstanding Letters of Credit denominated in an Alternate Currency,
and (b) the Dollar Equivalent of the aggregate amount of the draws made on
Letters of Credit denominated in an Alternate Currency that have not been
reimbursed by Borrower or converted to a General Revolving Loan pursuant to
Section 2.1(a)(ii) hereof.

         "Alternate Currency Maximum Amount" shall mean the Dollar Equivalent of
Forty Million Dollars ($40,000,000).

         "Applicable Commitment Percentage" shall mean, for each Lender, (a)
with respect to the General Revolving Commitments, the percentage, if any, set
forth opposite such Lender's name, if any, under the column headed "General
Revolving Commitment Percentage" as


                                       3


described in SCHEDULE 1 hereto; (b) with respect to the 364 Day Commitments, the
percentage, if any, set forth opposite such Lender's name under the column
headed "364 Day Commitment Percentage" as described in SCHEDULE 1 hereto; and
(c) with respect to the Term Loan Commitments, the percentage, if any, set forth
opposite such Lender's name under the column headed "Term Loan Commitment
Percentage" as described in SCHEDULE 1 hereto.

         "Applicable Debt" shall mean:

               (a) with respect to the General Revolving Commitments,
          collectively, (i) all Indebtedness incurred by Borrower to the
          Fronting Lender, the Swing Line Lender and the General Revolving
          Lenders pursuant to this Agreement and includes, without limitation,
          the principal of and interest on all General Revolving Notes and the
          Swing Line Note and all obligations with respect to Letters of Credit,
          (ii) each extension, renewal or refinancing thereof, in whole or in
          part, (iii) the facility, prepayment and other fees and amounts
          payable hereunder in connection with the General Revolving
          Commitments, and (iv) all Related Expenses incurred in connection with
          the foregoing;

               (b) with respect to the 364 Day Commitments, collectively, (i)
          all Indebtedness incurred by Borrower to the 364 Day Lenders pursuant
          to this Agreement and includes, without limitation, the principal of
          and interest on all 364 Day Notes, (ii) each extension, renewal or
          refinancing thereof, in whole or in part, (iii) the facility,
          prepayment and other fees and amounts payable hereunder in connection
          with the 364 Day Commitments, and (iv) all Related Expenses incurred
          in connection with the foregoing; and

               (c) with respect to the Term Loan Commitments, collectively, (i)
          all Indebtedness incurred by Borrower to the Term Loan Lenders
          pursuant to this Agreement and includes, without limitation, the
          principal of and interest on all Term Notes, (ii) each extension,
          renewal or refinancing thereof in whole or in part, (iii) all
          prepayment and other fees and amounts payable hereunder in connection
          with the Term Loan Commitments, and (iv) all Related Expenses incurred
          in connection with the foregoing.

         "Applicable Facility Fee Rate" shall mean the number of basis points
that is determined, based upon the S&P Rating or the Moody's Rating (whichever
is higher, but subject to the proviso set forth below), as follows:




         --------------------------------------------------------------------------------------------------------------

                                                        APPLICABLE FACILITY FEE RATE   APPLICABLE FACILITY FEE RATE
                                                           FOR GENERAL REVOLVING          FOR 364 DAY COMMITMENTS
               S&P RATING           MOODY'S RATING              COMMITMENTS

         --------------------------------------------------------------------------------------------------------------
                                                                                 
         A or higher             A2 or higher                8.50 basis points               7.00 basis points
         --------------------------------------------------------------------------------------------------------------
         A-                      A3                          10.00 basis points              8.50 basis points
         --------------------------------------------------------------------------------------------------------------
         BBB+                    Baa1                        12.50 basis points             10.00 basis points
         --------------------------------------------------------------------------------------------------------------
         BBB                     Baa2                        25.00 basis points             20.00 basis points
         --------------------------------------------------------------------------------------------------------------
         BBB-                    Baa3                        37.50 basis points             25.00 basis points
         --------------------------------------------------------------------------------------------------------------
         BB+                     Ba1                         50.00 basis points             37.50 basis points
         --------------------------------------------------------------------------------------------------------------
         BB or lower or unrated  Ba2 or lower or             50.00 basis points             37.50 basis points
                                 unrated
         --------------------------------------------------------------------------------------------------------------



                                       4



Changes to the Applicable Facility Fee Rate shall be immediately effective upon
any change in the Moody's Rating or the S&P Rating; provided, however, that (a)
(i) if, at any time, there shall be a Split Rating of one rating, then the
Applicable Facility Fee Rate then in effect shall be based upon the higher of
the Moody's Rating or the S&P Rating, or (ii) if, at any time, there shall be a
Split Rating of two ratings or more, then the Applicable Facility Fee Rate then
in effect shall be based upon the rating that is one level below the higher of
the Moody's Rating or the S&P Rating; or (b) notwithstanding the foregoing
subpart (a) hereof, if, at any time, either (i) the Moody's Rating shall be
below Baa2 or (ii) the S& P Rating shall be below BBB, then, in such case, the
Applicable Facility Fee Rate then in effect shall be based upon the lower of the
Moody's Rating or the S&P Rating. The above matrix does not modify or waive, in
any respect, the rights of the Global Agent and the Lenders to charge the
Default Rate, or the rights and remedies of the Global Agent and the Lenders
hereunder.

         "Applicable Margin" shall mean the number of basis points that is
determined, based upon the S&P Rating or the Moody's Rating (whichever is
higher, but subject to the proviso set forth below), as follows:



- -----------------------------------------------------------------------------------------------------------------------

                                APPLICABLE MARGIN      APPLICABLE MARGIN     APPLICABLE MARGIN   APPLICABLE MARGIN
  S&P RATING      MOODY'S     FOR FIXED RATE LOANS   FOR FIXED RATE LOANS      FOR BASE RATE       FOR BASE RATE
                   RATING         UNDER GENERAL          UNDER 364 DAY          LOANS UNDER       LOANS UNDER 364
                                    REVOLVING             COMMITMENTS        GENERAL REVOLVING    DAY COMMITMENTS
                                   COMMITMENTS                                  COMMITMENTS

- -----------------------------------------------------------------------------------------------------------------------
                                                                                    
A or higher     A2 or higher    91.50 basis points     93.00 basis points     0 basis points       0 basis points
- -----------------------------------------------------------------------------------------------------------------------
A-              A3             115.00 basis points    116.50 basis points     0 basis points       0 basis points
- -----------------------------------------------------------------------------------------------------------------------
BBB+            Baa1           137.50 basis points    140.00 basis points     0 basis points       0 basis points
- -----------------------------------------------------------------------------------------------------------------------
BBB             Baa2           175.00 basis points    180.00 basis points     0 basis points       0 basis points
- -----------------------------------------------------------------------------------------------------------------------
BBB-            Baa3           212.50 basis points    225.00 basis points     0 basis points       0 basis points
- -----------------------------------------------------------------------------------------------------------------------
BB+             Ba1            250.00 basis points    262.50 basis points    100 basis points     100 basis points
- -----------------------------------------------------------------------------------------------------------------------
BB or lower     Ba2 or         300.00 basis points    312.50 basis points    150 basis points     150 basis points
or unrated      lower or
                unrated
- -----------------------------------------------------------------------------------------------------------------------


Changes to the Applicable Margin shall be immediately effective upon any change
in the Moody's Rating or the S&P Rating, as applicable; provided, however, that
(a) (i) if, at any time, there shall be a Split Rating of one rating, then the
Applicable Margin then in effect shall be based upon the higher of the Moody's
Rating or the S&P Rating, or (ii) if, at any time, there shall be a Split Rating
of two ratings or more, then the Applicable Margin then in effect shall be based
upon the rating that is one level below the higher of the Moody's Rating or the
S&P Rating; or (b) notwithstanding the foregoing subpart (a) hereof, if, at any
time (i) either the Moody's Rating shall be below Baa2 or (ii) the S&P Rating
shall be below BBB, then, in such case, the Applicable Margin then in effect
shall be based upon the lower of the Moody's Rating or the S&P Rating. The above
matrix does not modify or waive, in any respect, the rights of the Global Agent
and the Lenders to charge the Default Rate, or the rights and remedies of the
Global Agent and the Lenders hereunder.


                                       5


         "Applicable Term Loan Margin" shall mean, with respect to the Term
Loan, (a) four hundred fifty (450) basis points for any portion of the Term Loan
that is a Eurodollar Loan, and (b) two hundred fifty (250) basis points for any
portion of the Term Loan that is a Base Rate Loan; provided, however, that, the
Applicable Term Loan Margin shall be increased by an additional fifty (50) basis
points at any time that either (i) the Moody's Rating shall be Ba2 or lower,
(ii) the S&P Rating shall be BB or lower or (iii) if Adjusted Consolidated Cash
Flow for any period of four consecutive quarters ending on or prior to May 31,
2003, shall be less than Two Hundred Twenty-Five Million Dollars ($225,000,000).
Any change to the Applicable Term Loan Margin shall be immediately effective
upon any change in the Moody's Rating or the S&P Rating. The foregoing does not
modify or waive, in any respect, the rights of the Global Agent and the Lenders
to charge the Default Rate, or the rights and remedies of the Global Agent and
the Lenders hereunder.

         "Assignment Agreement" shall mean an Assignment and Acceptance
Agreement in the form of the attached EXHIBIT K.

         "Base Rate" shall mean a rate per annum equal to the greater of (a) the
Prime Rate or (b) one-half of one percent (1/2%) in excess of the Federal Funds
Effective Rate. Any change in the Base Rate shall be effective immediately from
and after such change in the Base Rate.

         "Base Rate Loan" shall mean a Loan described in Section 2.1(a), (b) or
(c) hereof on which Borrower shall pay interest at a rate based upon the Base
Rate.

         "Business Day" shall mean a day of the year on which banks are not
required or authorized to close in Cleveland, Ohio, and, if the applicable
Business Day relates to any Eurodollar Loan, on which dealings are carried on in
the London interbank Eurodollar market, and, if the applicable Business Day
relates to any Alternate Currency Loan, on which commercial banks are open for
international business (including the clearing of currency transfer in the
relevant Alternate Currency) in the principal financial center of the home
country of such Alternate Currency.

         "Capital Distribution" shall mean a payment made, liability incurred or
other consideration given for the purchase, acquisition, redemption or
retirement of any capital stock or other equity interest of any Company or as a
dividend, return of capital or other distribution (other than any stock
dividend, stock split or other equity distribution payable only in capital stock
or other equity of the Company in question) in respect of any Company's capital
stock or other equity interest.

         "Capitalization Ratio" shall mean, for the most recently completed
fiscal quarter of the Companies, on a Consolidated basis and in accordance with
GAAP, the ratio of (a) Consolidated Total Indebtedness, to (b) the sum of
Consolidated Total Indebtedness and Consolidated Net Worth.

         "Cash Dividend" shall mean a Capital Distribution of Borrower payable
in cash to the shareholders of Borrower with respect to any class or series of
stock of Borrower.

         "Cash Equivalent" shall mean (a) a security that is the direct
obligation of the United States of America, any member state of the European
Union or any other sovereign nation


                                       6



acceptable to the Global Agent so long as the full faith of and credit of such
nation is pledged in support thereof; (b) time deposits, certificates of deposit
or bankers acceptances issued by any Lender or any other domestic or foreign
commercial bank or United States branch of a foreign bank licensed under the
laws of the United States or a State thereof having (i) capital and surplus in
excess of Two Hundred Fifty Million Dollars ($250,000,000) and (ii) a Keefe Bank
Watch Rating of "B" or better or, with respect to any investment or deposit in a
foreign bank in excess of Two Hundred Fifty Thousand Dollars ($250,000), an
equivalent rating from a comparable foreign rating agency (each an "Approved
Depository"); (c) commercial paper or securities that at the time of investment
therein shall have been assigned one of the two highest quality ratings in
accordance with the rating systems employed by either Moody's or S&P; or (d)
fully collateralized repurchase obligations entered into with any Lender or
Approved Depository, having a term of not more than thirty (30) days and
covering securities of the type describe in subpart (a) above.

         "Casualty Event Proceeds" shall mean any funds, in excess of the
aggregate amount of One Million Dollars ($1,000,000) for any single casualty
event, received by any Company or Companies from (a) insurance losses, returns
or unearned premiums under any policy of insurance; (b) any condemnation,
eminent domain or other proceeding relating to the Real Property; or (c) any
litigation, settlement or other legal proceeding.

         "Change in Control" shall mean (a) the acquisition of, or, if earlier,
the shareholder or director approval of the acquisition of, ownership or voting
control, directly or indirectly, beneficially or of record, on or after the
Closing Date, by any Person or group (within the meaning of Rule 13d-3 of the
SEC under the Securities Exchange Act of 1934, as then in effect), of shares
representing more than twenty percent (20%) of the aggregate ordinary Voting
Power represented by the issued and outstanding capital stock of Borrower;
provided, however, that the foregoing restriction shall not apply to the
Permitted Holders so long as the acquisition by the Permitted Holders of such
Voting Power shall not result, directly or indirectly, in a "going private
transaction" within the meaning of the Securities Exchange Act of 1934; (b) the
occupation of a majority of the seats (other than vacant seats) on the board of
directors of Borrower by Persons who were neither (i) nominated by the board of
directors of Borrower nor (ii) appointed by directors so nominated; or (c) the
occurrence of a change in control, or other similar provision, as defined in any
Material Indebtedness Agreement.

         "Closing Date" shall mean the effective date of this Agreement.

         "Closing Fee Letter" shall mean the Closing Fee Letter between Borrower
and the Lenders, dated as of the Closing Date.

         "Code" shall mean the Internal Revenue Code of 1986, as amended,
together with the rules and regulations promulgated thereunder.

         "Collateral" shall mean, collectively, (a) all of the Collateral, as
defined in each of the respective Security Documents executed by any Company,
(b) all of the Mortgaged Real Property, and (c) any other property, whether
tangible or intangible, at any time securing the Debt, or any part thereof.


                                       7



         "Collateral Agent" shall mean National City Bank in its capacity as
collateral agent under this Agreement and the Security Documents, together with
any successor collateral agent appointed pursuant to Section 10.23 hereof.

         "Collateral Assignment and Security Agreement" shall mean a Collateral
Assignment and Security Agreement, in the form of the attached EXHIBIT G,
executed and delivered on or after the Closing Date by a Company to the
Collateral Agent, pursuant to which such Company shall have granted to the
Collateral Agent a security interest in and an assignment of all intellectual
property owned by such Company, as the same may from time to time be amended,
restated or otherwise modified.

         "Combined Closing Commitment Amount" shall mean Two Hundred Twenty-Five
Million Dollars ($225,000,000).

         "Combined Maximum Commitment Amount" shall mean Two Hundred Forty-Five
Million Dollars ($245,000,000).

         "Commitment" shall mean the obligation hereunder of (a) the General
Revolving Lenders to make General Revolving Loans, the Fronting Lender to issue
Letters of Credit and the Swing Line Lender to make Swing Loans pursuant to the
General Revolving Commitments, up to the Maximum General Revolving Commitment
Amount, (b) the 364 Day Lenders to make 364 Day Loans pursuant to the 364 Day
Commitments, up to the Maximum 364 Day Commitment Amount, and (c) the Term Loan
Lenders to make the Term Loan pursuant to the Term Loan Commitment, in the Term
Loan Commitment Amount.

         "Commitment Increase Period" shall mean the period from the Closing
Date to July 31, 2002, or such later date as shall be agreed to in writing by
the Global Agent.

         "Commitment Period" shall mean (a) with respect to the General
Revolving Commitments, the period from the Closing Date to January 15, 2006, and
(b) with respect to the 364 Day Commitment, the period from the Closing Date to
August 6, 2002, or, in the case of both (a) and (b), such earlier date on which
the Commitment shall have been terminated pursuant to Article VIII hereof.

         "Company" shall mean Borrower or a Subsidiary.

         "Companies" shall mean Borrower and all Subsidiaries.

         "Compliance Certificate" shall mean a certificate, substantially in the
form of the attached EXHIBIT F.

         "Consideration" shall mean, in connection with an Acquisition, the
aggregate consideration paid, including borrowed funds, cash, the issuance of
securities or notes, the assumption or incurring of liabilities (direct or
contingent), the payment of consulting fees or fees for a covenant not to
compete and any other consideration paid for the purchase.

         "Consolidated" shall mean the resultant consolidation of the financial
statements of Borrower and its Subsidiaries in accordance with GAAP, including
principles of consolidation


                                       8



consistent with those applied in preparation of the consolidated financial
statements referred to in Section 6.13 hereof.

         "Consolidated Adjusted Net Worth" shall mean, at any date, (a) the net
book value (after deducting all applicable reserves and excluding any
re-appraisal or write-up of assets) of the assets (other than patents, goodwill
or other intangibles) of the Companies, minus (b) Consolidated Total
Liabilities.

         "Consolidated Capital Expenditures" shall mean, for any period, the
amount of capital expenditures of the Companies, as determined on a Consolidated
basis and in accordance with GAAP.

         "Consolidated Depreciation and Amortization Charges" shall mean, for
any period, the aggregate of all depreciation and amortization charges for fixed
assets, leasehold improvements and general intangibles (specifically including
goodwill) of the Companies for such period, as determined on a Consolidated
basis and in accordance with GAAP.

         "Consolidated EBITDA" shall mean, for any period, on a Consolidated
basis and in accordance with GAAP, Consolidated Net Earnings for such period
plus the aggregate amounts deducted in determining such Consolidated Net
Earnings in respect of (a) income taxes, (b) Consolidated Interest Expense, (c)
Consolidated Depreciation and Amortization Charges, and (d) the Restructuring
Charges.

         "Consolidated Interest Expense" shall mean, for any period, the
interest expense of the Companies for such period, as determined on a
Consolidated basis and in accordance with GAAP; provided, however, that
Consolidated Interest Expense shall include the interest component of the
Permitted Receivables Facility.

         "Consolidated Net Earnings" shall mean, for any period, the net income
(loss) of the Companies for such period, as determined on a Consolidated basis
and in accordance with GAAP.

         "Consolidated Net Worth" shall mean, at any date, the Consolidated
stockholders' equity of the Companies, determined as of such date in accordance
with GAAP.

         "Consolidated Total Indebtedness" shall mean all Indebtedness of the
Companies, as determined on a Consolidated basis and in accordance with GAAP,
including but not limited to all Indebtedness under the Permitted Receivables
Facility.

         "Consolidated Total Liabilities" shall mean the total of items of
Indebtedness or liabilities of the Companies that, in accordance with GAAP,
would be included in determining total liabilities on the liability side of the
balance sheet of the Companies as of the date of determination, as determined on
a Consolidated basis.

         "Controlled Group" shall mean a Company and each Person required to be
aggregated with a Company under Code Sections 414(b), (c), (m) or (o).


                                       9



         "Convertible Excess Proceeds" shall mean the gross proceeds received by
Borrower pursuant to the issuance of notes under the Subordination Convertible
Indenture in excess of One Hundred Fifty Million Dollars ($150,000,000).

         "Credit Event" shall mean (a) the making by any Lender of a Loan, the
conversion by any Lender of a Fixed Rate Loan or Base Rate Loan, or the
continuation by any Lender of a Fixed Rate Loan, (b) the making by the Swing
Line Lender of a Swing Loan, or (c) the issuance by the Fronting Lender of any
Letter of Credit.

         "Credit Exposure" shall mean, at any time, with respect to any
Commitment, the sum of the Dollar Equivalent of (a) the aggregate principal
amount of Loans outstanding thereunder, and (b) the Letter of Credit Exposure,
if any.

         "Debt" shall mean, collectively, (a) all Indebtedness and other
obligations incurred by Borrower to the Global Agent, the Swing Line Lender, the
Fronting Lender or the Lenders pursuant to this Agreement and includes, without
limitation, the principal of and interest on all Notes and all obligations in
connection with Letters of Credit; (b) each extension, renewal or refinancing
thereof in whole or in part; (c) the facility and other fees, including any
prepayment fee, payable hereunder; and (d) all Related Expenses.

         "Default" shall mean an event or condition that constitutes, or with
the lapse of any applicable grace period or the giving of notice or both would
constitute, an Event of Default and that has not been waived by the Required
Lenders (or, if applicable, all of the Lenders) in writing.

         "Default Rate" shall mean a rate per annum equal to two percent (2%) in
excess of the Base Rate from time to time in effect.

         "Derived Base Rate" shall mean with respect to Base Rate Loans, a rate
per annum equal to the sum of the Applicable Margin (from time to time in
effect) plus the Base Rate.

         "Derived Fixed Rate" shall mean with respect to Eurodollar Loans or
Alternate Currency Loans, a rate per annum equal to the sum of (a) the
Applicable Margin (from time to time in effect), plus (b) the applicable LIBO
Pre-Margin Rate, plus (c) (i) if the S&P Rating shall be lower than BBB- but
higher than BB or the Moody's Rating shall be lower than Baa3 but higher than
Ba2, seventy-five (75) basis points, or (ii) if the S&P Rating shall be BB or
lower or the Moody's Rating shall be Ba2 or lower, one hundred (100) basis
points.

         "Derived Swing Loan Rate" shall mean, with respect to any Swing Loan, a
rate per annum quoted to Borrower by the Swing Line Lender and agreed to by
Borrower, which rate shall be determined by the Swing Line Lender by adding the
Applicable Margin (from time to time in effect) to the Swing Line Lender's costs
of funds, as determined by Swing Line Lender.

         "Derived Term Loan Base Rate" shall mean a rate per annum equal to the
sum of the Applicable Term Loan Margin (from time to time in effect) plus the
Base Rate.


                                       10



         "Derived Term Loan Eurodollar Rate" shall mean a rate per annum equal
to the sum of the Applicable Term Loan Margin (from time to time in effect) plus
the LIBO Pre-Margin Rate applicable to Eurodollar Loans.

         "Designated Lending Office" shall mean, with respect to the Global
Agent, the address set forth on the signature pages to this Agreement, or such
other office or address as the Global Agent shall designate in writing to
Borrower and the appropriate Lenders.

         "Disposition" shall mean the sale, lease, transfer or other disposition
of assets (whether in one or more than one transaction) by a Company, other than
a sale, lease, transfer or other disposition made by a Company pursuant to
Section 5.12(e) hereof.

         "Dividend Reduction Amount" shall mean (a) for any date of
determination on or before February 28, 2003, an amount equal to (i) the maximum
amount of Cash Dividends Borrower was permitted to make during the period from
the Closing Date to the date of determination, or if such period is longer than
twelve months, during the twelve month period immediately preceding such date of
determination minus (ii) the actual amount of Cash Dividends made by Borrower
during the relevant period, and (b) for any date of determination after February
28, 2003 an amount equal to (i) the maximum amount of Cash Dividends Borrower
was permitted to make during the most recently completed fiscal year pursuant to
Section 5.20(a) hereof, minus (ii) the actual amount of Cash Dividends made by
Borrower during such fiscal year.

         "Dollars" or "$" shall mean the lawful currency of the United States of
America.

         "Dollar Equivalent" of (a) an Alternate Currency Loan, shall mean the
Dollar equivalent of the amount of such Alternate Currency Loan, determined by
the Global Agent on the basis of its spot rate at approximately 11:00 A.M.
London time on the date two (2) Business Days before the date of such Alternate
Currency Loan, for the purchase of the relevant Alternate Currency with Dollars
for delivery on the date of such Alternate Currency Loan, and (b) any other
amount, shall mean the Dollar equivalent of such amount, determined by the
Global Agent on the basis of its spot rate at approximately 11:00 A.M. London
time on the date for which the Dollar equivalent amount of such amount is being
determined, for the purchase of the relevant Alternate Currency with Dollars for
delivery on such date; provided, however, that, in calculating the Dollar
Equivalent for purposes of determining (i) Borrower's obligation to prepay Loans
pursuant to Section 2.8 hereof, or (ii) Borrower's ability to request additional
Loans pursuant to the Commitment, the Global Agent may, in its discretion, on
any Business Day (prior to payment in full of the Debt) selected by the Global
Agent, calculate the Dollar Equivalent of each such Loan. The Global Agent shall
notify Borrower of the Dollar Equivalent of such Alternate Currency Loan or any
other amount at the time that Dollar Equivalent shall be determined.

         "Domestic Company" shall mean Borrower or a Domestic Subsidiary.

         "Domestic Subsidiary" shall mean a Subsidiary that is not a Foreign
Subsidiary.

         "Eligible Receivables" shall mean accounts receivable eligible for
inclusion in the Permitted Receivables Facility against which the provider of
such Permitted Receivables Facility is willing to lend as of the date of the
most recent Permitted Receivables Facility Certificate.


                                       11



         "Eligible Transferee" shall mean any commercial bank, financial
institution or other "accredited investor" (as defined in SEC Regulation D) that
is not Borrower or a Subsidiary or any Affiliate thereof.

         "Environmental Laws" shall mean all provisions of law, statutes,
ordinances, rules, regulations, permits, licenses, judgments, writs,
injunctions, decrees, orders, awards and standards promulgated by the government
of the United States of America, Australia, Canada, the United Kingdom or any
other foreign jurisdiction, or by any state or municipality thereof, or by any
court, agency, instrumentality, regulatory authority or commission of any of the
foregoing concerning health, safety and protection of, or regulation of the
discharge of substances into, the environment.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated pursuant thereto.

         "ERISA Event" shall mean (a) the existence of a condition or event with
respect to an ERISA Plan that presents a risk of the imposition of an excise tax
or any other liability on a Company or of the imposition of a Lien on the assets
of a Company; (b) the engagement by a Controlled Group member in a non-exempt
"prohibited transaction" (as defined under ERISA Section 406 or Code Section
4975) or a breach of a fiduciary duty under ERISA that could result in liability
to a Company; (c) the application by a Controlled Group member for a waiver from
the minimum funding requirements of Code Section 412 or ERISA Section 302 or a
Controlled Group member is required to provide security under Code Section
401(a)(29) or ERISA Section 307; (d) the occurrence of a Reportable Event with
respect to any Pension Plan as to which notice is required to be provided to the
PBGC; (e) the withdrawal by a Controlled Group member from a Multiemployer Plan
in a "complete withdrawal" or a "partial withdrawal" (as such terms are defined
in ERISA Sections 4203 and 4205, respectively); (f) the involvement of, or
occurrence or existence of any event or condition that makes likely the
involvement of, a Multiemployer Plan in any reorganization under ERISA Section
4241; (g) the failure of an ERISA Plan (and any related trust) that is intended
to be qualified under Code Sections 401 and 501 to be so qualified or the
failure of any "cash or deferred arrangement" under any such ERISA Plan to meet
the requirements of Code Section 401(k); (h) the taking by the PBGC of any steps
to terminate a Pension Plan or appoint a trustee to administer a Pension Plan,
or the taking by a Controlled Group member of any steps to terminate a Pension
Plan; (i) the failure by a Controlled Group member or an ERISA Plan to satisfy
any requirements of law applicable to an ERISA Plan; (j) the commencement,
existence or threatening of a claim, action, suit, audit or investigation with
respect to an ERISA Plan, other than a routine claim for benefits; or (k) any
occurrence by or any expectation of the incurrence by a Controlled Group member
of any liability for post-retirement benefits under any Welfare Plan, other than
as required by ERISA Section 601, ET. SEQ. or Code Section 4980B.

         "ERISA Plan" shall mean an "employee benefit plan" (within the meaning
of ERISA Section 3(3)) that a Controlled Group member at any time sponsors,
maintains, contributes to, has liability with respect to or has an obligation to
contribute to such plan.

         "Eurodollar" shall mean a Dollar denominated deposit in a bank or
branch outside of the United States.


                                       12



         "Eurodollar Loan" shall mean a Loan described in Section 2.1(a), (b) or
(c) hereof that is denominated in Eurodollars and on which Borrower shall pay
interest at a rate based on the applicable LIBO Pre-Margin Rate.

         "Event of Default" shall mean an event or condition that constitutes an
event of default as defined in Article VII hereof.

         "Excess Cash Flow" shall mean, for any period, on a Consolidated basis
and in accordance with GAAP, an amount (if positive) equal to (a) the sum,
without duplication, of the amounts for such period of (i) Consolidated EBITDA
plus (ii) other income (to the extent it has been excluded from the calculation
of Consolidated EBITDA), minus (b) the sum, without duplication, of the amounts
for such period of (i) Operating Working Capital Adjustment, (ii) Consolidated
Interest Expense, (iii) Consolidated Capital Expenditures (net of any related
refinancings with respect to such expenditures), (iv) scheduled or mandatory
principal payments with respect to Consolidated Total Indebtedness (other than
optional prepayments of the General Revolving Commitments or the 364 Day
Commitments), (v) Capital Distributions, (vi) cash Restructuring Charges, (vii)
the charges set forth on SCHEDULE 6.7 hereto, and (viii) provisions for current
taxes based on income of the Companies and payable in cash with respect to such
period. As used in this definition, (A) "Consolidated Current Assets" shall
mean, as of the date of determination, the amount of Consolidated total assets
that may properly be classified as current assets in accordance with GAAP,
excluding cash and cash equivalents, deferred and refundable income taxes, and
including Other Assets, (B) "Consolidated Current Liabilities" shall mean, as of
the date of determination, the amount of Consolidated Total Liabilities that may
properly be classified as current liabilities in accordance with GAAP, excluding
debt due within one year, and including Other Liabilities, (C) "Operating
Working Capital Adjustment" shall mean, for any period, the amount (that may be
a negative number) by which Operating Working Capital as of the beginning of
such period exceeds (or is less than) Operating Working Capital as of the end of
such period, and (D) "Operating Working Capital" shall mean, as of the date of
determination, the excess of Consolidated Current Assets over Consolidated
Current Liabilities.

         "Excess Cash Flow Prepayment" shall have the meaning given to such term
in Section 2.8(b) hereof.

         "Federal Funds Effective Rate" shall mean, for any day, the rate per
annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of
1%)) announced by the Federal Reserve Bank of New York (or any successor) on
such day as being the weighted average of the rates on overnight federal funds
transactions arranged by federal funds brokers on the previous trading day, as
computed and announced by such Federal Reserve Bank (or any successor) in
substantially the same manner as such Federal Reserve Bank computes and
announces the weighted average it refers to as the "Federal Funds Effective
Rate" as of the Closing Date.

         "Financial Officer" shall mean any of the following officers: chief
executive officer, president, chief financial officer or treasurer. Unless
otherwise qualified, all references to a Financial Officer in this Agreement
shall refer to a Financial Officer of Borrower.


                                       13



         "Financial Projections" shall mean the financial projections prepared
by Borrower and delivered to the Global Agent and the Lenders for the period
from May 31, 2001 through February 29, 2004.

         "Fixed Charge Coverage Ratio Condition" shall mean any time that
Borrower's Fixed Charge Coverage Ratio (as defined in the Subordinated
Indenture) shall be less than (a) 2.50 to 1.00 for the period from the Closing
Date through June 29, 2002, (b) 2.75 to 1.00 on June 30, 2002 through June 29,
2003, and (c) 3.00 to 1.00 thereafter, as calculated in accordance with the
terms and conditions of the Subordinated Indenture.

         "Fixed Rate Loan" shall mean a Eurodollar Loan or an Alternate Currency
Loan.

         "Foreign Subsidiary" shall mean a Subsidiary that is organized outside
of the United States, including any Subsidiary organized under the laws of any
territory of the United States.

         "Fronting Lender" shall mean, as to any Letter of Credit transaction
hereunder, National City Bank, as the issuer of such Letter of Credit, or such
other General Revolving Lender (or subsidiary or affiliate thereof), as
determined by the Global Agent, as shall agree to issue a Letter of Credit in
its own name, but on behalf of the General Revolving Lenders.

         "GAAP" shall mean generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, applied on a basis consistent with the
past accounting practices and procedures of Borrower and its Subsidiaries.

         "General Revolving Commitment" shall mean the obligation hereunder,
during the applicable Commitment Period, of (a) each Lender to participate in
the making of General Revolving Loans up to the aggregate amount set forth
opposite such Lender's name under the column headed "General Revolving
Commitment Amount" as set forth on SCHEDULE 1 hereto (or such other amount as
shall be determined pursuant to Section 2.7 hereof, (b) the Swing Line Lender to
make, and each General Revolving Lender to participate, if required, in the
making of, Swing Loans pursuant to the Swing Line Commitment, and (c) the
Fronting Lender to issue, and each Lender to participate in the issuance of,
Letters of Credit pursuant to the Letter of Credit Commitment.

         "General Revolving Commitment Exposure" shall mean, at any time, the
sum of the Dollar Equivalent of (a) the aggregate principal amount of all
General Revolving Loans outstanding, (b) the Swing Line Exposure, and (c) the
Letter of Credit Exposure.

         "General Revolving Lender" shall mean a Lender with a General Revolving
Commitment.

         "General Revolving Note" shall mean a General Revolving Credit Note in
the form of the attached EXHIBIT A, executed and delivered pursuant to Section
2.1(a)(i) hereof.

         "General Revolving Loan" shall mean a loan granted to Borrower by the
General Revolving Lenders in accordance with Section 2.1(a)(i) hereof.


                                       14



         "Global Agent Fee Letter" shall mean the Global Agent Fee Letter
between Borrower and the Global Agent, dated as of the Closing Date.

         "Guarantor" shall mean a Person that pledges its credit or property in
any manner for the payment or other performance of the indebtedness, contract or
other obligation of another and includes (without limitation) any guarantor
(whether of payment or of collection), surety, co-maker, endorser or Person that
agrees conditionally or otherwise to make any purchase, loan or investment in
order thereby to enable another to prevent or correct a default of any kind.

         "Guarantor of Payment" shall mean each of the Companies set forth on
SCHEDULE 2 hereto that are each executing and delivering a Guaranty of Payment,
or any other Person that shall have delivered a Guaranty of Payment to the
Global Agent subsequent to the Closing Date.

         "Guaranty of Payment" shall mean each Guaranty of Payment of Debt, in
the form of EXHIBIT H hereto, executed and delivered on or after the Closing
Date in connection herewith by a Guarantor of Payment, as the same may from time
to time be amended, restated or otherwise modified.

         "Hedge Agreement" shall mean any hedge agreement, interest rate swap,
cap, collar or floor agreement, or other interest rate management device entered
into by Borrower with any Person in connection with any Indebtedness of
Borrower.

         "Indebtedness" shall mean, for any Company (excluding in all cases
trade payables payable in the ordinary course of business by such Company),
without duplication, (a) all obligations to repay borrowed money, direct or
indirect, incurred, assumed, or guaranteed, (b) all obligations for the deferred
purchase price of capital assets, (c) all obligations under conditional sales or
other title retention agreements, (d) all obligations (contingent or otherwise)
under any letter of credit, banker's acceptance, currency swap agreement,
interest rate swap, cap, collar or floor agreement or other interest rate
management device, (e) all synthetic leases, (f) all lease obligations that have
been or should be capitalized on the books of such Company in accordance with
GAAP, (g) all obligations of such Company with respect to asset securitization
financing, including, but not limited to, all obligations of any Company under
the Permitted Receivables Facility, (h) all obligations to advance funds to, or
to purchase assets, property or services from, any other Person in order to
maintain the financial condition of such Person, and (i) any other transaction
(including forward sale or purchase agreements) having the commercial effect of
a borrowing of money entered into by such Company to finance its operations or
capital requirements.

         "Intellectual Property" shall mean, with respect to any Person, all
patents, patent applications, trademarks, service marks, copyrights, licenses
and other intellectual property of such Person.

         "Interest Adjustment Date" shall mean the last day of each Interest
Period.

         "Interest Coverage Ratio" shall mean, for the most recently completed
four fiscal quarters of the Companies, on a Consolidated basis and in accordance
with GAAP, the ratio of (a) Consolidated EBITDA to (b) Consolidated Interest
Expense.


                                       15



         "Interest Period" shall mean, with respect to any Fixed Rate Loan, the
period commencing on the date such Fixed Rate Loan is made and ending on the
last day of such period, as selected by Borrower pursuant to the provisions
hereof, and, thereafter, each subsequent period commencing on the last day of
the immediately preceding Interest Period and ending on the last day of such
period, as selected by Borrower pursuant to the provisions hereof. The duration
of each Interest Period for any Fixed Rate Loan shall be one month, two months,
three months or six months, in each case as Borrower may select upon notice, as
set forth in Section 2.2 hereof, provided that (a) if Borrower shall fail to so
select the duration of any Interest Period for a Eurodollar Loan, Borrower shall
be deemed to have converted such Eurodollar Loan to a Base Rate Loan at the end
of the then current Interest Period; (b) Borrower may not select any Interest
Period for a Fixed Rate Loan that shall end after any date when principal shall
be due on such Fixed Rate Loan, and (c) if Borrower shall fail to select a new
Interest Period with respect to an outstanding Alternate Currency Loan at least
three (3) Business Days prior to the Interest Adjustment Date applicable to such
Alternative Currency Loan, such Alternate Currency Loan shall be repaid on the
last day of the applicable Interest Period.
...
         "Landlord's Agreement" shall mean a landlord's waiver or mortgagee's
waiver, each in form and substance satisfactory to the Collateral Agent,
delivered by a Company in connection with this Agreement, as the same may from
time to time be amended, restated or otherwise modified.

         "Lender Credit Exposure" shall mean, for any Lender, at any time, the
aggregate of such Lender's respective Pro Rata Shares of the General Revolving
Commitment Exposure, the 364 Day Exposure and the Term Loan Exposure.

         "Letter of Credit" shall mean any sight commercial documentary letter
of credit or any standby letter of credit that shall be issued by the Fronting
Lender for the account of Borrower, including amendments thereto, if any, and
shall have an expiration date no later than the earlier of (a) one year after
its date of issuance or (b) thirty (30) days prior to the last day of the
applicable Commitment Period.

         "Letter of Credit Commitment" shall mean the commitment of the Fronting
Lender, on behalf of the Lenders, to issue Letters of Credit in an aggregate
face amount of up to the Dollar Equivalent of Sixty Million Dollars
($60,000,000), during the Commitment Period applicable to the General Revolving
Commitment, on the terms and conditions set forth in Section 2.1(a)(ii) hereof.

         "Letter of Credit Exposure" shall mean, at any time, the sum of the
Dollar Equivalent of (a) the aggregate undrawn face amount of all issued and
outstanding Letters of Credit, and (b) the aggregate of the draws made on
Letters of Credit that have not been reimbursed by Borrower or converted to a
General Revolving Loan pursuant to Section 2.1(a)(ii) hereof.

         "Leverage Ratio" shall mean, at any time, for the most recently
completed four fiscal quarters of the Companies, on a Consolidated basis and in
accordance with GAAP, the ratio of (a) Consolidated Total Indebtedness to (b)
Consolidated EBITDA.

         "LIBO Pre-Margin Rate" shall mean:


                                       16



         (a) with respect to a Eurodollar Loan, the rate per annum (rounded
upwards, if necessary, to the next higher 1/16 of 1%), as determined by the
Global Agent, that equals the average rate per annum at which deposits in
Dollars are offered for deposits of the duration and amount in question, at
11:00 A.M. (London time) (or as soon thereafter as practicable) two Business
Days prior to the first day of the Interest Period in question, to the Global
Agent by prime banking institutions in any eurodollar market reasonably selected
by the Global Agent, as adjusted for reserves required under Regulation D of the
Federal Reserve Act or under any other applicable law or regulation; and

         (b) with respect to an Alternate Currency Loan, the rate per annum
(rounded upwards, if necessary, to the next higher 1/16 of 1%), as determined by
the Global Agent, that equals the average rate per annum at which deposits in
the relevant Alternate Currency are offered for deposits of the duration and
amount in question, at 11:00 A.M. (London time) (or as soon thereafter as
practicable) two Business Days prior to the first day of the Interest Period in
question, to the Global Agent by prime banking institutions in any Alternate
Currency market reasonably selected by the Global Agent, as adjusted for
reserves required under Regulation D of the Federal Reserve Act or under any
other applicable law or regulation.

         "Lien" shall mean any mortgage, security interest, lien (statutory or
other), charge, encumbrance on, pledge or deposit of, or conditional sale,
leasing, sale with a right of redemption or other title retention agreement and
any capitalized lease with respect to any property (real or personal) or asset.

         "Loan" shall mean a General Revolving Loan, a 364 Day Revolving Loan, a
Swing Loan or the Term Loan.

         "Loan Documents" shall mean, collectively, this Agreement, each Note,
each Guaranty of Payment, each Security Document, the Global Agent Fee Letter,
the Closing Fee Letter, each Assignment Agreement, and all documentation
relating to each Letter of Credit, as any of the foregoing may from time to time
be amended, restated or otherwise modified or replaced.

         "Mandatory Prepayment Event" shall mean (a) the receipt by any Company
of any Casualty Event Proceeds; (b) a public or private offering of equity or
debt securities by any Company; or (c) a Significant Asset Disposition the
proceeds of which have not been reinvested in accordance with Section 5.12(f)
hereof.

         "Material Adverse Effect" shall mean a material adverse effect on (a)
the business, operations, property, condition (financial or otherwise) or
prospects of Borrower, (b) the business, operations, property, condition
(financial or otherwise) or prospects of the Companies taken as a whole, or (c)
the validity or enforceability of this Agreement or any of the other Loan
Documents or the rights and remedies of the Global Agent or the Lenders
hereunder or thereunder.

         "Material Indebtedness Agreement" shall mean any debt instrument, lease
(capital, operating or otherwise), guaranty, contract, commitment, agreement or
other arrangement evidencing any Indebtedness of any Company in excess of the
aggregate amount of Five Million Dollars ($5,000,000) (or the Dollar Equivalent
thereof).


                                       17



         "Maximum 364 Day Commitment Amount" shall mean the principal amount of
One Hundred Five Million Dollars ($105,000,000) (or such other amount as shall
be determined pursuant to Section 2.7 hereof).

         "Maximum Acquisition Amount" shall mean an amount equal to (a) Ten
Million Dollars ($10,000,000), plus (b) the Additional Convertible Proceeds
Amount (which amount shall only be applicable in connection with one
Acquisition), if any, plus (c) the Dividend Reduction Amount.

         "Maximum Annual Dividend Amount" shall mean, for any fiscal year of the
Companies, Twenty-Seven Million Dollars ($27,000,000); provided, however, that,
(a) if, during any fiscal quarter, the S&P Senior Rating shall be BB (or lower)
or the Moody's Senior Rating shall be Ba2 (or lower), the Maximum Annual
Dividend Amount for purposes of determining the Maximum Quarterly Dividend
Amount for such fiscal quarter shall be Thirteen Million Five Hundred Thousand
Dollars ($13,500,000), (b) if, during any fiscal quarter, the S&P Senior Rating
shall be BBB- and the Moody's Senior Rating shall be Baa3, the Maximum Annual
Dividend Amount for purposes of determining the Maximum Quarterly Dividend
Amount for such fiscal quarter shall be Fifty Million Dollars ($50,000,000), and
(c) if, during any fiscal quarter, the S&P Senior Rating shall be BBB and the
Moody's Senior Rating shall be Baa2, the Maximum Annual Dividend Amount for
purposes of determining the Maximum Quarterly Dividend Amount for such fiscal
quarter shall be an amount equal to the greater of (i) Fifty Million Dollars
($50,000,000), or (ii) fifty percent (50%) of Consolidated Net Earnings for such
year. In determining the foregoing amount, if, during any period of the
Companies, there is a change in the S&P Senior Rating or the Moody's Senior
Rating, then the lowest ratings level of each of the S&P Senior Rating and the
Moody's Senior Rating in effect during such fiscal year shall apply.

         "Maximum General Revolving Commitment Amount" shall mean the principal
amount of One Hundred Twenty Million Dollars ($120,000,000) (including the
Dollar Equivalent of each Alternate Currency Loan), or such other amount as
shall be determined pursuant to Section 2.7 hereof.

         "Maximum Quarterly Dividend Amount" shall mean, for any fiscal quarter
of the Companies, an amount equal to twenty-five percent (25%) of the Maximum
Annual Dividend Amount.

         "Minimum Borrowing Amount" shall mean with respect to (a) a Base Rate
Loan, an amount of not less than One Million Dollars ($1,000,000), increased by
increments of One Hundred Thousand Dollars ($100,000), (b) a Fixed Rate Loan, an
amount of not less than Five Million Dollars ($5,000,000) (or, with respect to
an Alternate Currency Loan, the Dollar Equivalent thereof), increased by
increments of One Million Dollars ($1,000,000) (or, with respect to an Alternate
Currency Loan, such approximately comparable amount as shall result in a rounded
number of the applicable Alternate Currency), and (iii) a Swing Loan, an amount
of not less than One Million Dollars ($1,000,000).

         "Minimum Required Consolidated EBITDA Amount" shall mean, for the
fiscal period set forth in the table below, the amount set forth opposite such
period:


                                       18





         ---------------------------------------------------------------------------------------------------

                                      PERIOD                                            AMOUNT

         ---------------------------------------------------------------------------------------------------
                                                                               
         For the four quarter period ending August 31, 2001                          $216,000,000
         ---------------------------------------------------------------------------------------------------
         For the four quarter period ending November, 30, 2001                       $229,000,000
         ---------------------------------------------------------------------------------------------------
         For the four quarter period ending February 28, 2002                        $256,000,000
         ---------------------------------------------------------------------------------------------------
         For the four quarter period ending May 31, 2002                             $309,000,000
         ---------------------------------------------------------------------------------------------------
         For the four quarter period ending August 31, 2002                          $302,000,000
         ---------------------------------------------------------------------------------------------------
         For the four quarter period ending November, 30 2002                        $334,000,000
         ---------------------------------------------------------------------------------------------------
         For the four quarter period ending February 28, 2003                        $404,000,000
         ---------------------------------------------------------------------------------------------------


         "Moody's" shall mean Moody's Investors Service, Inc., or any successor
to such company.

         "Moody's Rating" means the rating accorded to Borrower's senior credit
facilities by Moody's.

         "Moody's Senior Rating" shall mean the senior implied rating accorded
to Borrower by Moody's.

         "Mortgage" shall mean a Mortgage, Deed of Trust or other instrument, in
form and substance reasonably satisfactory to the Global Agent, executed by a
Company on or after the Closing Date, with respect to a Mortgaged Real Property,
as the same may from time to time be amended, restated or otherwise modified.

         "Mortgaged Real Property" shall mean each of the parcels of real
property as set forth on SCHEDULE 3 hereto, or interests therein, owned or
leased by a Company, together with each other parcel of real property that shall
become subject to a Mortgage on or after the Closing Date, in each case together
with all of such Company's right, title and interest in the improvements and
buildings thereon and all appurtenances, easements or other rights belonging
thereto.

         "Multiemployer Plan" shall mean a Pension Plan that is subject to the
requirements of Subtitle E of Title IV of ERISA.

         "Note" shall mean any General Revolving Note, any 364 Day Note, the
Swing Line Note, any Term Note or any other note delivered pursuant to this
Agreement.

         "Notice of Loan" shall mean a Notice of Loan in the form of the
attached EXHIBIT E.

         "Obligor" shall mean (a) a Person whose credit or any of whose property
is pledged to the payment of the Debt and includes, without limitation, any
Guarantor, and (b) any signatory to a Related Writing.

         "Organizational Documents" shall mean, with respect to any Person
(other than an individual), such Person's Articles (Certificate) of
Incorporation, or equivalent formation documents, and Regulations (Bylaws), or
equivalent governing documents, and any amendments to any of the foregoing.


                                       19



         "Other Assets" shall have the meaning assigned to such term in the
applicable Consolidated balance sheet for the Companies determined in conformity
with the historical accounting practices of the Companies in effect as of the
date of the financial statements for the fiscal year ended February 28, 2001.

         "Other Liabilities" shall have the meaning assigned to such term in the
applicable Consolidated balance sheet for the Companies determined in conformity
with the historical accounting practices of the Companies in effect as of the
date of the financial statements for the fiscal year ended February 28, 2001.

         "PBGC" shall mean the Pension Benefit Guaranty Corporation, or its
successor.

         "Pension Plan" shall mean an ERISA Plan that is a "pension plan"
(within the meaning of ERISA Section 3(2)).

         "Permitted Foreign Subsidiary Loans and Investments" shall mean (a) the
investments, existing as of the Closing Date, by a Domestic Company (other than
the Receivables Subsidiary) in Foreign Subsidiaries, as set forth on SCHEDULE
5.11 hereto; (b) loans and investments by a Domestic Company (other than the
Receivables Subsidiary) to or in a Foreign Subsidiary made on or after the
Closing Date in the ordinary course of business, so long as the aggregate amount
of all such loans and investments by all Domestic Companies shall not, at any
time, exceed (i) Ten Million Dollars ($10,000,000) (or the Dollar Equivalent
thereof), minus (ii) the Dollar Equivalent of the amount of Indebtedness of
Foreign Subsidiaries guaranteed by a Domestic Company pursuant to subpart (c) of
this definition; and (c) loans to a Foreign Subsidiary by any Person (other than
a Company), and any guaranty of such loans by a Domestic Subsidiary (other than
the Receivables Subsidiary), so long as the aggregate principal amount of all
such loans shall not exceed the Dollar Equivalent of Fifteen Million Dollars
($15,000,000) at any time.

         "Permitted Holders" shall mean Morry Weiss, Judith A. Weiss, Harry H.
Stone, Gary Weiss, Jeffrey Weiss, Zev Weiss, Elie Weiss, the Irving I. Stone
Limited Liability Co. and the American Greetings Corporation Retirement Profit
Sharing and Savings Plan or any Person controlled by any of the foregoing.

         "Permitted Investment" shall mean an investment of a Company in the
stock (or other debt or equity instruments) of a Person (other than a Company),
so long as (a) the Company making the investment shall be Borrower or a
Guarantor of Payment; and (b) the aggregate amount of all such investments of
all Companies shall not exceed, at any time, the Dollar Equivalent of Fifteen
Million Dollars ($15,000,000).

         "Permitted Receivables Facility" shall mean the accounts receivable
facility established pursuant to the Receivables Facility Documents whereby
certain of the Companies shall have sold or transferred, or hereafter sell or
transfer, the accounts receivables of the Companies directly or indirectly to
the Receivables Subsidiary which in turn transfers to a buyer, purchaser or
lender undivided fractional interests in such accounts receivable, so long as
(a) no portion of the Indebtedness or any other obligation (contingent or
otherwise) under such Permitted Receivables Facility shall be guaranteed by any
Company, (b) there shall be no recourse or obligation to any Company (other than
the Receivables Subsidiary) whatsoever other than pursuant to customary
representations, warranties, covenants and indemnities entered into in the


                                       20



ordinary course of business in connection with such Permitted Receivables
Subsidiary, and (c) no Company (other than the Receivables Subsidiary) shall
have provided, either directly or indirectly, any other credit support of any
kind in connection with such Permitted Receivables Facility, other than as set
forth in subpart (b) of this definition.

         "Permitted Receivables Facility Certificate" shall mean a certificate
executed by a Financial Officer of Borrower and delivered to the Global Agent,
certifying (a) the Prior Seasonal Peak Drawing Level for purposes of complying
with Section 5.27 hereof, (b) that the provider of the Permitted Receivables
Facility has informed Borrower in writing that such provider has confirmed the
amount of the Prior Seasonal Peak Drawing Level as specified in the foregoing
subpart (a) and that there has not been and is not anticipated to be any change
or condition in the existing or expected Eligible Receivables as compared to
those used in the calculation of the Prior Seasonal Peak Drawing Level that
could reasonably be expected to have a material adverse impact on the amount
available for drawing under the Permitted Receivables Facility, and (c) that all
credit enhancements in effect as of the date of the Permitted Receivables
Facility Certificate shall remain in full force and effect for the term of the
Permitted Receivables Facility.

         "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, unincorporated organization, corporation, limited liability
company, institution, trust, estate, government or other agency or political
subdivision thereof or any other entity.

         "Pledge Agreement" shall mean a Pledge Agreement, in the form of the
attached EXHIBIT J, executed and delivered to the Collateral Agent by a Company
on or after the Closing Date, as the same may from time to time be amended,
restated or otherwise modified.

         "Prepayment Proceeds" shall mean the proceeds of any Mandatory
Prepayment Event minus taxes, fees and expenses actually paid in connection with
such Mandatory Prepayment Event; provided, however, that, with respect to a
Mandatory Prepayment Event relating to the issuance of equity securities by any
Company, Prepayment Proceeds shall be limited to an amount equal to eight
percent (80%) of such Prepayment Proceeds.

         "Prime Rate" shall mean the interest rate established from time to time
by the Global Agent as the Global Agent's prime rate, whether or not such rate
is publicly announced; the Prime Rate may not be the lowest interest rate
charged by the Global Agent for commercial or other extensions of credit. Each
change in the Prime Rate shall be effective immediately from and after such
change.

         "Prior Seasonal Peak Drawing Level" shall mean, as of any date of
calculation, the amount that Borrower could have drawn as of the most recent
November 30 prior to the date of calculation pursuant to the terms of the
Permitted Receivables Facility in effect on the date of calculation, as
determined by applying the criteria (after giving effect to the existence of any
credit enhancements in effect as of the date of calculation) for Eligible
Receivables of any Receivables Facility Participant to the accounts receivable
of such Receivables Facility Participant as of the prior November 30, excluding
for purposes of making such calculation (a) twenty percent (20%) of any accounts
receivable owed by Wal-Mart, Kmart or their respective affiliates as of November
30, 2000 (other than any such accounts receivable owed to Plus Mark, Inc. which
shall not be subject to such twenty percent (20%) exclusion), and (b) the entire


                                       21



amount of any accounts receivable owed by any other Person that, as of the date
of calculation, does not satisfy the credit standards of Borrower or the
provider of the Permitted Receivables Facility.

         "Pro Rata Basis" or "pro rata basis" shall mean, as appropriate, (a)
distribution to the applicable Lenders by the Global Agent in accordance with
the Applicable Commitment Percentages, or (b) distribution among the Commitments
in accordance with the Credit Exposure thereunder.

         "Pro Rata Share" or "pro rata share" shall mean, with respect to the
Applicable Debt, a Lender's share in accordance with such Lender's Applicable
Commitment Percentage.

         "Ratable Account" or "ratable account" shall mean each Lender's share
of the Applicable Debt in accordance with such Lender's Applicable Commitment
Percentage.

         "Ratable Share" or "ratable share" shall mean each Lender's share of
the Applicable Debt in accordance with such Lender's Applicable Commitment
Percentage.

         "Ratably" or "ratably" shall mean in accordance with each Lender's
Ratable Share.

         "Real Property" shall mean any one of the parcels of real property, or
interests therein, owned or leased by a Company (including, but not limited to,
the Mortgaged Real Property), together with all improvements and buildings
thereon and all appurtenances, easements or other rights belonging thereto.

         "Receivables Facility Documents" shall mean, collectively, the
Receivables Purchase Agreement, dated as of August 7, 2001, among the
Receivables Subsidiary, the members of various purchase groups, as Purchasers,
American Greetings Corp., as Servicer, and PNC Bank, National Association, as
Administrator, together with each other document, instrument or agreement
executed in connection with the foregoing, as any of the foregoing may, in
accordance with Section 5.24(b) hereof, be amended, restated or otherwise
modified or replaced from time to time.

         "Receivables Facility Participant" shall mean Borrower, Gibson
Greetings, Inc. or Plus Mark, Inc.

         "Receivables Related Assets" shall mean (a) any indebtedness and other
obligations owed to any Receivables Facility Participant by, or any right of
such Receivables Facility Participant to payment from or on behalf of, the
Person obligated with respect to such indebtedness or other obligations, arising
in connection with the sale of goods or the rendering of services by any
Receivables Facility Participant (in each case, an "Account Receivable") that is
subject to the Permitted Receivables Facility, and the following to the extent
that they are proceeds of or relate to the Accounts Receivable that are subject
to the Permitted Receivables Financing: (i) accounts, (ii) instruments, (iii)
chattel paper, (iv) general intangibles, (v) the merchandise or goods (including
returned goods), the sale or lease of which gave rise to such Accounts
Receivable, and the insurance proceeds thereof, (vi) contractual rights
(including any agreement, lease, invoice or other writing), guaranties,
insurance, claims and indemnities, (vii) books and records, (viii) all
documentation of title evidencing the shipment or storage of any


                                       22



goods (including returned goods), (ix) guaranties and collections of such
Accounts Receivable, (x) any security interest or liens and property thereto
from time to time purporting to secure payment of such Accounts Receivable, (xi)
lock-box accounts and amounts on deposit therein, (xii) monies due or to become
due, and (xiii) all proceeds and products of and all amounts received or
receivable under any of the foregoing; (b) the Purchase and Sale Agreement (as
defined in the Permitted Receivables Facility Documents) and all rights of AGSC
thereunder; and (c) the Receivables Sale Agreement (as defined in the
Receivables Facility Documents) and all rights of Borrower thereunder.

         "Receivables Subsidiary" shall mean AGC Funding Corporation, a Delaware
corporation, and a Wholly-Owned Subsidiary of Borrower that shall have been
established as a "bankruptcy remote" Subsidiary for the sole purpose of
acquiring accounts receivable under the Permitted Receivables Facility and that
shall not engage in any activities other than in connection with the Permitted
Receivables Facility.

         "Related Expenses" shall mean any and all costs, liabilities and
expenses (including, without limitation, losses, damages, penalties, claims,
actions, reasonable attorneys' fees, legal expenses, judgments, suits and
disbursements) incurred by, imposed upon, or asserted against, the Global Agent,
Collateral Agent or any Lender in any attempt by the Global Agent or Collateral
Agent (a) to obtain, preserve, perfect or enforce any security interest
evidenced by any Security Document or any other Loan Document or any Related
Writing; (b) to obtain payment, performance or observance of any and all of the
Debt; (c) to maintain, insure, audit, collect, preserve, repossess or dispose of
any of the collateral securing the Debt or any thereof, including, without
limitation, costs and expenses for appraisals, assessments and audits of any
Company or any such collateral; or (d) incidental or related to (a) through (c)
above, including, without limitation, interest thereupon from the date incurred,
imposed or asserted until paid at the Default Rate.

         "Related Writing" shall mean each Loan Document and any other
assignment, mortgage, security agreement, guaranty agreement, subordination
agreement, financial statement, audit report or other writing furnished by
Borrower, Subsidiary or Obligor, or any of their respective officers, to the
Global Agent or the Lenders pursuant to or otherwise in connection with this
Agreement.

         "Reportable Event" shall mean a reportable event as that term is
defined in Title IV of ERISA, except actions of general applicability by the
Secretary of Labor under Section 110 of such Act.

         "Required Lenders" shall mean the holders of at least fifty-one percent
(51%) of the Total Commitment Amount, or, if there shall be any borrowing
hereunder, the holders (including such Lender's risk participation with respect
to outstanding Swing Loans and Letters of Credit) of at least fifty-one percent
(51%) of the sum of the Dollar Equivalent of (a) the aggregate amount of the
Loans outstanding (other than Swing Loans), (b) the Letter of Credit Exposure,
and (c) the Swing Line Exposure.

         "Restricted Payment" shall mean (a) any Capital Distribution; (b) any
amount paid by a Company in repayment, redemption, retirement, repurchase,
direct or indirect, of any Subordinated Indebtedness, including, but not limited
to, the Indebtedness incurred pursuant to


                                       23



the notes issued in connection with the Subordinated Indenture or the
Subordinated Convertible Indenture; (c) any amount paid by a Company in
repayment, redemption, retirement, repurchase, direct or indirect, of any the
Indebtedness incurred pursuant to the notes or securities issued in connection
with the Senior Indenture; or (d) the exercise by a Company of any right of
defeasance or covenant defeasance or similar right with respect to (i) any
Subordinated Indebtedness, including, but not limited to the Indebtedness
incurred pursuant to the notes issued in connection with the Subordinated
Indenture or the Subordinated Convertible Indenture, or (ii) the Indebtedness
incurred pursuant to the notes or securities issued in connection with the
Senior Indenture.

         "Restructuring Charges" shall mean the restructuring charges,
write-downs and reserves taken by Borrower in accordance with GAAP in connection
with the restructuring of the Companies to the extent such restructuring
charges, write-downs and reserves were deducted in determining Consolidated Net
Earnings; provided, however, that (a) the aggregate amount of all such charges
shall not exceed Three Hundred Fifty Million Six Hundred Thousand Dollars
($350,600,000), which amount shall include no more than (i) Thirty Two Million
Six Hundred Thousand Dollars ($32,600,000) related to the write-down of
Borrower's investment in Egreetings Network, Inc., (ii) Eighteen Million Dollars
($18,000,000) related to changes in contractual relationships with strategic
partners of americangreetings.com, (iii) Ninety Million Dollars ($90,000,000)
related to the implementation of scan-based trading at select retailers, or (iv)
Two Hundred Ten Million Dollars ($210,000,000) related to corporate
restructuring, and (b) only those charges that shall have been taken during
Borrower's fiscal year ending February 28, 2002 shall be deemed to be
Restructuring Charges for purposes of this Agreement.

         "SEC" shall mean the United States Securities and Exchange Commission,
or any governmental body or agency succeeding to any of its principal functions.

         "Security Agreement" shall mean a Security Agreement, in the form of
EXHIBIT J hereto, executed and delivered by a Company to the Collateral Agent in
connection with this Agreement, as the same may from time to time be amended,
restated or otherwise modified.

         "Security Documents" shall mean each Security Agreement, each Pledge
Agreement, each Collateral Assignment and Security Agreement, each Mortgage,
each Landlord's Agreement, each U.C.C. financing statement executed in
connection herewith or securing any interest created in any of the foregoing
documents, and any other documents relating to any of the foregoing, as any of
the foregoing may from time to time be amended, restated or otherwise modified
or replaced.

         "Senior Indenture" shall mean the Indenture between Borrower and NBD
Bank, as trustee, dated as of July 27, 1998, as the same may, in accordance with
Section 5.24(b) hereof, from time to time be amended, supplemented, restated or
otherwise modified or replaced.

         "Significant Asset Disposition" shall mean a Disposition or
Dispositions in which the aggregate fair market value or book value, whichever
is greater, of the assets sold, leased, transferred or otherwise disposed of
shall be greater than or equal to One Million Dollars ($1,000,000).


                                       24



         "Standard & Poor's" shall mean Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., or any successor to such company.

         "S&P Rating" means the rating accorded to Borrower's senior credit
facilities by Standard & Poor's.

         "S&P Senior Rating" shall mean the corporate credit rating accorded to
Borrower by S&P.

         "Split Rating" shall exist at any time there shall be a difference in
level between the Moody's Rating and the S&P Rating that correlates with the
Moody's Rating.

         "Subordinated", as applied to Indebtedness, shall mean that the
Indebtedness shall have been subordinated (by written terms or written agreement
being, in either case, in form and substance satisfactory to the Global Agent
and the Required Lenders) in favor of the prior payment in full of the Debt.

         "Subordinated Convertible Indenture" shall mean the Indenture between
Borrower and National City Bank, as trustee, dated as of June 29, 2001, as the
same may, in accordance with Section 5.24(b) hereof, from time to time be
amended, supplemented, restated or otherwise modified or replaced, pursuant to
which Borrower shall have issued the 7.00% Convertible Subordinated Notes Due
July 15, 2006.

         "Subordinated Indenture" shall mean the Indenture between Borrower and
The Huntington National Bank, as trustee, dated as of June 29, 2001, as the same
may, in accordance with Section 5.24(b) hereof, from time to time be amended,
supplemented, restated or otherwise modified or replaced, pursuant to which
Borrower shall have issued the 11.75% Senior Subordinated Notes Due 2008.

         "Subsidiary" of Borrower or any of its Subsidiaries shall mean (a) a
corporation more than fifty percent (50%) of the Voting Power of which is owned,
directly or indirectly, by Borrower or by one or more other subsidiaries of
Borrower or by Borrower and one or more subsidiaries of Borrower, (b) a
partnership or limited liability company of which Borrower, one or more other
subsidiaries of Borrower or Borrower and one or more subsidiaries of Borrower,
directly or indirectly, is a general partner or managing member, as the case may
be, or otherwise has the power to direct the policies, management and affairs
thereof, or (c) any other Person (other than a corporation) in which Borrower,
one or more other subsidiaries of Borrower or Borrower and one or more
subsidiaries of Borrower, directly or indirectly, has at least a majority
interest in the Voting Power or the power to direct the policies, management and
affairs thereof.

         "Swing Line" shall mean the credit facility established by the Swing
Line Lender for Borrower in accordance with Section 2.1(a)(iii) hereof.

         "Swing Line Commitment" shall mean the commitment of the Swing Line
Lender to make Swing Loans to Borrower up to the maximum aggregate amount at any
time outstanding of Ten Million Dollars ($10,000,000), in accordance with the
terms and conditions of the Swing Line.


                                       25



         "Swing Line Exposure" shall mean, at any time, the aggregate principal
amount of all Swing Loans outstanding.

         "Swing Line Lender" shall mean the Global Agent, as holder of the Swing
Line Commitment.

         "Swing Line Note" shall mean the Swing Line Note in the form of the
attached EXHIBIT B, executed and delivered pursuant to Section 2.1(a)(iii)
hereof.

         "Swing Loan" shall mean a loan granted to Borrower by the Swing Line
Lender under the Swing Line.

         "Swing Loan Maturity Date" shall mean, with respect to any Swing Loan,
the earlier of (a) the last day of the period for such Swing Loan as established
by the Swing Line Lender and agreed to be Borrower but in no event later than
thirty (30) days after the date such Swing Loan is made, or (b) the last day of
the applicable Commitment Period.

         "Term Loan" shall mean the Term Loan made by the Term Loan Lenders
pursuant to Section 2.1(c) hereof.

         "Term Loan Commitment" shall mean the obligation hereunder of each Term
Loan Lender to participate in the making of the Term Loan, up to the amount set
forth opposite such Term Loan Lender's name under the column headed "Term Loan
Commitment Amount", as set forth on SCHEDULE 1 hereto.

         "Term Loan Commitment Amount" shall mean One Hundred Twenty-Five
Million Dollars ($125,000,000).

         "Term Loan Exposure" shall mean, at any time, the outstanding principal
amount of the Term Loan.

         "Term Loan Lender" shall mean a Lender with a Term Loan Commitment.

         "Term Loan Maturity Date" shall mean June 15, 2006.

         "Term Loan Prepayment Fee" shall mean (a) for the period from the
Closing Date through the first anniversary of the Closing Date, an amount equal
to five percent (5%) of the principal amount to be prepaid, (b) for the period
from the second anniversary of the Closing Date through the third anniversary of
the Closing Date, an amount equal to three percent (3%) of the principal amount
to be prepaid, and (c) for the period from the third anniversary of the Closing
Date through the fourth anniversary of the Closing Date, an amount equal to one
percent (1%) of the principal amount to be prepaid; provided, however, that,
notwithstanding the foregoing, the Term Loan Prepayment Fee with respect to a
prepayment of the Term Loan pursuant to Section 2.8(b) or subdivision (vi) of
Section 5.12(f) hereof, shall be an amount equal to one percent (1%) of the
principal amount to be prepaid.

         "Term Note" shall mean a Term Note in the form of the attached EXHIBIT
D, executed and delivered pursuant to Section 2.1(c) hereof.


                                       26



         "Total Commitment Amount" shall mean the Dollar Equivalent of the
amount of the Commitment.

         "Voting Power" shall mean, with respect to any Person, the exclusive
ability to control, through the ownership of shares of capital stock,
partnership interests, membership interests or otherwise, the election of
members of the board of directors or other similar governing body of such
Person, and the holding of a designated percentage of Voting Power of a Person
means the ownership of shares of capital stock, partnership interests,
membership interests or other interests of such Person sufficient to control
exclusively the election of that percentage of the members of the board of
directors or similar governing body of such Person.

         "Welfare Plan" shall mean an ERISA Plan that is a "welfare plan" within
the meaning of ERISA Section 3 (l).

         "Wholly-Owned Subsidiary" shall mean, with respect to any Person, any
corporation, limited liability company or other entity, all of the securities or
other ownership interest of which having ordinary voting power to elect a
majority of the board of directors, or other persons performing similar
functions, are at the time directly or indirectly owned by such Person.

         Any accounting term not specifically defined in this Article I shall
have the meaning ascribed thereto by GAAP.

         The foregoing definitions shall be applicable to the singular and
plurals of the foregoing defined terms.


                     ARTICLE II. AMOUNT AND TERMS OF CREDIT

         Section 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and
conditions of this Agreement, each Lender shall participate, to the extent
hereinafter provided, in making Loans to Borrower, and issuing Letters of Credit
at the request of Borrower, in such aggregate amount as Borrower shall request
pursuant to the Commitment.

         Each Lender, for itself and not one for any other, agrees to
participate in Loans made and Letters of Credit issued hereunder during the
Commitment Period on such basis that (i) immediately after the completion of any
borrowing by Borrower, the Dollar Equivalent of the aggregate principal amount
then outstanding on each Note (other than any Swing Line Note) issued to such
Lender or, if there is no Note, outstanding from such Lender, when combined with
the Dollar Equivalent of such Lender's Pro Rata Share of any Letter of Credit
Exposure or Swing Line Exposure, shall not be in excess of the respective
amounts of any of such Lender's 364 Day Commitment, General Revolving Commitment
or Term Loan Commitment; and (ii) the Dollar Equivalent of the principal amount
outstanding on each Note issued to such Lender (other than any Swing Line Note)
or, if there is no Note, outstanding from such Lender, shall represent,
respectively that percentage of the aggregate principal amount of Loans (other
than Swing Loans) then outstanding under each of the 364 Day Commitments,
General Revolving Commitments and Term Loan Commitments that shall be such
Lender's Applicable Commitment Percentage.


                                       27



         Within each Commitment, each borrowing (other than Swing Loans) from
the Lenders hereunder shall be made Pro Rata according to the respective
Applicable Commitment Percentages of the Lenders. The Loans may be made and
Letters of Credit may be issued as follows:

         (a) GENERAL REVOLVING COMMITMENTS.

         (i) GENERAL REVOLVING LOANS. Subject to the terms and conditions of
this Agreement, during the applicable Commitment Period, the General Revolving
Lenders shall make a General Revolving Loan or General Revolving Loans to
Borrower in such amount or amounts as Borrower may from time to time request,
but not exceeding in aggregate principal amount at any time outstanding
hereunder the Maximum General Revolving Commitment Amount, when such General
Revolving Loans are combined with the Letter of Credit Exposure and the Swing
Line Exposure; provided, however, that Borrower shall not request a General
Revolving Loan hereunder (and the General Revolving Lenders shall not be
obligated to make a General Revolving Loan) if, after giving effect thereto, (A)
the Alternate Currency Exposure would exceed the Alternate Currency Maximum
Amount or (B) the General Revolving Commitment Exposure would exceed the Maximum
General Revolving Commitment. Borrower shall have the option, subject to the
terms and conditions set forth herein, to borrow General Revolving Loans,
maturing on the last day of the applicable Commitment Period, by means of any
combination of Base Rate Loans, Eurodollar Loans, or Alternate Currency Loans.
With respect to each Alternate Currency Loan, subject to the other provisions of
this Agreement, Borrower shall have the right to receive all of the proceeds of
such Alternate Currency Loan in an Alternate Currency. Each Alternate Currency
Loan shall be made in a single Alternate Currency.

         Borrower shall pay interest on the unpaid principal amount of Base Rate
Loans outstanding from time to time under the General Revolving Commitment from
the date thereof until paid at the Derived Base Rate from time to time in
effect. Interest on such Base Rate Loans shall be payable, commencing September
30, 2001, and on the last day of each succeeding December, March, June and
September thereafter and at the maturity thereof.

         Borrower shall pay interest on the unpaid principal amount of each
Fixed Rate Loan outstanding from time to time under the General Revolving
Commitment, fixed in advance on the first day of the Interest Period applicable
thereto through the last day of the Interest Period applicable thereto (but
subject to changes in the Applicable Margin) at the Derived Fixed Rate. Interest
on such Fixed Rate Loan shall be payable on each Interest Adjustment Date
(provided that if an Interest Period shall exceed three months, the interest
shall be paid every three months, commencing three months from the beginning of
such Interest Period).

         At the request of Borrower to the Global Agent, subject to the notice
and other provisions of Section 2.2 hereof, the General Revolving Lenders shall
convert, under the General Revolving Commitment, (A) Base Rate Loans to
Eurodollar Loans at any time and (B) Eurodollar Loans to Base Rate Loans on any
Interest Adjustment Date. No General Revolving Loan may be converted to or from
an Alternate Currency Loan.

         The obligation of Borrower to repay the Base Rate Loans and Fixed Rate
Loans made by the General Revolving Lenders pursuant to the General Revolving
Commitment and to pay


                                       28



interest thereon shall be evidenced by a General Revolving Note, payable to the
order of each General Revolving Lender in the principal amount of its General
Revolving Commitment, or, if less, the aggregate unpaid principal amount of
General Revolving Loans made hereunder by such General Revolving Lender. Subject
to the provisions of this Agreement, Borrower shall be entitled under this
Section 2.1(a)(i) to borrow funds, repay the same in whole or in part and
re-borrow hereunder at any time and from time to time during the applicable
Commitment Period.

         (ii) LETTERS OF CREDIT. Subject to the terms and conditions of this
Agreement, during the applicable Commitment Period, the Fronting Lender, shall,
in its own name, but only as agent for the General Revolving Lenders, issue such
Letters of Credit for the account of Borrower, as Borrower may from time to time
request. Borrower shall not request any Letter of Credit (and the Fronting
Lender shall not be obligated to issue any Letter of Credit) if, after giving
effect thereto, (A) the Letter of Credit Exposure would exceed the Letter of
Credit Commitment, (B) the General Revolving Commitment Exposure would exceed
the Maximum General Revolving Commitment Amount, or (C) the Alternate Currency
Exposure would exceed the Alternate Currency Maximum Amount. Borrower may
request that a Letter of Credit be issued in Dollars or an Alternate Currency.
The issuance of each Letter of Credit shall confer upon each General Revolving
Lender the benefits and liabilities of a participation consisting of an
undivided pro rata interest in the Letter of Credit to the extent of the
Applicable Commitment Percentage of such General Revolving Lender.

         Each request for a Letter of Credit shall be delivered to the Global
Agent and the Fronting Lender not later than 11:00 A.M. (Cleveland, Ohio time)
three Business Days prior to the day upon which the Letter of Credit is to be
issued (or such shorter time period as may be agreed to by the Fronting Lender).
Each such request shall be in a form acceptable to the Global Agent and the
Fronting Lender and specify the face amount thereof, whether such Letter of
Credit shall be a commercial documentary or a standby Letter of Credit, the type
of currency, the account party, the beneficiary, the intended date of issuance,
the expiry date thereof, and the nature of the transaction to be supported
thereby. Concurrently with each such request, Borrower, shall execute and
deliver to the Fronting Lender an appropriate application and agreement, being
in the standard form of the Fronting Lender for such letters of credit, as
amended to conform to the provisions of this Agreement if required by the Global
Agent. Global Agent shall give each General Lender notice of each such request
for a Letter of Credit.

         In respect of each Letter of Credit that shall be a commercial
documentary letter of credit and the drafts thereunder, if any, Borrower agrees
(1) to pay to the Global Agent, for the pro rata benefit of the General
Revolving Lenders, a non-refundable commission based upon the Dollar Equivalent
of the face amount of such Letter of Credit, which shall be paid on the date
that any draw shall have been made on such Letter of Credit, at a rate equal to
(y) one-half (1/2) of the Applicable Margin (in effect on the date such payment
is to be made, times (z) the Dollar Equivalent amount drawn under such Letter of
Credit, and (2) to pay to the Fronting Lender such issuance, amendment,
negotiation, draw, acceptance, telex, courier, postage and similar transactional
fees as shall be generally charged by the Fronting Lender under its fee schedule
as in effect from time to time.

         In respect of each Letter of Credit that shall be a standby letter of
credit and the drafts thereunder, if any, Borrower agrees (a) to pay to the
Global Agent, for the pro rata benefit of the Lenders, a non-refundable
commission based upon the Dollar Equivalent of the face amount of


                                       29



such Letter of Credit, which shall be paid quarterly in arrears, at a rate per
annum equal to (i) the then current Applicable Margin (and specifically
including any additional amount payable pursuant to subpart (c) of the
definition of Derived Fixed Rate) for Eurodollar Loans (i.e., the Applicable
Margin for Eurodollar Loans in effect on the date such Letter of Credit shall be
issued and, as to each quarterly payment thereafter, the Applicable Margin for
Eurodollar Loans in effect on the date of such quarterly payment), times (ii)
the Dollar Equivalent of the average undrawn face amount of such Letter of
Credit during such fiscal quarter, (b) to pay to the Fronting Lender, for its
sole account, an additional Letter of Credit fee, which shall be paid on each
date that such Letter of Credit shall be issued or renewed at the rate of
one-eighth percent (1/8 of 1%) of the face amount of such Letter of Credit, and
(c) to pay to the Fronting Lender for its sole account, such other issuance,
amendment, negotiation, draw, acceptance, telex, courier, postage and similar
transactional fees as shall be generally charged by the Fronting Lender under
its fee schedule as in effect from time to time.

         Whenever a Letter of Credit shall have been drawn, Borrower shall
immediately reimburse the Fronting Lender for the amount drawn in Dollars or in
the Alternate Currency in which such Letter of Credit shall have been issued, as
the case may be. If the amount drawn in Dollars shall not be reimbursed by
Borrower within one Business Day of the drawing of such Letter of Credit, at the
sole option of the Fronting Lender, Borrower shall be deemed to have requested a
General Revolving Loan, subject to the provisions of Section 2.1(a)(i), in the
amount drawn. Such General Revolving Loan shall be evidenced by the General
Revolving Notes. Each General Revolving Lender agrees to make a General
Revolving Loan on the date of such notice, subject to no conditions precedent
whatsoever. Each General Revolving Lender acknowledges and agrees that its
obligation to make a General Revolving Loan pursuant to Section 2.1(a)(i)
hereof, when required by this Section 2.1(a)(ii) shall be absolute and
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the occurrence and continuance of a Default or
Event of Default, and that its payment to the Global Agent, for the account of
the Fronting Lender, of the proceeds of such General Revolving Loan shall be
made without any offset, abatement, recoupment, counterclaim, withholding or
reduction whatsoever and whether or not the General Revolving Commitment of such
General Revolving Lender shall have been reduced or terminated. Borrower
irrevocably authorizes and instructs the Global Agent to apply the proceeds of
any borrowing pursuant to this paragraph to reimburse, in full, the Fronting
Lender for the amount drawn on such Letter of Credit. Each such General
Revolving Loan shall be deemed to be a Base Rate Loan. Each General Revolving
Lender is hereby authorized to record on its records relating to its General
Revolving Note such Lender's Pro Rata Share of the amounts paid and not
reimbursed on the Letters of Credit.

         If, for any reason, the Fronting Lender shall be unable to or, in the
opinion of the Global Agent, it shall be impracticable to, convert any Letter of
Credit to a General Revolving Loan pursuant to the preceding paragraph, the
Fronting Lender shall have the right to request that each General Revolving
Lender purchase a participation in the amount due with respect to such Letter of
Credit, and the Global Agent shall promptly notify each General Revolving Lender
thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but
without further action, the Fronting Lender hereby agrees to grant to each
General Revolving Lender, and each General Revolving Lender hereby agrees to
acquire from the Fronting Lender, an undivided participation interest in the
amount due with respect to such Letter of Credit in an amount equal to such
General Revolving Lender's Applicable Commitment Percentage of the Dollar
Equivalent of the aggregate principal amount of the amount due with respect to
such Letter of Credit. In


                                       30



consideration and in furtherance of the foregoing, each General Revolving Lender
hereby absolutely and unconditionally agrees, upon receipt of notice as provided
above, to pay in Dollars to the Global Agent, for the account of the Fronting
Lender, such General Revolving Lender's ratable share of the Dollar Equivalent
of the amount due with respect to such Letter of Credit (determined in
accordance with the Applicable Commitment Percentage of such General Revolving
Lender). Each General Revolving Lender acknowledges and agrees that its
obligation to acquire participations in the amount due under any Letter of
Credit that shall have been drawn but not reimbursed by Borrower pursuant to
this Section 2.1(a)(ii) shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, the
occurrence and continuance of a Default or Event of Default, and that each such
payment shall be made without any offset, abatement, recoupment, counterclaim,
withholding or reduction whatsoever and whether or not the General Revolving
Commitment of such General Revolving Lender shall have been reduced or
terminated. Each General Revolving Lender shall comply with its obligation under
this Section 2.1 (a)(ii) by wire transfer of immediately available funds, in the
same manner as provided in Section 2.2 hereof with respect to General Revolving
Loans. Each General Revolving Lender is hereby authorized to record on its
records such General Revolving Lender's Pro Rata Share of the amounts paid and
not reimbursed on the Letters of Credit.

         (iii) SWING LOANS. Subject to the terms and conditions of this
Agreement, during the Commitment Period applicable to the General Revolving
Commitment, the Swing Line Lender shall make a Swing Loan or Swing Loans to
Borrower in such amount or amounts as Borrower may from time to time request;
provided that Borrower shall not request any Swing Loan hereunder if, after
giving effect thereto, (A) the General Revolving Commitment Exposure would
exceed the Maximum General Revolving Commitment Amount, or (B) the Swing Line
Exposure would exceed the Swing Line Commitment. Each Swing Loan shall be due
and payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan
shall be made in Dollars.

         Borrower shall pay interest, for the sole benefit of the Swing Line
Lender (and any General Revolving Lender that shall have purchased a
participation in such Swing Loan), on the unpaid principal amount of each Swing
Loan outstanding from time to time from the date thereof until paid, at the
Derived Swing Loan Rate applicable to such Swing Loan. Interest on each Swing
Loan shall be payable on the Swing Loan Maturity Date applicable thereto. Each
Swing Loan shall bear interest for a minimum of one day.

         The obligation of Borrower to repay the Swing Loans and to pay interest
thereon shall be evidenced by a Swing Line Note of Borrower payable to the order
of the Swing Line Lender in the principal amount of the Swing Line Commitment,
or, if less, the aggregate unpaid principal amount of Swing Loans made hereunder
by the Swing Line Lender. Subject to the provisions of this Agreement, Borrower
shall be entitled under this Section 2.1(a)(iii) to borrow funds, repay the same
in whole or in part and reborrow hereunder at any time and from time to time
during the Commitment Period applicable to the General Revolving Commitment.

         If the Swing Line Lender shall so elect, by giving notice to Borrower
and the Lenders, Borrower agrees that the Swing Line Lender shall have the
right, in its sole discretion, to require that any Swing Loan be refinanced as a
General Revolving Loan. Such General Revolving Loan shall be a Base Rate Loan
unless and until converted by Borrower to a Eurodollar Loan pursuant


                                       31



to Section 2.1(a)(i) and Section 2.2 hereof. Upon receipt of such notice by
Borrower, Borrower shall be deemed, on such day, to have requested a General
Revolving Loan in the principal amount of the Swing Loan in accordance with
Section 2.1(a)(i) hereof. Each General Revolving Lender agrees to make a General
Revolving Loan on the date of such notice, subject to no conditions precedent
whatsoever. Each General Revolving Lender acknowledges and agrees that such
General Revolving Lender's obligation to make a General Revolving Loan pursuant
to Section 2.1(a)(i) hereof when required by this Section 2.1(a)(iii) shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or Event of Default, and that its payment to the Swing Line Lender, for
the account of the Swing Line Lender, of the proceeds of such General Revolving
Loan shall be made without any offset, abatement, recoupment, counterclaim,
withholding or reduction whatsoever and whether or not such General Revolving
Lender's General Revolving Commitment shall have been reduced or terminated.
Borrower irrevocably authorizes and instructs the Swing Line Lender to apply the
proceeds of any borrowing pursuant to this paragraph to repay in full such Swing
Loan.

         If, for any reason, the Swing Line Lender shall be unable or, in the
opinion of the Swing Line Lender, it shall be impracticable, to convert any
Swing Loan to a General Revolving Loan pursuant to the preceding paragraph,
then, on any day that a Swing Loan shall be outstanding (whether before or after
the maturity thereof), the Swing Line Lender shall have the right to request
that each General Revolving Lender purchase a participation in such Swing Loan,
and the Swing Line Lender shall promptly notify each General Revolving Lender
thereof (by facsimile or telephone, confirmed in writing). Upon such notice, but
without further action, the Swing Line Lender hereby agrees to grant to each
General Revolving Lender, and each General Revolving Lender hereby agrees to
acquire from the Swing Line Lender, an undivided participation interest in such
Swing Loan in an amount equal to such General Revolving Lender's Applicable
Commitment Percentage of the aggregate principal amount of such Swing Loan. In
consideration and in furtherance of the foregoing, each General Revolving Lender
hereby absolutely and unconditionally agrees, upon receipt of notice as provided
above, to pay to the Swing Line Lender, for its sole account, such General
Revolving Lender's ratable share of such Swing Loan (determined in accordance
with such General Revolving Lender's Applicable Commitment Percentage). Each
General Revolving Lender acknowledges and agrees that its obligation to acquire
participations in Swing Loans pursuant to this Section 2.1(a)(iii) shall be
absolute and unconditional and shall not be affected by any circumstance
whatsoever, including, without limitation, the occurrence and continuance of a
Default or an Event of Default, and that each such payment shall be made without
any offset, abatement, recoupment, counterclaim, withholding or reduction
whatsoever and whether or not such General Revolving Lender's General Revolving
Commitment shall have been reduced or terminated. Each General Revolving Lender
shall comply with its obligation under this Section 2.1(a)(iii) by wire transfer
of immediately available funds, in the same manner as provided in Section 2.2
hereof with respect to General Revolving Loans to be made by such General
Revolving Lender. Each General Revolving Lender is hereby authorized to record
on its records such General Revolving Lender's Pro Rata Share of the amounts
paid and not reimbursed on the Swing Loans.

         (b) 364 DAY COMMITMENTS.

         Subject to the terms and conditions of this Agreement, during the
applicable Commitment Period, the 364 Day Lenders shall make a 364 Day
Revolving Loan or 364 Day



                                       32



Revolving Loans to Borrower in such amount or amounts as Borrower may from time
to time request, but not exceeding in aggregate principal amount at any time
outstanding hereunder the Maximum 364 Day Commitment Amount. Borrower shall
have the option, subject to the terms and conditions set forth herein, to
borrow 364 Day Revolving Loans, maturing on the last day of the applicable
Commitment Period, by means of any combination of Base Rate Loans or Eurodollar
Loans.

         Borrower shall pay interest on the unpaid principal amount of Base Rate
Loans outstanding from time to time under the 364 Day Commitment from the date
thereof until paid at the Base Rate from time to time in effect. Interest on
such Base Rate Loans shall be payable, commencing September 30, 2001, and on the
last day of each succeeding December, March, June and September thereafter and
at the maturity thereof.

         Borrower shall pay interest on the unpaid principal amount of each
Eurodollar Loan outstanding from time to time under the 364 Day Commitment,
fixed in advance on the first day of the Interest Period applicable thereto
through the last day of the Interest Period applicable thereto (but subject to
changes in the Applicable Margin) at the Derived Fixed Rate applicable to
Eurodollar Loans. Interest on such Eurodollar Loan shall be payable on each
Interest Adjustment Date (provided that if an Interest Period shall exceed three
months, the interest shall be paid every three months, commencing three months
from the beginning of such Interest Period).

         At the request of Borrower to the Global Agent, subject to the notice
and other provisions of Section 2.2 hereof, the 364 Day Lenders shall convert,
under the 364 Day Commitment, (i) Base Rate Loans to Eurodollar Loans at any
time and (ii) Eurodollar Loans to Base Rate Loans on any Interest Adjustment
Date.

         The obligation of Borrower to repay the Base Rate Loans and Eurodollar
Loans made by the 364 Day Lenders pursuant to the 364 Day Commitment and to pay
interest thereon shall be evidenced by a 364 Day Note, payable to the order of
each 364 Day Lender in the principal amount of its 364 Day Commitment, or, if
less, the aggregate unpaid principal amount of 364 Day Revolving Loans made
hereunder by such 364 Day Lender. Subject to the provisions of this Agreement,
Borrower shall be entitled under this Section 2.1(b) to borrow funds, repay the
same in whole or in part and re-borrow hereunder at any time and from time to
time during the applicable Commitment Period.

         (c) TERM LOAN COMMITMENTS.

         Subject to the terms and conditions of this Agreement, the Term Loan
Lenders shall make the Term Loan to Borrower on the Closing Date in the Term
Loan Commitment Amount. To evidence the Term Loan, Borrower shall, upon request
of any Term Loan Lender, execute and deliver to such Term Loan Lender a Term
Note. The Term Loan shall be payable in twenty (20) quarter-annual installments,
commencing November 30, 2001, and continuing on the last day of each succeeding
February, May, August and November thereafter until paid in full. From November
30, 2001 through February 28, 2006, each payment shall be in the principal
amount of Three Hundred Twelve Thousand Five Hundred Dollars ($312,500), with
the last payment to be paid on the Term Loan Maturity Date in the amount of the
then remaining balance of the Term Loan.


                                       33



         Borrower shall notify the Global Agent, in accordance with the notice
provisions of Section 2.2 hereof, whether the Term Loan will be a Base Rate Loan
or a Eurodollar Loan. The Term Loan may be a mixture of a Base Rate Loan and
Eurodollar Loans. The Term Loan Lenders, at the request of Borrower to the
Global Agent, subject to the applicable notice and other provisions of Section
2.2 hereof, shall convert a Base Rate Loan to a Eurodollar Loan at any time and
shall convert a Eurodollar Loan to a Base Rate Loan on any Interest Adjustment
Date.

         With respect to any portion of the Term Loan that shall be a Base Rate
Loan, Borrower shall pay interest on the unpaid principal amount thereof
outstanding from time to time from the date thereof until paid, commencing
September 30, 2001, and continuing on the last day of each succeeding December,
March, June and September thereafter and at the maturity thereof, at the Derived
Term Loan Base Rate from time to time in effect.

         With respect to any portion of the Term Loan that shall be a Eurodollar
Loan, Borrower shall pay interest on the unpaid principal amount of each
Eurodollar Loan outstanding from time to time, fixed in advance on the first day
of the Interest Period applicable thereto through the last day of the Interest
Period applicable thereto (but subject to changes in the Applicable Term Loan
Margin), the Derived Term Loan Eurodollar Rate. Interest on such Eurodollar Loan
shall be payable on each Interest Adjustment Date (provided that if an Interest
Period shall exceed three months, the interest shall be paid every three months,
commencing three months from the beginning of such Interest Period).

         Section 2.2. CONDITIONS TO CREDIT EVENTS. The obligation of the Global
Agent, the Swing Line Lender, the Fronting Lender or any Lender to participate
in any Credit Event shall be conditioned, in the case of each such Credit Event,
upon:

         (a) all conditions precedent as listed in Article IV hereof shall have
been satisfied;

         (b) for General Revolving Loans, 364 Day Revolving Loans or the Term
Loan, (i) in respect of Base Rate Loans, receipt by the Global Agent of a Notice
of Loan by 11:00 A.M. (Cleveland, Ohio time) on the proposed date of borrowing
or conversion, and (ii) in respect of Fixed Rate Loans, receipt by the Global
Agent by 11:00 A.M. (Cleveland, Ohio time) three Business Days (or, with respect
to Alternate Currency Loans, four Business Days) prior to the proposed date of
borrowing, conversion or continuation. The Global Agent shall notify each Lender
of the date, amount and Interest Period (if applicable) promptly upon the
receipt of such notice, and, in any event, by 2:00 P.M. (Cleveland, Ohio time)
on the date such notice is received. On the date such Loan is to be made, each
Lender shall provide the Global Agent, not later than 3:00 P.M. (Cleveland, Ohio
time), with the amount of Dollars or, if applicable, Alternate Currency required
of it, in federal or other immediately available funds;

         (c) for Swing Loans, receipt by the Global Agent of a Notice of Loan,
such notice to be received by 11:00 A.M. (Cleveland, Ohio time) on the proposed
date of borrowing;

         (d) with respect to Letters of Credit, satisfaction of the notice
provisions set forth in Section 2.1(a)(ii) hereof;


                                       34



         (e) Borrower's request for a Loan shall have been for no less than the
Minimum Borrowing Amount for such Loan;

         (f) the fact that no Default or Event of Default shall then exist or
immediately after such Credit Event would exist; and

         (g) the fact that each of the representations and warranties contained
in Article VI hereof shall be true and correct with the same force and effect as
if made on and as of the date of such Credit Event, except to the extent that
any thereof expressly relate to an earlier date.

         At no time shall Borrower request that Fixed Rate Loans be outstanding
for more than six different Interest Periods at any time, and, if Base Rate
Loans are outstanding, then Fixed Rate Loans shall be limited to five different
Interest Periods at any time.

         Each request by Borrower with respect to any Credit Event hereunder
shall be deemed to be a representation and warranty by Borrower as of the date
of such request as to the facts specified in (f) and (g) above.

         Each request for a Fixed Rate Loan shall be irrevocable and binding on
Borrower and Borrower shall indemnify the Global Agent and the applicable
Lenders against any loss or expense incurred by the Global Agent or such Lenders
as a result of any failure by Borrower to consummate such transaction including,
without limitation, any loss (including loss of anticipated profits) or expense
incurred by reason of liquidation or re-employment of deposits or other funds
acquired by such Lenders to fund such Fixed Rate Loan. A certificate as to the
amount of such loss or expense submitted by such Lenders to Borrower shall be
conclusive and binding for all purposes, absent manifest error.

         If the Global Agent shall elect to advance the proceeds of a Loan prior
to receiving funds from the applicable Lenders, the Global Agent shall have the
right, upon prior notice to Borrower, to debit any account of Borrower or
otherwise receive from Borrower, on demand, such amount, in the event that any
such Lender shall fail to reimburse the Global Agent in accordance with this
subsection. The Global Agent shall also have the right to receive interest from
any such Lender at the Federal Funds Effective Rate in the event that such
Lender shall fail to provide its portion of the Loan on the date requested and
the Global Agent shall elect to provide such funds.

         Section 2.3. PAYMENT ON NOTES, ETC.

         (a) PAYMENTS WITHOUT SET-OFF. Each payment made hereunder by Borrower
shall be made without any offset, abatement, recoupment, counterclaim,
withholding or reduction whatsoever.

         (b) PAYMENTS IN ALTERNATE CURRENCY. With respect to any Alternate
Currency Loan, all payments (including prepayments) to any Lender of the
principal of or interest on such Alternate Currency Loan shall be made in the
same Alternate Currency as the original Loan. All such payments shall be
remitted by Borrower to the Global Agent at the Designated Lending Office for
the account of the Lenders not later than 11:00


                                       35



A.M. (Cleveland, Ohio time) on the due date thereof in same day funds. Any
payments received by the Global Agent after 11:00 A.M. (Cleveland, Ohio time)
shall be deemed to have been made and received on the next following Business
Day.

         (c) PAYMENTS IN DOLLARS. With respect to (i) any Loan (other than as
set forth in subparts (b) above), or (ii) any other payment to the Global Agent
or the Lenders that shall not be covered by subsection (b) above, all such
payments (including prepayments) of the principal of or interest on such Loan or
other payment, including but not limited to principal, interest, fees or any
other amount owed by Borrower under this Agreement, shall be made in Dollars.
All payments described in this subsection (c) shall be remitted to the Global
Agent at its Designated Lending Office for the account of the appropriate
Lenders not later than 11:00 A.M. (Cleveland, Ohio time) on the due date thereof
in immediately available funds. Any such payments received by the Global Agent
after 11:00 A.M. (Cleveland, Ohio time) shall be deemed to have been made and
received on the next following Business Day.

         (d) PAYMENTS TO LENDERS. Upon the Global Agent's receipt of payments
hereunder, the Global Agent shall immediately distribute to the appropriate
Lenders their respective Ratable Shares, if any, of the amount of principal,
interest, and facility and other fees received by the Global Agent for the
account of such Lenders. Payments received by the Global Agent in Dollars shall
be delivered to the appropriate Lenders in Dollars in immediately available
funds. Payments received by the Global Agent in any Alternate Currency shall be
delivered to the appropriate Lenders in such Alternate Currency in same day
funds. Each Lender shall record any principal, interest or other payment, the
principal amounts of Base Rate Loans and Fixed Rate Loans, the type of currency
for each Loan, all prepayments and the applicable dates, including Interest
Periods, with respect to the Loans made, and payments received by such Lender,
by such method as such Lender may generally employ; provided, however, that
failure to make any such entry shall in no way detract from the obligations of
Borrower under this Agreement or the Notes. The aggregate unpaid amount of
Loans, types of Loans, Interest Periods and similar information with respect to
such Loans and Letters of Credit set forth on the records of the Global Agent
shall be rebuttably presumptive evidence with respect to such information,
including the amounts of principal and interest owing to each Lender.

         (e) TIMING OF PAYMENTS. Whenever any payment to be made hereunder,
including, without limitation, any payment to be made on any Note, shall be
stated to be due on a day that shall not be a Business Day, such payment shall
be made on the next succeeding Business Day and such extension of time shall in
each case be included in the computation of the interest payable on such Note;
provided, however, that, with respect to any Fixed Rate Loan, if the next
succeeding Business Day shall fall in the succeeding calendar month, such
payment shall be made on the preceding Business Day and the relevant Interest
Period shall be adjusted accordingly.

         Section 2.4. PAYMENTS NET OF TAXES.

         (a) GENERAL PROVISIONS. All payments under this Agreement shall be made
absolutely net of, without deduction or offset for, and altogether free and
clear of, any and all present and future taxes, levies, deductions, charges and
withholdings and all liabilities with respect thereto, under the laws of the
United States of America or any foreign jurisdiction (or any state or political
subdivision thereof), excluding income and franchise taxes imposed on any Lender
(and withholding relating thereto) under the laws of the United States of
America, Australia or any


                                       36



other foreign jurisdiction (or any state or political subdivision thereof). If
Borrower shall be compelled by law to deduct any such taxes or levies (other
than such excluded taxes) or to make any such other deductions, charges or
withholdings, then Borrower shall pay such additional amounts as may be
necessary in order that the net payments after such deduction, and after giving
effect to any United States or foreign jurisdiction (or any state or political
subdivision thereof) income taxes required to be paid by the Lenders in respect
of such additional amounts, shall equal the amount of interest, and other fees
and amounts payable as provided in Section 2.1 and Section 2.6 hereof for each
Loan or Letter of Credit, plus any principal then due.

         (b) ALTERNATE CURRENCY TRANSACTIONS. All payments on account of
principal, if any, interest and other fees and amounts payable hereunder shall
be made without set-off or counterclaim and, unless otherwise required by law,
shall be made free and clear of and without deduction for withholding tax or
similar tax, present or future, imposed by any taxing authority in any
jurisdiction (in this subsection (b) hereof, a "Tax"). If Borrower shall be
required to withhold or pay any Tax, it shall make the required withholding and
payment in accordance with and within the time allowed by law, and shall
nonetheless pay to the appropriate Lender such additional amounts as shall be
necessary to cause such Lender actually to receive in full all amounts (after
taking account of any further deduction or withholding that is required to be
made as a consequence of the payment of such additional amounts) on account of
principal and interest or other fees or amounts owing to it hereunder, as if
such Tax had not been paid. As soon as practicable after the date that any Tax
shall become due and payable, (i) Borrower shall give to such Lender the
original or a copy of a receipt for the payment of the Tax, or, if such receipts
are not issued by or received from the taxing authority to which the Tax was
paid, a certificate of an officer of Borrower, confirming the date and amount of
the payment so made and reasonable details of the calculation of the amount due;
and (ii) Borrower shall indemnify and save such Lender harmless from and against
any claim, liability, loss, cost, expense (including without limitation legal,
accounting and other professional fees, and interest and penalty charges or
fines imposed by any taxing authority in respect of or arising from non-payment
of such Tax) to which such Lender may be exposed or that it may incur, by reason
of Borrower's failure to make punctual payment of any amount required to be paid
to a taxing authority pursuant to subsection (b) hereof.

         Section 2.5. VOLUNTARY PREPAYMENT; PREPAYMENT FEES.

         (a) RIGHT TO PREPAY. Borrower shall have the right, at any time or from
time to time, to prepay, on a Pro Rata Basis for all of the applicable Lenders
(or, with respect to Swing Loans, the applicable Swing Line Lender), all or any
part of the principal amount of the Notes of Borrower then outstanding, as
designated by Borrower, plus interest accrued on the amount so prepaid to the
date of such prepayment.

         (b) PREPAYMENT FEES.

               (i) Prepayments of Base Rate Loans shall be without any premium
          or penalty;

               (ii) In any case of prepayment of a Fixed Rate Loan, Borrower
          agrees that if the reinvestment rate with respect to Eurodollars or
          the Alternate Currency, as the case may be, of such Fixed Rate Loan,
          as quoted by the money desk of the Global Agent (the "Reinvestment
          Rate"), shall be lower than the Adjusted LIBOR Rate applicable to the


                                       37



          Fixed Rate Loan that is intended to be prepaid (hereinafter, "Last
          LIBOR"), then Borrower shall, upon written notice from the Global
          Agent, promptly pay to the Global Agent, for the account of the
          applicable Lenders, in immediately available funds, a prepayment fee
          equal to the product of (A) a rate (the "Prepayment Rate") which shall
          be equal to the difference between the Last LIBOR and the Reinvestment
          Rate, times (B) the prepayment principal amount of the Fixed Rate Loan
          that is to be prepaid, times (C) (1) the number of days remaining in
          the Interest Period of the Fixed Rate Loan that is to be prepaid
          divided by (2) three hundred sixty (360). In addition, Borrower shall
          immediately pay directly to the Global Agent, for the account of the
          applicable Lenders, the amount of any additional costs or expenses
          (including, without limitation, cost of telex, wires, or cables)
          incurred by the Global Agent or the Lenders in connection with the
          prepayment, upon Borrower's receipt of a written statement from the
          Global Agent; and

               (iii) In the case of prepayment of any Swing Loan, Borrower
          agrees to pay to the Swing Line Lender, on demand, for any resulting
          loss, cost or expense of the Swing Line Lender as a result thereof,
          including, without limitation, any loss incurred in obtaining,
          liquidating or employing deposits.

         (c) TERM LOAN PREPAYMENT FEES. In addition to any fees payable pursuant
to subpart (b) above, in the case of any prepayment of the Term Loan, whether in
whole or in part, Borrower shall pay to the Global Agent, for the account of the
Term Loan Lenders, on the date of such prepayment, a fee equal to the Term Loan
Prepayment Fee and if, as a result of such prepayment, any Fixed Rate Loan shall
be prepaid prior to the Interest Adjustment Date applicable thereto, Borrower
shall pay to the Term Loan Lenders the prepayment fees set forth in subsection
(b) hereof.

         (d) NOTICE OF PREPAYMENT. Borrower shall give the Global Agent written
notice of prepayment of any Base Rate Loan by not later than 11:00 A.M.
(Cleveland, Ohio time) on the Business Day such prepayment is to be made and
written notice of the prepayment of any Fixed Rate Loan not later than 1:00 P.M.
(Cleveland, Ohio time) three Business Days prior to the Business Day on which
such prepayment is to be made.

         (e) MINIMUM AMOUNT. Except in the case of a mandatory prepayment in
connection with Section 2.8 or Article III hereof, each prepayment of a Fixed
Rate Loan by Borrower shall be in the aggregate principal amount of not less
than Five Million Dollars ($5,000,000) (or, with respect to an Alternate
Currency Loan, the Dollar Equivalent of such amount).

         Section 2.6. FACILITY AND OTHER FEES.

         (a) GENERAL FACILITY FEE. Borrower shall pay to the Global Agent, for
the ratable account of the General Revolving Lenders, as a consideration for the
General Revolving Commitments, a facility fee from the Closing Date to and
including the last day of the applicable Commitment Period, payable quarterly,
at a rate per annum equal to (i) the Applicable Facility Fee Rate in effect on
the date that such facility fee shall be due, times (ii) the average daily
Maximum General Revolving Commitment Amount during such quarter. The facility
fee with respect to the General Revolving Commitments shall be payable in
arrears, on September 30,


                                       38



2001 and on the last day of each succeeding December, March, June and September
thereafter, and on the last day of the applicable Commitment Period.

         (b) 364 DAY FACILITY FEE. Borrower shall pay to the Global Agent, for
the ratable account of the 364 Day Lenders, as a consideration for the 364 Day
Commitments, a facility fee from the Closing Date to and including the last day
of the applicable Commitment Period, payable quarterly, at a rate per annum
equal to (i) the Applicable Facility Fee Rate in effect on the date that such
facility fee shall be due, times (ii) the average daily Maximum 364 Day
Commitment Amount during such quarter. The facility fee with respect to the 364
Day Commitments shall be payable in arrears, on September 30, 2001 and on the
last day of each succeeding December, March, June and September thereafter, and
on the last day of the applicable Commitment Period.

         (c) GLOBAL AGENT FEES. Borrower shall pay to the Global Agent, for its
sole benefit, the fees set forth in the Global Agent Fee Letter.

         Section 2.7.      MODIFICATION OF COMMITMENT.

         (a) REDUCTION OF GENERAL REVOLVING COMMITMENTS. Borrower may at any
time or from time to time permanently reduce in whole, or ratably in part, the
General Revolving Commitments to an amount not less than the then existing
General Revolving Commitment Exposure by giving the Global Agent not fewer than
three Business Days' notice of such reduction, provided that any such partial
reduction shall be in an aggregate amount, for all of the General Revolving
Lenders, of not less than Five Million Dollars ($5,000,000), increased by
increments of One Million Dollars ($1,000,000). The Global Agent shall promptly
notify each General Revolving Lender of the date of each such reduction and such
General Revolving Lender's proportionate share thereof. After each such
reduction, the facility fees payable hereunder shall be calculated upon the
General Revolving Commitments as so reduced in accordance with Section 2.6(a)
hereof. If Borrower shall reduce in whole the General Revolving Commitments, on
the effective date of such reduction (Borrower having prepaid in full the unpaid
principal balance, if any, of the General Revolving Notes and the Swing Line
Note, together with all interest and facility and other fees accrued and unpaid,
and so long as there shall exist no Letter of Credit Exposure), all of the
General Revolving Notes shall be delivered to the Global Agent marked "Canceled"
and the Global Agent shall redeliver such General Revolving Notes to Borrower.
Any partial reduction in the General Revolving Commitments shall be effective
during the remainder of the applicable Commitment Period.

         (b) REDUCTION OF 364 DAY COMMITMENTS. Borrower may at any time or from
time to time permanently reduce in whole, or ratably in part, the 364 Day
Commitments to an amount not less than the then existing 364 Day Exposure by
giving the Global Agent not fewer than three Business Days' notice of such
reduction, provided that any such partial reduction shall be in an aggregate
amount, for all of the 364 Day Lenders, of not less than Five Million Dollars
($5,000,000), increased by increments of One Million Dollars ($1,000,000). The
Global Agent shall promptly notify each 364 Day Lender of the date of each such
reduction and such 364 Day Lender's proportionate share thereof. After each such
reduction, the facility fees payable hereunder shall be calculated upon the 364
Day Commitments as so reduced in accordance with Section 2.6(b) hereof. If
Borrower shall reduce in whole the 364 Day Commitments, on the effective date of
such reduction (Borrower having prepaid in full the unpaid principal balance, if


                                       39



any, of the 364 Day Notes, together with all interest and facility and other
fees accrued and unpaid), all of the 364 Day Notes shall be delivered to the
Global Agent marked "Canceled" and the Global Agent shall redeliver such 364 Day
Notes to Borrower. Any partial reduction in the 364 Day Commitments shall be
effective during the remainder of the applicable Commitment Period.

         (c) INCREASE IN COMMITMENT. At any time during the Commitment Increase
Period, Borrower may request that the Global Agent proportionally increase the
Maximum 364 Day Commitment Amount and Maximum General Revolving Commitment
Amount from the Combined Closing Commitment Amount to the Combined Maximum
Commitment Amount by either (i) proportionally increasing, for one or more
Lenders, with their prior written consent, their 364 Day Commitment and General
Revolving Commitment, or (ii) including one or more Additional Lenders, each
with a new 364 Day Commitment and a new General Revolving Commitment (with the
same Commitment Percentage for the 364 Day Commitment and the General Revolving
Commitment), as a party to this Agreement (collectively, the "Additional
Commitment"). During the Commitment Increase Period, the Lenders agree that the
Global Agent, in its sole discretion, may permit one or more Additional
Commitments upon satisfaction of the following requirements: (A) each Additional
Lender, if any, shall execute an Additional Lender Assumption Agreement, (B) the
Global Agent shall provide to each Lender a revised SCHEDULE 1 to this Agreement
at least three Business Days prior to the effectiveness of such Additional
Commitments (each an "Assumption Effective Date"), and (C) Borrower shall
execute and deliver to the Global Agent and the Lenders such replacement or
additional 364 Day Notes and General Revolving Notes as shall be required by the
Global Agent. The Lenders hereby authorize the Global Agent to execute each
Additional Lender Assumption Agreement on behalf of the Lenders. On each
Assumption Effective Date, the 364 Day Lenders and the General Revolving Lenders
shall make adjustments among themselves with respect to the 364 Day Loans and
General Revolving Loans then outstanding and amounts of principal, interest,
facility fees and other amounts paid or payable with respect thereto as shall be
necessary, in the opinion of the Global Agent, in order to reallocate among such
Lenders such outstanding amounts, based on the revised Applicable Commitment
Percentages and to otherwise carry out fully the terms of this Section 2.7(c).
Borrower shall not request any increase in the Commitment pursuant to this
Section 2.7(c) if a Default or an Event of Default shall then exist or
immediately after giving effect to any such increase would exist.

         Section 2.8. MANDATORY PAYMENT.

         (a) COMMITMENTS. If (i) the General Revolving Commitment Exposure at
any time shall exceed the Maximum General Commitment Amount as then in effect,
Borrower shall, as promptly as practicable, but in no event later than the next
Business Day, prepay an aggregate principal amount of the General Revolving
Loans sufficient to bring the General Revolving Commitment Exposure within the
Maximum General Revolving Commitment Amount, (ii) the 364 Day Exposure at any
time shall exceed the Maximum 364 Day Commitment Amount as then in effect,
Borrower shall, as promptly as practicable, but in no event later than the next
Business Day, prepay an aggregate principal amount of the 364 Day Revolving
Loans sufficient to bring the 364 Day Exposure within the Maximum 364 Day
Commitment Amount, or (iii) the Alternate Currency Exposure shall at any time
exceed the Alternate Currency Maximum Amount, then Borrower shall, as promptly
as practicable, but in no event later than the next Business Day,


                                       40



prepay an aggregate principal amount of Alternate Currency Loans sufficient to
bring the Alternate Currency Exposure within the Alternate Currency Maximum
Amount.

         (b) EXCESS CASH FLOW. Within one hundred (100) days after the end of
each fiscal year of the Companies, commencing with the fiscal year ending
February 28, 2002, Borrower shall make a prepayment in an amount of not less
than fifty percent (50%) of Excess Cash Flow, if any, based on the financial
statements of the Companies for the most recently completed fiscal year (each
such prepayment an "Excess Cash Flow Prepayment"). Each Excess Cash Flow
Prepayment shall be applied (i) first, to the principal payments of the Term
Loan (to be applied in the inverse order of maturity), and (ii) second, on a Pro
Rata Basis, to (1) the General Revolving Commitment Exposure (with payments to
be made in the following order: General Revolving Loans, Swing Loans, and to be
held by the Global Agent in a special account as security for any Letter of
Credit Exposure pursuant to subpart (f) hereof) and (2) the 364 Day Exposure. If
there shall be Credit Exposure under the General Revolving Commitments or Credit
Exposure under the 364 Day Commitments, the then remaining Prepayment Proceeds
shall be paid to whichever such General Revolving Commitments or 364 Day
Commitments as shall then have Credit Exposure. The General Revolving
Commitments and the 364 Day Commitments shall be permanently reduced by the
amount of such Prepayment Proceeds allocated thereto, respectively.

         (c) MANDATORY PREPAYMENT EVENT.

               (i) INVOLVING A COMPANY PRIOR TO AN EVENT OF DEFAULT. If any
          Company shall effect a Mandatory Prepayment Event (which Mandatory
          Prepayment Event shall only be permitted in accordance with the terms
          of this Agreement), then the Prepayment Proceeds of such Mandatory
          Prepayment Event shall be paid, on the date of such Mandatory
          Prepayment Event, by Borrower (or Company) to the Global Agent to be
          applied, (A) first, to the outstanding principal balance of the Term
          Loan (to be applied to the principal payments thereof in the inverse
          order of maturity), and (B) second, on a Pro Rata Basis, to (1) the
          General Revolving Commitment Exposure (with payments to be made in the
          following order: General Revolving Loans, Swing Loans, and to be held
          by the Global Agent in a special account as security for any Letter of
          Credit Exposure pursuant to subpart (d) hereof) and (2) the 364 Day
          Exposure. If there shall be Credit Exposure under the General
          Revolving Commitments or Credit Exposure under the 364 Day
          Commitments, the then remaining Prepayment Proceeds shall be paid to
          whichever such General Revolving Commitments or 364 Day Commitments as
          shall then have Credit Exposure. The General Revolving Commitments and
          the 364 Day Commitments shall be permanently reduced by the amount of
          such Prepayment Proceeds allocated thereto, respectively, whether or
          not there shall be any Credit Exposure thereunder. Any remaining
          Prepayment Proceeds shall be distributed in accordance with subpart
          (ii) hereof;

               (ii) INVOLVING ANY COMPANY AFTER AN EVENT OF DEFAULT. If any
          Company shall effect a Mandatory Prepayment Event (which Mandatory
          Prepayment Event shall only be permitted in accordance with the terms
          of this Agreement) after an Event of Default shall have occurred (and
          whether or not such Event of Default shall have been waived), then the
          Prepayment Proceeds of such Mandatory Prepayment Event shall be paid,
          on the date of such Prepayment Event, by Borrower (or the appropriate
          Company) to the Global


                                       41



          Agent to be applied to the following, on a Pro Rata Basis among the
          Commitments: (A) the General Revolving Commitment Exposure (with
          payments to be made in the following order: General Revolving Loans,
          Swing Loans, and to be held by the Global Agent in a special account
          as security for any Letter of Credit Exposure pursuant to subpart (d)
          hereof), (B) the 364 Day Exposure, and (C) the unpaid principal
          balance of the Term Loan (with any prepayment of the Term Loan to be
          applied to the principal payments thereof in the inverse order of
          maturity). The General Revolving Commitments and 364 Day Commitments
          shall be permanently reduced by the amount of such Prepayment Proceeds
          allocated thereto, respectively, whether or not there shall not be any
          Credit Exposure thereunder. If there shall be no Credit Exposure under
          any Commitment, the then remaining Prepayment Proceeds shall be
          reallocated among the other Commitments on a Pro Rata Basis.

         (d) RIGHT OF TERM LOAN LENDERS TO FOREGO PROCEEDS. Each Term Loan
Lender shall have the right to forego the application of any mandatory
prepayment of the Term Loan required to be made to such Term Loan Lender
pursuant to subparts (c) or (d) above in accordance with the following
provisions:

               (i) the Global Agent shall, on or prior to 3:00 P. M. (Cleveland,
          Ohio time) on the date it shall have received immediately available
          funds from Borrower in respect of a mandatory prepayment of Loans
          pursuant to subpart (c) or (d) above, give each Term Loan Lender
          written or telephonic notice of (A) the amount of such mandatory
          prepayment, (B) the portion thereof proposed to be paid to such Term
          Loan Lender, and (C) such Term Loan Lender's right to forego its
          portion of such mandatory prepayment, which notice shall request such
          Term Loan Lender to confirm to the Global Agent whether or not such
          Term Loan Lender shall forego such mandatory prepayment;

               (ii) If any Term Loan Lender shall indicate its desire to forego
          its portion of such mandatory prepayment by giving the Global Agent
          written or telephonic notice to such effect by 5:00 P. M. (Cleveland,
          Ohio time) on the date that is two (2) Business Days after such Term
          Loan Lender shall have received such written or telephonic notice from
          the Global Agent, the amount of the applicable prepayment that would
          otherwise have been paid to such Term Loan Lender shall,
          notwithstanding anything in this Section 2.8 to the contrary, be
          applied, on a Pro Rata Basis, in accordance with subpart (c)(ii)
          above. The General Revolving Commitments and the 364 Day Commitments
          shall be permanently reduced by the amount of such prepayment;

               (iii) the Global Agent may act without liability upon the basis
          of any such telephonic notice or written notice believed by the Global
          Agent in good faith to be from an authorized representative of a Term
          Loan Lender. In the case of each such telephonic notice, the Global
          Agent's record of the terms of such telephonic notice shall be
          conclusive absent manifest error;

               (iv) any Term Loan Lender that shall not have responded to the
          Global Agent, within the time period specified above, to a notice from
          the Global Agent requesting such Term Loan Lender to confirm whether
          or not such Term Loan Lender wishes to exercise its right to forego
          the application of its portion of such mandatory prepayment pursuant
          to


                                       42



          this Section 2.8, shall be deemed to have waived such right to forego
          such application; and

               (v) notwithstanding anything to the contrary contained in this
          Agreement, the Global Agent may defer, until the next Business Day,
          the distribution to the Term Loan Lenders of any portion of any
          mandatory prepayment of Loans received by the Global Agent pursuant to
          this Section 2.8 as to which the Global Agent shall be determining
          whether or not the Term Loan Lenders wish to exercise their rights
          under this subpart (d).

         (e) APPLICATION OF PROCEEDS. Unless otherwise designated by Borrower,
each prepayment pursuant to this Section 2.8 shall be applied in the following
order (i) first, on a pro rata basis among all of the outstanding Base Rate
Loans of Borrower, and (ii) second, on a pro rata basis among all of the
outstanding Fixed Rate Loans of Borrower, provided that if the outstanding
principal amount of any Fixed Rate Loan shall reduced to an amount less than the
applicable Minimum Borrowing Amount as a result of such prepayment, then such
Fixed Rate Loan shall be converted into a Base Rate Loan on the date of such
prepayment. Any prepayment of a Fixed Rate Loan or Swing Loan pursuant to this
Section 2.8 shall be subject to the prepayment penalties set forth in Section
2.5 hereof.

         (f) LETTER OF CREDIT EXPOSURE. Any amounts to be distributed for
application to a Lender's liabilities with respect to any Letter of Credit
Exposure shall be held by the Collateral Agent in an interest bearing trust
account (the "SPECIAL TRUST ACCOUNT") as collateral security for such
liabilities until a drawing on any Letter of Credit, at which time such amounts,
together with interest accrued thereon, shall be released by the Collateral
Agent and applied to such liabilities. If any such Letter of Credit shall expire
without having been drawn upon in full, the amounts held in the Special Trust
Account with respect to the undrawn portion of such Letter of Credit, together
with interest accrued thereon, shall be applied by the Collateral Agent in
accordance with the provisions of subpart (c) above.

         Section 2.9. COMPUTATION OF INTEREST AND FEES; DEFAULT RATE.

         (a) With the exception of Base Rate Loans, interest on Loans, Related
Expenses and facility and other fees and charges hereunder shall be computed on
the basis of a year having three hundred sixty (360) days and calculated for the
actual number of days elapsed. With respect to Base Rate Loans, interest shall
be computed on the basis of a year having three hundred sixty-five (365) days or
three hundred sixty-six (366) days, as the case may be, and calculated for the
actual number of days elapsed.

         (b) Anything herein to the contrary notwithstanding, if an Event of
Default shall have occurred hereunder, at the option of the Required Lenders,
(i) the principal of each Loan and the unpaid interest thereon shall bear
interest, until paid, at the Default Rate; and (ii) the fees for the aggregate
undrawn face amount of all issued and outstanding Letters of Credit shall be
increased to two percent (2%) in excess of the rate otherwise applicable
thereto; provided, however, that in no event shall the rate of interest
hereunder exceed the maximum rate allowable by law.

         Section 2.10. FIXED CHARGE COVERAGE RATIO CONDITION. Borrower shall
provide immediate written notice to the Global Agent and the Lenders at any time
that the Fixed Charge Coverage Ratio Condition shall exist or, within the next
three months, shall be likely to exist,


                                       43



and, so long as the Fixed Charge Coverage Ratio Condition shall exist, Borrower
shall not request any Credit Event, and the Fronting Lender, the Swing Line
Lender and any Lender shall not be obligated to make or participate in any
Credit Event, unless (a) the proceeds of such Credit Event shall constitute, in
the sole opinion of the Global Agent, Designated Senior Indebtedness (as defined
in the Subordinated Indenture), and (b) upon request of the Global Agent,
Borrower shall have provided to the Global Agent and the Lenders such opinion of
counsel with respect to the Subordinated Indenture, as the Global Agent may
require in its reasonable discretion.

         Section 2.11. EXTENSION OF COMMITMENT. Not more than sixty (60) days
(but not less than thirty (30) days) prior to the last day of the Commitment
Period applicable to the 364 Day Commitments, Borrower may request that the
Lenders extend the maturity of the 364 Day Commitments for an additional year.
Such request shall be made in writing to the Global Agent and the Lenders shall
not respond to such request earlier than thirty (30) days prior to the last day
of the Commitment Period applicable to the 364 Day Commitments. Any such
extension shall require the unanimous written consent of all of the Lenders with
a 364 Day Commitment and shall be upon such terms and conditions as may be
agreed to by the Global Agent, Borrower and the Lenders. Borrower shall pay any
attorneys' fees or other expenses of the Global Agent in connection with the
documentation of any such extension, as well as such other fees as may be agreed
upon between Borrower and the Global Agent.


            ARTICLE III. ADDITIONAL PROVISIONS RELATING TO FIXED RATE
                        LOANS; INCREASED CAPITAL; TAXES.

         Section 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If, at any time,
any law, treaty or regulation (including, without limitation, Regulation D of
the Board of Governors of the Federal Reserve System) or the interpretation
thereof by any governmental authority charged with the administration thereof or
any central bank or other fiscal, monetary or other authority shall impose
(whether or not having the force of law), modify or deem applicable any reserve
or special deposit requirement (other than reserves included in the eurocurrency
reserve percentage, the effect of which is reflected in the interest rates of
the Fixed Rate Loans in question) against assets held by, or deposits in or for
the amount of any Fixed Rate Loan by, any Lender, and the result of the
foregoing shall be to increase the cost (whether by incurring a cost or adding
to a cost) to such Lender of making or maintaining hereunder such Fixed Rate
Loan or to reduce the amount of principal or interest received by such Lender
with respect to such Fixed Rate Loan, then, upon demand by such Lender, Borrower
shall pay to such Lender from time to time on Interest Adjustment Dates with
respect to such Fixed Rate Loan, as additional consideration hereunder,
additional amounts sufficient to fully compensate and indemnify such Lender for
such increased cost or reduced amount, assuming (which assumption such Lender
need not corroborate) such additional cost or reduced amount was allocable to
such Fixed Rate Loan. A certificate as to the increased cost or reduced amount
as a result of any event mentioned in this Section 3.1, setting forth the
calculations therefor, shall be promptly submitted by such Lender to Borrower
and shall, in the absence of manifest error, be conclusive and binding as to the
amount thereof. Notwithstanding any other provision of this Agreement, after any
such demand for compensation by any Lender, Borrower, upon at least three
Business Days' prior written notice to such Lender through the Global Agent, may
prepay any affected Fixed Rate Loan in full or, if such Fixed Rate Loan shall be
a Eurodollar Loan, convert such Eurodollar Loan to a Base Rate


                                       44



Loan regardless of the Interest Period thereof. Any such prepayment or
conversion shall be subject to the prepayment fees set forth in Section 2.5
hereof. Each Lender shall notify Borrower as promptly as practicable (with a
copy thereof delivered to the Global Agent) of the existence of any event that
will likely require the payment by Borrower of any such additional amount under
this Section.

         Section 3.2. TAX LAW, ETC. In the event that, by reason of any law,
regulation or requirement or in the interpretation thereof by an official
authority, or the imposition of any requirement of any central bank whether or
not having the force of law, any Lender shall, with respect to this Agreement or
any transaction under this Agreement, be subjected to any tax, levy, impost,
charge, fee, duty, deduction or withholding of any kind whatsoever (other than
any tax imposed upon the total net income of such Lender) and if any such
measures or any other similar measure shall result in an increase in the cost to
such Lender of making or maintaining any Fixed Rate Loan or in a reduction in
the amount of principal, interest or commitment fee receivable by such Lender in
respect thereof, then such Lender shall promptly notify Borrower stating the
reasons therefor. Borrower shall thereafter pay to such Lender, upon demand from
time to time on Interest Adjustment Dates with respect to such Fixed Rate Loan,
as additional consideration hereunder, such additional amounts as shall fully
compensate such Lender for such increased cost or reduced amount. A certificate
as to any such increased cost or reduced amount, setting forth the calculations
therefor, shall be submitted by such Lender to Borrower and shall, in the
absence of manifest error, be conclusive and binding as to the amount thereof.

         If any Lender shall receive such additional consideration from Borrower
pursuant to this Section 3.2, such Lender shall use reasonable efforts to obtain
the benefits of any refund, deduction or credit for any taxes or other amounts
on account of which such additional consideration has been paid and shall
reimburse Borrower to the extent, but only to the extent, that such Lender shall
have received a refund of such taxes or other amounts together with any interest
thereon or an effective net reduction in taxes or other governmental charges
(including any taxes imposed on or measured by the total net income of such
Lender) of the United States or any state or subdivision thereof (or any
applicable foreign jurisdiction) by virtue of any such deduction or credit,
after first giving effect to all other deductions and credits otherwise
available to such Lender. If, at the time any audit of such Lender's income tax
return is completed, such Lender determines, based on such audit, that it was
not entitled to the full amount of any refund reimbursed to Borrower as
aforesaid or that its net income taxes are not reduced by a credit or deduction
for the full amount of taxes reimbursed to Borrower as aforesaid, Borrower, upon
demand of such Lender, shall promptly pay to such Lender the amount so refunded
to which such Lender was not so entitled, or the amount by which the net income
taxes of such Lender were not so reduced, as the case may be.

         Notwithstanding any other provision of this Agreement, after any such
demand for compensation by any Lender, Borrower, upon at least three Business
Days' prior written notice to such Lender through the Global Agent, may prepay
any affected Fixed Rate Loan in full or, if such Fixed Rate Loan shall be a
Eurodollar Loan, convert such Eurodollar Loan to a Base Rate Loan regardless of
the Interest Period of any thereof. Any such prepayment or conversion shall be
subject to the prepayment fees set forth in Section 2.5 hereof.

         Section 3.3. EURODOLLAR OR ALTERNATE CURRENCY DEPOSITS UNAVAILABLE OR
INTEREST RATE UNASCERTAINABLE. In respect of any Fixed Rate Loan, in the event
that the Global Agent shall


                                       45



have determined that Dollar deposits or deposit of the applicable Alternate
Currency of the relevant amount for the relevant Interest Period for such Fixed
Rate Loan shall not be available to the applicable Lender in the applicable
Eurodollar or Alternate Currency market or that, by reason of circumstances
affecting such market, adequate and reasonable means shall not exist for
ascertaining the Derived Fixed Rate applicable to such Interest Period, as the
case may be, the Global Agent shall promptly give notice of such determination
to Borrower and (a) any notice of a new Fixed Rate Loan (or conversion of an
existing Loan to a Fixed Rate Loan) previously given by Borrower and not yet
borrowed (or converted, as the case may be) shall be deemed to be a notice to
make a Base Rate Loan, and (b) Borrower shall be obligated either to prepay, or
to convert to a Base Rate Loan, any outstanding Eurodollar Loan on the last day
of the then current Interest Period applicable thereto.

         Section 3.4. INDEMNITY. Without prejudice to any other provisions of
this Article III, Borrower hereby agrees to indemnify each Lender against any
loss or expense that such Lender may sustain or incur as a consequence of any
default by Borrower in payment when due of any amount hereunder in respect of
any Fixed Rate Loan, including, but not limited to, any loss of profit, premium
or penalty incurred by such Lender in respect of funds borrowed by it for the
purpose of making or maintaining such Fixed Rate Loan, as determined by such
Lender in the exercise of its sole but reasonable discretion. A certificate as
to any such loss or expense shall be promptly submitted by such Lender to
Borrower and shall, in the absence of manifest error, be conclusive and binding
as to the amount thereof.

         Section 3.5. CHANGES IN LAW RENDERING FIXED RATE LOANS UNLAWFUL. If, at
any time, any new law, treaty or regulation, or any change in any existing law,
treaty or regulation, or any interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof, shall make it
unlawful for any Lender to fund any Fixed Rate Loan that it is committed to make
hereunder with moneys obtained in the eurodollar market, the commitment of such
Lender to fund such Fixed Rate shall, upon the happening of such event forthwith
be suspended for the duration of such illegality, and such Lender shall by
written notice to the affected Borrowers and the Global Agent declare that its
commitment with respect to such Fixed Rate Loan shall have been so suspended
and, if and when such illegality shall cease to exist, such suspension shall
cease and such Lender shall similarly notify Borrower and the Global Agent. If
any such change shall make it unlawful for any Lender to continue in effect the
funding in the applicable eurodollar market of any Fixed Rate Loan previously
made by it hereunder, such Lender shall, upon the happening of such event,
notify Borrower, the Global Agent and the other appropriate Lenders thereof in
writing, stating the reasons therefor, and Borrower shall, on the earlier of (a)
the last day of the then current Interest Period or (b) if required by such law,
regulation or interpretation, on such date as shall be specified in such notice,
either convert such Fixed Rate Loan, if such Fixed Rate Loan shall be a
Eurodollar Loan, to a Base Rate Loan or prepay such Fixed Rate Loan to the
appropriate Lenders in full. Any such prepayment or conversion shall be subject
to the prepayment fees described in Section 2.5 hereof.

         Section 3.6. FUNDING. Each Lender may, but shall not be required to,
make Fixed Rate Loans hereunder with funds obtained outside of the United States
or, if applicable, outside of the country in which such Lender is located or
domiciled.

         Section 3.7. CAPITAL ADEQUACY. If any Lender shall have determined,
after the Closing Date, that the adoption of any applicable law, rule,
regulation or guideline regarding capital


                                       46



adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its lending office) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing the
rate of return on such Lender's capital (or the capital of its holding company)
as a consequence of its obligations hereunder to a level below that which such
Lender (or its holding company) could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's policies or the
policies of its holding company with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, within fifteen
(15) days after demand by such Lender (with a copy to the Global Agent), the
applicable Borrowers shall pay to such Lender such additional amount or amounts
as shall compensate such Lender (or its holding company) for such reduction.
Each Lender shall designate a different lending office if such designation will
avoid the need for, or reduce the amount of, such compensation and will not, in
the judgment of such Lender, be otherwise disadvantageous to such Lender. A
certificate of any Lender claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of manifest error. In determining such amount, such
Lender may use any reasonable averaging and attribution methods. Failure on the
part of any Lender to demand compensation for any reduction in return on capital
with respect to any period shall not constitute a waiver of such Lender's rights
to demand compensation for any reduction in return on capital in such period or
in any other period. The protection of this Section shall be available to each
Lender regardless of any possible contention of the invalidity or
inapplicability of the law, regulation or other condition which shall have been
imposed.


                        ARTICLE IV. CONDITIONS PRECEDENT

         The obligation of the Fronting Lender, the Swing Line Lender or the
Lenders to make, issue or participate in the first Credit Event shall be subject
to Borrower satisfying each of the following conditions:

         Section 4.1. NOTES. (a) Borrower shall have executed and delivered to
each Lender a General Revolving Note and a 364 Day Note and shall have executed
and delivered to the Swing Line Lender the Swing Line Note, and (b) Borrower
shall have executed and delivered a Term Note to each Term Loan Lender that
shall have requested a Term Note.

         Section 4.2. GUARANTIES OF PAYMENT. Each Guarantor of Payment shall
have executed and delivered to the Global Agent a Guaranty of Payment.

         Section 4.3. SECURITY DOCUMENTS. Borrower and each Guarantor of Payment
shall have executed and delivered to the Collateral Agent:

               (a) a Security Agreement;

               (b) a Collateral Assignment and Security Agreement;


                                       47



               (c) a Pledge Agreement, together with delivery of the share
          certificates or other evidence of equity interest referenced therein;

               (d) as appropriate, a Mortgage with respect to the Mortgaged Real
          Property;

               (e) a Landlord's Agreement, duly executed by the appropriate
          lessor or lessors, with respect to such locations as the Global Agent
          shall request; and

               (f) such U.C.C. financing statements, in form and substance
          satisfactory to the Collateral Agent and the Lenders, as the
          Collateral Agent and the Lenders shall deem necessary or appropriate.

         Section 4.4. OFFICER'S CERTIFICATE, RESOLUTIONS, ORGANIZATIONAL
DOCUMENTS. Borrower and each Guarantor of Payment shall have delivered to the
Global Agent an officer's certificate certifying the names of the officers of
Borrower or such Guarantor of Payment authorized to sign the Loan Documents to
which Borrower or such Guarantor of Payment is a party, together with the true
signatures of such officers and certified copies of (a) the resolutions (or
other authorization documents) of the board of directors (or equivalent
governing body) of Borrower and such Guarantor of Payment evidencing approval of
the execution and delivery of the Loan Documents and the other Related Writings
to which Borrower or such Guarantor of Payment shall be a party, and (b) the
Organizational Documents of Borrower and such Guarantor of Payment.

         Section 4.5. LEGAL OPINIONS. Borrower shall have delivered to the
Global Agent and the Lenders the following opinions of counsel (each of which
shall be in form and substance satisfactory to the Global Agent and the Lenders
and shall contain such opinions as the Global Agent shall deem necessary or
appropriate): (a) an opinion of Brouse McDowell LPA as special counsel to
Borrower and each other Company; and (b) an opinion of special local counsel
acceptable to the Global Agent with respect to each Mortgage.

         Section 4.6. GOOD STANDING CERTIFICATES AND ARTICLES OF INCORPORATION.
Borrower shall have delivered to the Global Agent and the Lenders (a) a good
standing certificate or full force and effect certificate (or foreign
equivalent) for Borrower and each Guarantor of Payment, issued on or about the
Closing Date by the Secretary of State (or other appropriate governmental
authority) in the state or jurisdiction where Borrower or such Guarantor of
Payment is incorporated, organized or formed and in each state or other
jurisdiction where Borrower or such Guarantor of Payment is qualified or
authorized to do business as a foreign entity and where the failure to so
qualify would have a Material Adverse Effect, and (b) a copy of the current
Articles (or Certificate) of Incorporation or Organization (or equivalent
formation documents), together with all amendments thereto, for each Domestic
Company, certified by the Secretary of State of the appropriate jurisdiction, on
or about the Closing Date, as being true and correct.

         Section 4.7. CLOSING AND LEGAL FEES; FEE LETTERS. Borrower shall have
(a) executed and delivered to the Global Agent, the Global Agent Fee Letter and
paid to the Global Agent, for its sole benefit, the fees set forth therein, (b)
executed and delivered to the Global Agent, for the benefit of the Lenders, the
Closing Fee Letter and paid to each of the Lenders the fees set forth therein,
and (c) paid all legal fees and expenses of the Lead Arrangers in connection
with the preparation and negotiation of the Loan Documents.


                                       48



         Section 4.8. LIEN SEARCHES. With respect to the property owned or
leased by each Domestic Company, Borrower shall have caused to be delivered to
the Global Agent (a) the results of U.C.C. lien searches, satisfactory to the
Global Agent and the Lenders; (b) the results of federal and state tax lien and
judicial lien searches, satisfactory to the Global Agent and the Lenders; and
(c) U.C.C. termination statements or other appropriate releases reflecting the
termination or release of all U.C.C. financing statements or other evidence of a
Lien previously filed or recorded by any Person having a security interest or
Lien in any part of the Collateral and not expressly permitted pursuant to
Section 5.9 hereof.

         Section 4.9. INSURANCE CERTIFICATES. Borrower shall have delivered to
the Global Agent and the Lenders evidence of insurance on ACORD 27 form, and
otherwise satisfactory to the Global Agent, of adequate personal and real
property and liability insurance of each Company, with the Collateral Agent
listed as loss payee and additional insured and with a standard mortgagee's
endorsement in favor of the Collateral Agent.

         Section 4.10. SENIOR INDENTURE. With respect to the Senior Indenture,
Borrower shall have provided to the Global Agent and the Lenders (a) a copy of
the Senior Indenture, together with any amendments or supplements thereto,
certified by an officer of Borrower as being true and complete; and (b) an
officer's certificate, signed by a Financial Officer, and otherwise in form and
substance satisfactory to the Global Agent and the Lenders, certifying that no
Event of Default (as defined in the Senior Indenture), or event or condition
that, with the passage of time or giving of notice or both, would constitute an
Event of Default (as defined in the Senior Indenture), exists under the Senior
Indenture, nor will exist after the first Credit Event occurs hereunder.

         Section 4.11. SUBORDINATED INDENTURE. With respect to the Subordinated
Indenture, Borrower shall have provided to the Global Agent and the Lenders (a)
a copy of the Subordinated Indenture, together with any amendments or
supplements thereto, certified by an officer of Borrower as being true and
complete; and (b) an officer's certificate, signed by a Financial Officer, and
otherwise in form and substance satisfactory to the Global Agent and the
Lenders, certifying (i) that no Default (as defined in the Subordinated
Indenture) or Event of Default (as defined in the Subordinated Indenture) exists
under the Indenture, nor will exist after the making of the first Credit Event
hereunder, (ii) the Fixed Charge Coverage Ratio Condition does not exist, nor
will it exist after the first Credit Event occurs hereunder, (iii) that all of
the Debt constitutes Senior Indebtedness (as defined in the Subordinated
Indenture), Designated Senior Indebtedness (as defined in the Subordinated
Indenture), and Permitted Debt (as defined in the Subordinated Indenture), and
(iv) as to such other matters with respect to the Subordinated Indenture as the
Global Agent shall deem necessary or appropriate.

         Section 4.12. SUBORDINATED CONVERTIBLE INDENTURE. With respect to the
Subordinated Convertible Indenture, Borrower shall have provided to the Global
Agent and the Lenders (a) a copy of the Subordinated Convertible Indenture,
together with any amendments or supplements thereto, certified by an officer of
Borrower as being true and complete; and (b) an officer's certificate, signed by
a Financial Officer, and otherwise in form and substance satisfactory to the
Global Agent and the Lenders, certifying (i) that no Default (as defined in the
Subordinated Convertible Indenture) or Event of Default (as defined in the
Subordinated Convertible Indenture) exists under the Subordinated Convertible
Indenture, nor will exist after the making of


                                       49



the first Credit Event hereunder, (ii) that all of the Debt constitutes Senior
Indebtedness (as defined in the Subordinated Convertible Indenture), Designated
Senior Indebtedness (as defined in the Subordinated Convertible Indenture), and
Permitted Debt (as defined in the Subordinated Convertible Indenture), and (iii)
as to such other matters with respect to the Subordinated Convertible Indenture
as the Global Agent shall deem necessary or appropriate.

         Section 4.13. PERMITTED RECEIVABLES FACILITY. With respect to the
Permitted Receivables Facility, Borrower shall have (a) provided to the Global
Agent and the Lenders a copy of the Receivables Facility Documents, certified by
an officer of Borrower as being true and complete; and (b) provided to the
Global Agent and the Lenders an officer's certificate, signed by a Financial
Officer, and otherwise in form and substance satisfactory to the Global Agent
and the Lenders, certifying that (i) Borrower shall have satisfied all
conditions precedent to funding as set forth in the Receivables Facility
Documents, and (ii) no default or event of default, or event or condition that,
with the passage of time or giving of notice or both, would constitute a default
or event of default, shall exist under the Receivables Facility Documents, nor
will exist after the making of the first Credit Event hereunder.

         Section 4.14. EXISTING CREDIT AGREEMENT. Borrower shall have delivered
to the Global Agent evidence, in form and substance satisfactory to the Global
Agent, that, after giving effect to the first Credit Events hereunder, that
Borrower shall have terminated the Second Amended and Restated Credit Agreement
among Borrower, the other borrowers named therein, the financial institutions
named therein, and Bank of America, N.A., as Global Agent, dated as of August 3,
2000.

         Section 4.15. FINANCIAL PROJECTIONS. Borrower shall have delivered to
the Global Agent and the Lenders the Financial Projections which shall be in
form and substance satisfactory to the Lead Arrangers.

         Section 4.16. REGULATORY APPROVALS. Borrower shall have delivered to
the Global Agent and the Lenders a certificate of an officer, in form and
substance satisfactory to the Global Agent, that (a) Borrower have obtained any
necessary regulatory approvals and licenses in connection with the transactions
contemplated by this Agreement and the other Loan Documents, and (b) there
exists no legal, regulatory or other restrictions or prohibitions to the
Companies entering into the Loan Documents to which each is a party and
consummating the transactions contemplated by this Agreement and the other Loan
Documents.

         Section 4.17. CLOSING CERTIFICATE. Borrower shall have delivered to the
Global Agent and the Lenders an officer's certificate certifying that, as of the
Closing Date, (a) all conditions precedent set forth in this Article IV have
been satisfied, (b) no Default or Event of Default exists nor immediately after
the occurrence of the first Credit Event will exist, and (c) each of the
representations and warranties contained in Article VI hereof are true and
correct as of the Closing Date.

         Section 4.18. NO MATERIAL ADVERSE CHANGE. No material adverse change,
in the opinion of the Global Agent, shall have occurred in the financial
condition, operations or prospects of the Companies since May 31, 2001.


                                       50



         Section 4.19. MISCELLANEOUS. Borrower shall have provided to the Global
Agent and the Lenders such other items and shall have satisfied such other
conditions as may be reasonably required by the Global Agent or the Lenders.


                              ARTICLE V. COVENANTS

         Borrower agrees that, so long as the Commitment remains in effect and
thereafter until all of the Debt shall have been paid in full, Borrower shall
perform and observe, and shall cause each other Company to perform and observe,
each of the following provisions:

         Section 5.1. INSURANCE. Each Company shall at all times maintain
insurance upon its real and personal property in such form, written by such
companies, in such amounts, for such period, and against such risks as may be
acceptable to the Global Agent, with provisions (with respect to each Domestic
Company) satisfactory to the Global Agent for payment of all losses thereunder
to the Collateral Agent and such Company as their interests may appear (loss
payable endorsement in favor of the Collateral Agent). Any such policies of
insurance shall provide for no fewer than thirty (30) days prior written notice
of cancellation to the Collateral Agent. Any sums received by the Collateral
Agent in payment of insurance losses, returns, or unearned premiums under the
policies shall be applied in accordance with the terms of this Agreement. The
Collateral Agent is hereby authorized to act as attorney-in-fact for each
Domestic Company in obtaining, adjusting, settling and canceling such insurance
and indorsing any drafts. In the event of failure to provide such insurance as
herein provided, the Collateral Agent, acting at the direction of the Global
Agent, may provide such insurance and Borrower shall pay to the Collateral
Agent, upon demand, the cost thereof. Should Borrower fail to pay such sum to
the Collateral Agent upon demand, interest shall accrue thereon, from the date
of demand until paid in full, at the Default Rate. Within ten (10) days of the
Global Agent's written request, Borrower shall furnish to the Global Agent such
information about any Company's insurance as the Global Agent may from time to
time reasonably request, which information shall be prepared in form and detail
satisfactory to the Global Agent and certified by a Financial Officer of
Borrower or Company.

         Section 5.2. MONEY OBLIGATIONS. Each Company shall pay in full (a)
prior in each case to the date when penalties would attach, all taxes,
assessments and governmental charges and levies (except only those so long as
and to the extent that the same shall be contested in good faith by appropriate
and timely proceedings and for which adequate reserves have been established in
accordance with GAAP) for which it may be or become liable or to which any or
all of its properties may be or become subject; (b) all of its wage obligations
to its employees in compliance with the Fair Labor Standards Act (29 U.S.C.
206-207) or any comparable provisions; and (c) all of its other obligations
calling for the payment of money (except only those so long as and to the extent
that the same shall be contested in good faith and for which adequate reserves
have been established in accordance with GAAP) before such payment becomes
overdue.

         Section 5.3. FINANCIAL STATEMENTS. Borrower shall furnish to each
Lender or, with respect to subpart (a) below, only to the Global Agent:


                                       51



         (a) within twenty (20) days after the end of each month, monthly
balance sheets, a statement of cash flow and an income statement for the month
then ended (and including the appropriate adjusted financial statements to
reflect the Restructuring Charges), in form and substance satisfactory to the
Global Agent, prepared on a year-to-date basis and on a comparative basis to the
previous year, and on a Consolidated basis; the Global Agent shall provide
copies of the foregoing information to any Lender upon such Lender's written
request;

         (b) within sixty (60) days after the end of each of the first three
quarter-annual periods of each fiscal year of the Companies, balance sheets of
the Companies as of the end of such period and statements of income (loss),
stockholders' equity and cash flow for the quarter and fiscal year to date
periods, all prepared on a Consolidated and consolidating basis, in accordance
with GAAP, and in form and detail satisfactory to the Lenders (and including the
appropriate adjusted financial statements to reflect the Restructuring Charges)
and certified by a Financial Officer;

         (c) within one hundred (100) days after the end of each fiscal year of
the Companies, an annual audit report of the Companies for that year prepared on
a Consolidated and consolidating basis, in accordance with GAAP, and in form and
detail satisfactory to the Global Agent and certified by an independent public
accountant satisfactory to the Required Lenders, which report shall include
balance sheets and statements of income (loss), stockholders' equity and
cash-flow for that period, together with a certificate by the accountant setting
forth the Defaults or Events of Default coming to its attention during the
course of its audit or, if none, a statement to that effect;

         (d) concurrently with the delivery of the financial statements set
forth in (b) and (c) above, a Compliance Certificate;

         (e) with the delivery of the quarterly and annual financial statements
in (b) and (c) above, a copy of any management report, letter or similar writing
furnished to the Companies by the accountants in respect of the Companies'
systems, operations, financial condition or properties;

         (f) within one hundred (100) days after the end of each fiscal year of
the Companies, annual pro-forma projections of the Companies for the then
current fiscal year and the next two succeeding fiscal years, to be in form
acceptable to the Global Agent;

         (g) as soon as available, copies of all notices, reports, definitive
proxy or other statements and other documents sent by Borrower to its
shareholders, to the holders of any of its debentures or bonds or the trustee of
any indenture securing the same or pursuant to which they are issued, or sent by
Borrower (in final form) to any securities exchange or over the counter
authority or system, or to the SEC or any similar federal agency having
regulatory jurisdiction over the issuance of Borrower's securities; and

         (h) within ten (10) days of the written request of the Global Agent or
any Lender, such other information about the financial condition, properties and
operations of any Company as the Global Agent or Lender may from time to time
reasonably request, which information shall be submitted in form and detail
satisfactory to the Global Agent or any Lender and certified by a Financial
Officer of the Company or Companies in question.


                                       52



         Section 5.4. FINANCIAL RECORDS. Each Company shall at all times
maintain true and complete records and books of account, including, without
limiting the generality of the foregoing, appropriate reserves for possible
losses and liabilities, all in accordance with GAAP (except with respect to
certain Foreign Subsidiaries, which shall maintain such records in accordance
with generally accepted accounting principles of the country in which such
Foreign Subsidiary has its principal place of business), and at all reasonable
times (during normal business hours and upon notice to such Company) permit the
Global Agent or any Lender, or any representative of the Global Agent or such
Lender, to examine that Company's books and records and to make excerpts
therefrom and transcripts thereof.

         Section 5.5. FRANCHISES. Each Company shall preserve and maintain at
all times its existence, rights and franchises, except as otherwise permitted
pursuant to Section 5.12 hereof.

         Section 5.6. ERISA COMPLIANCE. No Company shall incur any material
accumulated funding deficiency within the meaning of ERISA, or any material
liability to the PBGC, established thereunder in connection with any ERISA Plan.
Borrower shall furnish to the Lenders (a) as soon as possible and in any event
within thirty (30) days after any Company knows or has reason to know that any
Reportable Event with respect to any ERISA Plan has occurred, a statement of the
Financial Officer of such Company, setting forth details as to such Reportable
Event and the action that such Company proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event given to the PBGC if
a copy of such notice is available to such Company, and (b) promptly after
receipt thereof a copy of any notice such Company, or any member of the
Controlled Group may receive from the PBGC or the Internal Revenue Service with
respect to any ERISA Plan administered by such Company; provided, that this
latter clause shall not apply to notices of general application promulgated by
the PBGC or the Internal Revenue Service. Borrower shall promptly notify the
Lenders of any material taxes assessed, proposed to be assessed or that Borrower
has reason to believe may be assessed against a Company by the Internal Revenue
Service with respect to any ERISA Plan. As used in this Section "material" means
the measure of a matter of significance that shall be determined as being an
amount equal to five percent (5%) of the Consolidated Net Worth of Borrower. As
soon as practicable, and in any event within twenty (20) days, after any Company
becomes aware that an ERISA Event shall have occurred, such Company shall
provide the Global Agent with notice of such ERISA Event with a certificate by a
Financial Officer of such Company setting forth the details of the event and the
action such Company or another Controlled Group member proposes to take with
respect thereto. Borrower shall, at the request of the Global Agent or any
Lender, deliver or cause to be delivered to the Global Agent or such Lender, as
the case may be, true and correct copies of any documents relating to the ERISA
Plan of any Company.

         Section 5.7. FINANCIAL COVENANTS.

         (a) CAPITALIZATION RATIO. The Companies shall not suffer or permit at
any time the Capitalization Ratio to exceed (i) 0.55 to 1.00 on the Closing Date
through August 31, 2001, (ii) 0.60 to 1.00 on September 1, 2001 through November
30, 2001, and (iii) 0.55 to 1.00 on December 1, 2001 and thereafter.


                                       53



         (b) INTEREST COVERAGE RATIO. The Companies shall not suffer or permit
at any time the Interest Coverage Ratio to be less than (i) 2.70 to 1.00 on the
Closing Date through February 28, 2002, (ii) 3.20 to 1.00 on March 1, 2002
through August 31, 2002, (iii) 3.40 to 1.00 on September 1, 2002 through
November 30, 2002, (iv) 4.00 to 1.00 on December 1, 2002 through February 28,
2003, and (v) 4.20 to 1.00 on March 1, 2003 and thereafter.

         (c) NET WORTH. The Companies shall not suffer or permit at any time the
Consolidated Adjusted Net Worth, for the most recently completed fiscal quarter
of the Companies, to be less than (i) Six Hundred Twenty Million Dollars
($620,000,000) for the period from the Closing Date through August 31, 2001,
(ii) Six Hundred Thirty-Five Million Dollars ($635,000,000) on September 1, 2001
through November 30, 2001, (iii) Six Hundred Fifty Million Dollars
($650,000,000) on December 1, 2001 through February 28, 2002, (iv) Seven Hundred
Twenty Million Dollars ($720,000,000) on March 1, 2002 through May 31, 2002, and
(v) Six Hundred Fifty Million Dollars ($650,000,000) on June 1, 2002 and
thereafter, with each such amount to be positively increased on a cumulative
basis, by the Increase Amount on November 30, 2002, and by an additional
Increase Amount on the last day of each succeeding fiscal quarter thereafter. As
used herein, the term "Increase Amount" shall mean an amount equal to (i) fifty
percent (50%) of positive Consolidated Net Earnings for the fiscal quarter then
ended (with no deduction for losses), plus (ii) one hundred percent (100%) of
the proceeds of any equity offering by the Companies, or any debt offering of
the Companies, to the extent converted into equity, plus (iii) one hundred
percent (100%) of the incremental net worth associated with any Acquisition made
by the Companies during such period.

         (d) MINIMUM EBITDA. The Companies shall not suffer or permit at any
time Consolidated EBITDA, for the most recently completed four fiscal quarters
of the Companies, to be less than (i) One Hundred Eighty-Eight Million Dollars
($188,000,000) for the period from the Closing Date through August 31, 2001,
(ii) One Hundred Ninety-Seven Million Dollars ($197,000,000) on September 1,
2001, through November 30, 2001, (iii) Two Hundred Twenty-One Million Dollars
($221,000,000) on December 1, 2001 through February 28, 2002, (iv) Two Hundred
Fifty-Four Million Dollars ($254,000,000) on March 1, 2002 through May 31, 2002,
(v) Two Hundred Forty-Five Million Dollars ($245,000,000) on June 1, 2002
through August 31, 2002, (vi) Two Hundred Seventy-Five Million Dollars
($275,000,000) on September 1, 2002 through November 30, 2002, (vii) Three
Hundred Twenty-Three Million Dollars ($323,000,000) on December 1, 2002 through
February 28, 2003, and (viii) Three Hundred Fifty Million Dollars ($350,000,000)
on March 1, 2003 and thereafter.

         (e) LEVERAGE RATIO. The Companies shall not suffer or permit at any
time the Leverage Ratio to be greater than (i) 5.00 to 1.00 on the Closing Date
through August 31, 2001, (ii) 5.90 to 1.00 on September 1, 2001 through November
30, 2001, (iii) 4.00 to 1.00 on December 1, 2001 through November 30, 2002, (iv)
3.20 to 1.00 on December 1, 2002 through November 30, 2003, and (v) 2.50 to 1.00
on December 1, 2003 and thereafter.

         Section 5.8. BORROWING. No Company shall create, incur or have
outstanding any obligation for borrowed money or any Indebtedness of any kind;
provided, that this Section shall not apply to:

         (a) the Loans, Letters of Credit or any other Indebtedness under this
Agreement;


                                       54



         (b) in addition to the Indebtedness permitted pursuant to the other
subparts of this Section, the Indebtedness that shall exist as of the Closing
Date as set forth in SCHEDULE 5.8 hereto, but not any extensions, renewals or
replacements of such Indebtedness except (i) renewals and extensions expressly
provided for in the agreements evidencing any such Indebtedness as the same are
in effect on the date of this Agreement and (ii) refinancings and extensions of
any such Indebtedness if the terms and conditions thereof are not less favorable
to the obligor thereon or to the Global Agent and the Lenders taken as a whole
in the reasonable judgment of the Global Agent than the Indebtedness being
refinanced or extended and the average life to maturity thereof shall be greater
than or equal to that of the Indebtedness being refinanced or extended; provided
that such Indebtedness permitted under the immediately preceding clause (i) or
(ii) above shall not (A) include Indebtedness of an obligor that was not an
obligor with respect to the Indebtedness being extended, renewed or refinanced
(other than the Companies), (B) exceed in a principal amount the Indebtedness
being renewed, extended or refinanced plus the costs of refinancing (including
consent fees), accrued interest and premiums or (C) be incurred, created or
assumed if any Default or Event of Default shall have occurred and be continuing
or would result therefrom);

         (c) the unsecured Indebtedness of Borrower in connection with the notes
(including any replacement notes) issued pursuant to the Subordinated Indenture,
so long as (i) all of such Indebtedness shall be Subordinated at all times to
the Debt, and (ii) the aggregate principal amount of such Indebtedness shall not
exceed Two Hundred Sixty Million Dollars ($260,000,000) at any time;

         (d) the unsecured Indebtedness of Borrower in connection with the notes
issued pursuant to the Subordinated Convertible Indenture, so long as (i) all of
such Indebtedness shall be Subordinated at all times to the Debt, and (ii) the
aggregate principal amount of such Indebtedness shall not exceed One Hundred
Seventy-Five Million Dollars ($175,000,000) at any time;

         (e) the Indebtedness of Borrower in connection with the notes or
securities issued pursuant to the Senior Indenture, so long as the aggregate
principal amount of such Indebtedness shall not exceed Three Hundred Million
Dollars ($300,000,000) at any time;

         (f) loans or capital leases to any Company for the purchase or lease of
fixed assets, which loans or leases shall be secured by the assets being
purchased or leased, so long as the aggregate principal amount of all such loans
and leases for all Companies shall not exceed Twenty-Five Million Dollars
($25,000,000) at any time;

         (g) loans by a Domestic Company (other than the Receivables Subsidiary)
to another Domestic Company (other than the Receivables Subsidiary) so long as
each such Company shall be Borrower or a Guarantor of Payment;

         (h) loans by a Foreign Subsidiary to a Domestic Company (other than the
Receivables Subsidiary);

         (i) Permitted Foreign Subsidiary Loans and Investments;


                                       55



         (j) Indebtedness under any Hedge Agreement, so long as such Hedge
Agreement shall have been entered into in the ordinary course of business and
not for speculative purposes;

         (k) the Indebtedness of Borrower with respect to the Other Lender
Obligations, as defined in Article X hereof, listed on SCHEDULE 10.1 hereto;

         (l) (i) Indebtedness of the Receivables Subsidiary under the Permitted
Receivables Facility, so long as the funded amount shall not exceed Two Hundred
Fifty Million Dollars ($250,000,000) at any time, or (ii) Indebtedness of the
Receivables Subsidiary or AGSC to any other Company in connection with the
Permitted Receivables Facility in accordance with the Receivables Facility
Documents;

         (m) the Indebtedness of Borrower to AGSC pursuant to the AGSC Note so
long as (i) all of such Indebtedness is Subordinated, and (ii) the aggregate
principal amount of such Indebtedness shall not exceed One Hundred Thirty
Million Dollars ($130,000,000) at any time; or

         (n) in addition to the Indebtedness permitted pursuant to subparts (a)
through (m) above, other unsecured Indebtedness of Borrower so long as (i) all
of such Indebtedness is Subordinated, (ii) no Default or Event of Default shall
then exist or immediately after incurring any of such Indebtedness will exist,
(iii) the documentation with respect to such Indebtedness shall be in form and
substance satisfactory to the Global Agent, and (iv) the Companies shall be in
compliance with the financial covenants set forth in Section 5.7 hereof both
immediately before and after giving pro forma effect to the incurrence of such
Indebtedness.

         Section 5.9. LIENS. No Company shall create, assume or suffer to exist
any Lien upon any of its property or assets, whether now owned or hereafter
acquired; provided that this Section shall not apply to the following:

         (a) Liens for taxes not yet due or that are being actively contested in
good faith by appropriate proceedings and for which adequate reserves shall have
been established in accordance with GAAP;

         (b) other statutory Liens incidental to the conduct of its business or
the ownership of its property and assets that (i) were not incurred in
connection with the borrowing of money or the obtaining of advances or credit,
and (ii) do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation of its
business;

         (c) Liens on property or assets of a Subsidiary to secure obligations
of such Subsidiary to Borrower or a Guarantor of Payment;

         (d) purchase money Liens on fixed assets securing the loans and capital
leases pursuant to Section 5.8(f) hereof, provided that such Lien shall be
limited to the purchase (or lease) price and only attaches to the property being
acquired or leased;

         (e) the Liens existing on the Closing Date as set forth in SCHEDULE 5.9
hereto;


                                       56



         (f) easements or other minor defects or irregularities in title of real
property not interfering in any material respect with the use of such property
in the business of any Company; or

         (g) any Lien granted to the Global Agent or the Collateral Agent
securing the Debt or Liens granted to the Collateral Agent to secure the
Obligations, as defined in Article X hereof, so long as any such Lien granted to
the Collateral Agent that secures any obligations of any Person (other than the
Global Agent and the Lenders in connection with this Agreement) shall be at all
times subject to the intercreditor provisions set forth in Article X hereof.

No Company shall enter into any contract or agreement that would prohibit the
Global Agent or the Lenders from acquiring a security interest, mortgage or
other Lien on, or a collateral assignment of, any of the property or assets of a
Company.

         Section 5.10. REGULATIONS U AND X. No Company shall take any action
that would result in any non-compliance of the Loans with Regulations U and X,
or any other applicable regulation, of the Board of Governors of the Federal
Reserve System.

         Section 5.11. INVESTMENTS AND LOANS. No Company shall (a) create,
acquire or hold any Subsidiary, (b) make or hold any investment in any stocks,
bonds or securities of any kind, (c) be or become a party to any joint venture
or other partnership, (d) make or keep outstanding any advance or loan to any
Person, or (e) be or become a Guarantor of any kind; provided, that this Section
shall not apply to:

         (i)      investments by the Companies in Cash Equivalents;

         (ii) any endorsement of a check or other medium of payment for deposit
or collection through normal banking channels or similar transaction in the
normal course of business;

         (iii) the holding of Subsidiaries listed on SCHEDULE 6.1 hereto and the
creation, acquisition and holding of any new Subsidiary (other than by the
Receivables Subsidiary) after the Closing Date so long as such new Subsidiary
shall be created, acquired or held in accordance with the terms and conditions
of this Agreement and, if required, shall comply with Section 5.21 hereof;

         (iv) loans to or investments in a Domestic Company by another Domestic
Company so long as each such Company shall be Borrower or a Guarantor of
Payment;

         (v) loans to or investments in a Domestic Company by a Foreign
Subsidiary;

         (vi) Permitted Foreign Subsidiary Loans and Investments;

         (vii) any advance or loan to an officer or employee of a Company made
in the ordinary course of such Company's business, so long as all such advances
and loans from all Companies shall aggregate not more than the maximum principal
sum of Five Hundred Thousand Dollars ($500,000) at any time outstanding;

         (viii) any Permitted Investment;


                                       57



         (ix) guarantees of Indebtedness of the Companies incurred or permitted
pursuant to this Agreement;

         (x) Indebtedness of the Receivables Subsidiary to Borrower or AGSC and
Indebtedness of AGSC to Borrower in connection with Permitted Receivables
Facility in accordance with the Receivables Facility Documents; or

         (xi) the Indebtedness of Borrower to AGSC pursuant to the AGSC Note so
long as (i) all of such Indebtedness is Subordinated, and (ii) the aggregate
principal amount of such Indebtedness shall not exceed One Hundred Thirty
Million Dollars ($130,000,000) at any time.

         Section 5.12. MERGER AND SALE OF ASSETS. No Company shall merge or
consolidate with any other Person, or effect any Disposition other than in the
ordinary course of business, except that, if no Default or Event of Default
shall then exist or immediately thereafter shall begin to exist:

         (a) any Subsidiary (other than the Receivables Subsidiary) may merge
with (i) Borrower (provided that Borrower shall be the continuing or surviving
Person), or (ii) any one or more Guarantors of Payment;

         (b) any Subsidiary (other than the Receivables Subsidiary) may sell,
lease, transfer or otherwise dispose of any of its assets to (i) Borrower, or
(ii) any one or more Guarantors of Payment;

         (c) in addition to any merger permitted pursuant to subpart (a) above,
any Foreign Subsidiary may merge with any one or more Foreign Subsidiaries;

         (d) in addition to any Disposition permitted pursuant to subpart (b)
above, any Foreign Subsidiary may sell, lease, transfer or otherwise dispose of
any of its assets to any one or more Foreign Subsidiaries;

         (e) in addition to any Disposition permitted pursuant to subparts (a)
through (d) above, AGSC or any Receivables Facility Participant may sell the
Receivables Related Assets in connection with the Permitted Receivables
Facility; and

         (f) in addition to any Disposition permitted pursuant to subparts (a)
through (e) above, any Company may effect a Disposition so long as (i) the
Companies shall be in full compliance with the Loan Documents both prior to and
subsequent to the transaction, (ii) no Default or Event of Default shall then
exist or immediately after such Disposition will exist, (iii) the Companies
shall be in compliance with the financial covenants set forth in Section 5.7
hereof both immediately before and after giving pro forma effect to such
Disposition, (iv) the Companies shall receive consideration equivalent to the
fair market value (as determined by the Board of Directors of Borrower) of the
assets disposed of in connection with such Disposition, (v) at least
seventy-five percent (75%) of the consideration received in connection with such
Disposition shall be in the form of cash (other than the Disposition of
substantially all of the non-core greeting card assets comprising the party
goods and candle business of Borrower, the non-cash portion of which shall not
at any one time exceed Fifty Million Dollars ($50,000,000)), (vi)


                                       58



an amount equal to at least fifty percent (50%) of the proceeds in excess of Ten
Million Dollars ($10,000,000) in the aggregate with respect to all such
Dispositions shall have been applied in accordance with Section 2.8(c) hereof,
and (vii) unless the Companies shall use the remaining proceeds of such
Disposition to effect an Acquisition permitted pursuant to Section 5.13 hereof
within one hundred eighty (180) days after the receipt of the proceeds of such
Disposition, then such remaining proceeds of such Disposition shall be applied
in accordance with Section 2.8(c) hereof.

         Section 5.13. ACQUISITIONS. No Company shall effect any Acquisition;
provided, however, that, subject to Section 5.27 hereof, Borrower or a Guarantor
of Payment may effect an Acquisition so long as:

         (a) Borrower or such Guarantor of Payment, as the case may be, shall be
the surviving entity in the case of a merger or other consolidation;

         (b) the business to be acquired shall be similar to the lines of
business of the Companies;

         (c) the Companies shall be in full compliance with the Loan Documents
both prior to and subsequent to the transaction, including, but not limited to
the requirements set forth in Section 5.21 hereof;

         (d) Borrower shall have provided to the Global Agent and the Lenders,
at least twenty (20) days prior to such Acquisition, historical financial
statements of the target entity and a pro forma financial statement of the
Companies accompanied by a certificate of a Financial Officer showing (i) pro
forma compliance with Section 5.7 hereof, both before and after giving effect to
the proposed Acquisition, and (ii) that, on a pro forma basis, such Acquisition
will not result in any negative financial impact with respect to the financial
ratios set forth in Section 5.7(a), and (b) and (e) hereof;

         (e) the Fixed Charge Coverage Ratio Condition shall not exist nor shall
it exist after giving effect to such Acquisition;

         (f) commencing with the fiscal quarter ending August 31, 2001, the
aggregate Consideration paid by the Companies in connection with such
Acquisition, when added to all other Acquisitions (including, without
limitation, the one time Acquisition described in subpart (g) below) for all
Companies, during any period of four consecutive fiscal quarters (calculated
without regard to any Acquisition that shall have occurred prior to the Closing
Date), shall not exceed the Maximum Acquisition Amount; and

         (g) the aggregate Consideration paid by the Companies in connection
with the one time Acquisition of internet related businesses on and after the
Closing Date shall not exceed the Maximum Acquisition Amount.

         Section 5.14. CAPITAL EXPENDITURES. The Companies shall not invest in
Consolidated Capital Expenditures (a) more than an aggregate amount equal to
Sixty-Five Million Dollars ($65,000,000) during the 2002 fiscal year of the
Companies, (b) more than an amount equal to Fifty-Seven Million Five Hundred
Thousand Dollars ($57,500,000) during the 2003 fiscal year


                                       59



of the Companies, and (c) more than an amount equal to Sixty-Nine Million
Dollars ($69,000,000) during the 2004 fiscal year of the Companies and during
each fiscal year of the Companies thereafter.

         Section 5.15. NOTICE.

         (a) Borrower shall cause a Financial Officer of Borrower to promptly
notify the Global Agent and the Lenders in writing whenever any Default or Event
of Default may occur hereunder or any representation or warranty made in Article
VI hereof or elsewhere in this Agreement or in any Related Writing may for any
reason cease in any material respect to be true and complete.

         (b) Borrower shall provide written notice to the Global Agent,
contemporaneously with any notice being provided by any Company or to any
Company in connection with the Senior Indenture, the Subordinated Indenture or
the Subordinated Convertible Indenture.

         (c) Borrower shall provide the Global Agent and the Lenders with
immediate written notice upon any change in the S&P Rating, the S&P Senior
Rating, the Moody's Rating or the Moody's Senior Rating.

         Section 5.16. ENVIRONMENTAL COMPLIANCE. Each Company shall comply in
all respects with any and all Environmental Laws including, without limitation,
all Environmental Laws in jurisdictions in which any Company owns or operates a
facility or site, arranges for disposal or treatment of hazardous substances,
solid waste or other wastes, accepts for transport any hazardous substances,
solid waste or other wastes or holds any interest in real property or otherwise.
Borrower shall furnish to the Lenders, promptly after receipt thereof, a copy of
any notice any Company may receive from any governmental authority or private
Person or otherwise that any material litigation or proceeding pertaining to any
environmental, health or safety matter has been filed or is threatened against
such Company, any real property in which such Company holds any interest or any
past or present operation of such Company. No Company shall allow the release or
disposal of hazardous waste, solid waste or other wastes on, under or to any
real property in which any Company holds any interest or performs any of its
operations, in violation of any Environmental Law. As used in this Section,
"litigation or proceeding" means any demand, claim, notice, suit, suit in equity
action, administrative action, investigation or inquiry whether brought by any
governmental authority or private Person or otherwise. Borrower shall defend,
indemnify and hold the Global Agent and the Lenders harmless against all costs,
expenses, claims, damages, penalties and liabilities of every kind or nature
whatsoever (including attorneys' fees) arising out of or resulting from the
noncompliance of any Company with any Environmental Law. Such indemnification
shall survive any termination of this Agreement.

         Section 5.17. AFFILIATE TRANSACTIONS. No Company shall, or shall permit
any Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
a Company on terms that are less favorable to such Company or such Subsidiary,
as the case may be, than those that might be obtained at the time in a
transaction with a non-Affiliate; provided, however, that the foregoing shall
not prohibit (a) the payment of customary and reasonable directors' fees to
directors who are not employees of a Company or


                                       60



employees of any Affiliate of a Company, (b) any transaction between Borrower
and an Affiliate (if Borrower or a Guarantor of Payment) that Borrower
reasonably determines in good faith is beneficial to Borrower and its Affiliates
as a whole and that is not entered into for the purpose of hindering the
exercise by the Global Agent or the Lenders of their rights or remedies under
this Agreement, (c) the transactions pursuant to the Permitted Receivables
Facility, or (d) the transactions pursuant to the AGSC Note.

         Section 5.18. USE OF PROCEEDS. Borrower's use of the proceeds of the
Notes shall be solely for the refinancing of existing Indebtedness, working
capital and other general corporate purposes of the Companies.

         Section 5.19. CORPORATE NAMES; LOCATION OF COLLATERAL. Borrower shall,
and shall cause each other Company to, comply with the following provisions:

         (a) no Company shall change its corporate name, unless, in each case,
such Company shall have provided the Global Agent and the Lenders with at least
thirty (30) days prior written notice thereof;

         (b) except as set forth on SCHEDULE 6.19 hereto, no Company shall use
trade names, assumed names or fictitious names, unless, in each case, such
Company shall have provided the Global Agent and the Lenders with at least
thirty (30) days prior written notice thereof;

         (c) Borrower shall provide the Global Agent with written notification
no later than ten (10) days after (i) any change in the location of the office
where any records of any Company pertaining to its accounts shall be kept; (ii)
the closing of any existing places of business; and (iii) any change in the
chief executive office of any Company;

         (d) Borrower shall provide the Global Agent with at least twenty (20)
days prior written notice of any new location where any inventory or equipment
of any Domestic Company is to be maintained; and

         (e) in the event of any of the foregoing, the appropriate Company shall
promptly execute and deliver to the Collateral Agent (and each Company agrees
that the Collateral Agent may execute and deliver the same as such Company's
irrevocable attorney-in-fact) new U.C.C. financing or other registration
statements describing any collateral securing the Debt and otherwise in form and
substance sufficient for recordation wherever necessary or appropriate, as
determined in the Global Agent's sole discretion, to perfect or continue
perfected the security interest of the Collateral Agent in such collateral,
based upon such new places of business or names, and Borrower shall pay all
filing and recording fees and taxes in connection with the filing or recordation
of such U.C.C financing or other registration statements and shall immediately
reimburse the Global Agent or the Collateral Agent therefor if the Global Agent
or the Collateral Agent pays the same. Such amounts shall be Related Expenses
hereunder.

         Section 5.20. RESTRICTED PAYMENTS. No Company shall make or commit
itself to make any Restricted Payment, except that:

         (a) subject to Section 5.27 hereof, Borrower may make Cash Dividends so
long as (i) no Default or Event of Default shall then exist or immediately
thereafter shall begin to exist, (ii)


                                       61



at all times prior to February 28, 2003, the Companies shall have achieved the
Minimum Required Consolidated EBITDA Amount, and (iii) the aggregate amount of
all Cash Dividends made during any fiscal quarter of Borrower shall not exceed
the Maximum Quarterly Dividend Amount for such fiscal quarter; provided,
however, that, if the Companies shall have failed to achieve the Minimum
Required Consolidated EBITDA Amount for any fiscal quarter, then Borrower shall
not be permitted to make any Cash Dividends for such fiscal quarter and shall
make no further Cash Dividends unless and until the Companies shall have
achieved the Minimum Required Consolidated EBITDA Amount for a fiscal quarter,
in which case Borrower shall be permitted to make Cash Dividends at the end of
such fiscal quarter in an amount equal to the Maximum Quarterly Dividend Amount
for such fiscal quarter, but not the fiscal quarter or fiscal quarters in which
the Companies shall have failed to achieve the Minimum Required Consolidated
EBITDA Amount;

         (b) if no Event of Default shall then exist or immediately thereafter
shall begin to exist, Borrower may make regularly scheduled payments of interest
with respect to the Indebtedness outstanding under the Subordinated Indenture;

         (c) if no Event of Default shall then exist or immediately thereafter
shall begin to exist, Borrower may make regularly scheduled payments of interest
with respect to the Indebtedness outstanding under the Subordinated Convertible
Indenture;

         (d) Borrower may make regularly scheduled payments of interest with
respect to the Indebtedness outstanding under the Senior Indenture; and

         (e) any Company may pay or commit itself to pay a Capital Distribution
at any time to Borrower or a Guarantor of Payment.

         Section 5.21. SUBSIDIARIES ACQUIRED OR HELD SUBSEQUENT TO THE CLOSING
DATE.

         (a) Subject to subpart (b) of this Section, each Subsidiary created,
acquired or held subsequent to the Closing Date (i) shall immediately execute
and deliver to the Global Agent a Guaranty of Payment and such Security
Documents as the Global Agent shall require, and shall deliver to the Global
Agent and the Lenders certified copies of such Organizational Documents and
authorization documents, and an opinion of counsel, as may be deemed necessary
or appropriate by the Global Agent; and (ii) the appropriate Company shall
deliver to the Collateral Agent the share certificates, or other evidence of
equity interest, of such Subsidiary pursuant to the terms of the Pledge
Agreement executed by such Company; provided, however, that (A) no Company shall
be required to pledge more than sixty-five percent (65%) of the outstanding
shares of stock or other equity interest of any first tier Foreign Subsidiary as
security for the obligations of Borrower under this Agreement and no Company
shall be obligated to pledge any of the outstanding shares of stock or other
equity interest in any Foreign Subsidiary other than a first tier Foreign
Subsidiary, and (B) neither the Receivables Subsidiary nor American Greetings
Service Corp. shall be required to be a Guarantor of Payment hereunder (and no
Company shall be obligated to pledge the shares of stock of the Receivables
Subsidiary) so long as the Permitted Receivables Facility shall not have been
terminated.

         (b) Notwithstanding anything in subpart (a) above to the contrary, a
Subsidiary shall not be required to execute and deliver a Guaranty of Payment or
any Security Documents to the


                                       62



Global Agent and the Lenders so long as (i) the total assets of such Subsidiary
shall be less than the amount of One Hundred Thousand Dollars ($100,000), and
(ii) the aggregate of the total assets of all such Subsidiaries with total asset
values of less than One Hundred Thousand Dollars ($100,000) shall not exceed the
aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000); provided
that, in the event that the total assets of any Subsidiary that shall not have
complied with the requirements of Section 5.21(a) above shall be at any time
equal to or greater than One Hundred Thousand Dollars ($100,000), Borrower shall
provide the Global Agent and the Lenders with prompt written notice of such
asset value and comply with Section 5.21(a) above with respect to such
Subsidiary.

         Section 5.22. AMENDMENT OF ORGANIZATIONAL DOCUMENTS. No Company shall
amend its Organizational Documents without the prior written consent of the
Global Agent; provided, however, that any Company that is not Borrower or a
Guarantor of Payment may amend its Organizational Documents so long as any such
amendment shall not have a material impact on the rights or remedies of the
Global Agent or the Lenders hereunder.

         Section 5.23. REAL PROPERTY MATTERS.

         (a) At the request of the Global Agent, Borrower or a Guarantor of
Payment shall, with respect to any Real Property acquired or held by a Company
subsequent to the Closing Date with a fair market value in excess of One Hundred
Thousand Dollars ($100,000), provide, or cause such Company to provide, to the
Collateral Agent (i) a Mortgage, (ii) such other information, documents or
agreements as may be deemed necessary or advisable by the Global Agent in
connection with such Mortgage, including, but not limited to, the items set
forth in subpart (b) hereof, and (iii) such corporate governance and
authorization documents and an opinion of counsel as may be deemed necessary or
appropriate by the Global Agent.

         (b) With respect to each Mortgaged Real Property, within thirty (30)
days of the Global Agent's written request, Borrower shall deliver to the
Collateral Agent:

               (i) a Loan Policy of title insurance, ALTA 1970 Form B (amended
          10/17/70 and 10/17/84) (unless such form is unavailable in any
          particular state, in which case Borrower shall have provided such
          other form of a Loan Policy of title insurance as may reasonably
          requested by the Global Agent) issued by a title company satisfactory
          to the Global Agent and the Required Lenders (collectively, the "Loan
          Policies" and individually, a "Loan Policy") in an amount equal to the
          fair market value of such Mortgaged Real Property insuring each
          Mortgage to be a valid first priority Lien on such Mortgaged Real
          Property, free and clear of all defects and encumbrances except such
          matters of record as permitted pursuant to this Agreement, with such
          endorsements and affirmative insurance as the Global Agent and the
          Required Lenders, in their reasonable discretion, may require;

               (ii) environmental reports or studies prepared by environmental
          engineering firms acceptable to the Global Agent and the Required
          Lenders (the "Reports"), which Reports shall be in form acceptable to
          the Global Agent and the Required Lenders;

               (iii) a current (certified not more than sixty (60) days prior to
          the date of such request) "as-built" survey of the such Mortgaged Real
          Property, prepared by a licensed


                                       63



          surveyor acceptable to the Global Agent and the Required Lenders,
          certified to the Global Agent, the Collateral Agent and the Lenders
          and the title company pursuant to certificate of survey acceptable to
          the Global Agent and the Required Lenders; such survey shall be in
          form and substance acceptable to the Global Agent and the Required
          Lenders, in their sole discretion, shall be made in accordance with
          the "Minimum Standard Detail Requirements for Land Title Surveys"
          adopted by the American Land Title Association in 1999;

               (iv) a copy of the certificate of occupancy for each building
          located on each such Mortgaged Real Property;

               (v) evidence of compliance with all building and zoning codes
          applicable to the Mortgaged Real Property and evidence of the
          availability and adequacy of utilities for the buildings located on
          the Mortgaged Real Property; and

               (vi) evidence, satisfactory to the Global Agent and the Required
          Lenders, that no portion of any of the Mortgaged Real Property is
          located in a Special Flood Hazard Area or is otherwise classified as
          Class A or Class BX on the Flood Maps maintained by the Federal
          Emergency Management Agency.

         Section 5.24. RESTRICTIVE AGREEMENTS; MATERIAL INDEBTEDNESS AGREEMENTS.

         (a) Except as set forth in this Agreement or the Receivables Facility
Documents, Borrower shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to (i)
make, directly or indirectly, any Capital Distribution to Borrower; (ii) make,
directly or indirectly, loans or advances or capital contributions to Borrower;
or (iii) transfer, directly or indirectly, any of the properties or assets of
such Subsidiary to Borrower, except for such encumbrances or restrictions
existing under or by reason of (A) applicable law, (B) customary non-assignment
provisions in leases or other agreements entered in the ordinary course of
business and consistent with past practices, or (C) customary restrictions in
security agreements or mortgages securing Indebtedness of a Company to the
extent such restrictions only restrict the transfer of the property subject to
such security agreement or mortgage.

         (b) No Company shall amend, restate, supplement or otherwise modify or
replace in any respect the Senior Indenture, the Subordinated Indenture, the
Subordinated Convertible Indenture, the Receivables Facility Documents or any
other Material Indebtedness Agreement without the prior written consent of the
Required Lenders; provided, however, that any Company may amend, supplement or
otherwise modify any of the foregoing agreements with the prior written consent
of the Global Agent, so long as any such amendment or modification does not, in
the opinion of the Global Agent, materially impact the rights or remedies of the
Global Agent and the Lenders hereunder.

         (c) No Company shall be or become a Guarantor of the Indebtedness
incurred pursuant to the Subordinated Indenture, the Subordinated Convertible
Indenture, the Senior Indenture or any other Material Indebtedness Agreement
(other than this Agreement).


                                       64



         Section 5.25. OTHER COVENANTS In the event that any Company shall enter
into, or shall have entered into, any Material Indebtedness Agreement, wherein
the covenants and agreements contained therein shall be more restrictive than
the covenants and agreements set forth herein, then such Company shall be bound
hereunder by such covenants and agreements with the same force and effect as if
such covenants and agreements were written herein.

         Section 5.26. PARI PASSU RANKING. The Debt shall, and Borrowers shall
take all necessary action to ensure that the Debt shall, at all times rank at
least pari passu in right of payment (to the fullest extent permitted by law)
with all other senior Indebtedness of the Companies (other than the Indebtedness
incurred in connection with the Permitted Receivables Facility).

         Section 5.27. PERMITTED RECEIVABLES FACILITY CERTIFICATION.
Notwithstanding anything to the contrary set forth in this Agreement, (a) unless
and until Borrower shall have delivered a Permitted Receivables Facility
Certificate to the Global Agent pursuant to which Borrower shall have certified
that the Permitted Receivables Facility is in effect providing for not less than
Two Hundred Fifty Million Dollars ($250,000,000) of aggregate permitted
borrowings by the Receivables Subsidiary thereunder and that the Prior Seasonal
Peak Drawing Level as of the most recent November 30 is at least Two Hundred
Twenty-Five Million Dollars ($225,000,000), Borrower shall not make any Cash
Dividends or effect any Acquisitions; (b) in the event Borrower shall have
delivered a Permitted Receivables Facility Certificate to the Global Agent
pursuant to which Borrower shall have certified that a Permitted Receivables
Facility is in effect providing for not less than Two Hundred Fifty Million
Dollars ($250,000,000) of aggregate permitted borrowings thereunder and that the
Prior Seasonal Peak Drawing Level as of the most recent November 30 is at least
Two Hundred Twenty-Five Million Dollars ($225,000,000) but less than Two Hundred
Fifty Million Dollars ($250,000,000), Borrower may either (i) make any Cash
Dividend otherwise permitted to be made under Section 5.20(a) hereof or, (ii) in
lieu of making such Cash Dividend, effect Acquisitions in accordance with
Section 5.13 hereof; provided, however, that any election by Borrower not to pay
Cash Dividends pursuant to this Section 5.27, shall not be calculated as part of
the Dividend Reduction Amount; and (c) at any time that Borrower shall have
delivered to the Global Agent a Permitted Receivables Facility Certificate
pursuant to which Borrower shall have certified that a Permitted Receivables
Facility is in effect providing for not less than Two Hundred Fifty Million
Dollars ($250,000,000) of aggregate permitted borrowings thereunder and that the
Prior Seasonal Peak Drawing Level as of the most recent November 30 is at least
Two Hundred Fifty Million Dollars ($250,000,000), the foregoing provisions of
this Section 5.27 shall not apply.


                   ARTICLE VI. REPRESENTATIONS AND WARRANTIES

         Borrower represents and warrants that the statements set forth in this
Article VI are true, correct and complete.

         Section 6.1. CORPORATE EXISTENCE; SUBSIDIARIES; FOREIGN QUALIFICATION.
Each Company is a corporation duly organized, validly existing, and in good
standing under the laws of its state of incorporation and is duly qualified and
authorized to do business and is in good standing as a


                                       65



foreign corporation in the jurisdictions set forth opposite its name on SCHEDULE
6.1 hereto, which are all of the states or jurisdictions where the character of
its property or its business activities makes such qualification necessary,
except where the failure to so qualify will not cause or result in a Material
Adverse Effect. SCHEDULE 6.1 hereto sets forth each Subsidiary of Borrower, its
state of incorporation, its relationship to Borrower, including the percentage
of each class of stock owned by a Company or the percentage of stock of Borrower
owned by it, the location of its chief executive offices and its principal place
of business. Except as set forth on SCHEDULE 6.1 hereto, Borrower owns all of
the capital stock of each of its Subsidiaries.

         Section 6.2. CORPORATE AUTHORITY. Borrower has the right and power and
is duly authorized and empowered to enter into, execute and deliver the Loan
Documents to which it is a party and to perform and observe the provisions of
the Loan Documents. The Loan Documents to which Borrower is a party have been
duly authorized and approved by Borrower's Board of Directors and are the valid
and binding obligations of Borrower, enforceable against Borrower in accordance
with their respective terms. The execution, delivery and performance of the Loan
Documents will not conflict with nor result in any breach in any of the
provisions of, or constitute a default under, or result in the creation of any
Lien (other than Liens permitted under Section 5.9 of this Agreement) upon any
assets or property of any Company under the provisions of, such Company's
Organizational Documents or any agreement.

         Section 6.3. COMPLIANCE WITH LAWS. Each Company:

         (a) holds permits, certificates, licenses, orders, registrations,
franchises, authorizations, and other approvals from federal, state, local, and
foreign governmental and regulatory bodies necessary for the conduct of its
business and is in compliance with all applicable laws relating thereto, except
where the failure to do so would not have or result in a Material Adverse
Effect;

         (b) is in compliance with all federal, state, local, or foreign
applicable statutes, rules, regulations, and orders including, without
limitation, those relating to environmental protection, occupational safety and
health, and equal employment practices except where the failure to do so would
not have or result in a Material Adverse Effect; and

         (c) is not in violation of or in default under any agreement to which
it is a party or by which its assets are subject or bound, except where such
violation or default would not have or result in a Material Adverse Effect.

         Section 6.4. LITIGATION AND ADMINISTRATIVE PROCEEDINGS. There are (a)
no lawsuits, actions, investigations, or other proceedings pending or threatened
against any Company, or in respect of which any Company may have any liability,
in any court or before any governmental authority, arbitration board, or other
tribunal, (b) no orders, writs, injunctions, judgments, or decrees of any court
or government agency or instrumentality to which any Company is a party or by
which the property or assets of any Company are bound, and (c) no grievances,
disputes, or controversies outstanding with any union or other organization of
the employees of any Company, or threats of work stoppage, strike, or pending
demands for collective bargaining, that, as to subparts (a) through (c) above,
if determined adversely, would have a Material Adverse Effect.


                                       66



         Section 6.5. TITLE TO ASSETS. Each Company has good title to and
ownership of all property it purports to own, which property is free and clear
of all Liens, except those permitted under Section 5.9 hereof.

         Section 6.6. LIENS AND SECURITY INTERESTS. On and after the Closing
Date, except for Liens permitted pursuant to Section 5.9 hereof, (a) there is no
financing statement, registration statement or other evidence of a Lien
outstanding covering any personal property of any Company, other than a
financing statement in favor of the Collateral Agent; (b) there is no mortgage,
deed of trust or other encumbrance with respect to any Real Property outstanding
covering any such Real Property, other than a mortgage in favor of the
Collateral Agent; and (c) no real or personal property of any Company is subject
to any security interest or Lien of any kind other than any security interest or
Lien that may be granted to the Collateral Agent. No Company has entered into
any contract or agreement that exists on or after the Closing Date that would
prohibit the Collateral Agent, the Global Agent or the Lenders from acquiring a
security interest, mortgage or other Lien on, or a collateral assignment of, any
of the property or assets of any Company.

         Section 6.7. TAX RETURNS. Except as set forth on SCHEDULE 6.7 hereto,
all federal, state, local and foreign tax returns and other reports required by
law to be filed in respect of the income, business, properties and employees of
each Company have been filed and all taxes, assessments, fees and other
governmental charges which are due and payable have been paid, except as
otherwise permitted herein or the failure to do so does not and will not cause
or result in a Material Adverse Effect. The provision for taxes on the books of
each Company is adequate for all years not closed by applicable statutes and for
the current fiscal year.

         Section 6.8. ENVIRONMENTAL LAWS. Each Company is in compliance with any
and all Environmental Laws, including, without limitation, all Environmental
Laws in all jurisdictions in which any Company owns or operates, or has owned or
operated, a facility or site, arranges or has arranged for disposal or treatment
of hazardous substances, solid waste or other wastes, accepts or has accepted
for transport any hazardous substances, solid waste or other wastes or holds or
has held any interest in real property or otherwise. No litigation or proceeding
arising under, relating to or in connection with any Environmental Law is
pending or, to the best knowledge of each Company, threatened, against any
Company, any real property in which any Company holds or has held an interest or
any past or present operation of any Company. No release, threatened release or
disposal of hazardous waste, solid waste or other wastes is occurring, or has
occurred (other than those that are currently being cleaned up in accordance
with Environmental Laws), on, under or to any real property in which any Company
holds any interest or performs any of its operations, in violation of any
Environmental Law. As used in this Section, "litigation or proceeding" means any
demand, claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority or
private Person or otherwise.

         Section 6.9. CONTINUED BUSINESS. There exists no actual, pending, or,
to Borrower's knowledge, any threatened termination, cancellation or limitation
of, or any modification or change in the business relationship of any Company
and any customer or supplier, or any group of customers or suppliers, whose
purchases or supplies, individually or in the aggregate, are material to the
business of any Company, and there exists no present condition or state of facts
or circumstances that would have a Material Adverse Effect or prevent a Company
from conducting


                                       67



such business or the transactions contemplated by this Agreement in
substantially the same manner in which it was previously conducted.

         Section 6.10. EMPLOYEE BENEFITS PLANS. No ERISA Event has occurred or
is expected to occur with respect to an ERISA Plan. Full payment has been made
of all amounts which a Controlled Group member is required, under applicable law
or under the governing documents, to have been paid as a contribution to or a
benefit under each ERISA Plan. The liability of each Controlled Group member
with respect to each ERISA Plan has been fully funded based upon reasonable and
proper actuarial assumptions, has been fully insured, or has been fully reserved
for on its financial statements. No changes have occurred or are expected to
occur that would cause a material increase in the cost of providing benefits
under the ERISA Plan. With respect to each ERISA Plan that is intended to be
qualified under Code Section 401(a), (a) the ERISA Plan and any associated trust
operationally comply with the applicable requirements of Code Section 401(a);
(b) the ERISA Plan and any associated trust have been amended to comply with all
such requirements as currently in effect, other than those requirements for
which a retroactive amendment can be made within the "remedial amendment period"
available under Code Section 401(b) (as extended under Treasury Regulations and
other Treasury pronouncements upon which taxpayers may rely); (c) the ERISA Plan
and any associated trust have received a favorable determination letter from the
Internal Revenue Service stating that the ERISA Plan qualifies under Code
Section 401(a), that the associated trust qualifies under Code Section 501(a)
and, if applicable, that any cash or deferred arrangement under the ERISA Plan
qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at
a time for which the above-described "remedial amendment period" has not yet
expired; (d) the ERISA Plan currently satisfies the requirements of Code Section
410(b), without regard to any retroactive amendment that may be made within the
above-described "remedial amendment period"; and (e) no contribution made to the
ERISA Plan is subject to an excise tax under Code Section 4972. With respect to
any Pension Plan, the "accumulated benefit obligation" of Controlled Group
members with respect to the Pension Plan (as determined in accordance with
Statement of Accounting Standards No. 87, "Employers' Accounting for Pensions")
does not exceed the fair market value of Pension Plan assets.

         Section 6.11. CONSENTS OR APPROVALS. No consent, approval or
authorization of, or filing, registration or qualification with, any
governmental authority or any other Person is required to be obtained or
completed by any Company in connection with the execution, delivery or
performance of any of the Loan Documents, that has not already been obtained or
completed, except where the failure to so would not have or result in a Material
Adverse Effect.

         Section 6.12. SOLVENCY. Borrower has received consideration that is the
reasonable equivalent value of the obligations and liabilities that Borrower has
incurred to the Lenders. Borrower is not insolvent as defined in any applicable
state or federal statute, nor will Borrower be rendered insolvent by the
execution and delivery of the Loan Documents to the Global Agent and the
Lenders. Borrower is not engaged or about to engage in any business or
transaction for which the assets retained by it are or will be an unreasonably
small amount of capital, taking into consideration the obligations to the Global
Agent and the Lenders incurred hereunder. Borrower does not intend to, nor does
it believe that it will, incur debts beyond its ability to pay such debts as
they mature.


                                       68



         Section 6.13. FINANCIAL STATEMENTS. The Consolidated financial
statements of the Companies for the fiscal year ended February 28, 2001,
furnished to the Global Agent and the Lenders, are true and complete, have been
prepared in accordance with GAAP, and fairly present the financial condition of
the Companies as of the date of such financial statements and the results of
their operations for the period then ending. Since the Closing Date there has
been no material adverse change in any Company's financial condition, properties
or business nor any change in any Company's accounting procedures.

         Section 6.14. REGULATIONS. Borrower is not engaged principally or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States of America). Neither the granting of any Loan (or any conversion
thereof) or the issuance of any Letter of Credit nor the use of the proceeds of
any Loan or Letter of Credit will violate, or be inconsistent with, the
provisions of Regulation U or X or any other Regulation of such Board of
Governors.

         Section 6.15. MATERIAL AGREEMENTS. Except as disclosed on SCHEDULE 6.15
hereto, no Company is a party to any (a) debt instrument; (b) lease (capital,
operating or otherwise), whether as lessee or lessor thereunder; (c) contract,
commitment, agreement, or other arrangement involving the purchase or sale of
any inventory by it, or the license of any right to or by it; (d) contract,
commitment, agreement, or other arrangement with any of its "Affiliates" (as
such term is defined in the Securities Exchange Act of 1934, as amended); (e)
management or employment contract or contract for personal services with any of
its Affiliates which is not otherwise terminable at will or on less than ninety
(90) days' notice without liability; (f) collective bargaining agreement; or (g)
other contract, agreement, understanding, or arrangement which, as to
subsections (a) through (g), above, if violated, breached, or terminated for any
reason, would have or would be reasonably expected to have a Material Adverse
Effect.

         Section 6.16. INTELLECTUAL PROPERTY. Each Company owns, possesses or
has the right to use all of such Company's Intellectual Property, and the rights
with respect to such Intellectual Property necessary for the conduct of its
business without any known conflict with the rights of any other Person.
SCHEDULE 1 to each Collateral Assignment and Security Agreement sets forth all
of the Intellectual Property of each Domestic Company.

         Section 6.17. INSURANCE. Each Company maintains with financially sound
and reputable insurers insurance with coverage and limits as required by law and
as is customary with Persons engaged in the same businesses as the Companies.
SCHEDULE 6.17 hereto sets forth all insurance carried by the Companies,
describing in detail the amount and type of such insurance.

         Section 6.18. ACCURATE AND COMPLETE STATEMENTS. Neither the Loan
Documents nor any written statement made by any Company in connection with any
of the Loan Documents contains any untrue statement of a material fact or omits
a material fact necessary to make the statements contained therein or in the
Loan Documents not misleading. After due inquiry by Borrower, there is no known
fact which any Company has not disclosed to the Global Agent and the Lenders
that has or would have a Material Adverse Effect.

         Section 6.19. LOCATION; TRADE NAMES. SCHEDULE 6.19 hereto sets forth
all of the following with respect to Borrower and each Domestic Subsidiary: (a)
the places of business of


                                       69



Borrower and such Domestic Subsidiary and the locations where Borrower and such
Domestic Subsidiary maintains any inventory or equipment or other fixed assets,
(b) the chief executive office of Borrower and such Domestic Subsidiary, and (c)
the office where Borrower and such Domestic Subsidiary keeps records of its
accounts. Except as set forth on SCHEDULE 6.19, or otherwise permitted pursuant
to this Agreement, no Domestic Company uses any trade name, assumed name or
fictitious name.

         Section 6.20. INVESTMENT COMPANY; HOLDING COMPANY. No Company is (a) an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or (ii) subject
to regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act, each as amended, or any foreign, federal, state or local statute or
regulation limiting its ability to incur Indebtedness.

         Section 6.21. SENIOR INDENTURE. No Event of Default (as defined in the
Senior Indenture) or event or condition that, with the passage of time or giving
of notice or both, would constitute an Event of Default (as defined in the
Senior Indenture), exists under the Senior Indenture, nor will any such Event of
Default or event or condition that, with the passage of time or giving of notice
or both, would constitute an Event of Default, exist under the Senior Indenture
immediately after the occurrence of any Credit Event.

         Section 6.22. SUBORDINATED INDENTURE AND SUBORDINATED CONVERTIBLE
INDENTURE.

         (a) (i) no Event of Default (as defined in the Subordinated Indenture)
or Default (as defined in the Subordinated Indenture) exists, nor will any such
Event of Default or Default exist under the Subordinated Indenture (or note or
other agreement executed in connection therewith) immediately after the
occurrence of any Credit Event; (ii) SCHEDULE 6.22 hereto sets forth all
Indebtedness of any Company that constitutes Indebtedness under Credit
Facilities (as defined in the Subordinated Indenture); and (iii) all of the Debt
constitutes Senior Indebtedness (as defined in the Subordinated Indenture),
Designated Senior Indebtedness (as defined in the Subordinated Indenture) and
Permitted Debt (as defined in the Subordinated Indenture).

         (b) (i) no Event of Default (as defined in the Subordinated Convertible
Indenture) or Default (as defined in the Subordinated Convertible Indenture)
exists, nor will any such Event of Default or Default exist under the
Subordinated Convertible Indenture (or note or other agreement executed in
connection therewith) immediately after the occurrence of any Credit Event; and
(ii) all of the Debt constitutes Senior Indebtedness (as defined in the
Subordinated Convertible Indenture), Designated Senior Indebtedness (as defined
in the Subordinated Convertible Indenture) and Permitted Debt (as defined in the
Subordinated Convertible Indenture).

         Section 6.23. DEFAULTS. No Default or Event of Default exists
hereunder, nor will any Default or Event of Default begin to exist immediately
after the execution and delivery hereof.


                         ARTICLE VII. EVENTS OF DEFAULT

         Each of the following shall constitute an Event of Default hereunder:


                                       70



         Section 7.1. PAYMENTS. If the principal of or interest on any Note or
any facility or other fee shall not be paid in full punctually when due and
payable.

         Section 7.2. SPECIAL COVENANTS. If any Company or Obligor shall fail or
omit to perform and observe Sections 5.7, 5.8, 5.9, 5.11, 5.12, 5.13, 5.14,
5.18, 5.19, 5.20, 5.21, 5.22, 5.23, 5.24, 5.25 or 5.26 hereof.

         Section 7.3. OTHER COVENANTS. If any Company or Obligor shall fail or
omit to perform and observe any agreement or other provision (other than those
referred to in Sections 7.1 or 7.2 hereof) contained or referred to in this
Agreement or any Related Writing that is on such Company's or Obligor's part, as
the case may be, to be complied with, and that Default shall not have been fully
corrected within fifteen (15) days after the giving of written notice thereof to
Borrower by the Global Agent or any Lender that the specified Default is to be
remedied.

         Section 7.4. REPRESENTATIONS AND WARRANTIES. If any representation,
warranty or statement made in or pursuant to this Agreement or any Related
Writing or any other material information furnished by any Company or Obligor to
the Global Agent or the Lenders, or any thereof, or any other holder of any
Note, shall be false or erroneous.

         Section 7.5. CROSS DEFAULT. If any Company or Obligor shall default in
the payment of principal or interest due and owing upon any other obligation for
borrowed money in excess of the aggregate, for all such obligations for all such
Companies and Obligors, of Ten Million Dollars ($10,000,000) beyond any period
of grace provided with respect thereto or in the performance or observance of
any other agreement, term or condition contained in any agreement under which
such obligation is created, if the effect of such default is to allow the
acceleration of the maturity of such Indebtedness or to permit the holder
thereof to cause such Indebtedness to become due prior to its stated maturity.

         Section 7.6. ERISA DEFAULT. The occurrence of one or more ERISA Events
which (a) the Required Lenders determine in good faith could have a Material
Adverse Effect, or (b) results in a Lien on any of the assets of any Company.

         Section 7.7. CHANGE IN CONTROL. If any Change in Control shall occur.

         Section 7.8. MONEY JUDGMENT. A final judgment or order for the payment
of money shall be rendered against any Company or Obligor by a court of
competent jurisdiction, which remains unpaid or unstayed and undischarged for a
period (during which execution shall not be effectively stayed) of thirty (30)
days after the date on which the right to appeal shall have expired, provided
that the aggregate of all such judgments, for all such Companies and Obligors,
shall exceed Ten Million Dollars ($10,000,000).

         Section 7.9. MATERIAL ADVERSE CHANGE. There shall have occurred any
condition or event that the Global Agent or the Required Lenders shall determine
in good faith has or is reasonably likely to have a Material Adverse Effect.

         Section 7.10. SENIOR INDENTURE. If any Event of Default (as defined in
the Senior Indenture) shall occur under the Senior Indenture.


                                       71



         Section 7.11. SUBORDINATED INDENTURE AND SUBORDINATED CONVERTIBLE
INDENTURE. If (a) (i) any Event of Default (as defined in the Subordinated
Indenture) shall occur under the Subordinated Indenture; (ii) without the prior
written consent of the Global Agent and the Required Lenders, any Company shall
incur any Indebtedness that shall constitute, in whole or in part, Credit
Facilities (as defined in the Subordinated Indenture) other than the
Indebtedness set forth on SCHEDULE 6.22 hereto; or (iii) the Debt, or any part
thereof, shall cease to constitute Senior Indebtedness (as defined in the
Subordinated Indenture), Designated Senior Indebtedness (as defined in the
Subordinated Indenture) or Permitted Debt (as defined in the Subordinated
Indenture); or (b) (i) any Event of Default (as defined in the Subordinated
Convertible Indenture) shall occur under the Subordinated Convertible Indenture;
(ii) the Debt, or any part thereof, shall cease to constitute Senior
Indebtedness (as defined in the Subordinated Convertible Indenture), Designated
Senior Indebtedness (as defined in the Subordinated Convertible Indenture) or
Permitted Debt (as defined in the Subordinated Convertible Indenture); or (iii)
Borrower shall designate any Indebtedness as Designated Senior Indebtedness (as
defined in the Subordinated Convertible Indenture) without the prior written
consent of the Global Agent.

         Section 7.12. VALIDITY OF LOAN DOCUMENTS. If (a) any material
provision, in the sole opinion of the Global Agent, of any Loan Document shall
at any time for any reason cease to be valid, binding and enforceable against
Borrower or any Guarantor of Payment; (b) the validity, binding effect or
enforceability of any Loan Document against Borrower or any Guarantor of Payment
shall be contested by any Company or Obligor; (c) Borrower or any Guarantor of
Payment shall deny that it has any or further liability or obligation
thereunder; or (d) any Loan Document shall be terminated, invalidated or set
aside, or be declared ineffective or inoperative or in any way cease to give or
provide to the Global Agent and the Lenders the benefits purported to be created
thereby.

         Section 7.13. SOLVENCY. If any Company with total assets the market
value of which shall exceed One Million Dollars ($1,000,000) shall (a) except as
permitted pursuant to Section 5.12 hereof, discontinue business, (b) generally
not pay its debts as such debts become due, (c) make a general assignment for
the benefit of creditors, (d) apply for or consent to the appointment of a
receiver, a custodian, a trustee, an interim trustee or liquidator of all or a
substantial part of its assets, (e) be adjudicated a debtor or have entered
against it an order for relief under Title 11 of the United States Code, as the
same may be amended from time to time, (f) file a voluntary petition in
bankruptcy, or have an involuntary proceeding filed against it and the same
shall continue undismissed for a period of thirty (30) days from commencement of
such proceeding or case or file a petition or an answer seeking reorganization
or an arrangement with creditors or seeking to take advantage of any other law
(whether federal or state) relating to relief of debtors, or admit (by answer,
by default or otherwise) the material allegations of a petition filed against it
in any bankruptcy, reorganization, insolvency or other proceeding (whether
federal or state) relating to relief of debtors, (g) suffer or permit to
continue unstayed and in effect for thirty (30) consecutive days any judgment,
decree or order entered by a court of competent jurisdiction, which approves a
petition seeking its reorganization or appoints a receiver, custodian, trustee,
interim trustee or liquidator of all or a substantial part of its assets, or (h)
take, or omit to take, any action in order thereby to effect any of the
foregoing.


                       ARTICLE VIII. REMEDIES UPON DEFAULT


                                       72



         Notwithstanding any contrary provision or inference herein or
elsewhere,

         Section 8.1. OPTIONAL DEFAULTS. If any Event of Default referred to in
Section 7.1, 7.2., 7.3, 7.4, 7.5, 7.6, 7.7, 7.8, 7.9, 7.10, 7.11 or 7.12 hereof
shall occur, the Global Agent may, with the consent of the Required Lenders, and
shall, at the request of Required Lenders, give written notice to Borrower, to:

         (a) terminate the Commitment and the credits hereby established, if not
previously terminated, and, immediately upon such election, the obligations of
the Global Agent and the Lenders, and each thereof, to make any further Loan and
the obligation of the Fronting Lender to issue any Letter of Credit hereunder
immediately shall be terminated, and/or

         (b) accelerate the maturity of all of the Debt (if the Debt shall not
already be due and payable), whereupon all of the Debt shall become and
thereafter be immediately due and payable in full without any presentment or
demand and without any further or other notice of any kind, all of which are
hereby waived by Borrower.

         Section 8.2. AUTOMATIC DEFAULTS. If any Event of Default referred to in
Section 7.13 hereof shall occur:

         (a) all of the Commitment and the credits hereby established shall
automatically and immediately terminate, if not previously terminated, and
neither the Global Agent nor any Lender thereafter shall be under any obligation
to grant any further Loan, nor shall the Fronting Lender be obligated to issue
any Letter of Credit hereunder, and

         (b) the principal of and interest then outstanding on all of the Notes,
and all of the other Debt, shall thereupon become and thereafter be immediately
due and payable in full (if the Debt is not already due and payable), all
without any presentment, demand or notice of any kind, which are hereby waived
by Borrower.

         Section 8.3. LETTERS OF CREDIT. If the maturity of the Notes shall be
accelerated pursuant to Sections 8.1 or 8.2 hereof, Borrower shall immediately
deposit with the Collateral Agent, as security for the obligations of Borrower
to reimburse the Fronting Lender and the Lenders for any then outstanding
Letters of Credit, cash (in Dollars or the relevant Alternate Currency) equal to
the sum of the aggregate undrawn (or unpaid) balance of any then outstanding
Letters of Credit. The Global Agent and the Lenders are hereby authorized, at
their option, to deduct any and all such amounts from any deposit balances then
owing by any Lender to or for the credit or account of any Company, as security
for the obligations of Borrower to reimburse the Fronting Lender and the Lenders
for any then outstanding Letters of Credit.

         Section 8.4. OFFSETS. If there shall occur or exist any Event of
Default referred to in Section 7.13 hereof or if the maturity of the Notes shall
have been accelerated pursuant to Section 8.1 or 8.2 hereof, each Lender shall
have the right at any time to set off against, and to appropriate and apply
toward the payment of, any and all Debt then owing by Borrower to that Lender
(including, without limitation, any participation purchased or to be purchased
pursuant to Section 2.1 or 8.5 hereof), whether or not the same shall then have
matured, any and all deposit balances and all other indebtedness then held or
owing by that Lender to or for the credit or


                                       73



account of Borrower or a Guarantor of Payment, all without notice to or demand
upon Borrower or any other Person, all such notices and demands being hereby
expressly waived by Borrower and each Guarantor of Payment.

         Section 8.5. EQUALIZATION PROVISION.

         (a) EQUALIZATION WITHIN COMMITMENTS. Subject to subpart (b) below, each
Lender agrees with the other Lenders that if it, at any time, shall obtain any
Advantage over the other Lenders, or any thereof, in respect of the Applicable
Debt (except under Article III hereof), it shall purchase from the other
Lenders, for cash and at par, such additional participation in the Applicable
Debt as shall be necessary to nullify the Advantage.

         (b) EQUALIZATION AMONG COMMITMENTS. After the occurrence of a Sharing
Event, as defined in Section 10.1 hereof, each Lender agrees with each other
Lender that if it, at any time, shall obtain any Advantage over the other
Lenders, or any thereof, in respect of the Debt (except under Article III
hereof) then outstanding (as calculated, with respect to any amounts outstanding
in an Alternate Currency, using the Dollar Equivalent in effect on the
Equalization Date, as hereinafter defined), then such Lender having an Advantage
shall purchase from the other Lenders, for cash and at par, such additional
participation in the Debt as shall be necessary to nullify the Advantage. For
purposes of determining whether or not, after a Sharing Event, an Advantage
shall exist, the Global Agent shall, as of the date that the Sharing Event
occurs (the "EQUALIZATION DATE"):

               (i) add the General Revolving Commitment Exposure, the 364 Day
          Commitment Exposure and the Term Loan Exposure to determine the
          equalization maximum amount (the "EQUALIZATION MAXIMUM AMOUNT"); and

               (ii) determine an equalization percentage (the "EQUALIZATION
          PERCENTAGE") for each Lender by dividing the aggregate amount of its
          Lender Credit Exposure by the Equalization Maximum Amount.

         (c) RECOVERY OF AMOUNT. If any such Advantage resulting in the purchase
of an additional participation as set forth in subparts (a) or (b) hereof shall
be recovered in whole or in part from the Lender receiving the Advantage, each
such purchase shall be rescinded, and the purchase price restored (but without
interest unless the Lender receiving the Advantage is required to pay interest
on the Advantage to the Person recovering the Advantage from such Lender)
ratably to the extent of the recovery.

         (d) APPLICATION AND SHARING OF SET-OFF AMOUNTS. Each Lender further
agrees with the other Lenders that if it at any time shall receive any payment
for or on behalf of Borrower or any Guarantor of Payment on any Indebtedness
owing by Borrower or such Guarantor of Payment to that Lender by reason of
offset of any deposit or other Indebtedness, it shall apply such payment first
to any and all Indebtedness owing by Borrower or such Guarantor of Payment to
that Lender pursuant to this Agreement (including, without limitation, any
participation purchased or to be purchased pursuant to this Section or any other
Section of this Agreement). Borrower and each Guarantor of Payment agree that
any Lender so purchasing a participation from the other Lenders, or any thereof,
pursuant to this Section may exercise all of its rights of payment (including
the right of set-off) with respect to such participation as fully as if such


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Lender were a direct creditor of Borrower or such Guarantor of Payment in the
amount of such participation.


                          ARTICLE IX. THE GLOBAL AGENT

         The Lenders authorize National City Bank, and National City Bank hereby
agrees, to act as the administrative agent for the Lenders in respect of this
Agreement. The Global Agent agrees to act in such capacity upon the terms and
conditions set forth elsewhere in this Agreement, and upon the following terms
and conditions:

         Section 9.1. APPOINTMENT AND AUTHORIZATION. Each Lender hereby
irrevocably appoints and authorizes the Global Agent to take such action, as
agent, on such Lender's behalf, and to exercise such powers hereunder as are
delegated to the Global Agent by the terms hereof, together with such powers as
are reasonably incidental thereto. Neither the Global Agent nor any of its
respective affiliates, directors, officers, attorneys or employees shall have
any implied duties or any shall be liable for any action taken or omitted to be
taken by it or them hereunder or in connection herewith, respectively, except
for its or their own respective gross negligence or willful misconduct. As of
the Closing Date, Goldman Sachs, in its capacity as joint Lead Arranger, shall
not have any obligations, but shall be entitled to all benefits of this Article
IX.

         Section 9.2. NOTE HOLDERS. The Global Agent may treat the payee of any
Note as the holder thereof until written notice of transfer shall have been
filed with it, signed by such payee and in form satisfactory to the Global
Agent.

         Section 9.3. CONSULTATION WITH COUNSEL. The Global Agent may consult
with legal counsel selected by it and shall not be liable for any action taken
or suffered in good faith by it in accordance with the opinion of such counsel.

         Section 9.4. DOCUMENTS. The Global Agent shall be under no duty to
examine into or pass upon the validity, effectiveness, genuineness or value of
any Loan Documents or any other Related Writing furnished pursuant hereto or in
connection herewith or the value of any collateral obtained hereunder, and the
Global Agent shall be entitled to assume that the same are valid, effective and
genuine and what they purport to be.

         Section 9.5. THE GLOBAL AGENT AND AFFILIATES. With respect to the Loans
and Letters of Credit, the Global Agent shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
the Global Agent, and the Global Agent and its respective affiliates may accept
deposits from, lend money to and generally engage in any kind of trust, debt,
equity or other business with any Company or any affiliate thereof.

         Section 9.6. KNOWLEDGE OF DEFAULT. It is expressly understood and
agreed that the Global Agent shall be entitled to assume that no Default or
Event of Default shall have occurred, unless the Global Agent shall have been
notified by a Lender in writing that such Lender believes that a Default or
Event of Default shall have occurred and be continuing and specifying the nature
thereof.


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         Section 9.7. ACTION BY THE GLOBAL AGENT. Subject to the other terms and
conditions hereof, so long as the Global Agent shall be entitled, pursuant to
Section 9.6 hereof, to assume that no Default or Event of Default shall have
occurred and be continuing, the Global Agent shall be entitled to use its
discretion with respect to exercising or refraining from exercising any rights
that may be vested in it by, or with respect to taking or refraining from taking
any action or actions that it may be able to take under or in respect of, this
Agreement. The Global Agent shall incur no liability under or in respect of this
Agreement by acting upon any notice, certificate, warranty or other paper or
instrument believed by it to be genuine or authentic or to be signed by the
proper party or parties, or with respect to anything that it may do or refrain
from doing in the reasonable exercise of its judgment, or which may seem to it
to be necessary or desirable in the premises.

         Section 9.8. NOTICES; DEFAULT. In the event that the Global Agent shall
have acquired actual knowledge of any Default or Event of Default, the Global
Agent shall promptly notify the Lenders and shall take such action and assert
such rights under this Agreement as the Required Lenders shall direct and the
Global Agent shall inform the other Lenders in writing of the action taken.
Subject to the other terms and conditions hereof, the Global Agent may take such
action and assert such rights as it shall deem to be advisable, in its
discretion, for the protection of the interests of the holders of the Notes.

         Section 9.9. INDEMNIFICATION OF THE GLOBAL AGENT. The Lenders agree to
indemnify the Global Agent (to the extent not reimbursed by Borrower) ratably,
according to their respective Applicable Commitment Percentages, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against the
Global Agent as agent in any way relating to or arising out of this Agreement or
any Loan Document or any action taken or omitted by the Global Agent with
respect to this Agreement or any Loan Document, provided that no Lender shall be
liable to the Global Agent for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including attorneys' fees) or disbursements resulting from the Global Agent's
gross negligence or willful misconduct, as determined by a court of competent
jurisdiction, or from any action taken or omitted by the Global Agent in any
capacity other than in its agency capacity under this Agreement.

         Section 9.10. SUCCESSOR AGENT. The Global Agent may resign from its
respective agency capacity hereunder by giving not fewer than thirty (30) days
prior written notice to Borrower and the Lenders. If the Global Agent (the
"Resigning Agent") shall resign under this Agreement, then either (a) the
Required Lenders shall appoint from among the Lenders a successor agent (a
"Successor Agent") for the Lenders (with the consent of Borrower so long as an
Event of Default shall not have occurred and which consent shall not be
unreasonably withheld), or (b) if a Successor Agent shall not be so appointed
and approved within the thirty (30) day period following the Resigning Agent's
notice to the Lenders of its resignation, then the Resigning Agent, with the
approval of the Global Agent, shall appoint a Successor Agent that shall serve
in the same agency capacity as the Resigning Agent until such time as the
Required Lenders shall appoint a Successor Agent. Upon its appointment, such
Successor Agent shall succeed to the rights, powers and duties of the Resigning
Agent, and all references to the Resigning Agent shall mean the Successor Agent,
effective upon its appointment, and the


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Resigning Agent's rights, powers and duties as agent shall be terminated without
any other or further act or deed on the part of such Resigning Agent or any of
the parties to this Agreement.


                       ARTICLE X. INTERCREDITOR PROVISIONS

         Section 10.1. DEFINITIONS. For the purposes of this Article, the
following terms shall have the following meanings:

         "Acceleration Event" shall have occurred if (a) after the occurrence of
a Default Event with respect to the Lender Obligations, the maturity of the
Lender Obligations shall have been accelerated, or (b) after the occurrence of a
Default Event with respect to the Senior Indenture Obligations, the maturity of
any of the Senior Indenture Obligations shall have been accelerated.

         "Administrative Expenses" shall mean (a) any and all reasonable costs,
liabilities and expenses (including, without limitation, losses, damages,
penalties, claims, actions, reasonable attorneys' fees, legal expenses,
judgments, suits and disbursements) incurred by, imposed upon, or asserted
against, the Collateral Agent in the performance of its duties under or
otherwise in connection with this Agreement or the Collateral Documents, or in
any attempt by the Collateral Agent to (i) obtain, preserve, perfect or enforce
any security interest evidenced by this Agreement, any other Collateral Document
or any other Lending Party Document; (ii) obtain payment, performance or
observance of any and all of the Obligations; or (iii) maintain, insure, audit,
collect, preserve, repossess or dispose of any of the Creditor Collateral or any
other collateral securing the Obligations, including, without limitation, costs
and expenses for appraisals, assessments, and audits of any Company, or any such
Creditor Collateral; (b) to the extent not covered in subpart (a) hereof, all
costs and expenses payable to the Collateral Agent pursuant to Section 10.20 of
this Agreement; or (c) all costs, liabilities and expenses incidental or related
to (a) or (b) above, including, without limitation, interest thereupon from the
date incurred, imposed or asserted until paid at the Default Rate.

         "Administrative Obligations" shall mean, collectively, all
Administrative Expenses and all other Indebtedness or other obligations now
owing or hereafter incurred by Borrower or any other Company to the Collateral
Agent pursuant to this Agreement or any Collateral Document.

         "Collateral Documents" shall mean the Security Documents, together with
all other documents, instruments or agreements executed in connection with the
Security Documents, or in connection with any security interest or Lien granted,
or otherwise obtained, on or in connection with the Creditor Collateral, or any
part thereof.

         "Creditor" shall mean any Lender, Securities Holder or Other Lender.

         "Creditor Collateral" shall mean, collectively, (a) all of the
Collateral, as defined in each of the respective Security Documents executed by
any Company, (b) all of the Mortgaged Real Property, and (c) any other property,
whether tangible or intangible, at any time securing the Obligations, or any
part thereof, whether such Lien securing any of the Obligations shall have been
granted to, or otherwise obtained by, the Collateral Agent or any Creditor.


                                       77



         "Default Event" shall mean the occurrence of (a) an Event of Default,
or (b) an "Event of Default", as defined in the Senior Indenture.

         "Hedge Agreement Obligations" shall mean the aggregate amount of
Indebtedness under any Hedge Agreement entered into by Borrower with a Lender
(or any of such Lender's affiliates) in connection with the Debt or any part
thereof, provided that, in determining the amount of the Indebtedness under any
Hedge Agreement, such amount shall be based upon the net termination obligation
of Borrower under such Hedge Agreement, calculated as of any date as if such
Hedge Agreement shall have been terminated as of such date.

         "Insolvency Event" shall mean (a) the pendency of any case against
Borrower or any Guarantor of Payment arising under the United States Bankruptcy
Code of 1978, as amended, or any successor statute, (b) the pendency of any case
against Borrower or any Guarantor of Payment arising under any other bankruptcy,
reorganization, compromise, arrangement, insolvency, readjustment of debt,
dissolution, liquidation or other similar law of any jurisdiction, (c) the
appointment of, or taking possession by, a trustee, receiver, custodian,
liquidator or similar official of Borrower or any Guarantor of Payment or any
substantial assets of any of them, (d) any assignment for the benefit of
creditors of Borrower or any Guarantor of Payment, or (e) the failure of
Borrower or any Guarantor of Payment generally to pay its debts as they become
due.

         "Lender Obligations" shall mean, collectively, (a) the Debt, and (b)
all other Indebtedness or other obligations incurred by any Company to the
Global Agent and the Lenders pursuant to this Agreement or any other Loan
Document, whether for principal, interest, fees, premiums, costs or indemnities,
and whether now existing or hereafter arising.

         "Lending Parties" shall mean, collectively, (a) the Global Agent, on
behalf of the Lenders, (b) each Securities Holder, and (c) each Other Lender.

         "Lending Party" shall mean (a) the Global Agent, on behalf of the
Lenders, (b) any Securities Holder, or (c) any Other Lender.

         "Lending Party Documents" shall mean, collectively, (a) the Loan
Documents, (b) the Senior Indenture and the Senior Securities, together with all
other documents, instruments or agreements executed and delivered in connection
with the foregoing, and (c) the Other Lender Documents.

         "Lending Party Pro Rata Share" shall mean, at the time of
determination, with respect to any Lending Party, the percentage that shall be
determined by dividing:

               (a) (i) for the Global Agent and the Lenders, the Loan and
          Reimbursement Obligations, (ii) for each Securities Holder, the
          aggregate principal amount then outstanding to such Securities Holder
          pursuant to the Senior Indenture, and (iii) for each Other Lender, (A)
          the aggregate principal amount of the Other Lender Obligations (other
          than the Hedge Agreement Obligations owing to such Other Lender) then
          outstanding from such Other Lender, plus (B) the Hedge Agreement
          Obligations, if any, owing to such Other Lender; by


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               (b) the sum of (i) the aggregate outstanding principal Dollar
          Equivalent amount of all of the Obligations (other than the
          Administrative Obligations), (ii) the Letter of Credit Exposure, and
          (iii) the Hedge Agreement Obligations.

For all purposes under this Agreement or any of the Collateral Documents,
Lending Party Pro Rata Share shall be determined on the date of the occurrence
of the first Sharing Event.

         "Loan and Reimbursement Obligations" shall mean, at the time of
determination, with respect to the Lender Obligations, the sum of (a) the
aggregate principal Dollar Equivalent amount of the Loans then outstanding, plus
(b) the Letter of Credit Exposure.

         "Obligations" shall mean, collectively, (a) the Lender Obligations, (b)
the Securities Holder Obligations, (c) the Other Lender Obligations, and (d) the
Administrative Obligations.

         "Other Lender" shall mean (a) the financial institution set forth on
SCHEDULE 10.1 hereto; or (b) any Lender that shall have entered (or in the
future enters) into a Hedge Agreement with Borrower; provided that, if any such
Lender shall cease to be a Lender under this Agreement, then the Other Lender
Obligations owing to such Lender shall no longer be secured by the Creditor
Collateral.

         "Other Lender Documents" shall mean the promissory notes and other
agreements evidencing or relating to the Other Lender Obligations.

         "Other Lender Obligations" shall mean (a) the Indebtedness and other
obligations incurred by Borrower arising under the Other Lender Documents as
described on SCHEDULE 10.1 hereto; provided, however, that the amount owing to
such Other Lender with respect to such obligations and secured pursuant to the
provisions of this Article X (other than with respect to Hedge Agreement
Obligations) shall not exceed the amount set forth opposite such Other Lender's
name on SCHEDULE 10.1 hereto, and (b) the Hedge Agreement Obligations.

         "Securities Holder" shall mean each Holder, as defined in the Senior
Indenture, under the Senior Indenture.

         "Securities Holder Obligations" shall mean all Indebtedness or other
obligations incurred by Borrower to the Securities Holders pursuant to the
Senior Securities and the Senior Indenture, whether for principal, interest,
fees, costs or indemnities, and whether now existing or hereafter arising.

         "Senior Securities" shall mean the securities or other instruments
issued pursuant to the Senior Indenture, as the same may from time to time be
amended, supplemented, restated or otherwise modified or replaced.

         "Sharing Event" shall mean the earlier of (a) the occurrence of an
Insolvency Event, or (b) the occurrence of an Acceleration Event.

         Section 10.2. CREDITOR OBLIGATIONS TO BE RATABLY SECURED. In order to
comply with the provisions of Section 1008 of the Senior Indenture, Borrower,
the Global Agent and the Lenders agree that all of the Obligations shall be
secured equally and ratably pursuant to the


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provisions of this Article X. In the event that the Securities Holders (or any
trustee or designee acting on behalf of the Securities Holders) shall request
the Global Agent, the Lenders, and the Collateral Agent to enter into a separate
intercreditor agreement with respect to the Creditor Collateral, then (a)
Borrower, (b) the Global Agent, acting on behalf of the Lenders (and each of the
Lenders hereby authorizes the Global Agent to so act upon its behalf), (c) the
Other Lenders, and (d) the Collateral Agent shall enter into an intercreditor
agreement (containing terms and conditions substantially similar to those set
forth in this Article X with the Securities Holders (or any trustee or designee
acting on their behalf) to facilitate the terms and conditions of this Article
X. The Global Agent is hereby authorized to sign any such intercreditor
agreement on behalf of the Lenders, and the Lenders shall be bound by the terms
of such intercreditor agreement as if they were parties thereto.

         Section 10.3. APPOINTMENT OF THE COLLATERAL AGENT. Each Creditor hereby
appoints National City Bank (together with its successors and assigns) as the
Collateral Agent under this Agreement and each Collateral Document, with such
powers as are specifically delegated to the Collateral Agent by the terms of
this Agreement and the Collateral Documents, together with such other powers as
are reasonably incidental thereto in order to carry out the intent of this
Agreement and the Collateral Documents, in the opinion of the Collateral Agent,
and National City Bank hereby accepts such appointment as the Collateral Agent
under this Agreement and the Collateral Documents. Neither the Collateral Agent
nor any of its directors, officers, attorneys or employees shall be liable for
any action taken or omitted to be taken by it or them hereunder or in connection
herewith, except for its or their own gross negligence or willful misconduct, as
determined by a court of competent jurisdiction.

         Section 10.4. PRO RATA DISTRIBUTION OF THE CREDITOR COLLATERAL. The
Collateral Agent shall be the secured party, beneficiary or mortgagee, as
applicable, under the Collateral Documents. The Creditor Collateral shall be
held for the benefit of the Lending Parties on a pari passu basis and shall
serve as security for the Obligations. Subject to the terms of this Agreement,
the Collateral Agent shall receive, hold, administer and enforce the Collateral
Documents, and foreclose upon, collect, dispose of all or any part of the
Creditor Collateral, for the benefit of the respective Lending Parties based
upon the Lending Party Pro Rata Share of each such Lending Party, and deliver to
the Lending Parties, the proceeds therefrom for the benefit of the respective
Lending Parties, based upon the Lending Party Pro Rata Share of each respective
Lending Party, in accordance with the terms of this Agreement. Each Creditor
agrees that any security interest or Lien granted to any Creditor with respect
to the Creditor Collateral, or any part thereof, whether granted prior to, or on
or after, the date of this Agreement, shall be deemed to be held by such
Creditor for the benefit of the Lending Parties pursuant to the terms of this
Agreement. Each Creditor further agrees that, notwithstanding the relative
priority or time of granting, creation, attachment or perfection under
applicable law of any security interest or lien, if any, of the Collateral Agent
or any Creditor, whether such security interest or lien shall arise now or
hereafter be acquired, such security interest or lien shall be first a first
priority security interest or lien in favor of the Collateral Agent to secure
the Obligations on a pari passu basis for the benefit of the respective Lending
Parties in accordance with the provisions of this Article X.

         Section 10.5. PAYMENTS OR PROCEED RECEIVED BY A CREDITOR PRIOR TO A
SHARING EVENT. Prior to the occurrence of a Sharing Event, the Creditors agree
that any Creditor may accept and apply payments made from any source (including
proceeds of the Creditor Collateral) on or in


                                       80



respect of the Obligations owing to such Creditor without any responsibility to
turn over to the Collateral Agent or share with any other Creditor such
payments, except as otherwise specifically provided in this Agreement with
respect to sharing among the Lenders.

         Section 10.6. PAYMENTS OR PROCEEDS RECEIVED BY THE COLLATERAL AGENT
PRIOR TO A SHARING EVENT. If the Collateral Agent (in its capacity as the
Collateral Agent and not in any other capacity) shall receive any payments from
any source (including proceeds of the Creditor Collateral) on or in respect of
the Obligations at any time prior to the occurrence of a Sharing Event, such
payment or proceeds shall be delivered to the appropriate Lending Party or, so
long as no Event of Default shall exist, to the appropriate Company, as the case
may be. If an Event of Default shall have occurred, the Collateral Agent shall
not deliver the proceeds of any of the Creditor Collateral to any Company unless
the Required Lenders so direct.

         Section 10.7. PAYMENTS OR PROCEEDS RECEIVED AFTER A SHARING EVENT.
After the occurrence of a Sharing Event, (a) any payment received (whether from
the proceeds of the Creditor Collateral or otherwise) from any Company by any
Creditor, shall be immediately forwarded to the Collateral Agent to be
distributed in accordance with the provisions of Section 10.8 hereof, and (b)
any payment received (whether from the proceeds of the Creditor Collateral or
otherwise) by the Collateral Agent shall be distributed in accordance with the
provisions of Section 10.8 hereof.

         Section 10.8. DISTRIBUTION OF PROCEEDS. Except as set forth in Section
10.6 hereof, any proceeds received by the Collateral Agent at any time shall be
applied by the Collateral Agent as follows:

               (a) first, to the payment of any Administrative Obligations,
          including, but not limited to, the costs and expenses of the
          Collateral Agent in connection with any sale, collection or other
          realization incurred by the Collateral Agent under the provisions of
          this Agreement, or any other fees (including attorneys' fees,
          accountants fees and other fees for special advisors or consultants
          retained by the Collateral Agent), expenses, liabilities (including
          rights to indemnification) or advances made or incurred by the
          Collateral Agent in connection with the administration or enforcement
          of the Collateral Documents;

               (b) second, to each Lending Party in an amount equal to the
          Lending Party Pro Rata Share of the amount to be distributed, until
          all of the Obligations shall have been satisfied in full; and

               (c) third, after all of the Obligations shall have been
          irrevocably satisfied in full, to Borrower or a Guarantor of Payment,
          as appropriate, or as a court of competent jurisdiction may direct or
          as otherwise required by law.

Notwithstanding the foregoing, any amounts to be distributed for application to
a Creditor's liabilities with respect to any issued but undrawn (or unpaid)
Letter of Credit shall be held by the Collateral Agent in an interest bearing
trust account (the "COLLATERAL TRUST ACCOUNT") as collateral security for such
liabilities until a drawing on such Letter of Credit, at which time such
amounts, together with interest accrued thereon, shall be released by the
Collateral Agent and applied to such liabilities. If any such Letter of Credit
shall expire without having been drawn


                                       81



upon (or paid) in full, the amounts held in the Collateral Trust Account with
respect to the undrawn (or unpaid) portion of such Letter of Credit, together
with interest accrued thereon, shall be applied by the Collateral Agent in
accordance with this Section 10.8.

         Section 10.9. DELIVERY OF CREDITOR COLLATERAL TO THE COLLATERAL AGENT.
If any Creditor receives possession of any portion of the Creditor Collateral,
or any proceeds thereof, whether prior to or after the occurrence of a Sharing
Event, such Creditor shall receive and hold the same in trust for the Collateral
Agent and shall deliver such Creditor Collateral or proceed to the Collateral
Agent, wherein the Collateral Agent shall hold or dispose of such Creditor
Collateral in accordance with the provisions of this Article X.

         Section 10.10. RETURN OF PAYMENTS. If any payment or other proceeds
received by any Creditor shall be required to be repaid or returned, in whole or
in part, by such Creditor to the payor thereof, or to any trustee, agent or
other representative, or such payment shall be otherwise rescinded, in whole or
in part, pursuant to applicable law, each other Creditor that shall have
received all or any part of such payment or proceeds shall promptly, upon
written demand, return all or the ratable part, as the case may be, of the
portion of such payment or proceeds so received by such other Creditor (and any
interest thereon to the extent the same is required to be paid by the Creditor
originally receiving such payment or proceeds in respect of the return of such
payment or proceeds) in order to equitably adjust for the return of all or part
of such payment or proceeds.

         Section 10.11. LENDING PARTY RIGHTS AND REMEDIES.

         (a) Except as set forth in subpart (c) below, each Lending Party shall
have the rights and remedies available to it under its respective Lending Party
Documents, other than rights specifically reserved for the Collateral Agent
under any of the Collateral Documents, upon the occurrence of a Default Event or
otherwise, including, but not limited to, the right to (i) accelerate any of the
Obligations owing to such Lending Party, (ii) institute suit against any
Company, (iii) take any other enforcement action with respect to any Default
Event, and (iv) take any other enforcement action with respect to any Default
Event; provided, however, that each Lending Party agrees that it shall have
recourse under or by virtue of the Collateral Documents to the Creditor
Collateral only through the Collateral Agent and that no Creditor Party shall
have any independent recourse to the liens and security interests created by the
Collateral Documents or otherwise, except that any Creditor may set-off any
amount of any balances held by it for the account of any Company or any other
property held or owing by such Creditor to or for the credit or the account of
any Company (provided that the amount set-off shall be delivered to the
Collateral Agent for application pursuant the terms of this Agreement).

         (b) Upon the occurrence of a Sharing Event, the appropriate Lending
Party shall promptly, and in any event within one Business Day thereafter,
provide notice to the Collateral Agent of the occurrence of such Sharing Event,
and, upon receipt of such notice, the Collateral Agent shall promptly, and in
any event within one Business Day of receipt thereof, deliver a copy to all of
the Creditors; provided, however, that the failure to provide any of the
foregoing notices shall not affect, in any way, any of the rights or obligations
of any Person under this Agreement.


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         (c) Upon receipt of a notice of a Sharing Event and at all times
thereafter, no Creditor shall institute suit against any Company or otherwise
take any other enforcement action with respect to the Creditor Collateral.

         (d) By accepting any proceeds of the Creditor Collateral pursuant to
this Article X or the benefits of any Collateral Document, a Lending Party shall
be deemed to be bound by the terms and conditions set forth herein.

         Section 10.12. RIGHTS AND REMEDIES OF THE COLLATERAL AGENT UPON SHARING
EVENT. Upon the occurrence of a Sharing Event, the Required Lenders may notify
and direct the Collateral Agent to enforce the rights of the Creditors in and to
the Creditor Collateral through such remedies as may be available pursuant to
the terms and conditions of any Collateral Document, at law or in equity, or
otherwise. The Collateral Agent shall act as the Required Lenders may, in their
reasonable discretion, direct, provided that the Collateral Agent shall have no
liability for acting in accordance with such request and no Creditor shall have
any liability to any other Creditor in connection with any such request. The
Collateral Agent shall not release any Liens or Creditor Collateral without the
direction or consent of the Required Lenders, except as expressly permitted
pursuant to Section 10.15 hereof.

         Section 10.13. APPOINT OF POWER OF ATTORNEY. Each Creditor irrevocably
authorizes, appoints, and empowers the Collateral Agent to act as such
Creditor's attorney-in-fact with respect to the Creditor Collateral, or any part
thereof, or under or with respect to any of the Collateral Documents, as the
Collateral Agent may deem necessary or advisable for the enforcement of the
provisions of this Article X or the Collateral Documents, or to otherwise carry
out the intent of the provisions of this Article X. Each Creditor shall execute
and deliver to the Collateral Agent such powers of attorney, assignments, or
other instruments as may be reasonably requested by the Collateral Agent to
enable the Collateral Agent to enforce any and all of the Collateral Agent's
rights or duties under this Agreement and the Collateral Documents.

         Section 10.14. OBLIGATIONS UNAFFECTED; MODIFICATION OF LENDING
DOCUMENTS. Except for the agreements made pursuant to this Article X, the
Lending Party Documents shall be unaffected hereby. Each Lending Party shall be
entitled to amend, restate or otherwise modify any of their respective Lending
Party Documents in accordance with the respective terms of such Lending Party
Documents; provided, however, that, in the event that any Lending Party shall
receive any additional Creditor Collateral or other security for any of their
respective Obligations or file any additional financing statement, mortgage or
other lien with respect thereto, such collateral or other security shall become
part of the Creditor Collateral hereunder and shall be held in trust for the
benefit of the Lending Parties, subject to the terms and conditions of this
Article X.

         Section 10.15. RELEASE OF CREDITOR COLLATERAL. Each Lending Party
hereby authorizes the Collateral Agent to execute and deliver such releases and
termination statements as may be necessary to permit the release of any Creditor
Collateral, so long as such release is made in connection with the sale, lease,
transfer or other disposition of assets specifically permitted pursuant to this
Agreement.

         Section 10.16. ACCOUNTING. Each Lending Party agrees to render to the
Collateral Agent, at any time upon request of the Collateral Agent, an
accounting of the amounts of the


                                       83



Obligations owing to such Lending Party and such other information with respect
to the Obligations owing to such Lending Party as the Collateral Agent may
reasonably request in order to give effect to the terms and conditions of this
Article X.

         Section 10.17. CONTESTING LIENS OR SECURITY INTERESTS. No Creditor
shall contest the validity, perfection, priority or enforceability of any Lien
or security interest granted to the Collateral Agent or any Creditor (provided
that such Lien or security interest shall be held for the benefit of the
Collateral Agent and the Lending Parties and shall be subject to the terms of
this Article X).

         Section 10.18. ACTIONS BY THE COLLATERAL AGENT. Each Creditor
acknowledges that (a) such Creditor has performed and shall continue to perform
its own credit analysis of the Companies, and its own investigations of the
risks involved in the transactions contemplated in connection with the
Obligations and in entering into this Agreement and the Collateral Documents,
(b) such Creditor has reviewed and approved the form and substance of each of
the Collateral Documents, including any U.C.C. financing statements filed in
connection with any of the Collateral Documents, and (c) the Collateral Agent,
by executing this Agreement, has not nor at any time shall the Collateral Agent
be deemed to have, made any representation or warranty, express or implied, with
respect to the (i) due execution, authenticity, legality, accuracy,
completeness, validity or enforceability of any of the Collateral Documents or
as to the financial condition or creditworthiness of Borrower or any other
Company, or the collectability of the Obligations, or (ii) validity, perfection,
priority, enforceability, value or sufficiency of, or title to any of the
Creditor Collateral, or the filing or recording, or taking of any other action
with respect to the Creditor Collateral. Although the Collateral Agent shall
endeavor to exercise the same care in administering the Creditor Collateral as
if the Collateral Agent were acting for its own account, the Collateral Agent
shall be fully protected in relying upon any document that appears to it to be
genuine and upon the advice of legal counsel, independent accountants and other
appropriate experts (including those retained by any Company). Neither the
Collateral Agent nor any of its affiliates, directors, officers, attorneys or
employees shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith, except for its or their own gross
negligence or willful misconduct, as determined by a court of competent
jurisdiction.

         Section 10.19. BANKRUPTCY FILING. The provisions of this Article X
shall be applicable both before and after the filing of any petition by or
against Borrower or any other Company under the United States Bankruptcy Code
or, if applicable, under the laws of any foreign jurisdiction, and all
references in this Agreement to Borrower or any other Company shall be deemed to
apply to Borrower or such Company as debtor-in-possession. All postpetition
distributions of the proceeds of any of the Creditor Collateral shall, subject
to any court order approving the financing of Borrower or any other Company as
debtor-in-possession (i.e. this Article X shall not limit any Creditor's right
to provide postpetition financing, or any Creditor's right to object to any such
financing, in accordance with Section 364 of the United States Bankruptcy Code
and any such financing, and any liens or security interests granted in
connection with such financing, shall be on such terms and conditions as
approved by the Bankruptcy Court), continue to be made after the filing of any
such petition on the same basis that the Creditor Collateral was to be
distributed prior to the date of such petition.


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         Section 10.20. INDEMNIFICATION BY CREDITORS. To the extent not
indemnified or reimbursed by Borrower, the Lending Parties agree to indemnify
the Collateral Agent, on the basis of the Lending Party Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against the
Collateral Agent in its capacity as collateral agent in any way relating to or
arising out of this Agreement or any Collateral Document or any action taken or
omitted by the Collateral Agent with respect to this Agreement or any Collateral
Document, provided that no Creditor shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses (including attorneys' fees) or disbursements resulting from the
Collateral Agent's gross negligence or willful misconduct, as determined by a
court of competent jurisdiction, or from any action taken or omitted by the
Collateral Agent in any capacity other than as collateral agent under this
Agreement.

         Section 10.21. RIGHT TO OPT OUT. Any Lending Party shall be entitled to
opt out of the sharing provisions of this Article X by giving written notice to
the Collateral Agent and each Lending Party (a "Disclaiming Creditor").
Effective upon receipt by the Collateral Agent of such notice from any
Disclaiming Creditor, such Disclaiming Creditor (a) shall have no interest in
any of the Creditor Collateral, nor shall such Disclaiming Creditor be entitled
to its Lending Party Pro Rata Share of the proceeds of any of the Creditor
Collateral, and (b) shall not be liable for any indemnification obligations with
respect to the Collateral Agent or any of the Creditor Collateral, except with
respect to any such obligations that relate to claims arising or occurring prior
to the date such Creditor shall have become a Disclaiming Creditor under this
Section 10.21.

         Section 10.22. THIRD PARTIES. The provisions of this Article X shall be
solely for the benefit of the Collateral Agent and the Creditors and are not
intended to grant any rights, benefits or defenses to or for the benefit of
Borrower, any other Company or any other Person. No Company shall have any
rights under this Article X.

         Section 10.23. SUCCESSOR COLLATERAL AGENT. The Collateral Agent may
resign as collateral agent hereunder by giving not fewer than thirty (30) days
prior written notice to the Global Agent and the Lenders. If the Collateral
Agent shall resign under this Agreement, then either (a) the Required Lenders
shall appoint a successor collateral agent hereunder, or (b) if a successor
collateral agent shall not have been so appointed and approved within the thirty
(30) day period following the Collateral Agent's notice to the Global Agent and
the Lenders of its resignation, then the Collateral Agent shall appoint a
successor collateral agent that shall serve as collateral agent until such time
as the Required Lenders appoint a successor collateral agent. Upon its
appointment, such successor collateral agent shall succeed to the rights, powers
and duties as collateral agent, and the term "Collateral Agent" under this
Agreement and any other Collateral Document shall mean such successor, effective
upon its appointment, and the former collateral agent's rights, powers and
duties as collateral agent shall be terminated without any other or further act
or deed on the part of such former collateral agent or any of the parties to
this Agreement.

         Section 10.24. TERMINATION. The provisions of this Article X shall
remain in full force and effect until all of the Lender Obligations shall have
been indefeasibly paid in full, and


                                       85



this Agreement terminated and not replaced by any other credit facility with the
Global Agent and the Lenders.


                            ARTICLE XI. MISCELLANEOUS

         Section 11.1. LENDERS' INDEPENDENT INVESTIGATION. Each Lender, by its
signature to this Agreement, acknowledges and agrees that the Global Agent has
not made any representation or warranty, express or implied, with respect to the
creditworthiness, financial condition, or any other condition of any Company or
with respect to the statements contained in any information memorandum furnished
in connection herewith or in any other oral or written communication between the
Global Agent and such Lender. Each Lender represents that it has made and shall
continue to make its own independent investigation of the creditworthiness,
financial condition and affairs of the Companies in connection with the
extension of credit hereunder, and agrees that the Global Agent shall not have
any duty or responsibility, either initially or on a continuing basis, to
provide any Lender with any credit or other information with respect thereto
(other than such notices as may be expressly required to be given by the Global
Agent to the Lenders hereunder), whether coming into its possession before the
first Credit Event hereunder or at any time or times thereafter.

         Section 11.2. NO WAIVER; CUMULATIVE REMEDIES. No omission or course of
dealing on the part of the Global Agent, any Lender or the holder of any Note in
exercising any right, power or remedy hereunder or under any of the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder
or under any of the Loan Documents. The remedies herein provided are cumulative
and in addition to any other rights, powers or privileges held by operation of
law, by contract or otherwise.

         Section 11.3. AMENDMENTS, CONSENTS. No amendment, modification,
termination, or waiver of any provision of any Loan Document nor consent to any
variance therefrom, shall be effective unless the same shall be in writing and
signed by the Required Lenders and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given (with the understanding, however, that, with respect to the application of
the mandatory prepayment provisions set forth in Section 2.8 hereof to the Term
Loan, the consent of Term Lenders holding at least fifty-one percent (51%) of
the aggregate amount outstanding under the Term Notes shall be required to amend
or waive such provisions). Anything herein to the contrary notwithstanding, the
prior written consent of all of the Lenders affected thereby shall be required
with respect to (a) any increase in the Commitment (or any part thereof), except
pursuant Section 2.7(c) hereof, (b) the extension of maturity of the Notes, the
payment date of interest or principal thereunder, or the payment of commitment
or other fees or amounts payable hereunder, (c) any reduction in the rate of
interest on the Notes, or in any amount of principal or interest due on any
Note, or reimbursement obligations with respect to any Letter of Credit, or the
payment of facility or other fees hereunder or any change in the manner of pro
rata application of any payments made by Borrower or the Collateral Agent to the
Lenders hereunder, (d) any change in any percentage voting requirement, voting
rights, or the Required Lenders definition in this Agreement, (e) the release of
any Guarantor of Payment or of any Collateral in excess of Five Million Dollars
($5,000,000) during any fiscal year of Borrower (other than the release of any
Collateral in connection with a transaction that shall be expressly permitted


                                       86



pursuant to the terms of this Agreement), or (f) any amendment to this Section
11.3 or Section 8.5 hereof. Notice of amendments or consents ratified by the
Lenders hereunder shall immediately be forwarded by the Global Agent to all
Lenders. Each Lender or other holder of a Note shall be bound by any amendment,
waiver or consent obtained as authorized by this Section, regardless of its
failure to agree thereto. In addition, Section 11.11 hereof may not be amended
without the prior written consent of any Designating Lender, as defined in
Section 11.11 hereof, affected thereby.

         Section 11.4. NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing and, if to Borrower,
mailed or delivered to it, addressed to it at the address specified on the
signature pages of this Agreement, if to the Global Agent or any Lender, mailed
or delivered to it, addressed to the address of the Global Agent or such Lender
specified on the signature pages of this Agreement, or, as to each party, at
such other address as shall be designated by such party in a written notice to
each of the other parties. All notices, statements, requests, demands and other
communications provided for hereunder shall be deemed to be given or made when
delivered or forty-eight (48) hours after being deposited in the mails with
postage prepaid by registered or certified mail, addressed as aforesaid, or sent
by facsimile with telephonic confirmation of receipt, except that notices
pursuant to any of the provisions hereof shall not be effective until received.

         Section 11.5. COSTS, EXPENSES AND TAXES. Borrower agrees to pay on
demand all costs and expenses of the Global Agent, and all Related Expenses,
including but not limited to, (a) syndication, administration, travel and
out-of-pocket expenses, including but not limited to attorneys' fees and
expenses, of the Global Agent in connection with the preparation, negotiation
and closing of the Loan Documents and the administration of the Loan Documents,
the collection and disbursement of all funds hereunder and the other instruments
and documents to be delivered hereunder, (b) extraordinary expenses of the
Global Agent and the Collateral Agent in connection with the administration of
the Loan Documents and the other instruments and documents to be delivered
hereunder, and (c) the reasonable fees and out-of-pocket expenses of special
counsel for the Global Agent and the Collateral Agent, with respect to the
foregoing, and of local counsel, if any, that may be retained by such special
counsel with respect thereto. Borrower agrees to pay on demand all costs and
expenses of the Global Agent, the Collateral Agent and the Lenders, including
reasonable attorneys' fees, in connection with the restructuring or enforcement
of the Debt, this Agreement or any Related Writing. In addition, Borrower shall
pay any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution and delivery of the Loan Documents, and
the other instruments and documents to be delivered hereunder, and agree to hold
the Global Agent, the Collateral Agent and each Lender harmless from and against
any and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees.

         Section 11.6. INDEMNIFICATION. Borrower agrees to defend, indemnify and
hold harmless the Global Agent, the Collateral Agent and the Lenders (and their
respective affiliates, officers, directors, attorneys, agents and employees)
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including attorneys'
fees) or disbursements of any kind or nature whatsoever that may be imposed on,
incurred by or asserted against the Global Agent, the Collateral Agent or Lender
in connection with any investigative, administrative or judicial proceeding
(whether or not such Lender or the Global Agent or the Collateral Agent shall be
designated a party thereto) or any other claim by


                                       87



any Person relating to or arising out of any Loan Document or any actual or
proposed use of proceeds of the Loans or any of the Debt, or any activities of
any Company or any Obligor or any of their respective affiliates; provided that
the Global Agent, the Collateral Agent or any Lender shall not have the right to
be indemnified under this Section for its own gross negligence or willful
misconduct, as determined by a court of competent jurisdiction. All obligations
provided for in this Section 11.6 shall survive any termination of this
Agreement.

         Section 11.7. OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS. The
obligations of the Lenders hereunder are several and not joint. Nothing
contained in this Agreement and no action taken by the Global Agent or the
Lenders pursuant hereto shall be deemed to constitute the Global Agent or the
Lenders a partnership, association, joint venture or other entity. No default by
any Lender hereunder shall excuse the other Lenders from any obligation under
this Agreement; but no Lender shall have or acquire any additional obligation of
any kind by reason of such default. The relationship among Borrower and the
Lenders with respect to the Loan Documents and the Related Writings is and shall
be solely that of debtors and creditors, respectively, and neither the Global
Agent nor any Lender shall have any fiduciary obligation toward Borrower with
respect to any such documents or the transactions contemplated thereby.

         Section 11.8. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute but one and the
same agreement.

         Section 11.9. BINDING EFFECT; BORROWERS' ASSIGNMENT. This Agreement
shall become effective when it shall have been executed by Borrower, the Global
Agent and each Lender and thereafter shall be binding upon and inure to the
benefit of Borrower, the Global Agent and each Lender and their respective
successors and assigns, except that Borrower shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent of
the Global Agent and all of the Lenders.

         Section 11.10. LENDER ASSIGNMENTS/PARTICIPATIONS.

         (a) ASSIGNMENTS OF COMMITMENTS. Each Lender shall have the right at any
time or times to assign to an Eligible Transferee, without recourse, all or a
percentage of all of the following: (a) that Lender's Commitment, (b) all Loans
made by that Lender, (c) that Lender's Notes, and (d) that Lender's interest in
any Letter of Credit and any participation purchased pursuant to Section 2.1 or
8.5 hereof; provided, however, in each such case, that the assignor and the
assignee shall have complied with the following requirements:

               (i) PRIOR CONSENT. No assignment may be consummated pursuant to
          this Section 11.10 without the prior written consent of the Global
          Agent (other than an assignment by any Lender to any affiliate of such
          Lender which affiliate is either wholly-owned by such Lender or is
          wholly-owned by a Person that wholly owns, either directly or
          indirectly, such Lender), which consent of the Global Agent shall not
          be unreasonably withheld. Anything herein to the contrary
          notwithstanding, any Lender may at any time make a collateral
          assignment of all or any portion of its rights under the Loan
          Documents to a Federal Reserve Bank, and no such assignment shall
          release such assigning Lender from its obligations hereunder;


                                       88



               (ii) MINIMUM AMOUNT. Each such assignment shall be in a minimum
          amount of the lesser of One Million Dollars ($1,000,000) of the
          assignor's Commitment and interest herein or the entire amount of the
          assignor's Commitment and interest herein;

               (iii) ASSIGNMENT FEE; ASSIGNMENT AGREEMENT. Unless the assignment
          shall be to an affiliate of the assignor or the assignment shall be
          due to merger of the assignor or for regulatory purposes, either the
          assignor or the assignee shall remit to the Global Agent, for its own
          account, an administrative fee (which fee may be waived by the Global
          Agent, in its sole discretion) of Three Thousand Five Hundred Dollars
          ($3,500). Unless the assignment shall be due to merger of the assignor
          or a collateral assignment for regulatory purposes, the assignor shall
          (A) cause the assignee to execute and deliver to Borrowers and the
          Global Agent an Assignment Agreement, and (B) execute and deliver, or
          cause the assignee to execute and deliver, as the case may be, to the
          Global Agent such additional amendments, assurances and other writings
          as the Global Agent may reasonably require; and

               (iv) NON-U.S. ASSIGNEE. If the assignment is to be made to an
          assignee that is organized under the laws of any jurisdiction other
          than the United States or any state thereof, the assignor Lender shall
          cause such assignee, at least five (5) Business Days prior to the
          effective date of such assignment, (A) to represent to the assignor
          Lender (for the benefit of the assignor Lender, the Global Agent and
          Borrower) that under applicable law and treaties no taxes will be
          required to be withheld by the Global Agent, Borrower or the assignor
          with respect to any payments to be made to such assignee in respect of
          the Loans hereunder, (B) to furnish to the assignor (and, in the case
          of any assignee registered in the Register (as defined below), the
          Global Agent and Borrower) either (1) U.S. Internal Revenue Service
          Form 4224 or U.S. Internal Revenue Service Form 1001 or (2) United
          States Internal Revenue Service Form W-8 or W-9, as applicable
          (wherein such assignee claims entitlement to complete exemption from
          U.S. federal withholding tax on all interest payments hereunder), and
          (C) to agree (for the benefit of the assignor, the Global Agent and
          Borrower) to provide the assignor Lender (and, in the case of any
          assignee registered in the Register, the Global Agent and Borrower) a
          new Form 4224 or Form 1001 or Form W-8 or W-9, as applicable, upon the
          expiration or obsolescence of any previously delivered form and
          comparable statements in accordance with applicable U.S. laws and
          regulations and amendments duly executed and completed by such
          assignee, and to comply from time to time with all applicable U.S.
          laws and regulations with regard to such withholding tax exemption.

         Upon satisfaction of the requirements specified in subparts (i) through
(iv) above, Borrower shall execute and deliver (A) to the Global Agent, the
assignor and the assignee, any consent or release (of all or a portion of the
obligations of the assignor) required to be delivered by Borrower in connection
with the Assignment Agreement, and (B) to the assignee, an appropriate Note or
Notes. After delivery of the new Note or Notes, the assignor's Note or Notes
being replaced shall be returned to Borrower marked "replaced".

         Upon satisfaction of the requirements set forth in subparts (i) through
(iv) above, and any other condition contained in this Section 11.12(a), (A) the
assignee shall become and thereafter be deemed to be a "Lender" for the purposes
of this Agreement, (B) in the event that the


                                       89



assignor's entire interest has been assigned, the assignor shall cease to be and
thereafter shall no longer be deemed to be a "Lender", and (C) the signature
pages hereto and SCHEDULE 1 hereto shall be automatically amended, without
further action, to reflect the result of any such assignment.

         The Global Agent shall maintain at its address referred to in Section
11.4 hereof a copy of each Assignment Agreement delivered to it and a register
(the "REGISTER") for the recordation of the names and addresses of the Lenders
and the Commitment of, and principal amount of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and Borrower, the Global Agent and the Lenders may
treat each financial institution whose name is recorded in the Register as the
owner of the Loan recorded therein for all purposes of this Agreement. The
Register shall be available for inspection by Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.

         (b) SALE OF PARTICIPATIONS. Each Lender shall have the right at any
time or times, without the consent of the Global Agent, Borrower or any other
Lender, to sell one or more participations or sub-participations to an Eligible
Transferee, as the case may be, in all or any part of (a) that Lender's
Commitment, (b) that Lender's Commitment Percentage, (c) any Loan made by that
Lender, (d) any Note delivered to that Lender pursuant to this Agreement, and
(e) that Lender's interest in any Letter of Credit and any participation, if
any, purchased pursuant to Section 2.1 or 8.5 hereof or this Section 11.10(b).

         The provisions of Article III and Section 11.6 shall inure to the
benefit of each purchaser of a participation or sub-participation and the Global
Agent shall continue to distribute payments pursuant to this Agreement as if no
participation has been sold.

         If any Lender shall sell any participation or sub-participation, that
Lender shall, as between itself and the purchaser, retain all of its rights
(including, without limitation, rights to enforce against Borrower the Loan
Documents and the Related Writings) and duties pursuant to the Loan Documents
and the Related Writings, including, without limitation, that Lender's right to
approve any waiver, consent or amendment pursuant to Section 11.3, except if and
to the extent that any such waiver, consent or amendment would:

               (i) reduce any fee or commission allocated to the participation
          or sub-participation, as the case may be;

               (ii) reduce the amount of any principal payment on any Loan
          allocated to the participation or sub-participation, as the case may
          be, or reduce the principal amount of any Loan so allocated or the
          rate of interest payable thereon; or

               (iii) extend the time for payment of any amount allocated to the
          participation or sub-participation, as the case may be.

         No participation or sub-participation shall operate as a delegation of
any duty of the seller thereof. Under no circumstance shall any participation or
sub-participation be deemed a novation in respect of all or any part of the
seller's obligations pursuant to this Agreement.


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         Section 11.11. DESIGNATION.

         (a) Notwithstanding anything in this Agreement to the contrary, any
Lender (a "Designating Lender") may grant to one or more special purpose funding
vehicles (each an "SPV"), identified in writing from time to time by such
Designating Lender to the Global Agent and Borrower, the option to provide to
Borrower all or any part of any Loan that such Designating Lender would
otherwise be obligated to make to Borrower pursuant to this Agreement; provided
that (i) nothing in this Section shall constitute a commitment by any SPV to
make any Loan, and (ii) if an SPV designated by a Designating Lender to make
Loans elects not to exercise such option or otherwise fails to provide all or
any part of such Loan, such Designating Lender shall still be obligated to make
such Loan pursuant to the terms hereof. The making of a Loan by an SPV hereunder
shall reduce the availability under the commitment of the Designating Lender to
the same extent, and as if, such Loan were made by such Designating Lender.

         (b) As to any Loans or portion thereof made by an SPV, each such SPV
shall have all of the rights that a Lender making such Loans or portion thereof
would have under this Agreement; provided, however, that each SPV shall have
granted its Designating Lender an irrevocable power of attorney to deliver and
receive all communications and notices under this Agreement and any other Loan
Document and to exercise, in its reasonable discretion, on behalf of such SPV,
all of such SPV's voting rights under this Agreement. No additional Note shall
be required to evidence the Loans or portion thereof made by an SPV and the
Designating Lender shall be deemed to hold its Note as agent for such SPV to the
extent of the Loans or portion thereof funded by such SPV. In addition, any
payments for the account of any SPV shall be paid to its respective Designating
Lender as agent for such SPV.

         (c) The Global Agent, Borrower and the Lenders agree that no SPV shall
be liable for an indemnity or payment under this Agreement for which a Lender
would otherwise be liable and the Designating Lender shall remain liable for its
Commitment Percentage of such indemnity or payment to the extent such
Designating Lender would otherwise be liable. In furtherance of the foregoing,
the Global Agent, Borrower and each of the Lenders hereby agree (which agreement
shall survive the termination of this Agreement) that, prior to the date that is
one year and one day after the payment in full of all of the outstanding
commercial paper or other senior indebtedness of any SPV, none of the Global
Agent, Borrower or any Lender shall institute against, or join any other Person
in instituting against, such SPV any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding under the laws of the United States or any
State thereof.

         (d) In addition, notwithstanding anything to the contrary contained in
this Section 11.11, or otherwise in this Agreement, any SPV may (i) at any time
and without paying any processing fee therefor, assign (or grant a participation
in) all or a portion of its interest in any Loans to its Designating Lender or
to any financial institution providing liquidity and/or credit support to or for
the account of such SPV to support the funding or maintenance of Loans, and (ii)
disclose on a confidential basis any non-public information relating to the
Loans made by such SPV to any rating agency, commercial paper dealer or provider
of any surety, guarantee or credit or liquidity enhancements to such SPV. This
Section 11.11 may not be amended without the prior written consent of any
Designating Lender affected thereby.


                                       91



         Section 11.12. SEVERABILITY OF PROVISIONS; CAPTIONS; ATTACHMENTS. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction. The several captions to Sections and subsections
herein are inserted for convenience only and shall be ignored in interpreting
the provisions of this Agreement. Each schedule or exhibit attached to this
Agreement shall be incorporated herein and shall be deemed to be a part hereof.

         Section 11.13. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement, each of the Notes and any Related Writing shall be governed by and
construed in accordance with the laws of the State of Ohio and the respective
rights and obligations of Borrower, the Global Agent and the Lenders shall be
governed by Ohio law, without regard to principles of conflict of laws. Borrower
hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state
or federal court sitting in Cleveland, Ohio, over any action or proceeding
arising out of or relating to this Agreement, the Debt or any Related Writing,
and Borrower hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such Ohio state or federal court.
Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably waives,
to the fullest extent permitted by law, any objection it may now or hereafter
have to the laying of venue in any action or proceeding in any such court as
well as any right it may now or hereafter have to remove such action or
proceeding, once commenced, to another court on the grounds of FORUM NON
CONVENIENS or otherwise. Borrower agrees that a final, nonappealable judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.

         Section 11.14. LEGAL REPRESENTATION OF PARTIES. The Loan Documents were
negotiated by the parties with the benefit of legal representation and any rule
of construction or interpretation otherwise requiring this Agreement or any
other Loan Document to be construed or interpreted against any party shall not
apply to any construction or interpretation hereof or thereof.

         Section 11.15. JUDGMENT CURRENCY. If the Global Agent or the Collateral
Agent, on behalf of the Lenders, obtains a judgment or judgments against
Borrower in an Alternate Currency, the obligations of Borrower in respect of any
sum adjudged to be due to the Global Agent or the Lenders hereunder or under the
Notes (the "JUDGMENT AMOUNT") shall be discharged only to the extent that, on
the Business Day following receipt by the Global Agent or the Collateral Agent,
as the case may be, of the Judgment Amount in the Alternate Currency, the Global
Agent, in accordance with normal banking procedures, purchases Dollars with the
Judgment Amount in such Alternate Currency. If the amount of Dollars so
purchased is less than the amount of Dollars that could have been purchased with
the Judgment Amount on the date or dates the Judgment Amount (excluding the
portion of the Judgment Amount that has accrued as a result of the failure of
Borrower to pay the sum originally due hereunder or under the Notes when it was
originally due hereunder or under the Notes) was originally due and owing to the
Global Agent or the Lenders hereunder or under the Notes (the "ORIGINAL DUE
DATE") (the "LOSS"), Borrower agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Global Agent or such Lender,
as the case may be, against the Loss, and, if the amount of Dollars so purchased
exceeds the amount of Dollars that could have been purchased


                                       92




with the Judgment Amount on the Original Due Date, the Global Agent or such
Lender agrees to remit such excess to Borrower.

         Section 11.16. DESIGNATED SENIOR INDEBTEDNESS. THE INDEBTEDNESS
EVIDENCED BY THIS AGREEMENT, EACH OF THE NOTES, EACH OF THE SECURITY DOCUMENTS
AND EACH OTHER LOAN DOCUMENT IS AND SHALL AT ALL TIMES CONSTITUTE "DESIGNATED
SENIOR INDEBTEDNESS" UNDER THE PROVISIONS OF THE SUBORDINATED CONVERTIBLE
INDENTURE.

                  [Remainder of page left intentionally blank]



                                       93





         Section 11.17. JURY TRIAL WAIVER. BORROWER, THE GLOBAL AGENT AND EACH
OF THE BANKS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY
DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, THE
GLOBAL AGENT AND THE BANKS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO.

Address: One American Road                 AMERICAN GREETINGS
         Cleveland, Ohio 44144                CORPORATION
         Attention:
                   ------------
                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------

Address: 1900 East Ninth Street            NATIONAL CITY BANK, as the Global
         Cleveland, Ohio 44114               Agent, a Lead Arranger and a Lender
         Attention: Large Corporate
                    Banking
                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------


Address:
        ------------------------           GOLDMAN SACHS CREDIT PARTNERS
        ------------------------             L.P., as a Lead Arranger and
        Attention:                            a Lender
                  --------------
                                           By:
                                              ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------


Address: 127 Public Square                 KEYBANK NATIONAL ASSOCIATION
         Cleveland, Ohio  44114
         Attention: Large Corporate        By:
                    Banking                   ----------------------------------
                                           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------


                                      S-1





Address:                                   BANK ONE, NA
        ------------------------
        ------------------------           By:
        Attention:                            ----------------------------------
                  --------------           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------


Address:                                   LASALLE BANK NATIONAL ASSOCIATION
        ------------------------
        ------------------------           By:
        Attention:                            ----------------------------------
                  --------------           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------


Address:                                   PNC BANK, NATIONAL ASSOCIATION
        ------------------------
        ------------------------           By:
        Attention:                            ----------------------------------
                  --------------           Name:
                                                --------------------------------
                                           Title:
                                                 -------------------------------



                                      S-2

EX-4.V

                                                                    Exhibit 4(v)


                                                                  EXECUTION COPY



================================================================================




                         RECEIVABLES PURCHASE AGREEMENT





                           dated as of August 7, 2001





                                      among





                            AGC FUNDING CORPORATION,





                         AMERICAN GREETINGS CORPORATION,
                                   as Servicer





                     THE MEMBERS OF VARIOUS PURCHASER GROUPS
                         FROM TIME TO TIME PARTY HERETO





                                       and





                         PNC BANK, NATIONAL ASSOCIATION,
                                as Administrator

================================================================================



                                TABLE OF CONTENTS


                                                                           PAGE
                                                                           ----


                                    ARTICLE I
                       AMOUNTS AND TERMS OF THE PURCHASES


Section 1.1   Purchase Facility ..............................................1
Section 1.2   Making Purchases ...............................................2
Section 1.3   Purchased Interest Computation .................................4
Section 1.4   Settlement Procedures ..........................................4
Section 1.5   Fees ..........................................................10
Section 1.6   Payments and Computations, Etc ................................10
Section 1.7   Increased Costs ...............................................11
Section 1.8   Requirements of Law ...........................................12
Section 1.9   Inability to Determine Euro-Rate ..............................12
Section 1.10  Extension of Termination Date .................................13


                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES; COVENANTS;
                               TERMINATION EVENTS


Section 2.1   Representations and Warranties; Covenants .....................14
Section 2.2   Termination Events ............................................14


                                   ARTICLE III
                                 INDEMNIFICATION


Section 3.1   Indemnities by the Seller .....................................14
Section 3.2   Indemnities by the Servicer ...................................16


                                   ARTICLE IV
                         ADMINISTRATION AND COLLECTIONS


Section 4.1   Appointment of the Servicer ...................................17
Section 4.2   Duties of the Servicer ........................................18
Section 4.3   Lock-Box Account Arrangements .................................19
Section 4.4   Enforcement Rights ............................................19
Section 4.5   Responsibilities of the Seller ................................21
Section 4.6   Servicing Fee .................................................21


                                       i



                                    ARTICLE V
                                   THE AGENTS


Section 5.1   Appointment and Authorization .................................21
Section 5.2   Delegation of Duties ..........................................23
Section 5.3   Exculpatory Provisions ........................................23
Section 5.4   Reliance by Agents ............................................23
Section 5.5   Notice of Termination Events ..................................24
Section 5.6   Non-Reliance on Administrator, Purchaser Agents and Other
              Purchasers ....................................................25
Section 5.8   Indemnification ...............................................25
Section 5.9   Successor Administrator .......................................25


                                   ARTICLE VI
                                  MISCELLANEOUS


Section 6.1   Amendments, Etc ...............................................26
Section 6.2   Notices, Etc ..................................................27
Section 6.3   Successors and Assigns; Participations; Assignments ...........27
Section 6.4   Costs, Expenses and Taxes .....................................29
Section 6.5   No Proceedings; Limitation on Payments ........................29
Section 6.6   GOVERNING LAW AND JURISDICTION ................................30
Section 6.7   Execution in Counterparts .....................................30
Section 6.8   Survival of Termination .......................................30
Section 6.9   WAIVER OF JURY TRIAL ..........................................30
Section 6.10  Sharing of Recoveries .........................................31
Section 6.11  Right of Setoff ...............................................31
Section 6.12  Entire Agreement ..............................................31
Section 6.13  Headings ......................................................31
Section 6.14  Purchaser Groups' Liabilities .................................31
Section 6.15  Call Option ...................................................32


EXHIBIT I                  Definitions
EXHIBIT II                 Conditions of Purchases
EXHIBIT III                Representations and Warranties
EXHIBIT IV                 Covenants
EXHIBIT V                  Termination Events


SCHEDULE I                 Credit and Collection Policy
SCHEDULE II                Lock-Box Banks and Lock-Box Accounts
SCHEDULE III               Trade Names


                                       ii





ANNEX A                    Form of Information Package
ANNEX B                    Form of Purchase Notice
ANNEX C                    Form of Assumption Agreement
ANNEX D                    Form of Transfer Supplement
ANNEX E                    Form of Paydown Notice















                                      iii




         This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "AGREEMENT ") is entered into as of
August 7, 2001, among AGC FUNDING CORPORATION, a Delaware corporation, as seller
(the "SELLER"), American Greetings Corp., an Ohio Corporation ("Greetings"), as
initial servicer (in such capacity, together with its successors and permitted
assigns in such capacity, the "SERVICER"), MARKET STREET FUNDING CORPORATION
("MARKET STREET "), a Delaware corporation, as a Conduit Purchaser, PNC BANK,
NATIONAL ASSOCIATION ("PNC"), as agent for Market Street, and as Administrator
for each Purchaser Group (in such capacity, the "ADMINISTRATOR "), and each of
the other members of each Purchaser Group party hereto or that become parties
hereto by executing an Assumption Agreement or a Transfer Supplement.


         PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in EXHIBIT I. References in the Exhibits
hereto to the "Agreement" refer to this Agreement, as amended, supplemented or
otherwise modified from time to time.


         The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Purchasers desire to
acquire such undivided variable percentage interest, as such percentage interest
shall be adjusted from time to time based upon, in part, reinvestment payments
that are made by such Purchasers.


         In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:



                                    ARTICLE I
                       AMOUNTS AND TERMS OF THE PURCHASES



         Section 1.1. PURCHASE FACILITY.

                  (a) On the terms and subject to the conditions hereof, the
         Seller may, from time to time before the Facility Termination Date,
         request that the Conduit Purchasers, or, only if a Conduit Purchaser
         denies such request or is unable to fund (and provides notice of such
         denial or inability to the Seller, the Administrator and its Purchaser
         Agent), ratably request that the Related Committed Purchasers, make
         purchases of and reinvestments in undivided percentage ownership
         interests with regard to the Purchased Interest from the Seller from
         time to time from the date hereof to the Facility Termination Date.
         Subject to SECTION 1.4(b), concerning reinvestments, at no time will a
         Conduit Purchaser that is not also a Related Committed Purchaser have
         any obligation to make a purchase. Each Related Committed Purchaser
         severally hereby agrees, on the terms and subject to the conditions
         hereof, to make Purchases before the Facility Termination Date, based
         on the applicable Purchaser Group's Ratable Share of each purchase
         requested pursuant to SECTION 1.2(a) (each a "PURCHASE ") (and, in the
         case of each Related Committed Purchaser, its Commitment Percentage of
         its




         Purchaser Group's Ratable Share of such Purchase) to the extent its
         Investment would not thereby exceed its Commitment and the Aggregate
         Investment would not (after giving effect to all Purchases on such
         date) exceed the Purchase Limit.


                  (b) The Seller may, upon at least 60 days' written notice to
         the Administrator and each Purchaser Agent terminate the purchase
         facility provided for in this Section in whole or, upon 30 days'
         written notice to the Administrator and each Purchaser Agent, from time
         to time, irrevocably reduce in part the unfunded portion of the
         Purchase Limit (but not below the amount which would cause the Group
         Investment of any Purchaser Group to exceed its Group Commitment (after
         giving effect to such reduction)); provided that each partial reduction
         shall be in the amount of at least $10,000,000, or an integral multiple
         of $1,000,000 in excess thereof and unless terminated in whole, the
         Purchase Limit shall in no event be reduced below $50,000,000. Such
         reduction shall at the option of the Seller be applied either (i)
         ratably to reduce the Group Commitment of each Purchaser Group or (ii)
         to terminate the Group Commitment of any one Purchaser Group.

         Section 1.2. MAKING PURCHASES.

                  (a) Each purchase (but not reinvestment) of undivided
         percentage ownership interests with regard to the Purchased Interest
         hereunder shall be made upon the Seller's irrevocable written notice in
         the form of Annex B delivered to the Administrator and each Purchaser
         Agent in accordance with SECTION 6.2 (which notice must be received by
         the Administrator and each Purchaser Agent before 11:00 a.m., New York
         City time) at least three Business Days before the requested Purchase
         Date, which notice shall specify: (A) the amount requested to be paid
         to the Seller (such amount, which shall not be less than $1,000,000, or
         an integral multiple of $100,000 in excess thereof with respect to each
         Purchaser Group, being the aggregate of the Investments of each
         Purchaser within such Purchaser Group, relating to the undivided
         percentage ownership interest then being purchased), (B) the date of
         such purchase (which shall be a Business Day), and (C) a pro forma
         calculation of the Purchased Interest after giving effect to the
         increase in the Aggregate Investment. If the Purchase is requested from
         a Conduit Purchaser and such Conduit Purchaser determines, in its sole
         discretion, to make the requested Purchase, such Conduit Purchaser
         shall transfer to the account of the Seller described in SECTION
         1.2(b), below (the "DISBURSEMENT ACCOUNT "), an amount equal to such
         Conduit Purchaser's Purchaser Group Ratable Share of such Purchase on
         the requested Purchase Date. If the Purchase is requested from the
         Related Committed Purchasers for a Purchaser Group (in the case where
         the related Conduit Purchaser determined not to or was unable to make
         such Purchase), subject to the terms and conditions hereof, such
         Related Committed Purchasers for a Purchaser Group shall transfer the
         applicable Purchaser Group's Ratable Share of each Purchase (and, in
         the case of each Related Committed Purchaser, its Commitment Percentage
         of its Purchaser Group's Ratable Share of such Purchase) into the
         Disbursement Account by no later than 4:00 p.m. (New York time) on the
         Purchase Date.


                                       2


                  (b) On the date of each Purchase, each Purchaser (or the
         related Purchaser Agent on its behalf), shall make available to the
         Seller in same day funds, at National City Bank, Cleveland, Ohio,
         account number 657364116, ABA #041000124, an amount equal to the
         proceeds of such Purchase.

                  (c) Effective on the date of each Purchase pursuant to this
         SECTION 1.2 and each reinvestment pursuant to SECTION 1.4, the Seller
         hereby sells and assigns to the Administrator for the benefit of the
         Purchasers (ratably, according to each such Purchaser's Investment) an
         undivided percentage ownership interest in: (i) each Pool Receivable
         then existing, (ii) all Related Security with respect to such Pool
         Receivables, and (iii) all Collections with respect to, and other
         proceeds of, such Pool Receivables and Related Security.

                  (d) To secure all of the Seller's obligations (monetary or
         otherwise) under this Agreement and the other Transaction Documents to
         which it is a party, whether now or hereafter existing or arising, due
         or to become due, direct or indirect, absolute or contingent, the
         Seller hereby grants to the Administrator, for the benefit of the
         Purchasers, a security interest in all of the Seller's right, title and
         interest (including any undivided interest of the Seller) in, to and
         under all of the following, whether now or hereafter owned, existing or
         arising: (i) all Pool Receivables, (ii) all Related Security with
         respect to such Pool Receivables, (iii) all Collections with respect to
         such Pool Receivables, (iv) the Lock-Box Accounts and all amounts on
         deposit therein, and all certificates and instruments, if any, from
         time to time evidencing such Lock-Box Accounts and amounts on deposit
         therein, (v) all books and records of each Receivable, and all
         Transaction Documents to which the Seller is a party, together with all
         rights (but none of the obligations) of the Seller thereunder and (vi)
         all proceeds and products of, and all amounts received or receivable
         under any or all of, the foregoing (collectively, the "POOL ASSETS").
         The Administrator, for the benefit of the Purchasers, shall have, with
         respect to the Pool Assets, and in addition to all the other rights and
         remedies available to the Administrator and the Purchasers, all the
         rights and remedies of a secured party under any applicable UCC.

                  (e) The Seller may, with the written consent of the
         Administrator and each Purchaser, add additional Persons as Purchasers
         (either to an existing Purchaser Group or by creating new Purchaser
         Groups) or cause an existing Purchaser to increase its Commitment in
         connection with a corresponding increase in the Purchase Limit;
         PROVIDED, HOWEVER, that the Commitment of any Purchaser may only be
         increased with the consent of such Purchaser. Each new Purchaser (or
         Purchaser Group) and each Purchaser increasing its Commitment shall
         become a party hereto or increase its Commitment, as the case may be,
         by executing and delivering to the Administrator and the Seller an
         Assumption Agreement in the form of Annex C hereto (which Assumption
         Agreement shall, in the case of any new Purchaser or Purchasers be
         executed by each Person in such new Purchaser's Purchaser Group).

                  (f) Each Related Committed Purchaser's obligation hereunder
         shall be several, such that the failure of any Related Committed
         Purchaser to make a payment in connection


                                       3


         with any purchase hereunder shall not relieve any other Related
         Committed Purchaser of its obligation hereunder to make payment for any
         Purchase. Further, in the event any Related Committed Purchaser fails
         to satisfy its obligation to make a purchase as required hereunder,
         upon receipt of notice of such failure from the Administrator (or any
         relevant Purchaser Agent), subject to the limitations set forth herein,
         the non-defaulting Related Committed Purchasers in such defaulting
         Related Committed Purchaser's Purchaser Group shall purchase the
         defaulting Related Committed Purchaser's Commitment Percentage of the
         related Purchase PRO RATA in proportion to their relative Commitment
         Percentages (determined without regard to the Commitment Percentage of
         the defaulting Related Committed Purchaser; it being understood that a
         defaulting Related Committed Purchaser's Commitment Percentage of any
         Purchase shall be first put to the Related Committed Purchasers in such
         defaulting Related Committed Purchaser's Purchaser Group and thereafter
         if there are no other Related Committed Purchasers in such Purchaser
         Group or if such other Related Committed Purchasers are also defaulting
         Related Committed Purchasers, then such defaulting Related Committed
         Purchaser's Commitment Percentage of such Purchase shall be put to each
         other Purchaser Group ratably and applied in accordance with this
         paragraph (f)). Notwithstanding anything in this paragraph (f) to the
         contrary, no Related Committed Purchaser shall be required to make a
         Purchase pursuant to this paragraph for an amount which would cause (i)
         the aggregate Investment of such Related Committed Purchaser (after
         giving effect to such Purchase) to exceed its Commitment or (ii) the
         sum of the aggregate Investments of all Purchasers in the Purchaser
         Group of such Related Committed Purchaser (after giving effect to such
         Purchase) to exceed the sum of the Commitments of all of the Purchasers
         in such Purchaser Group.


         Section 1.3. PURCHASED INTEREST COMPUTATION. The Purchased Interest
shall be initially computed on the date of the initial Purchase hereunder.
Thereafter, until the Facility Termination Date, such Purchased Interest shall
be automatically recomputed (or deemed to be recomputed) on each Business Day
other than a Termination Day. From and after the occurrence of any Termination
Day, the Purchased Interest shall (until the event(s) giving rise to such
Termination Day are satisfied or are waived by the Administrator and a Simple
Majority of the Purchasers) be deemed to be 100%. The Purchased Interest shall
become zero when the Aggregate Investment thereof and Aggregate Discount thereon
shall have been paid in full, all the amounts owed by the Seller, each
Originator, AGSC, Greetings and the Servicer hereunder or under any other
Transaction Document to each Purchaser, the Administrator and any other
Indemnified Party or Affected Person are paid in full, and the Servicer shall
have received the accrued Servicing Fee thereon.

         Section 1.4. SETTLEMENT PROCEDURES.

                  (a) The collection of the Pool Receivables shall be
         administered by the Servicer in accordance with this Agreement. The
         Seller shall provide to the Servicer on a timely basis all information
         needed for such administration, including notice of the occurrence of
         any Termination Day and current computations of the Purchased Interest.


                                       4



                  (b) The Servicer shall, on each day on which Collections of
         Pool Receivables are received (or deemed received) by the Seller or the
         Servicer:


                      (i) set aside and hold in trust (and shall, at the request
                  of the Administrator (with the consent or at the direction of
                  the Majority Purchasers), segregate in a separate account
                  approved by the Administrator if, at the time of such request,
                  there exists an Unmatured Termination Event or a Termination
                  Event (or if the failure to so segregate reasonably could be
                  expected to cause a Material Adverse Effect)) for the benefit
                  of each Purchaser Group, out of the Purchasers' Share of such
                  Collections, first, an amount equal to the Aggregate Discount
                  accrued through such day for each Portion of Investment and
                  not previously set aside, second, an amount equal to the fees
                  set forth in each Purchaser Group Fee Letter accrued and
                  unpaid through such day, and third, to the extent funds are
                  available therefor, an amount equal to the aggregate of each
                  Purchaser Group's Ratable Share of the Purchasers' Share of
                  the Servicing Fee accrued through such day and not previously
                  set aside,

                      (ii) subject to SECTION 1.4(f), if such day is not a
                  Termination Day, remit to the Seller, ratably, on behalf of
                  each Purchaser Group, the remainder of the Purchasers' Share
                  of such Collections. Such remainder shall, to the extent
                  representing a return on the Aggregate Investment, ratably,
                  according to each Purchaser's Investment, be automatically
                  reinvested in Pool Receivables, and in the Related Security,
                  Collections and other proceeds with respect thereto; PROVIDED,
                  HOWEVER, that if the Purchased Interest would exceed 100%,
                  then the Servicer shall not reinvest, but shall set aside and
                  hold in trust for the benefit of the Purchasers (and shall, at
                  the request of the Administrator (with the consent or at the
                  direction of the Majority Purchasers), segregate in a separate
                  account approved by the Administrator if, at the time of such
                  request, there exists an Unmatured Termination Event or a
                  Termination Event (or if the failure to so segregate
                  reasonably could be expected to cause a Material Adverse
                  Effect)) a portion of such Collections that, together with the
                  other Collections set aside pursuant to this paragraph, shall
                  equal the amount necessary to reduce the Purchased Interest to
                  100%; PROVIDED, FURTHER, that in the case of any Purchaser
                  that has provided notice (an "EXITING NOTICE") to its
                  Purchaser Agent of its refusal, pursuant to SECTION 1.10, to
                  extend its Commitment hereunder (an "EXITING PURCHASER "),
                  then such Purchaser's ratable share of such Collections based
                  on its Investment shall not be reinvested and shall instead be
                  held in trust for the benefit of such Purchaser and applied in
                  accordance with CLAUSE (iii) below,

                      (iii) if such day is a Termination Day (or any day
                  following the provision of an Exiting Notice), set aside,
                  segregate and hold in trust (and shall, at the request of the
                  Administrator (with the consent or at the direction of a
                  Simple Majority of the Purchasers), segregate in a separate
                  account approved by the Administrator) for the benefit of each
                  Purchaser Group the entire remainder of the Purchasers' Share
                  of the Collections (or in the case of an Exiting Purchaser an
                  amount equal to such



                                       5


                  Purchaser's ratable share of such Collections based on its
                  Investment; provided, that solely for the purpose of
                  determining such Purchaser's ratable share of such
                  Collections, such Purchaser's Investment shall be deemed to
                  remain constant from the date of the provision of an Exiting
                  Notice until the date such Purchaser's Investment has been
                  paid in full; it being understood that if such day is also a
                  Termination Day, such Exiting Purchaser's Investment shall be
                  recalculated taking into account amounts received by such
                  Purchaser in respect of this parenthetical and thereafter
                  Collections shall be set aside for such Purchaser ratably in
                  respect of its Investment (as recalculated)); provided, that
                  if amounts are set aside and held in trust on any Termination
                  Day of the type described in clause (a) of the definition of
                  "Termination Day" (or any day following the provision of an
                  Exiting Notice) and, thereafter, the conditions set forth in
                  SECTION 2 of EXHIBIT II are satisfied or waived by the
                  Administrator and a Simple Majority of the Purchasers (or in
                  the case of an Exiting Notice, such Exiting Notice has been
                  revoked by the related Exiting Purchaser, and written notice
                  thereof has been provided to the Administrator, the related
                  Purchaser Agent and the Servicer), such previously set-aside
                  amounts shall, to the extent representing a return on
                  Aggregate Investment (or the Investment of the Exiting
                  Purchaser) and ratably in accordance with each Purchaser's
                  Investment, be reinvested in accordance with CLAUSE (ii) on
                  the day of such subsequent satisfaction or waiver of
                  conditions or revocation of Exiting Notice, and

                      (iv) release to the Seller (subject to SECTION 1.4(f)) for
                  its own account any Collections in excess of: (x) amounts
                  required to be reinvested in accordance with CLAUSE (ii) or
                  the proviso to CLAUSE (iii) plus (y) the amounts that are
                  required to be set aside pursuant to CLAUSE (i), the proviso
                  to CLAUSE (ii) and CLAUSE (iii) plus (z) the Seller's Share of
                  the Servicing Fee accrued and unpaid through such day and all
                  reasonable and appropriate out-of-pocket costs and expenses of
                  the Servicer for servicing, collecting and administering the
                  Pool Receivables.

                  (c) The Servicer shall, in accordance with the priorities set
         forth in SECTION 1.4(d), below, deposit into each applicable
         Purchaser's account (or such other account designated by such
         applicable Purchaser or its Purchaser Agent), on each Settlement Date,
         Collections held for each Purchaser with respect to such Purchaser's
         Portion(s) of Investment pursuant to CLAUSE (b)(i) or (f) of Section
         1.4 plus the amount of Collections then held for such Purchaser
         pursuant to CLAUSES (b)(ii) and (iii) of SECTION 1.4; PROVIDED, that if
         Greetings, any Originator, AGSC or an Affiliate thereof is the
         Servicer, such day is not a Termination Day and the Administrator has
         not notified Greetings, AGSC or such Originator (or such Affiliate)
         that such right is revoked, Greetings, AGSC or such Originator (or such
         Affiliate) may retain the portion of the Collections set aside pursuant
         to CLAUSE (b)(i) that represents the aggregate of each Purchaser
         Group's Ratable Share of the Purchasers' Share of the Servicing Fee. On
         or before the last day of each Yield Period with respect to any Portion
         of Investment, the applicable Purchaser Agent will notify the Servicer
         by facsimile



                                       6


         of the amount of the Discount accrued with respect to each such Portion
         of Investment during the related Yield Period then ending.


                  (d) The Servicer shall distribute the amounts described (and
         at the times set forth) in SECTION 1.4(c), as follows:


                      (i) if such distribution occurs on a day that is not a
                  Termination Day and the Purchased Interest does not exceed
                  100%, first to each Purchaser Agent ratably according to the
                  Discount accrued during such Yield Period (for the benefit of
                  the relevant Purchasers within such Purchaser Agent's
                  Purchaser Group) in payment in full of all accrued Discount
                  and fees (other than Servicing Fees) with respect to each
                  Portion of Investment maintained by such Purchasers; it being
                  understood that each Purchaser Agent shall distribute such
                  amounts to the Purchasers within its Purchaser Group ratably
                  according to Discount, and second, if the Servicer has set
                  aside amounts in respect of the Servicing Fee pursuant to
                  CLAUSE (b)(i) and has not retained such amounts pursuant to
                  CLAUSE (c), to the Servicer's own account (payable in arrears
                  on each Settlement Date) in payment in full of the aggregate
                  of each Purchaser Group's Ratable Share of the Purchasers'
                  Share of accrued Servicing Fees so set aside, and


                      (ii) if such distribution occurs on a Termination Day or
                  on a day when the Purchased Interest exceeds 100%, FIRST if
                  Greetings, AGSC or any Originator or an Affiliate thereof is
                  not the Servicer, to the Servicer's own account in payment in
                  full of all accrued Servicing Fees, SECOND to each Purchaser
                  Agent ratably according to Discount (for the benefit of the
                  relevant Purchasers within such Purchaser Agent's Purchaser
                  Group) in payment in full of all accrued Discount with respect
                  to each Portion of Investment funded or maintained by the
                  Purchasers within such Purchaser Agent's Purchaser Group,
                  THIRD to each Purchaser Agent ratably according to the
                  aggregate of the Investment of each Purchaser in each such
                  Purchaser Agent's Purchaser Group (for the benefit of the
                  relevant Purchasers within such Purchaser Agent's Purchaser
                  Group) in payment in full of each Purchaser's Investment (or,
                  if such day is not a Termination Day, the amount necessary to
                  reduce the Purchased Interest to 100%); it being understood
                  that each Purchaser Agent shall distribute the amounts
                  described in the first and second clauses of this SECTION
                  1.4(d)(ii) to the Purchasers within its Purchaser Group
                  ratably according to Discount and Investment, respectively,
                  FOURTH, if the Aggregate Investment and accrued Aggregate
                  Discount with respect to each Portion of Investment for all
                  Purchaser Groups have been reduced to zero or if such day is
                  not a Termination Day, the Purchased Interest is reduced to
                  100%, and all accrued Servicing Fees payable to the Servicer
                  (if other than Greetings, AGSC or any Originator or an
                  Affiliate thereof) have been paid in full, to each Purchaser
                  Group ratably (for the benefit of the Purchasers within such
                  Purchaser Group) in accordance with its Ratable Share, the
                  Administrator and any other Indemnified Party or Affected
                  Person in payment in full of any other amounts owed


                                       7



                  thereto by the Seller or Servicer hereunder and, FIFTH, to the
                  Servicer's own account (if the Servicer is Greetings, AGSC or
                  any Originator or an Affiliate thereof) in payment in full of
                  the Aggregate of each Purchaser Group's Ratable Share of all
                  accrued Servicing Fees.

After the Aggregate Investment, Aggregate Discount, fees payable pursuant to
each Purchaser Group Fee Letter and Servicing Fees with respect to the Purchased
Interest, and any other amounts payable by the Seller and the Servicer to each
Purchaser Group, the Administrator or any other Indemnified Party or Affected
Person hereunder, have been paid in full, all additional Collections with
respect to the Purchased Interest shall be paid to the Seller for its own
account.

                  (e) For the purposes of this SECTION 1.4:

                      (i) if on any day the Outstanding Balance of any Pool
                  Receivable is reduced or adjusted as a result of any
                  defective, rejected, returned, repossessed or foreclosed goods
                  or services, or any revision, cancellation, allowance,
                  discount or other adjustment made by the Seller or any
                  Affiliate of the Seller, or the Servicer or any Affiliate of
                  the Servicer, or any setoff or dispute between the Seller or
                  any Affiliate of the Seller, or the Servicer or any Affiliate
                  of the Servicer and an Obligor, the Seller shall be deemed to
                  have received on such day a Collection of such Pool Receivable
                  in the amount of such reduction or adjustment; PROVIDED THAT
                  Seller shall be deemed to have received a Collection due to a
                  reduction or adjustment made to the Outstanding Balance of a
                  Seasonal Receivable in connection with the return of unsold
                  goods only to the extent Seller shall have a claim under
                  SECTION 3.3(c) of the Sale and Contribution Agreement in
                  connection with such Seasonal Receivable.


                      (ii) if on any day any of the representations or
                  warranties in SECTION 1(g) or (n) of EXHIBIT III is not true
                  with respect to any Pool Receivable, the Seller shall be
                  deemed to have received on such day a Collection of such Pool
                  Receivable in full;

                      (iii) except as provided in CLAUSE (i) or (ii), or as
                  otherwise required by applicable law or the relevant Contract,
                  all Collections received from an Obligor of any Receivable
                  shall be applied to the Receivables of such Obligor in the
                  order of the age of such Receivables, starting with the oldest
                  such Receivable, unless such Obligor designates in writing its
                  payment for application to specific Receivables; and

                      (iv) if and to the extent the Administrator, any
                  Purchaser Agent or any Purchaser shall be required for any
                  reason to pay over to an Obligor (or any trustee, receiver,
                  custodian or similar official in any Insolvency Proceeding)
                  any amount received by it hereunder, such amount shall be
                  deemed not to have been so received by such Person but rather
                  to have been retained by the Seller and, accordingly, such
                  Person shall have a claim against the Seller for such amount,
                  payable when and to the


                                       8


                  extent that any distribution from or on behalf of such Obligor
                  is made in respect thereof.


                  (f) If at any time the Seller shall wish to cause the
         reduction of Aggregate Investment (but not to commence the liquidation,
         or reduction to zero, of the entire Aggregate Investment), the Seller
         may do so as follows:


                      (i) the Seller shall give the Administrator, each
                  Purchaser Agent and the Servicer (A) at least two Business
                  Days' prior written notice thereof for any reduction of
                  Aggregate Investment less than or equal to $10,000,000 and (B)
                  at least ten Business Days' prior written notice thereof for
                  any reduction of Aggregate Investment greater than $10,000,000
                  (in each case such notice shall include the amount of such
                  proposed reduction and the proposed date on which such
                  reduction will commence);


                      (ii) on the proposed date of commencement of such
                  reduction and on each day thereafter, the Servicer shall cause
                  Collections not to be reinvested until the amount thereof not
                  so reinvested shall equal the desired amount of reduction; and


                      (iii) the Servicer shall hold such Collections in trust
                  for the benefit of each Purchaser ratably according to its
                  Investment, for payment to each such Purchaser (or its related
                  Purchaser Agent for the benefit of such Purchaser) on the (i)
                  next Settlement Date with respect to any Portions of
                  Investment maintained by such Purchaser immediately following
                  the related current Yield Period or (ii) such other date
                  approved by the Administrator, and the Aggregate Investment
                  (together with the Investment of any related Purchaser) shall
                  be deemed reduced in the amount to be paid to such Purchaser
                  (or its related Purchaser Agent for the benefit of such
                  Purchaser) only when in fact finally so paid;

PROVIDED, that:

                  (A) the amount of any such reduction shall be not less than
         $1,000,000 for each Purchaser Group and shall be an integral multiple
         of $100,000, and the entire Aggregate Investment after giving effect to
         such reduction shall be not less than $50,000,000 and shall be in an
         integral multiple of $1,000,000 (unless the Aggregate Investment shall
         have been reduced to zero); and


                  (B) with respect to any Portion of Investment, the Seller
         shall choose a reduction amount, and the date of commencement thereof,
         so that to the extent practicable such reduction shall commence and
         conclude in the same Yield Period.

         Section 1.5. FEES. The Seller shall pay to each Purchaser Agent for the
benefit of the related Purchasers certain fees in the amounts and on the dates
set forth in letters, dated the date


                                       9


hereof, each such letter (as amended, supplemented, or otherwise modified from
time to time, a "PURCHASER GROUP FEE LETTER") in each case among the Seller, the
Servicer, the Administrator and the related Purchaser Agent.

         Section 1.6. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or
deposited by the Seller or the Servicer hereunder shall be made without
reduction for offset or counterclaim and shall be paid or deposited no later
than noon (New York City time) on the day when due in same day funds to the
applicable Purchaser's account (as such account is identified in the related
Purchaser Group Fee Letter). All amounts received after noon (New York City
time) will be deemed to have been received on the next Business Day.


                  (a) The Seller or the Servicer, as the case may be, shall, to
         the extent permitted by law, pay interest on any amount not paid or
         deposited by the Seller or the Servicer, as the case may be, when due
         hereunder, at an interest rate equal to the Base Rate, payable on
         demand.

                  (b) All computations of interest under CLAUSE (b) and all
         computations of Discount, fees and other amounts hereunder shall be
         made on the basis of a year of 360 (or 365 or 366, as applicable, with
         respect to Discount or other amounts calculated by reference to the
         Base Rate) days for the actual number of days elapsed. Whenever any
         payment or deposit to be made hereunder shall be due on a day other
         than a Business Day, such payment or deposit shall be made on the next
         Business Day and such extension of time shall be included in the
         computation of such payment or deposit.


                  (c) Each Affected Person will notify Seller and the applicable
         Purchaser Agent promptly after it has actual knowledge of any event
         which will entitle such Affected Person to such additional amounts as
         compensation pursuant to this SECTION 1.7. Such additional amounts
         shall accrue from the date as to which such Affected Person becomes
         subject to such additional costs as a result of such event (or if such
         notice of such event is not given to Seller by such Affected Person
         within 90 days after such Affected Person has actual knowledge of such
         event, from the date which is 90 days prior to the date such notice is
         given to Seller by such Affected Person).

         Section 1.7. INCREASED COSTS.

                  (a) If any Purchaser Agent, Purchaser, Liquidity Provider, the
         Administrator or any other Program Support Provider or any of their
         respective Affiliates (each an "AFFECTED PERSON") reasonably determines
         that the existence of or compliance with: (i) any law or regulation or
         any change therein or in the interpretation or application thereof, in
         each case adopted, issued or occurring after the date hereof, or (ii)
         any request, guideline or directive from any central bank or other
         Governmental Authority (whether or not having the force of law) issued
         or occurring after the date of this Agreement, affects or would affect
         the amount of capital required or expected to be maintained by such
         Affected Person, and such Affected



                                       10


         Person determines that the amount of such capital is increased by or
         based upon the existence of any commitment to make purchases of (or
         otherwise to maintain the investment in) Pool Receivables related to
         this Agreement or any related liquidity facility, credit enhancement
         facility or other commitments of the same type, then, upon demand by
         such Affected Person (with a copy to the Administrator), the Seller
         shall promptly pay to the Administrator, for the account of such
         Affected Person, from time to time as specified by such Affected
         Person, additional amounts sufficient to compensate such Affected
         Person in the light of such circumstances, to the extent that such
         Affected Person reasonably determines such increase in capital to be
         allocable to the existence of any of such commitments. A certificate as
         to such amounts submitted to the Seller and the Administrator by such
         Affected Person shall be conclusive and binding for all purposes,
         absent manifest error.


                  (b) If, due to either: (i) the introduction of or any change
         in or in the interpretation of any law or regulation or (ii) compliance
         with any guideline or request from any central bank or other
         Governmental Authority (whether or not having the force of law), there
         shall be any increase in the cost to any Affected Person of agreeing to
         purchase or purchasing, or maintaining the ownership of, the Purchased
         Interest or any portion thereof in respect of which Discount is
         computed by reference to the Euro-Rate, then, upon demand by such
         Affected Person, the Seller shall promptly pay to such Affected Person,
         from time to time as specified by such Affected Person, additional
         amounts sufficient to compensate such Affected Person for such
         increased costs. A certificate as to such amounts submitted to the
         Seller and the Administrator by such Affected Person shall be
         conclusive and binding for all purposes, absent manifest error.


                  (c) If such increased costs affect the related Affected
         Person's portfolio of financing transactions, such Affected Person
         shall use reasonable averaging and attribution methods to allocate such
         increased costs to the transactions contemplated by this Agreement.

         Section 1.8. REQUIREMENTS OF LAW.

                  If any Affected Person reasonably determines that the
         existence of or compliance with: (a) any law or regulation or any
         change therein or in the interpretation or application thereof, in each
         case adopted, issued or occurring after the date hereof, or (b) any
         request, guideline or directive from any central bank or other
         Governmental Authority (whether or not having the force of law) issued
         or occurring after the date of this Agreement:


                  (i) does or shall subject such Affected Person to any tax of
         any kind whatsoever with respect to this Agreement, any increase in the
         Purchased Interest or any portion thereof or in the amount of such
         Person's Investment relating thereto, or does or shall change the basis
         of taxation of payments to such Affected Person on account of
         Collections, Discount or any other amounts payable hereunder (excluding
         taxes imposed on the overall pre-tax net income of such Affected
         Person, and franchise taxes imposed on such Affected Person, by the



                                       11


         jurisdiction under the laws of which such Affected Person is organized
         or a political subdivision thereof),

                  (ii) does or shall impose, modify or hold applicable any
         reserve, special deposit, compulsory loan or similar requirement
         against assets held by, or deposits or other liabilities in or for the
         account of, purchases, advances or loans by, or other credit extended
         by, or any other acquisition of funds by, any office of such Affected
         Person that are not otherwise included in the determination of the
         Euro-Rate or the Base Rate hereunder, or

                  (iii) does or shall impose on such Affected Person any other
         condition,

and the result of any of the foregoing is: (A) to increase the cost to such
Affected Person of acting as Administrator or as a Purchaser Agent, or of
agreeing to purchase or purchasing or maintaining the ownership of undivided
percentage ownership interests with regard to the Purchased Interest (or
interests therein) or any Portion of Investment, or (B) to reduce any amount
receivable hereunder (whether directly or indirectly), then, in any such case,
upon demand by such Affected Person, the Seller shall promptly pay to such
Affected Person additional amounts necessary to compensate such Affected Person
for such additional cost or reduced amount receivable. All such amounts shall be
payable as incurred. A certificate from such Affected Person to the Seller and
the Administrator certifying, in reasonably specific detail, the basis for,
calculation of, and amount of such additional costs or reduced amount receivable
shall be conclusive and binding for all purposes, absent manifest error;
PROVIDED, HOWEVER, that no Affected Person shall be required to disclose any
confidential or tax planning information in any such certificate.


         Section 1.9. INABILITY TO DETERMINE EURO-RATE. (a) If the Administrator
(or any Purchaser Agent) determines before the first day of any Yield Period
(which determination shall be final and conclusive) that, by reason of
circumstances affecting the interbank eurodollar market generally, deposits in
dollars (in the relevant amounts for such Yield Period) are not being offered to
banks in the interbank eurodollar market for such Yield Period, or adequate
means do not exist for ascertaining the Euro-Rate for such Yield Period, then
the Administrator shall give notice thereof to the Seller. Thereafter, until the
Administrator or such Purchaser Agent notifies the Seller that the circumstances
giving rise to such suspension no longer exist, (a) no Portion of Investment
shall be funded at the Yield Rate determined by reference to the Euro-Rate and
(b) the Discount for any outstanding Portions of Investment then funded at the
Yield Rate determined by reference to the Euro-Rate shall, on the last day of
the then current Yield Period, be converted to the Yield Rate determined by
reference to the Base Rate.


         (b) If, on or before the first day of any Yield Period, the
Administrator shall have been notified by any Purchaser, Purchaser Agent or
Liquidity Provider that, such Person has determined (which determination shall
be final and conclusive) that, any enactment, promulgation or adoption of or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by a governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by such Person with any guideline, request


                                       12


or directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for such
Person to fund or maintain any Portion of Investment at the Yield Rate and based
upon the Euro-Rate, the Administrator shall notify the Seller thereof. Upon
receipt of such notice, until the Administrator notifies the Seller that the
circumstances giving rise to such determination no longer apply, (a) no Portion
of Investment shall be funded at the Yield Rate determined by reference to the
Euro-Rate and (b) the Discount for any outstanding Portions of Investment then
funded at the Yield Rate determined by reference to the Euro-Rate shall be
converted to the Yield Rate determined by reference to the Base Rate either (i)
on the last day of the then current Yield Period if such Person may lawfully
continue to maintain such Portion of Investment at the Yield Rate determined by
reference to the Euro-Rate to such day, or (ii) immediately, if such Person may
not lawfully continue to maintain such Portion of Investment at the Yield Rate
determined by reference to the Euro-Rate to such day.

         Section 1.10. EXTENSION OF TERMINATION DATE. The Seller may advise the
Administrator and each Purchaser Agent in writing of its desire to extend the
Facility Termination Date for an additional 364 days, provided such request is
made not more than 90 days prior to, and not less than 60 days prior to, the
then current Facility Termination Date. In the event that the Purchaser Agents
are all agreeable to such extension, the Administrator shall so notify the
Seller in writing (it being understood that the Purchaser Agents may accept or
decline such a request in their sole discretion and on such terms as they may
elect) not less than 30 days prior to the then current Facility Termination Date
and the Seller, the Administrator, the Purchaser Agents and the Purchasers shall
enter into such documents as the Purchasers may deem necessary or appropriate to
reflect such extension, and all reasonable costs and expenses incurred by the
Purchasers, the Administrator and the Purchaser Agents in connection therewith
(including reasonable Attorneys' Costs) shall be paid by the Seller. In the
event the Purchaser Agents decline the request for such extension, the
Administrator shall so notify the Seller of such determination; provided,
however, that the failure of the Administrator to notify the Seller of the
determination to decline such extension shall not affect the understanding and
agreement that the Purchaser Agents shall be deemed to have refused to grant the
requested extension in the event the Administrator fails to affirmatively notify
the Seller, in writing, of their agreement to accept the requested extension.



                                   ARTICLE II
                   REPRESENTATIONS AND WARRANTIES; COVENANTS;
                               TERMINATION EVENTS



         Section 2.1. REPRESENTATIONS AND WARRANTIES; COVENANTS. Each of the
Seller, Greetings and the Servicer hereby makes the representations and
warranties, and hereby agrees to perform and observe the covenants, applicable
to it set forth in EXHIBITS III and IV, respectively.

         Section 2.2. TERMINATION EVENTS. If any of the Termination Events set
forth in EXHIBIT V shall occur, the Administrator may (with the consent of a
Simple Majority of the Purchasers) or shall


                                       13


(at the direction of a Simple Majority of the Purchasers), by notice to the
Seller, declare the Facility Termination Date to have occurred (in which case
the Facility Termination Date shall be deemed to have occurred); PROVIDED, that
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in PARAGRAPH (f) of EXHIBIT
V, the Facility Termination Date shall occur. Upon any such declaration,
occurrence or deemed occurrence of the Facility Termination Date, the
Administrator, each Purchaser Agent and each Purchaser shall have, in addition
to the rights and remedies that they may have under this Agreement, all other
rights and remedies provided after default under the New York UCC and under
other applicable law, which rights and remedies shall be cumulative.



                                   ARTICLE III
                                 INDEMNIFICATION



         Section 3.1. INDEMNITIES BY THE SELLER. Without limiting any other
rights that the any Purchaser Agent, Purchaser, Liquidity Provider, the
Administrator or any Program Support Provider or any of their respective
Affiliates, employees, officers, directors, agents, counsel, successors,
transferees or assigns (each, an "INDEMNIFIED PARTY ") may have hereunder or
under applicable law, the Seller hereby agrees to indemnify each Indemnified
Party from and against any and all claims, damages, expenses, costs, losses and
liabilities (including Attorney Costs) (all of the foregoing being collectively
referred to as "INDEMNIFIED AMOUNTS ") arising out of or resulting from this
Agreement (whether directly or indirectly), the use of proceeds of purchases or
reinvestments, the ownership of the Purchased Interest, or any interest therein,
or in respect of any Receivable, Related Security or Contract, excluding,
however: (a) Indemnified Amounts to the extent resulting from gross negligence
or willful misconduct on the part of such Indemnified Party or its officers,
directors, agents or counsel, (b) recourse with respect to any Receivable to the
extent that such Receivable is uncollectible on account of the insolvency,
bankruptcy or lack of credit worthiness of the related Obligor, or (c) any
overall net income taxes or franchise taxes imposed on such Indemnified Party by
the jurisdiction under the laws of which such Indemnified Party is organized or
otherwise is considered doing business (unless the Indemnified Party would not
be considered doing business in such jurisdiction, but for having entered into,
or engaged in the transactions in connection with this Agreement or any other
Transaction Document) or any political subdivision thereof. Without limiting or
being limited by the foregoing, and subject to the exclusions set forth in the
preceding sentence, the Seller shall pay on demand (which demand shall be
accompanied by documentation of the Indemnified Amounts, in reasonable detail)
to each Indemnified Party any and all amounts necessary to indemnify such
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from any of the following:


                      (i) the failure of any Receivable included in the
                  calculation of the Net Receivables Pool Balance as an Eligible
                  Receivable to be an Eligible Receivable, the failure of any
                  information contained in an Information Package to be true and
                  correct, or the failure of any other information provided to
                  such Indemnified Party by the



                                       14


                  Seller or Servicer with respect to Receivables or this
                  Agreement to be true and correct,

                      (ii) the failure of any representation, warranty or
                  statement made or deemed made by the Seller (or any of its
                  officers) under or in connection with this Agreement to have
                  been true and correct as of the date made or deemed made in
                  all respects when made,


                      (iii) the failure by the Seller to comply with any
                  applicable law, rule or regulation with respect to any Pool
                  Receivable or the related Contract, or the failure of any Pool
                  Receivable or the related Contract to conform to any such
                  applicable law, rule or regulation,

                      (iv) the failure to vest in the Administrator (for the
                  benefit of the Purchasers) a valid and enforceable: (A)
                  perfected undivided percentage ownership interest, to the
                  extent of the Purchased Interest, in the Receivables in, or
                  purporting to be in, the Receivables Pool and the other Pool
                  Assets, or (B) first priority perfected security interest in
                  the Pool Assets, in each case, free and clear of any Adverse
                  Claim,


                      (v) the failure to have filed, or any delay in filing,
                  financing statements or other similar instruments or documents
                  under the UCC of any applicable jurisdiction or other
                  applicable laws with respect to any Receivables in, or
                  purporting to be in, the Receivables Pool and the other Pool
                  Assets, whether at the time of any purchase or reinvestment or
                  at any subsequent time,


                      (vi) any dispute, claim, offset or defense (other than any
                  reduction, revision or discharge in bankruptcy of or other
                  Insolvency Event in respect of the Obligor) of the Obligor to
                  the payment of any Receivable in, or purporting to be in, the
                  Receivables Pool (including a defense (not connected with any
                  Insolvency Event) based on such Receivable or the related
                  Contract not being a legal, valid and binding obligation of
                  such Obligor enforceable against it in accordance with its
                  terms), or any other claim resulting from the sale of the
                  goods or services related to such Receivable or the furnishing
                  or failure to furnish such goods or services or relating to
                  collection activities with respect to such Receivable,


                      (vii) any failure of the Seller, any Affiliate of the
                  Seller or the Servicer to perform its duties or obligations in
                  accordance with the provisions hereof or under the Contracts,


                      (viii) any products liability or other claim,
                  investigation, litigation or proceeding arising out of or in
                  connection with merchandise, insurance or services that are
                  the subject of any Contract,

                                       15

                      (ix) the commingling of Collections at any time with
                  other funds,

                      (x) the use of proceeds of purchases or reinvestments, or


                      (xi) any reduction in the Aggregate Investment as a result
                  of the distribution of Collections pursuant to SECTION 1.4(d),
                  if all or a portion of such distributions shall thereafter be
                  rescinded or otherwise must be returned for any reason.

         Section 3.2. INDEMNITIES BY THE SERVICER. Without limiting any other
rights that any Indemnified Party may have hereunder or under applicable law,
the Servicer hereby agrees to indemnify each Indemnified Party from and against
any and all Indemnified Amounts arising out of or resulting from (whether
directly or indirectly): (a) the failure of any information contained in an
Information Package to be true and correct, or the failure of any other
information provided to such Indemnified Party by, or on behalf of, the Servicer
to be true and correct, (b) the failure of any representation, warranty or
statement made or deemed made by the Servicer (or any of its officers) under or
in connection with this Agreement or any other Transaction Document to which it
is a party to have been true and correct as of the date made or deemed made in
all respects when made, (c) the failure by the Servicer to comply with any
applicable law, rule or regulation with respect to any Pool Receivable or the
related Contract, (d) any dispute, claim, offset or defense of the Obligor to
the payment of any Receivable in, or purporting to be in, the Receivables Pool
resulting from or related to the collection activities with respect to such
Receivable, (e) any failure of the Servicer to perform its duties or obligations
in accordance with the provisions hereof or any other Transaction Document to
which it is a party, (f) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to any
Receivables in, or purporting to be in, the Receivables Pool and the other Pool
Assets, whether at the time of any purchase or reinvestment or at any subsequent
time, or (g) any commingling by the Servicer of Collections at any time with
other funds.



                                   ARTICLE IV
                         ADMINISTRATION AND COLLECTIONS



         Section 4.1. APPOINTMENT OF THE SERVICER.

                  (a) The servicing, administering and collection of the Pool
         Receivables shall be conducted by the Person so designated from time to
         time as the Servicer in accordance with this Section. Until the
         Administrator gives notice to Greetings (in accordance with this
         SECTION 4.1) of the designation of a new Servicer, Greetings is hereby
         designated as, and hereby agrees to perform the duties and obligations
         of, the Servicer pursuant to the terms hereof. Upon the occurrence of a
         Termination Event, the Administrator may (with the consent of the
         Majority Purchasers) or shall (at the direction of the Majority
         Purchasers)


                                       16


         designate as Servicer any Person (including itself) to succeed
         Greetings or any successor Servicer, on the condition in each case that
         any such Person so designated shall agree to perform the duties and
         obligations of the Servicer pursuant to the terms hereof.

                  (b) Upon the designation of a successor Servicer as set forth
         in CLAUSE (a), Greetings agrees that it will terminate its activities
         as Servicer hereunder in a manner that the Administrator determines
         will facilitate the transition of the performance of such activities to
         the new Servicer, and Greetings shall cooperate with and assist such
         new Servicer. Such cooperation shall include access to and transfer of
         related records (including all Contracts) and use by the new Servicer
         of all licenses, hardware or software necessary or desirable to collect
         the Pool Receivables and the Related Security.


                  (c) Greetings acknowledges that, in making their decision to
         execute and deliver this Agreement, the Administrator and each
         Purchaser Group have relied on Greetings's agreement to act as Servicer
         hereunder. Accordingly, Greetings agrees that it will not voluntarily
         resign as Servicer without the consent of the Majority Purchasers.


                  (d) The Servicer may delegate its duties and obligations
         hereunder to any subservicer (each a "SUB-SERVICER "); PROVIDED, that,
         in each such delegation: (i) such Sub- Servicer shall agree in writing
         to perform the duties and obligations of the Servicer pursuant to the
         terms hereof, (ii) the Servicer shall remain primarily liable for the
         performance of the duties and obligations so delegated, (iii) the
         Seller, the Administrator and each Purchaser Group shall have the right
         to look solely to the Servicer for performance, and (iv) the terms of
         any agreement with any Sub-Servicer shall provide that the
         Administrator may terminate such agreement upon the termination of the
         Servicer hereunder by giving notice of its desire to terminate such
         agreement to the Servicer (and the Servicer shall provide appropriate
         notice to each such Sub-Servicer); PROVIDED, HOWEVER, that if any such
         delegation is to any Person other than an Originator or an Affiliate
         thereof, the Administrator and the Majority Purchasers shall have
         consented in writing in advance to such delegation; PROVIDED FURTHER
         that the parties agree that AGSC and each Originator shall serve as
         initial Sub-Servicers.

         Section 4.2. DUTIES OF THE SERVICER.

                  (a) The Servicer shall take or cause to be taken all such
         action as may be necessary or advisable to administer and collect each
         Pool Receivable from time to time, all in accordance with this
         Agreement and all applicable laws, rules and regulations, with
         reasonable care and diligence, and in accordance with the Credit and
         Collection Policies. The Servicer shall set aside, for the account of
         each Purchaser Group, the amount of the Collections to which each such
         Purchaser Group is entitled in accordance with ARTICLE I. The Servicer
         may, in accordance with the applicable Credit and Collection Policy,
         take such action as the Servicer may determine to be appropriate to
         maximize Collections thereof or reflect adjustments required under the
         applicable Contract; PROVIDED, HOWEVER, that: (i) such action shall not
         change the number of days such Pool Receivable has remained unpaid from



                                       17


         the date of the original due date related to such Pool Receivable and
         (ii) such action shall not alter the status of such Pool Receivable as
         a Delinquent Receivable or a Defaulted Receivable or limit the rights
         of the Administrator or any Purchaser Group under this Agreement. The
         Seller shall deliver to the Servicer and the Servicer shall hold for
         the benefit of the Seller and the Administrator (individually and for
         the benefit of each Purchaser Group), in accordance with their
         respective interests, all records and documents (including computer
         tapes or disks) with respect to each Pool Receivable. Notwithstanding
         anything to the contrary contained herein, the Administrator may direct
         the Servicer (whether the Servicer is Greetings, AGSC, any Originator
         or any other Person) to commence or settle any legal action to enforce
         collection of any Pool Receivable or to foreclose upon or repossess any
         Related Security; PROVIDED, HOWEVER, that no such direction may be
         given unless either: (A) a Termination Event has occurred or (B) the
         Administrator believes in good faith that failure to commence, settle
         or effect such legal action, foreclosure or repossession could
         adversely affect Receivables constituting a material portion of the
         Pool Receivables.


                  (b) The Servicer shall, as soon as practicable following
         actual receipt of collected funds, turn over to the Seller the
         collections of any indebtedness that is not a Pool Receivable, less, if
         Greetings, AGSC, any Originator or an Affiliate thereof is not the
         Servicer, all reasonable and appropriate out-of-pocket costs and
         expenses of such Servicer of servicing, collecting and administering
         such collections. The Servicer, if other than Greetings, AGSC, any
         Originator or an Affiliate thereof, shall, as soon as practicable upon
         demand, deliver to the Seller all records in its possession that
         evidence or relate to any indebtedness that is not a Pool Receivable,
         and copies of records in its possession that evidence or relate to any
         indebtedness that is a Pool Receivable.


                  (c) The Servicer's obligations hereunder shall terminate on
         the later of: (i) the Facility Termination Date and (ii) the date on
         which all amounts required to be paid to the Purchaser Agents, each
         Purchaser, the Administrator and any other Indemnified Party or
         Affected Person hereunder shall have been paid in full.


         After such termination, if Greetings, AGSC, any Originator or an
Affiliate thereof was not the Servicer on the date of such termination, the
Servicer shall promptly deliver to the Seller all books, records and related
materials that the Seller previously provided to the Servicer, or that have been
obtained by the Servicer, in connection with this Agreement.

         Section 4.3. LOCK-BOX ACCOUNT ARRANGEMENTS. On the Closing Date (or,
solely in the case of Lock-Box Banks used solely for Plus Mark, Inc.
Receivables, the Plus Mark Addition Date), the Seller shall have entered into
Lock-Box Agreements with all of the Lock-Box Banks and delivered original
counterparts of each to the Administrator and each Purchaser Agent. Upon the
occurrence of a Termination Event, the Administrator may (with the consent of a
Simple Majority of the Purchasers) or shall (upon the direction of a Simple
Majority of the Purchasers) at any time thereafter give notice to each Lock-Box
Bank that the Administrator is exercising its rights under the Lock-Box
Agreements to do any or all of the following: (a) to have the exclusive
ownership and control of the


                                       18


Lock-Box Accounts transferred to the Administrator (for the benefit of the
Purchasers) and to exercise exclusive dominion and control over the funds
deposited therein, (b) to have the proceeds that are sent to the respective
Lock-Box Accounts redirected pursuant to the Administrator's instructions rather
than deposited in the applicable Lock-Box Account, and (c) to take any or all
other actions permitted under the applicable Lock-Box Agreement. The Seller
hereby agrees that if the Administrator at any time takes any action set forth
in the preceding sentence, the Administrator shall have exclusive control (for
the benefit of the Purchasers) of the proceeds (including Collections) of all
Pool Receivables and the Seller hereby further agrees to take any other action
that the Administrator or any Purchaser Agent may reasonably request to transfer
such control. Any proceeds of Pool Receivables received by the Seller or the
Servicer thereafter shall be sent immediately to the Administrator. The parties
hereto hereby acknowledge that if at any time the Administrator takes control of
any Lock-Box Account, the Administrator shall not have any rights to the funds
therein in excess of the unpaid amounts due to the Administrator, the Purchaser
Groups, any Indemnified Party or any other Person hereunder, and the
Administrator shall distribute or cause to be distributed such funds in
accordance with SECTION 4.2(b) and ARTICLE I (in each case as if such funds were
held by the Servicer thereunder).

         Section 4.4. ENFORCEMENT RIGHTS.

                  (a) At any time following the occurrence of a Termination
         Event:


                      (i) the Administrator may (with the consent or at the
                  direction of the Majority Purchasers) direct the Obligors that
                  payment of all amounts payable under any Pool Receivable is to
                  be made directly to the Administrator or its designee,


                      (ii) the Administrator may (with the consent or at the
                  direction of the Majority Purchasers) instruct the Seller or
                  the Servicer to give notice of the Purchaser Groups' interest
                  in Pool Receivables to each Obligor, which notice shall direct
                  that payments be made directly to the Administrator or its
                  designee (on behalf of such Purchaser Groups), and the Seller
                  or the Servicer, as the case may be, shall give such notice at
                  the expense of the Seller or the Servicer, as the case may be;
                  PROVIDED, that if the Seller or the Servicer, as the case may
                  be, fails to so notify each Obligor, the Administrator (at the
                  Seller's or the Servicer's, as the case may be, expense) may
                  so notify the Obligors, and


                      (iii) the Administrator may (with the consent or at the
                  direction of the Majority Purchasers) request the Servicer to,
                  and upon such request the Servicer shall: (A) assemble all of
                  the records necessary or desirable to collect the Pool
                  Receivables and the Related Security, and transfer or license
                  to a successor Servicer the use of all software necessary or
                  desirable to collect the Pool Receivables and the Related
                  Security, and make the same available to the Administrator or
                  its designee (for the benefit of the Purchasers) at a place
                  selected by the Administrator, and (B) segregate all cash,
                  checks and other instruments received by it from time to time




                                       19


                  constituting Collections in a manner acceptable to the
                  Administrator and, promptly upon receipt, remit all such cash,
                  checks and instruments, duly endorsed or with duly executed
                  instruments of transfer, to the Administrator or its designee.


                  (b) The Seller hereby authorizes the Administrator (on behalf
         of each Purchaser Group), and irrevocably appoints the Administrator as
         its attorney-in-fact with full power of substitution and with full
         authority in the place and stead of the Seller, which appointment is
         coupled with an interest, to take any and all steps in the name of the
         Seller and on behalf of the Seller necessary or desirable, in the
         determination of the Administrator, after the occurrence of a
         Termination Event, to collect any and all amounts or portions thereof
         due under any and all Pool Assets, including endorsing the name of the
         Seller on checks and other instruments representing Collections and
         enforcing such Pool Assets. Notwithstanding anything to the contrary
         contained in this subsection, none of the powers conferred upon such
         attorney-in-fact pursuant to the preceding sentence shall subject such
         attorney-in-fact to any liability if any action taken by it shall prove
         to be inadequate or invalid, nor shall they confer any obligations upon
         such attorney-in-fact in any manner whatsoever.

         Section 4.5. RESPONSIBILITIES OF THE SELLER.

                  (a) Anything herein to the contrary notwithstanding, the
         Seller shall: (i) perform all of its obligations, if any, under the
         Contracts related to the Pool Receivables to the same extent as if
         interests in such Pool Receivables had not been transferred hereunder,
         and the exercise by the Administrator, the Purchaser Agents or the
         Purchasers of their respective rights hereunder shall not relieve the
         Seller from such obligations, and (ii) pay when due any taxes,
         including any sales taxes payable in connection with the Pool
         Receivables and their creation and satisfaction. The Administrator, the
         Purchaser Agents or any of the Purchasers shall not have any obligation
         or liability with respect to any Pool Asset, nor shall any of them be
         obligated to perform any of the obligations of the Seller, Servicer,
         Greetings, AGSC, or the Originators thereunder.


                  (b) Greetings hereby irrevocably agrees that if at any time it
         shall cease to be the Servicer hereunder, it shall act, and shall cause
         any former or current Sub-Servicers to act, (if the then-current
         Servicer so requests) as the data-processing agent of the Servicer and,
         in such capacity, Greetings shall conduct, and shall cause the former
         or current Sub-Servicers to conduct, the data-processing functions of
         the administration of the Receivables and the Collections thereon in
         substantially the same way that Greetings conducted such data-
         processing functions while it acted as the Servicer.

         Section 4.6. SERVICING FEE. (a) Subject to CLAUSE (b), the Servicer
shall be paid a fee (the "SERVICING FEE") equal to the lesser of (i) 1.50% PER
ANNUM of the daily average aggregate Outstanding Balance of the Pool Receivables
and (ii) 110% of the aggregate reasonable costs and expenses incurred by
Servicer in connection with performance of its obligations as Servicer. The
Aggregate of each Purchaser Group's Ratable Share of such fee shall be paid
through the


                                       20


distributions contemplated by SECTION 1.4(d), and the Seller's Share of such fee
shall be paid by the Seller.


         (b) If the Servicer ceases to be Greetings or an Affiliate thereof, the
servicing fee shall be the greater of: (i) the amount calculated pursuant to
CLAUSE (a), and (ii) an alternative amount specified by the successor Servicer
not to exceed 110% of the aggregate reasonable costs and expenses incurred by
such successor Servicer in connection with the performance of its obligations as
Servicer.



                                    ARTICLE V
                                   THE AGENTS



         Section 5.1. APPOINTMENT AND AUTHORIZATION. (a) Each Purchaser and
Purchaser Agent hereby irrevocably designates and appoints PNC as the
"Administrator" hereunder and authorizes the Administrator to take such actions
and to exercise such powers as are delegated to the Administrator hereby and to
exercise such other powers as are reasonably incidental thereto. The
Administrator shall hold, in its name, for the benefit of each Purchaser,
ratably, the Purchased Interest. The Administrator shall not have any duties
other than those expressly set forth herein or any fiduciary relationship with
any Purchaser or Purchaser Agent, and no implied obligations or liabilities
shall be read into this Agreement, or otherwise exist, against the
Administrator. The Administrator does not assume, nor shall it be deemed to have
assumed, any obligation to, or relationship of trust or agency with, the Seller
or Servicer. Notwithstanding any provision of this Agreement or any other
Transaction Document to the contrary, in no event shall the Administrator ever
be required to take any action which exposes the Administrator to personal
liability or which is contrary to the provision of any Transaction Document or
applicable law.


                  (b) Each Purchaser hereby irrevocably designates and appoints
the respective institution identified as the Purchaser Agent for such
Purchaser's Purchaser Group on the signature pages hereto or in the Assumption
Agreement or Transfer Supplement pursuant to which such Purchaser becomes a
party hereto, and each authorizes such Purchaser Agent to take such action on
its behalf under the provisions of this Agreement and to exercise such powers
and perform such duties as are expressly delegated to such Purchaser Agent by
the terms of this Agreement, if any, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement, no Purchaser Agent shall have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Purchaser or other Purchaser Agent or the Administrator,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of such Purchaser Agent shall be read into this
Agreement or otherwise exist against such Purchaser Agent.


                  (c) Except as otherwise specifically provided in this
Agreement, the provisions of this Article V are solely for the benefit of the
Purchaser Agents, the Administrator and the Purchasers,


                                       21


and none of the Seller or Servicer shall have any rights as a third-party
beneficiary or otherwise under any of the provisions of this ARTICLE V, except
that this ARTICLE V shall not affect any obligations which any Purchaser Agent,
the Administrator or any Purchaser may have to the Seller or the Servicer under
the other provisions of this Agreement. Furthermore, no Purchaser shall have any
rights as a third-party beneficiary or otherwise under any of the provisions
hereof in respect of a Purchaser Agent which is not the Purchaser Agent for such
Purchaser.


                  (d) In performing its functions and duties hereunder, the
Administrator shall act solely as the agent of the Purchasers and the Purchaser
Agents and does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for the Seller or Servicer or any of
their successors and assigns. In performing its functions and duties hereunder,
each Purchaser Agent shall act solely as the agent of its respective Purchaser
and does not assume nor shall be deemed to have assumed any obligation or
relationship of trust or agency with or for the Seller, the Servicer, any other
Purchaser, any other Purchaser Agent or the Administrator, or any of their
respective successors and assigns.

         Section 5.2. DELEGATION OF DUTIES. The Administrator may execute any
of its duties through agents or attorneys-in-fact and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The
Administrator shall not be responsible for the negligence or misconduct of any
agents or attorneys-in-fact selected by it with reasonable care.

         Section 5.3. EXCULPATORY PROVISIONS. None of the Purchaser Agents, the
Administrator or any of their directors, officers, agents or employees shall be
liable for any action taken or omitted (i) with the consent or at the direction
of the Majority Purchasers (or in the case of any Purchaser Agent, the
Purchasers within its Purchaser Group that have a majority of the aggregate
Commitment of such Purchaser Group) or (ii) in the absence of such Person's
gross negligence or willful misconduct. The Administrator shall not be
responsible to any Purchaser, Purchaser Agent or other Person for (i) any
recitals, representations, warranties or other statements made by the Seller,
Servicer, or any of their Affiliates, (ii) the value, validity, effectiveness,
genuineness, enforceability or sufficiency of any Transaction Document, (iii)
any failure of the Seller, AGSC, any Originator, Greetings or any of their
Affiliates to perform any obligation or (iv) the satisfaction of any condition
specified in EXHIBIT II. The Administrator shall not have any obligation to any
Purchaser or Purchaser Agent to ascertain or inquire about the observance or
performance of any agreement contained in any Transaction Document or to inspect
the properties, books or records of the Seller, Greetings, Servicer, AGSC, any
Originator or any of their Affiliates.

         Section 5.4. RELIANCE BY AGENTS. Each Purchaser Agent and the
Administrator shall in all cases be entitled to rely, and shall be fully
protected in relying, upon any document or other writing or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person and upon advice and statements of legal counsel (including
counsel to the Seller), independent accountants and other experts selected by
the Administrator. Each Purchaser Agent and the Administrator shall in all cases
be fully justified in failing or refusing to take any action under any
Transaction Document unless it shall first receive such advice or concurrence of
the Majority


                                       22


Purchasers (or in the case of any Purchaser Agent, the Purchasers within its
Purchaser Group that have a majority of the aggregate Commitment of such
Purchaser Group), and assurance of its indemnification, as it deems appropriate.


                  (b) The Administrator shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in accordance with a
request of the Majority Purchasers or the Purchaser Agents, and such request and
any action taken or failure to act pursuant thereto shall be binding upon all
Purchasers, the Administrator and Purchaser Agents.


                  (c) The Purchasers within each Purchaser Group with a majority
of the Commitment of such Purchaser Group shall be entitled to request or direct
the related Purchaser Agent to take action, or refrain from taking action, under
this Agreement on behalf of such Purchasers. Such Purchaser Agent shall in all
cases be fully protected in acting, or in refraining from acting, under this
Agreement in accordance with a request of such majority Purchasers, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all of such Purchaser Agent's Purchasers.


                  (d) Unless otherwise advised in writing by a Purchaser Agent
or by any Purchaser on whose behalf such Purchaser Agent is purportedly acting,
each party to this Agreement may assume that (i) such Purchaser Agent is acting
for the benefit of each of the Purchasers in respect of which such Purchaser
Agent is identified as being the "Purchaser Agent" in the definition of
"Purchaser Agent" hereto, as well as for the benefit of each assignee or other
transferee from any such Person, and (ii) each action taken by such Purchaser
Agent has been duly authorized and approved by all necessary action on the part
of the Purchasers on whose behalf it is purportedly acting. Each Purchaser Agent
and its Purchaser(s) shall agree amongst themselves as to the circumstances and
procedures for removal, resignation and replacement of such Purchaser Agent.

         Section 5.5. NOTICE OF TERMINATION EVENTS. Neither any Purchaser Agent
nor the Administrator shall be deemed to have knowledge or notice of the
occurrence of any Termination Event or Unmatured Termination Event unless such
Administrator has received notice from any Purchaser, Purchaser Agent, the
Servicer or the Seller stating that a Termination Event or Unmatured Termination
Event has occurred hereunder and describing such Termination Event or Unmatured
Termination Event. In the event that the Administrator receives such a notice,
it shall promptly give notice thereof to each Purchaser Agent whereupon each
such Purchaser Agent shall promptly give notice thereof to its Purchasers. In
the event that a Purchaser Agent receives such a notice (other than from the
Administrator), it shall promptly give notice thereof to the Administrator. The
Administrator shall take such action concerning a Termination Event or Unmatured
Termination Event as may be directed by the Majority Purchasers unless such
action otherwise requires the consent of all Purchasers), but until the
Administrator receives such directions, the Administrator may (but shall not be
obligated to) take such action, or refrain from taking such action, as the
Administrator deems advisable and in the best interests of the Purchasers and
Purchaser Agents.


                                       23


         Section 5.6. NON-RELIANCE ON ADMINISTRATOR, PURCHASER AGENTS AND OTHER
PURCHASERS. Each Purchaser expressly acknowledges that none of the
Administrator, the Purchaser Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Administrator, or any
Purchaser Agent hereafter taken, including any review of the affairs of the
Seller, Greetings, Servicer, AGSC, or any Originator, shall be deemed to
constitute any representation or warranty by the Administrator or such Purchaser
Agent, as applicable. Each Purchaser represents and warrants to the
Administrator and the Purchaser Agents that, independently and without reliance
upon the Administrator, Purchaser Agents or any other Purchaser and based on
such documents and information as it has deemed appropriate, it has made and
will continue to make its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and
creditworthiness of the Seller, Greetings, AGSC, Servicer or the Originators,
and the Receivables and its own decision to enter into this Agreement and to
take, or omit, action under any Transaction Document. Except for items
specifically required to be delivered hereunder, the Administrator shall not
have any duty or responsibility to provide any Purchaser Agent with any
information concerning the Seller, Greetings, AGSC, Servicer or the Originators
or any of their Affiliates that comes into the possession of the Administrator
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.

         Section 5.7. ADMINISTRATORS AND AFFILIATES. Each of the Purchasers and
the Administrator and their Affiliates may extend credit to, accept deposits
from and generally engage in any kind of banking, trust, debt, equity or other
business with the Seller, Greetings, AGSC, Servicer or any Originator or any of
their Affiliates and PNC may exercise or refrain from exercising its rights and
powers as if it were not the Administrator. With respect to the acquisition of
the Eligible Receivables pursuant to this Agreement, each of the Purchaser
Agents and the Administrator shall have the same rights and powers under this
Agreement as any Purchaser and may exercise the same as though it were not such
an agent, and the terms "Purchaser" and "Purchasers" shall include each of the
Purchaser Agents and the Administrator in their individual capacities.

         Section 5.8. INDEMNIFICATION. Each Purchaser Group shall indemnify and
hold harmless the Administrator (but solely in its capacity as Administrator)
and its officers, directors, employees, representatives and agents (to the
extent not reimbursed by the Seller, Greetings AGSC, or Servicer and without
limiting the obligation of the Seller, Greetings, AGSC, or Servicer to do so),
ratably in accordance with its Ratable Share from and against any and all
liabilities, obligations, losses, damages, penalties, judgments, settlements,
costs, expenses and disbursements of any kind whatsoever (including in
connection with any investigative or threatened proceeding, whether or not the
Administrator or such Person shall be designated a party thereto) that may at
any time be imposed on, incurred by or asserted against the Administrator or
such Person as a result of, or related to, any of the transactions contemplated
by the Transaction Documents or the execution, delivery or performance of the
Transaction Documents or any other document furnished in connection therewith
(but excluding any such liabilities, obligations, losses, damages, penalties,
judgments, settlements, costs, expenses or disbursements resulting solely from
the gross negligence or willful misconduct of the Administrator or such Person
as finally determined by a court of competent jurisdiction); PROVIDED, that in
the case of each Purchaser that is a commercial paper conduit, such


                                       24


indemnity shall be provided solely to the extent of amounts received by such
Purchaser under this Agreement which exceed the amounts required to repay such
Purchaser's outstanding Notes. Notwithstanding anything in this SECTION 5.8 to
the contrary, each of the Administrator, each Purchaser Agent and each Purchaser
hereby covenants and agrees that it shall not institute against, or join any
other Person in instituting against, any Conduit Purchaser any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding or other
proceedings under any federal or state bankruptcy or similar law, for one year
and a day after the latest maturing Note issued by such Conduit Purchaser is
paid in full.

         Section 5.9. SUCCESSOR ADMINISTRATOR. The Administrator may, upon at
least five (5) days notice to the Seller and each Purchaser and Purchaser Agent,
resign as Administrator. Such resignation shall not become effective until a
successor agent is appointed by the Majority Purchasers and has accepted such
appointment. Upon such acceptance of its appointment as Administrator hereunder
by a successor Administrator, such successor Administrator shall succeed to and
become vested with all the rights and duties of the retiring Administrator, and
the retiring Administrator shall be discharged from its duties and obligations
under the Transaction Documents. After any retiring Administrator's resignation
hereunder, the provisions of SECTIONS 3.1 and 3.2 and this Article V shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
the Administrator.



                                   ARTICLE VI
                                  MISCELLANEOUS



         Section 6.1. AMENDMENTS, ETC. No amendment or waiver of any provision
of this Agreement or any other Transaction Document, or consent to any departure
by the Seller or the Servicer therefrom, shall be effective unless in a writing
signed by the Administrator and each of the Majority Purchasers, and, in the
case of any amendment, by the other parties thereto; and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; PROVIDED, HOWEVER, that, if required by any
Conduit Purchaser, no such material amendment shall be effective until both
Moody's and Standard & Poor's have notified the related Purchaser Agent in
writing that such action will not result in a reduction or withdrawal of the
rating of any Notes; PROVIDED, FURTHER that no such amendment or waiver shall,
without the consent of each affected Purchaser, (A) extend the date of any
payment or deposit of Collections by the Seller or the Servicer, (B) reduce the
rate or extend the time of payment of Yield, (C) reduce any fees payable to the
Administrator, any Purchaser Agent or any Purchaser pursuant to the applicable
Purchaser Group Fee Letter, (D) change (except as contemplated by Section 1.4)
the amount of Investment of any Purchaser, any Purchaser's pro rata share of the
Purchased Interest or (except as contemplated by Section 1.10) any Related
Committed Purchaser's Commitment, (E) amend, modify or waive any provision of
the definition of "Majority Purchaser" or this SECTION 6.1, (F) consent to or
permit the assignment or transfer by the Seller of any of its rights and
obligations under this Agreement, (G) change the definition of "Concentration
Percentage," "Specifically Reserved Dilution Amount," "Sales Based Loss Reserve



                                       25


Percentage," "Receivables Based Loss Reserve Percentage, "Eligible Receivable,"
"Loss Reserve," "Loss Reserve Percentage," "Dilution Reserve," "Dilution Reserve
Percentage," "Termination Event," "Total Reserve," "Yield Reserve," or "Yield
Reserve Percentage", (H) amend or modify any defined term (or any defined term
used directly or indirectly in such defined term) used in clauses (A) through
(G) above in a manner that would circumvent the intention of the restrictions
set forth in such clauses, or (I) otherwise materially and adversely affect the
rights of any such Purchaser hereunder. No failure on the part of the Purchasers
or the Administrator to exercise, and no delay in exercising any right hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right hereunder preclude any other or further exercise thereof or the
exercise of any other right.

         Section 6.2. NOTICES, ETC. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party hereto
at its address set forth under its name on the signature pages hereof (or in any
Assumption Agreement pursuant to which it became a party hereto) or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent (and shall be followed by hard copy sent by first class mail), and
notices and communications sent by other means shall be effective when received.

         Section 6.3. SUCCESSORS AND ASSIGNS; PARTICIPATIONS; ASSIGNMENTS.

         (a) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns. Except as otherwise provided herein, the Seller may not assign or
transfer any of its rights or delegate any of its duties hereunder or under any
Transaction Document without the prior consent of the Administrator, the
Purchaser Agents and the Purchasers.

         (b) PARTICIPATIONS. Any Purchaser may sell to one or more Persons (each
a "PARTICIPANT ") participating interests in the interests of such Purchaser
hereunder; provided, however, that no Purchaser shall grant any participation
under which the Participant shall have rights to approve any amendment to or
waiver of this Agreement or any other Transaction Document. Such Purchaser shall
remain solely responsible for performing its obligations hereunder, and the
Seller, each Purchaser Agent and the Administrator shall continue to deal solely
and directly with such Purchaser in connection with such Purchaser's rights and
obligations hereunder. A Purchaser shall not agree with a Participant to
restrict such Purchaser's right to agree to any amendment hereto, except
amendments that require the consent of all Purchasers.

         (c) ASSIGNMENTS BY CERTAIN RELATED COMMITTED PURCHASERS. Any Related
Committed Purchaser may assign to one or more Persons (each a "PURCHASING
RELATED COMMITTED PURCHASER "), reasonably acceptable to the related Purchaser
Agent in its sole discretion, any portion of its Commitment pursuant to a
supplement hereto, substantially in the form of ANNEX D with any changes as have
been approved by the parties thereto (a "TRANSFER SUPPLEMENT "), executed by
each such Purchasing Related Committed Purchaser, such selling Related Committed
Purchaser, such


                                       26


related Purchaser Agent. Any such assignment by Related Committed Purchaser
cannot be for an amount less than $10,000,000. Upon (i) the execution of the
Transfer Supplement, (ii) delivery of an executed copy thereof to the Seller,
such related Purchaser Agent and the Administrator and (iii) payment by the
Purchasing Related Committed Purchaser to the selling Related Committed
Purchaser of the agreed purchase price, such selling Related Committed Purchaser
shall be released from its obligations hereunder to the extent of such
assignment and such Purchasing Related Committed Purchaser shall for all
purposes be a Related Committed Purchaser party hereto and shall have all the
rights and obligations of a Related Committed Purchaser hereunder to the same
extent as if it were an original party hereto. The amount of the Commitment of
the selling Related Committed Purchaser allocable to such Purchasing Related
Committed Purchaser shall be equal to the amount of the Commitment of the
selling Related Committed Purchaser transferred regardless of the purchase price
paid therefor. The Transfer Supplement shall be an amendment hereof only to the
extent necessary to reflect the addition of such Purchasing Related Committed
Purchaser as a "Related Committed Purchaser" and any resulting adjustment of the
selling Related Committed Purchaser's Commitment.

         (d) REPLACEABLE RELATED COMMITTED PURCHASER. If any Related Committed
Purchaser (a "REPLACEABLE RELATED COMMITTED PURCHASER ") shall (i) petition the
Seller for any amounts under SECTION 1.7 or 1.8 or (ii) cease to have a
short-term debt rating of "A-1" by Standard & Poor's and "P-1" by Moody's (if
such a rating is required by the related Purchaser's securitization program),
the related Purchaser Agent or the Administrator may designate a replacement
financial institution (a "REPLACEMENT RELATED COMMITTED PURCHASER "), to which
such Replaceable Related Committed Purchaser shall, subject to its receipt of an
amount equal to the aggregate outstanding principal balance of its Investment
and accrued and unpaid Discount thereon (and, if applicable, its receipt (unless
a later date for the remittance thereof shall be agreed upon by the Seller and
such Replaceable Related Committed Purchaser) of all amounts claimed under
SECTION 1.7 and/or 1.8) promptly assign all of its rights, obligations and
Commitment hereunder, together with all of its right, title and interest in, to
and under the Purchased Interest allocable to it, to the Replacement Related
Committed Purchaser in accordance with SECTION 6.3(c), above. Once such
assignment becomes effective, the Replacement Related Committed Purchaser shall
be deemed to be a "Related Committed Purchaser" for all purposes hereof and such
Replaceable Related Committed Purchaser shall cease to be "Related Committed
Purchaser" for all purposes hereof and shall have no further rights or
obligations hereunder.

         (e) ASSIGNMENT BY CONDUIT PURCHASERS. Each party hereto agrees and
consents (i) to any Conduit Purchaser's assignment, participation, grant of
security interests in or other transfers of any portion of, or any of its
beneficial interest in, the Purchased Interest (or portion thereof), including
without limitation to any Liquidity Provider or to any collateral agent in
connection with its commercial paper program and (ii) to the complete assignment
by any Conduit Purchaser of all of its rights and obligations hereunder to any
other Person, and upon such assignment such Conduit Purchaser shall be released
from all obligations and duties, if any, hereunder; provided, however, that such
Conduit Purchaser may not, without the prior consent of its Related Committed
Purchasers, make any such transfer of its rights hereunder unless the assignee
(i) is principally engaged in the


                                       27


purchase of assets similar to the assets being purchased hereunder, (ii) has as
its Purchaser Agent the Purchaser Agent of the assigning Conduit Purchaser and
(iii) issues commercial paper or other Notes with credit ratings substantially
comparable to the ratings of the assigning Conduit Purchaser. Any assigning
Conduit Purchaser shall deliver to any assignee a supplement hereto,
substantially in the form of ANNEX D with any changes as have been approved by
the parties thereto (also, a "TRANSFER SUPPLEMENT "), duly executed by such
Conduit Purchaser, assigning any portion of its interest in the Purchased
Interest to its assignee. Such Conduit Purchaser shall promptly (i) notify each
of the other parties hereto of such assignment and (ii) take all further action
that the assignee reasonably requests in order to evidence the assignee's right,
title and interest in such interest in the Purchased Interest and to enable the
assignee to exercise or enforce any rights of such Conduit Purchaser hereunder.
Upon the assignment of any portion of its interest in the Purchased Interest,
the assignee shall have all of the rights hereunder with respect to such
interest (except that the Discount therefor shall thereafter accrue at the rate,
determined with respect to the assigning Conduit Purchaser unless the Seller,
the related Purchaser Agent and the assignee shall have agreed upon a different
Discount).

         (f) OPINIONS OF COUNSEL. If required by the Administrator or the
applicable Purchaser Agent or to maintain the ratings of any Conduit Purchaser,
each Transfer Supplement must be accompanied by an opinion of counsel of the
assignee as to such matters as the Administrator or such Purchaser Agent may
reasonably request.

         Section 6.4. COSTS, EXPENSES AND TAXES. In addition to the rights of
indemnification granted under SECTION 3.1, the Seller agrees to pay on demand
(which demand shall be accompanied by documentation thereof in reasonable
detail) all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic internal audits by
the Administrator of Pool Receivables) of this Agreement, the other Transaction
Documents and the other documents and agreements to be delivered hereunder (and
all reasonable costs and expenses in connection with any amendment, waiver or
modification of any thereof), including: (i) Attorney Costs for the
Administrator, each Purchaser Group and their respective Affiliates and agents
with respect thereto and with respect to advising the Administrator, each
Purchaser Group and their respective Affiliates and agents as to their rights
and remedies under this Agreement and the other Transaction Documents, and (ii)
all reasonable costs and expenses (including Attorney Costs), if any, of the
Administrator, each Purchaser Group and their respective Affiliates and agents
in connection with the enforcement of this Agreement and the other Transaction
Documents.


                  (a) In addition, the Seller shall pay on demand any and all
         stamp and other taxes and fees payable in connection with the
         execution, delivery, filing and recording of this Agreement or the
         other documents or agreements to be delivered hereunder, and agrees to
         save each Indemnified Party harmless from and against any liabilities
         with respect to or resulting from any delay in paying or omission to
         pay such taxes and fees.

         Section 6.5. NO PROCEEDINGS; LIMITATION ON PAYMENTS. Each of the
Seller, Greetings, the Servicer, the Administrator, the Purchaser Agents, the
Purchasers, each assignee of the Purchased Interest or any interest therein, and
each Person that enters into a commitment to purchase the


                                       28


Purchased Interest or interests therein, hereby covenants and agrees that it
will not institute against, or join any other Person in instituting against, any
Conduit Purchaser any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceeding, or other proceeding under any federal or state
bankruptcy or similar law, for one year and one day after the latest maturing
Note issued by such Conduit Purchaser is paid in full. The provision of this
SECTION 6.5 shall survive any termination of this Agreement.


         Section 6.6. GOVERNING LAW AND JURISDICTION.


                  (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER
         AND GOVERNED BY 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) EXCEPT TO THE EXTENT THAT THE VALIDITY OR
         PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF
         ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION
         OTHER THAN THE STATE OF NEW YORK.


                  (b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
         AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
         THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY
         EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE PARTIES HERETO
         CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY, TO THE
         NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO
         IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY
         OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
         THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE
         TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN
         RESPECT OF THIS AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE
         PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
         OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED
         BY NEW YORK LAW.

         Section 6.7. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts, each of which, when so executed, shall be deemed
to be an original, and all of which, when taken together, shall constitute one
and the same agreement.

         Section 6.8. SURVIVAL OF TERMINATION. The provisions of SECTIONS 1.7,
1.8, 3.1, 3.2, 6.4, 6.5, 6.6, 6.9 and 6.14 shall survive any termination of this
Agreement.


         Section 6.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF


                                       29


ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION
OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES,
WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE
PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A
COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES
HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.

         Section 6.10. SHARING OF RECOVERIES. Each Purchaser agrees that if it
receives any recovery, through set-off, judicial action or otherwise, on any
amount payable or recoverable hereunder in a greater proportion than should have
been received hereunder or otherwise inconsistent with the provisions hereof,
then the recipient of such recovery shall purchase for cash an interest in
amounts owing to the other Purchasers (as return of Investment or otherwise),
without representation or warranty except for the representation and warranty
that such interest is being sold by each such other Purchaser free and clear of
any Adverse Claim created or granted by such other Purchaser, in the amount
necessary to create proportional participation by the Purchaser in such
recovery. If all or any portion of such amount is thereafter recovered from the
recipient, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.

         Section 6.11. RIGHT OF SETOFF. During a Termination Event, each
Purchaser is hereby authorized (in addition to any other rights it may have) to
setoff, appropriate and apply (without presentment, demand, protest or other
notice which are hereby expressly waived) any deposits and any other
indebtedness held or owing by such Purchaser (including by any branches or
agencies of such Purchaser) to, or for the account of, the Seller against
amounts owing by the Seller hereunder (even if contingent or unmatured).

         Section 6.12. ENTIRE AGREEMENT. This Agreement and the other
Transaction Documents embody the entire agreement and understanding between the
parties hereto, and supersede all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.

         Section 6.13. HEADINGS. The captions and headings of this Agreement and
any Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.

         Section 6.14. PURCHASER GROUPS' LIABILITIES. The obligations of each
Purchaser Agent and each Purchaser under the Transaction Documents are solely
the corporate obligations of such Person.


                                       30


Except with respect to any claim arising out of the willful misconduct or gross
negligence of the Administrator, any Purchaser Agent or any Purchaser, no claim
may be made by the Seller or the Servicer or any other Person against the
Administrator, any Purchaser Agent or any Purchaser or their respective
Affiliates, directors, officers, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by the Agreement or any other Transaction Document, or
any act, omission or event occurring in connection therewith; and each of Seller
and Servicer hereby waives, releases, and agrees not to sue upon any claim for
any such damages, whether or not accrued and whether or not known or suspected
to exist in its favor.

         Section 6.15. CALL OPTION. The Seller shall have the right to
repurchase the Purchased Interest from the Purchasers on any Settlement Date on
the terms hereinafter set forth in this SECTION 6.15. The Seller shall give the
Administrator at least ten Business Days' prior written notice of such
repurchase and upon payment of the repurchase price for the Purchased Interest,
as hereinafter provided, the Purchasers shall be deemed to have reconveyed the
Purchased Interest to the Seller without recourse, representation or warranty
except for a representation from each Purchaser that the Purchased Interest
assigned is (or concurrently with the Administrator's receipt of such repurchase
price shall become) free of any Adverse Claim created by such Purchaser. The
Seller shall pay such repurchase price for the Purchased Interest in immediately
available funds to the Administrator (for the benefit of the Purchasers or the
Administrator, as the case may be) in an amount equal to the sum of (i) the
aggregate of the Aggregate Discount accrued for each Portion of Investment for
each Purchaser accrued to and including the repurchase date, (ii) the Aggregate
Investment for each Purchaser, (iii) the amounts payable pursuant to SECTIONS
1.5, 1.7 and 1.8, or Article III (of which the Seller has notice) related to the
Purchased Interest accrued to and including the repurchase date, (iv) all other
obligations that are then due and payable and (v) if Greetings is not the
Servicer, the Servicing Fee allocated to the Purchased Interest that has accrued
to and including the repurchase date.



                    [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]










                                       31


IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective officers thereunto duly authorized, as of the date first above
written.


                                 AGC FUNDING CORPORATION, as Seller


                                 By: /s/ William S. Meyer
                                     ----------------------------------
                                     Name: William S. Meyer
                                     Title: President


                                     Address:


                                         Attention:
                                         Telephone:
                                         Facsimile:


                                 AMERICAN GREETINGS CORPORATION, as Servicer


                                 By: William S. Meyer
                                     ----------------------------------
                                     Name: William S. Meyer
                                     Title: Senior Vice President & CFO


                                     Address:


                                         Attention:
                                         Telephone:
                                         Facsimile:






                                      S-1


                                 PNC BANK, NATIONAL ASSOCIATION,
                                 as Administrator


                                 By: /s/ John T. Smathers
                                     ----------------------------------
                                     Name: John T. Smathers
                                     Title: Vice President


                                     Address:


                                         PNC Bank, National Association
                                         One PNC Plaza
                                         249 Fifth Avenue
                                         Pittsburgh, Pennsylvania 15222-2707


                                         Attention: John Smathers
                                         Telephone: (412) 762-6440
                                         Facsimile: (412) 762-9184







                                      S-2

                          PURCHASER


                          MARKET STREET FUNDING CORPORATION, as a
                          Conduit Purchaser and as a Related Committed Purchaser


                          By: /s/ Douglas K. Johnson
                              ----------------------------------
                              Name: Douglas K. Johnson
                              Title: President


                              Address:


                                  Market Street Funding Corporation
                                  c/o AMACAR Group, L.L.C.
                                  6525 Morrison Blvd., Suite 318
                                  Charlotte, North Carolina 28211


                                  Attention: Douglas K. Johnson
                                  Telephone: (704) 365-0569
                                  Facsimile No.: (704) 365-1362


                              With a copy to:


                                  PNC Bank, National Association
                                  One PNC Plaza
                                  249 Fifth Avenue
                                  Pittsburgh, Pennsylvania 15222-2707


                                  Attention: John Smathers
                                  Telephone: (412) 762-6440
                                  Facsimile: (412) 762-9184


                                      Commitment $250,000,000






                                      S-3

                        PNC BANK, NATIONAL ASSOCIATION,
                        as Purchaser Agent for Market Street Funding Corporation


                        By: /s/ John T. Smathers
                            ----------------------
                            Name: John T. Smathers
                            Title: Vice President


                            Address:


                                  PNC Bank, National Association
                                  One PNC Plaza
                                  249 Fifth Avenue
                                  Pittsburgh, Pennsylvania 15222-2707


                                  Attention: John Smathers
                                  Telephone No.: (412) 762-6440
                                  Facsimile No.: (412) 762-9184




                                      S-4

                                    EXHIBIT I
                                   DEFINITIONS



         As used in the Agreement (including its Exhibits, Schedules and
Annexes), the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule
references in this Exhibit are to Sections of and Annexes, Exhibits and
Schedules to the Agreement.

         "ADMINISTRATOR" has the meaning set forth in the preamble to the
Agreement.

         "ADMINISTRATOR'S ACCOUNT" means the account (account number 1002422076
ABA 043000096) of the Administrator maintained at the office of PNC at One PNC
Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, or such other
account as may be so designated in writing by the Administrator to the Servicer.

         "ADVERSE CLAIM" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being understood
that any thereof in favor of the Administrator (for the benefit of the
Purchasers ) shall not constitute an Adverse Claim.

         "AFFECTED PERSON" has the meaning set forth in SECTION 1.7 of the
Agreement.

         "AFFILIATE" means, as to any Person: (a) any Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (b) who is a director or officer: (i) of such Person or (ii) of
any Person described in CLAUSE (a), except that, in the case of each Conduit
Purchaser, Affiliate shall mean the holder of its capital stock. For purposes of
this definition, control of a Person shall mean the power, direct or indirect:
(x) to vote 25% or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the direction of
the management and policies of such Person, in either case whether by ownership
of securities, contract, proxy or otherwise.

         "AGGREGATE DISCOUNT" at any time, means the sum of the aggregate for
each Purchaser of the accrued and unpaid Discount with respect to each such
Purchaser's Investment at such time.

         "AGGREGATE INVESTMENT" means the amount paid to the Seller in respect
of the Purchased Interest or portion thereof by each Purchaser pursuant to the
Agreement, as reduced from time to time by Collections distributed and applied
on account of such Aggregate Investment pursuant to SECTION 1.4(d) of the
Agreement; PROVIDED, that if such Aggregate Investment shall have been reduced
by any distribution, and thereafter all or a portion of such distribution is
rescinded or must otherwise be returned for any reason, such Aggregate
Investment shall be increased by the amount of such rescinded or returned
distribution as though it had not been made.



                                      I-1


         "AGREEMENT" has the meaning set forth in the preamble to the Agreement.

         "AGSC" means American Greetings Services Corp., a Delaware
corporation.

         "AGSC ASSIGNMENT CERTIFICATE" has the meaning set forth in the Sale
and Contribution Agreement.

         "ASSUMPTION AGREEMENT" means an agreement substantially in the form
set forth in Annex C to the Agreement.

         "ATTORNEY COSTS" means and includes all reasonable fees and
disbursements of any law firm or other external counsel.

         "BANKRUPTCY CODE" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C. ss.101, et seq.), as amended from time to time.

         "BASE RATE" means, for any day, (i) in the case of the Purchaser Group
including Market Street, the Market Street Base Rate and (ii) in the case of
each other Purchaser Group, shall mean the rate set forth as the Base Rate for
such Purchaser Group in the related Purchaser Group Fee Letter.

         "BBA" means the British Bankers' Association.

         "BENEFIT PLAN" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, any Originator, Greetings,
AGSC or any ERISA Affiliate is, or at any time during the immediately preceding
six years was, an "employer" as defined in Section 3(5) of ERISA.

         "BUSINESS DAY" means any day (other than a Saturday or Sunday) on
which: (a) banks are not authorized or required to close in New York City, New
York or Pittsburgh, Pennsylvania and (b) if this definition of "Business Day" is
utilized in connection with the Euro-Rate, dealings are carried out in the
London interbank market.

         "CHANGE IN CONTROL" means (i) with respect to Seller, that at any time
Greetings shall fail to own, directly or indirectly through one or more
wholly-owned Subsidiaries free and clear of any Adverse Claim, 100% of the
shares of outstanding voting stock of the Seller on a fully diluted basis, (ii)
with respect to AGSC, that at any time Greetings shall fail to own, directly or
indirectly through one or more wholly-owned subsidiaries, free and clear of any
Adverse Claim, 100% of the shares of outstanding voting stock of AGSC on a fully
diluted basis, (iii) with respect to any Originator other than Greetings, that
at any time Greetings shall fail to own, directly or indirectly through one or
more wholly-owned Subsidiaries free and clear of any Adverse Claim, 100% of the
share of outstanding voting stock of such Originator on a fully diluted basis,
and (iv) with respect to Greetings, the acquisition by any Person or its
Affiliates of 20% or more of the stock (or equivalent


                                      I-2


ownership or controlling interest) having by the terms thereof ordinary voting
power to elect a majority of the directors of Greetings (irrespective of whether
or not at the time the stock of any class or classes of Greetings will have or
might have voting power by reason of the happening or any contingency).

         "CLOSING DATE" means August 7, 2001.

         "COLLECTIONS" means, with respect to any Pool Receivable: (a) all funds
that are received by any Originator, Greetings, AGSC, the Seller or the Servicer
in payment of any amounts owed in respect of such Receivable (including purchase
price, finance charges, interest and all other charges), or that are applied to
amounts owed in respect of such Receivable (including insurance payments and net
proceeds of the sale or other disposition of repossessed goods or other
collateral or property of the related Obligor or any other Person directly or
indirectly liable for the payment of such Pool Receivable and available to be
applied thereon), (b) all amounts deemed to have been received pursuant to
SECTION 1.4(e) of the Agreement and (c) all other proceeds of such Pool
Receivable.

         "COMMITMENT" means, with respect to each Related Committed Purchaser,
the maximum amount which such Purchaser is obligated to pay hereunder on
account of any Purchase, as set forth below its signature to this Agreement or
in the Assumption Agreement pursuant to which it became a Purchaser, as such
amount may be modified in connection with any subsequent assignment pursuant to
SECTION 6.3(c) or in connection with a change in the Purchase Limit pursuant to
SECTIONS 1.1(b) or 1.2(e).

         "COMMITMENT PERCENTAGE" means, for each Related Committed Purchaser in
a Purchaser Group, such Related Committed Purchaser's Commitment divided by the
total of all Commitments of all Related Committed Purchasers in such Purchaser
Group.

         "CONCENTRATION PERCENTAGE" means for any Obligor which is (i) Target
Corporation, 40%, so long as (a) it would be considered a Group A Obligor and
(b) the sum of the Loss Reserve Percentage and the Dilution Reserve Percentage
is greater than or equal to 40%, (ii) any other Group A Obligor, 30%, (iii) a
Group B Obligor, 20%, (iv) a Group C Obligor, 10%, or (v) a Group D Obligor, 5%.

         "CONDUIT PURCHASERS" means each commercial paper conduit that is a
party to the Agreement, as a purchaser, or that becomes a party to the
Agreement, as a purchaser pursuant to an Assumption Agreement.

         "CONTRACT" means, with respect to any Receivable, any and all
contracts, instruments, agreements, leases, invoices, notes or other writings
pursuant to which such Receivable arises or that evidence such Receivable or
under which an Obligor becomes or is obligated to make payment in respect of
such Receivable.


                                      I-3


         "CP RATE" for any Yield Period for any Portion of Investment (i) in
the case of the Purchaser Group including Market Street, means the Market Street
CP Rate, and (ii) in the case of each other Purchaser Group, shall mean the rate
set forth as the CP Rate for such Purchaser Group in the related Purchaser Group
Fee Letter.

         "CREDIT AGREEMENT" means the Credit Agreement dated as August 7, 2001
among American Greetings Corporation, as Borrower, the financial institutions
named therein, as Lenders, National City Bank, as US Agent and Global Agent,
KeyBank National Association, as Documentation Agent, and National City Bank and
Goldman Sachs Credit Partners L.P., as Joint-Lead Arrangers and Co- Syndication
Agents, as it may be amended, supplemented or otherwise modified from time to
time.

         "CREDIT AND COLLECTION POLICY" means, as the context may require,
those receivables credit and collection policies and practices of AGSC (with
respect to Receivables sold to it pursuant to the Purchase and Sale Agreement)
and Plus Mark, Inc. (with respect to Receivables originated by it) in effect on
the date of the Agreement and described in SCHEDULE I to the Agreement, as
modified in compliance with the Agreement.

         "DAYS' SALES OUTSTANDING" means, at any time, an amount computed as of
the last day of each calendar month equal to: (a) the average of the Outstanding
Balance of all Pool Receivables as of the last day of each of the three most
recent calendar months ended on the last day of such calendar month divided by
(b)(i) the aggregate credit sales made by the Originator during the three
calendar months ended on or before the last day of such calendar month divided
by (ii) 90.

         "DEBT" means: (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services, (d)
obligations as lessee under leases that shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, and (e) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in CLAUSES (a) through (d).

         "DEFAULTED RECEIVABLE" means a Receivable:

                  (a) as to which any payment, or part thereof, remains unpaid
         for more than 150 days, in each case from the due date for such
         payment, or


                  (b) without duplication (i) as to which an Insolvency
         Proceeding shall have occurred with respect to the Obligor thereof or
         any other Person obligated thereon or owning any Related Security with
         respect thereto, (ii) that has been charged-off as uncollectible or
         (iii) that should have been charged-off as uncollectible pursuant to
         the Credit and Collection Policy.

                                      I-4


         "DELINQUENCY RATIO" means the ratio (expressed as a percentage and
rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed
as of the last day of each calendar month by dividing: (a) the aggregate
Outstanding Balance of all Pool Receivables that were Delinquent Receivables on
such day by (b) the aggregate Outstanding Balance of all Pool Receivables on
such day.

         "DELINQUENT RECEIVABLE" means a Receivable (a) as to which any
payment, or part thereof, remains unpaid for more than 90 days from the due date
for such payment or (b) without duplication, which has been (or consistent with
the Credit and Collection Policy, would be) classified as a Delinquent
Receivable by the applicable Originator.

         "DILUTION RATIO" means the ratio (expressed as a percentage and
rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward),
computed as of the last day of each calendar month by dividing: (a) the
aggregate amount of payments made or owed by the Seller pursuant to SECTION
1.4(e)(i) of the Agreement (other than Specifically Reserved Dilution Amounts)
during such calendar month, by (b) the aggregate credit sales made by the
Originators during the calendar months that are two and three months prior to
such calendar month.

         "DILUTION RESERVE" means, on any day, an amount equal to: (a) the
Aggregate Investment at the close of business of the Servicer on such date
MULTIPLIED BY (b) (i) the Dilution Reserve Percentage on such date, DIVIDED BY
(ii) 100% minus the Dilution Reserve Percentage on such date.

         "DILUTION RESERVE PERCENTAGE" means, on any date, the greater of (a)
10.0%, or (b) the percentage determined by the following formula:


         (2.0 x ED) + ((DS-ED) x DS/ED)) x DHR + 0.02 x CS

         ED       =        the "Expected Dilution," which shall be equal to the
                           12-month rolling average Dilution Ratio, expressed
                           as a percentage;

         DS       =        the "Dilution Spike," which shall be equal to the
                           highest one month Dilution Ratio over the immediately
                           preceding 12 months, expressed as a percentage; and

         CS       =        the aggregate credit sales made by the Originators
                           during the most recent calendar month divided by the
                           Net Receivables Pool Balance for such calendar month.

         DHR      =        the "Dilution Horizon Ratio," which shall be equal
                           to the aggregate credit sales made by the Originators
                           during the two preceding calendar months divided by
                           the Net Receivables Pool Balance as of the last day
                           of most recent calendar month.

                                      I-5


         "DISCOUNT" means with respect to any Purchaser:

                  (a) for any Portion of Investment for any Yield Period with
         respect to any Purchaser to the extent such Portion of Investment will
         be funded by such Purchaser during such Yield Period through the
         issuance of Notes:

                                CPR x I x ED/360

                  (b) for any Portion of Investment for any Yield Period with
         respect to any Purchaser to the extent such Portion of Investment will
         not be funded by such Purchaser during such Yield Period through the
         issuance of Notes:

                              YR x I x ED/Year + TF

         where:

                  YR     =    the Yield Rate, as applicable, for such Portion
                              of Investment for such Yield Period with respect
                              to such Purchaser,

                  I      =    the Investment with respect to such Portion of
                              Investment during such Yield Period with respect
                              to such Purchaser,

                  CPR    =    the CP Rate for the Portion of Investment for
                              such Yield Period with respect to such Purchaser,

                  ED     =    the actual number of days during such Yield
                              Period,

                  Year   =    if such Portion of Investment is funded based
                              upon: (i) the Euro-Rate, 360 days, and (ii) the
                              Base Rate, 365 or 366 days, as applicable, and

                  TF     =    the Termination Fee, if any, for the Portion of
                              Investment for such Yield Period with respect to
                              such Purchaser;

PROVIDED, that no provision of the Agreement shall require the payment or
permit the collection of Discount in excess of the maximum permitted by
applicable law; and PROVIDED FURTHER, that Discount for any Portion of
Investment shall not be considered paid by any distribution to the extent that
at any time all or a portion of such distribution is rescinded or must otherwise
be returned for any reason.

         "DISPUTED DEFAULT RATIO" means the ratio (expressed as a percentage
and rounded to the nearest 1/100th of 1% with 5/1000th of 1% rounded upwards)
computed as of the last day of each calendar month by dividing: (a) the
aggregate Outstanding Balance of all Pool Receivables identified by the Seller
or Servicer on the most recent Information Package as Receivables relating to
amounts


                                      I-6


categorized as "deductions" or "recharges" that became Defaulted Receivables
during such month, by (b) the aggregate Outstanding Balance of all Pool
Receivables six months prior to such month.

         "ELIGIBLE RECEIVABLE" means, at any time, a Pool Receivable:

                  (a) the Obligor of which is (i) a Person resident in or with a
         place of business in the United States, (ii) not a government or a
         governmental subdivision, affiliate or agency, (iii) not subject to any
         action of the type described in PARAGRAPH (f) of Exhibit V to the
         Agreement and (iv) not an Affiliate of Greetings,

                  (b) that is denominated and payable only in U.S. dollars in
         the United States,

                  (c) that is either a Seasonal Sale or a Receivable in which
         the Obligor is Target Corporation, or does not have a stated maturity
         which is more than 38 days after the original invoice date of such
         Receivable; PROVIDED, HOWEVER, that (i) Receivables not related to
         Seasonal Sales in which the Obligor is K Mart and (ii) up to 25% of the
         aggregate Outstanding Balance of all Receivables (not including
         Receivables with respect to which K Mart or Target is the Obligor) may
         have a stated maturity which is more than 38 days but not more than 68
         days from the original invoice date of such Receivable.

                  (d) that arises under a duly authorized Contract for the sale
         and delivery of goods and services in the ordinary course of an
         Originator's business,

                  (e) that arises under a duly authorized Contract that is in
         full force and effect and that is a legal, valid and binding obligation
         of the related Obligor, enforceable against such Obligor in accordance
         with its terms,

                  (f) that conforms in all material respects with all applicable
         laws, rulings and regulations in effect,

                  (g) that is not the subject of any asserted dispute or offset
         (but only to the extent of the disputed or offset amount, and only to
         the extent such amount has not been deemed a collection pursuant to
         Section 1.4(e)) or any hold back defense, Adverse Claim or other
         similar claim,

                  (h) that satisfies all applicable requirements of the
         applicable Credit and Collection Policy,

                  (i) that has not been modified, waived or restructured since
         its creation, except as permitted pursuant to SECTION 4.2 of the
         Agreement and SECTION 2(d) of EXHIBIT IV to the Agreement,

                                      I-7


                  (j) in which the Seller owns good and marketable title, free
         and clear of any Adverse Claims, and that is freely assignable by the
         Seller (including without any consent of the related Obligor),

                  (k) for which the Administrator (for the benefit of each
         Purchaser) shall have a valid and enforceable undivided percentage
         ownership or security interest, to the extent of the Purchased
         Interest, and a valid and enforceable first priority perfected security
         interest therein and in the Related Security and Collections with
         respect thereto, in each case free and clear of any Adverse Claim,

                  (l) that constitutes an account as defined in the UCC, and
         that is not evidenced by instruments or chattel paper,

                  (m) that is not a Defaulted Receivable or a Delinquent
         Receivable,

                  (n) for which none of the Originator thereof, the Seller and
         the Servicer has established any offset arrangements with the related
         Obligor,

                  (o) for which Defaulted Receivables of the related Obligor do
         not exceed 35% of the Outstanding Balance of all such Obligor's
         Receivables; provided that solely for purposes of making such
         determination, amounts that would otherwise be considered Defaulted
         Receivables which are the subject of disputes between the Obligor and
         the Seller or Servicer which continue to be investigated and
         negotiated, shall not be considered Defaulted Receivables,

                  (p) that represents amounts earned and payable by the Obligor
         that are not subject to the performance of additional services by the
         Originator or Servicer thereof, and

                  (q) that was acquired or deemed acquired by AGSC pursuant to
         the Purchase and Sale Agreement or (at any time on or after a future
         date to be set by the Administrator and agreed to by the Servicer) was
         originated by Plus Mark, Inc. and sold by Greetings pursuant to the
         Sale and Contribution Agreement.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.

         "ERISA AFFILIATE" means: (a) any corporation that is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Seller, any Originator, AGSC or Greetings, (b)
a trade or business (whether or not incorporated) under common control (within
the meaning of Section 414(c) of the Internal Revenue Code) with the Seller, any
Originator, AGSC or Greetings, or (c) a member of the same affiliated service
group


                                      I-8


(within the meaning of Section 414(m) of the Internal Revenue Code) as the
Greetings, Seller, any Originator, AGSC any corporation described in CLAUSE (a)
or any trade or business described in CLAUSE (b).

         "EURO-RATE" means with respect to any Yield Period, the interest rate
per annum determined by the Administrator by dividing (the resulting quotient
rounded upwards, if necessary, to the nearest 1/100th of 1% per annum) (i) the
rate of interest determined by the applicable Purchaser Agent in accordance with
its usual procedures (which determination shall be conclusive absent manifest
error) to be the average of the London interbank market offered rates for U.S.
dollars quoted by the BBA as set forth on Dow Jones Markets Service (formerly
known as Telerate) (or appropriate successor or, if BBA or its successor ceases
to provide display page 3750 (or such other display page on the Dow Jones
Markets Service system as may replace display page 3750) at or about 11:00 a.m.
(London time) on the Business Day which is two (2) Business Days prior to the
first day of such Yield Period for an amount comparable to the Portion of
Investment to be funded at the Yield Rate and based upon the Euro-Rate during
such Yield Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve
Percentage. The Euro-Rate may also be expressed by the following formula:



                           Average of London interbank offered rates quoted by
                           BBA as shown on Dow Jones Markets Service display
                           page 3750 or appropriate successor
         Euro-Rate =
                      ---------------------------------------------------------

                                1.00 - Euro-Rate Reserve Percentage


where "EURO-RATE RESERVE PERCENTAGE" means, the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including without limitation, supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"EUROCURRENCY LIABILITIES "). The Euro-Rate shall be adjusted with respect to
any Portion of Investment funded at the Yield Rate and based upon the Euro-Rate
that is outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The applicable Purchaser Agent shall give
prompt notice to the Seller of the Euro-Rate as determined or adjusted in
accordance herewith (which determination shall be conclusive absent manifest
error).

         "EVERYDAY DEFAULT RATIO" means the ratio (expressed as a percentage
and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward)
computed as of the last day of each calendar month by dividing: (a) the
aggregate Outstanding Balance of all Pool Receivables identified by the Seller
or the Servicer on the most recent Information Package as Receivables relating
to everyday invoices and manual invoices that became Defaulted Receivables
during such month by (b) the aggregate credit sales other than Seasonal Sales
made by the Originators during the month that is six months before such month.


                                      I-9


         "EXCESS CONCENTRATION" means, on any date, the sum of the amounts by
which the Outstanding Balance of Eligible Receivables of each Obligor then in
the Receivables Pool exceeds an amount equal to: (a) the applicable
Concentration Percentage for such Obligor multiplied by (b) the Outstanding
Balance of all Eligible Receivables, on such date.

         "EXCESS RETURN AMOUNT" means, for any calendar month, an amount equal
to 106% of the Seasonal Dilution Estimate at the beginning of such calendar
month.

         "EXITING PURCHASER" has the meaning set forth in SECTION 1.4(b)(ii).

         "FACILITY TERMINATION DATE" means the earliest to occur of: (a) with
respect to each Purchaser August 7, 2004, subject to any extension pursuant to
SECTION 1.10 of the Agreement (it being understood that if any such Purchaser
does not extend its Commitment hereunder then the Purchase Limit shall be
reduced ratably with respect to the Purchasers in each Purchaser Group by an
amount equal to the Commitment of such Exiting Purchaser and the Commitment
Percentages and Group Commitments of the Purchasers within each Purchaser Group
shall be appropriately adjusted), (b) the date determined pursuant to SECTION
2.2 of the Agreement, (c) the date the Purchase Limit reduces to zero pursuant
to Section 1.1(b) of the Agreement, (d) with respect to each Purchaser Group,
the date that the commitments of all of the Liquidity Providers terminate under
the related Liquidity Agreements or the date one or more of such Purchaser
Group's Program Support Agreements terminate and (e) with respect to each
Purchaser Group, the date that the commitment, of all of the Related Committed
Purchasers of such Purchaser Group terminate pursuant to SECTION 1.10.

         "Federal Funds Rate" means, for any day, the per annum rate set forth
in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotations") for such day under the caption "Federal Funds Effective Rate." If
on any relevant day the appropriate rate is not yet published in either
H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be
the arithmetic mean as determined by the applicable Purchaser Agent of the rates
for the last transaction in overnight Federal funds arranged before 9:00 a.m.
(New York time) on that day by each of three leading brokers of Federal funds
transactions in New York City selected by such Purchaser Agent.

         "FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal functions.

         "FEES" means the fees payable by the Seller to each Purchaser Group
pursuant to the applicable Purchaser Group Fee Letter.


                                      I-10


         "GAAP" means the generally accepted accounting principles and practices
in the United States, consistently applied.

         "GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any court, and any Person owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.

         "GREETINGS" has the meaning set forth in the preamble to the Agreement.

         "GROUP A OBLIGOR" means an Obligor with a short-term senior unsecured
         indebtedness rating
(or, if such Obligor does not have such a short-term rating, a long-term senior
unsecured indebtedness rating) of at least "A-1" (or "A+") by Standard & Poor's
and "P-1" (or "A1") by Moody's.

         "GROUP B OBLIGO" means an Obligor with a short-term senior unsecured
indebtedness rating (or, if such Obligor does not have such a short-term
rating, a long-term senior unsecured indebtedness rating) of at least "A-2" (or
"BBB+") by Standard & Poor's and "P-2" (or "Baa1") by Moody's, that is not a
Group A Obligor.

         "GROUP C OBLIGOR" means an Obligor with a short-term senior unsecured
indebtedness rating (or, if such Obligor does not have such a short-term rating,
a long-term senior unsecured indebtedness rating) of at least "A-3" (or "BBB-")
by Standard & Poor's and "P-3" (or "Baa3") by Moody's, that is not a Group A
Obligor or a Group B Obligor.

         "GROUP COMMITMENT" means with respect to any Purchaser Group the
aggregate of the Commitments of each Purchaser within such Purchaser Group.

         "GROUP D OBLIGOR" means an Obligor which is not a Group A Obligor, a
Group B Obligor or a Group C Obligor.

         "GROUP INVESTMENT" means with respect to any Purchaser Group, an
amount equal to the aggregate of all Investments of the Purchasers within such
Purchaser Group.

         "INDEMNIFIED AMOUNTS" has the meaning set forth in SECTION 3.1 of the
         Agreement.

         "INDEMNIFIED PARTY" has the meaning set forth in SECTION 3.1 of the
Agreement.

         "INDEPENDENT DIRECTOR" has the meaning set forth in PARAGRAPH 3(c) of
EXHIBIT IV to the Agreement.


                                      I-11


         "INFORMATION PACKAGE" means a report, in substantially the form of
ANNEX A to the Agreement, furnished to the Administrator pursuant to the
Agreement.

         "INSOLVENCY PROCEEDING" means: (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of creditors
of a Person or, composition, marshaling of assets for creditors of a Person, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors, in each of cases (a) and (b) undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy Code.

         "INTERNAL REVENUE CODE" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code also refer to any successor
sections.

         "INVESTMENT" means with respect to any Purchaser the amount paid to
the Seller by such Purchaser pursuant to the Agreement, or such amount divided
or combined in accordance with the Agreement, in each case reduced from time to
time by Collections distributed and applied on account of such Investment
pursuant to SECTION 1.4(d) of the Agreement; provided, that if such Investment
shall have been reduced by any distribution and thereafter all or a portion of
such distribution is rescinded or must otherwise be returned for any reason,
such Investment shall be increased by the amount of such rescinded or returned
distribution as though it had not been made.

         "LIQUIDITY AGENT" means each of the banks acting as agent for the
various Liquidity Banks under each Liquidity Agreement.

         "LIQUIDITY AGREEMENT" means any agreement entered into in connection
with this Agreement pursuant to which a Liquidity Provider agrees to make
purchases or advances to, or purchase assets from, any Conduit Purchaser in
order to provide liquidity for such Conduit Purchaser's Purchases.

         "LIQUIDITY PROVIDER" means each bank or other financial institution
that provides liquidity support to any Conduit Purchaser pursuant to the terms
of a Liquidity Agreement.

         "LOCK-BOX ACCOUNT" means an account maintained at a bank or other
financial institution for the purpose of, directly or indirectly, receiving
Collections.

         "LOCK-BOX AGREEMENT" means an agreement among the Seller, the
applicable Originator, the Servicer, the Administrator and a Lock-Box Bank.

         "LOCK-BOX BANK" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.


                                      I-12


         "LOSS RESERVE" means, on any date, an amount equal to (a) the Aggregate
Investment at the close of business of the Servicer on such date MULTIPLIED by
(b) (i) the Loss Reserve Percentage on such date DIVIDED by (ii) 100% minus the
Loss Reserve Percentage on such date.

         "LOSS RESERVE PERCENTAGE" means, on any date, the greater of 20% or
the sum of the Sales Based Loss Reserve Percentage and the Receivables Based
Loss Reserve Percentage.

         "MAJORITY PURCHASERS" means, at any time, Purchasers whose Commitments
aggregate 2/3rds or more of the aggregate of the Commitments of all Purchasers;
provided, however, that so long as any Purchaser's Commitment is greater than
50% of the aggregate Commitments, then "Majority Purchasers" shall mean a
minimum of two Purchasers whose Commitments aggregate more than 50% of the
aggregate Commitments.

         "MARKET STREET" has the meaning set forth in the preamble to the
Agreement.

         "MARKET STREET BASE RATE" means, in the case of Market Street or any
Purchaser in its Purchaser Group, for any day, a fluctuating interest rate per
annum as shall be in effect from time to time, which rate shall be at all times
equal to the higher of:

                  (a) the rate of interest in effect for such day as publicly
         announced from time to time by PNC in Pittsburgh, Pennsylvania as its
         "prime rate." Such "prime rate" is set by PNC based upon various
         factors, including PNC's costs and desired return, general economic
         conditions and other factors, and is used as a reference point for
         pricing some loans, which may be priced at, above or below such
         announced rate, and

                  (b) 0.50% per annum above the latest Federal Funds Rate.

         "MARKET STREET CP RATE" means, with respect to Market Street for any
Yield Period with respect to any Portion of Investment, the per annum rate
equivalent to the "weighted average cost" (as defined below) related to the
issuance of Market Street's Notes that are allocated, in whole or in part, by
Market Street (or by its Purchaser Agent) to fund or maintain such Portion of
Investment (and which may also be allocated in part to the funding of other
Portions of Investment hereunder or of other assets of Market Street); PROVIDED,
HOWEVER, that if any component of such rate is a discount rate, in calculating
the "MARKET STREET CP RATE" for such Portion of Investment for such Yield
Period, Market Street shall for such component use the rate resulting from
converting such discount rate to an interest bearing equivalent rate per annum.
As used in this definition, Market Street's "WEIGHTED AVERAGE COST" shall
consist of (x) the actual interest rate (or discount) paid to purchasers of
Market Street's Notes, together with the commissions of placement agents and
dealers in respect of such Notes, to the extent such commissions are allocated,
in whole or in part, to such Notes by Market Street (or by its Purchaser Agent)
and (y) any incremental carrying costs incurred with respect to Market Street's
Notes maturing on dates other than those on which corresponding funds are
received by Market Street. Notwithstanding the foregoing, the "Market Street CP
Rate"


                                      I-13


for any day while a Termination Event exists shall be an interest rate equal to
2% above the Base Rate in effect on such day.

         "MARKET STREET YIELD RATE" for any Yield Period for any Portion of
Investment of the Purchased Interest in the case of Market Street or any
Purchaser in its Purchaser Group, means an interest rate per annum equal to, at
Seller's option: (a) the rate set forth as the "Applicable Margin" in the
Purchaser Group Fee Letter relating to Market Street above the Euro-Rate for
such Yield Period, or (b) the Base Rate for such Yield Period; PROVIDED,
HOWEVER, that in the case of:

                           (i) any Yield Period on or before the first day of
                  which the Administrator shall have been notified by any
                  Purchaser or other Program Support Provider that the
                  introduction of or any change in or in the interpretation of
                  any law or regulation makes it unlawful, or any central bank
                  or other Governmental Authority asserts that it is unlawful,
                  for such Person, to fund any Euro-Rate Portion of Investment
                  (and such Person shall not have subsequently notified the
                  Administrator that such circumstances no longer exist),

                           (ii) any Yield Period of one to (and including) 29
                  days,

                           (iii) any Yield Period as to which the Administrator
                  does not receive notice before noon (New York City time) on
                  the third Business Day preceding the first day of such Yield
                  Period that the Seller desires that the related Portion of
                  Investment be a Euro-Rate Portion of Investment, or

                           (iv) any Yield Period relating to a Portion of
                  Investment that is less than $5,000,000,

the "Yield Rate" for each such Yield Period shall be an interest rate per annum
equal to the Base Rate in effect on each day of such Yield Period. The "Yield
Rate" for any day while a Termination Event exists shall be an interest rate
equal to 2% per annum above the applicable Base Rate in effect on such day.

         "MATERIAL ADVERSE EFFECT" means a material adverse effect on:

                  (a) the assets, operations, business or financial condition of
         the Seller, the Servicer, AGSC, any Originator or Greetings.

                  (b) the ability of Seller, Servicer, AGSC, Originator or
         Greetings to perform its obligations under the Agreement or any other
         Transaction Document to which it is a party,

                  (c) as to Seller, Servicer, AGSC, any Originator or Greetings,
         the validity or enforceability of any other Transaction Document, or
         the validity, enforceability or collectibility of a material portion of
         the Pool Receivables, or


                                      I-14


                  (d) the status, perfection, enforceability or priority of any
         Purchaser's, AGSC's or the Seller's interest in the Pool Assets.

         "MOODY'S" means Moody's Investors Service, Inc.

         "NET RECEIVABLES POOL BALANCE" means, at any time: (a) the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus (b) the
Excess Concentration; provided that such calculation shall exclude the
Receivables for which the related Obligor has a net credit balance.

         "NOTES" means short-term promissory notes issued, or to be issued, by
each Conduit Purchaser to fund its investments in accounts receivable or other
financial assets.

         "OBLIGOR" means, with respect to any Receivable, the Person obligated
to make payments pursuant to the Contract relating to such Receivable.

         "ORIGINATOR" means the "Originators" party in such capacity to any of
the Receivables Sale Agreement, the Purchase and Sale Agreement or the Sale and
Contribution Agreement from time to time.

         "ORIGINATOR ASSIGNMENT CERTIFICATE" means each assignment, (i) in
substantially the form of Exhibit C to the Receivables Sale Agreement, (ii) in
substantially the form of EXHIBIT C to the Purchase and Sale Agreement,
evidencing AGSC's ownership of the Receivables generated by an Originator, (iii)
in substantially the form of EXHIBIT C to the Sale and Contribution Agreement,
evidencing Seller's ownership of the Receivables generated by an Originator or
acquired by AGSC, in each case as the same may be amended, supplemented, amended
and restated, or otherwise modified from time to time in accordance with the
Purchase and Sale Agreement.

         "OUTSTANDING BALANCE" of any Receivable at any time means the then
outstanding principal balance thereof.

         "PERMITTED LOCK-BOX BANK" means any of the Banks listed on Schedule II
and identified as such.

         "PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.

         "PLUS MARK ADDITION DATE" means a date determined by the Administrator
and consented to by the Servicer.

         "PNC" has the meaning set forth in the preamble to the Agreement.

         "POOL ASSETS" has the meaning set forth in SECTION 1.2(d) of the
Agreement.


                                      I-15


         "POOL RECEIVABLE" means a Receivable in the Receivables Pool.

         "PORTION OF INVESTMENT" means, with respect to any Purchaser and its
related Investment, the portion of such Investment being funded or maintained by
such Purchaser by reference to a particular interest rate basis.

         "PROGRAM SUPPORT AGREEMENT" means and includes any Liquidity Agreement
and any other agreement entered into by any Program Support Provider providing
for: (a) the issuance of one or more letters of credit for the account of any
Conduit Purchaser, (b) the issuance of one or more surety bonds for which the
such Conduit Purchaser is obligated to reimburse the applicable Program Support
Provider for any drawings thereunder, (c) the sale by such Conduit Purchaser to
any Program Support Provider of the Purchased Interest (or portions thereof)
maintained by such Conduit Purchaser and/or (d) the making of loans and/or other
extensions of credit to any Conduit Purchaser in connection with such Conduit
Purchaser's securitization program contemplated in the Agreement, together with
any letter of credit, surety bond or other instrument issued thereunder (but
excluding any discretionary advance facility provided by the Administrator).

         "PROGRAM SUPPORT PROVIDER" means and includes with respect to each
Conduit Purchaser any Liquidity Provider and any other Person (other than any
customer of such Conduit Purchaser) now or hereafter extending credit or having
a commitment to extend credit to or for the account of, or to make purchases
from, such Conduit Purchaser pursuant to any Program Support Agreement.

         "PURCHASE" is defined in SECTION 1.1(a).

         "PURCHASE AND SALE AGREEMENT" means the Purchase and Sale Agreement,
dated as of August 7, among AGSC, the Originators party thereto as amended
through the date of the Agreement and as such agreement may be amended, amended
and restated, supplemented or otherwise modified from time to time.

         "PURCHASE AND SALE INDEMNIFIED AMOUNTS" has the meaning set forth in
SECTION 9.1 of the Purchase and Sale Agreement.

         "PURCHASE AND SALE INDEMNIFIED PARTY" has the meaning set forth in
SECTION 9.1 of the Purchase and Sale Agreement.

         "PURCHASE AND SALE TERMINATION DATE" has the meaning set forth in
SECTION 1.4 of the Purchase and Sale Agreement.

         "PURCHASE AND SALE TERMINATION EVENT" has the meaning set forth in
SECTION 8.1 of the Purchase and Sale Agreement.

         "PURCHASE DATE" means the date of which a Purchase or a reinvestment
is made pursuant to the Agreement.


                                      I-16


         "PURCHASE LIMIT" means $250,000,000, as such amount may be reduced
pursuant to SECTIONS 1.1(b) or 1.10 of the Agreement or increased pursuant to
Section 1.2(e) of the Agreement. References to the unused portion of the
Purchase Limit shall mean, at any time, the Purchase Limit minus the then
outstanding Aggregate Investment.

         "PURCHASED INTEREST" means, at any time, the undivided percentage
ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, (b) all Related Security with respect to such Pool
Receivables and (c) all Collections with respect to, and other proceeds of, such
Pool Receivables and Related Security. Such undivided percentage interest shall
be computed as:


                      Aggregate Investment + Total Reserves
                      -------------------------------------
                          Net Receivables Pool Balance

The Purchased Interest shall be determined from time to time pursuant to SECTION
1.3 of the Agreement.

         "PURCHASER" means each Conduit Purchaser and/or each Related Committed
Purchaser, as applicable.

         "PURCHASER AGENT" means each Person acting as agent on behalf of a
Purchaser Group and designated as a Purchaser Agent for such Purchaser Group on
the signature pages to the Agreement or any other Person who becomes a party to
this Agreement as a Purchaser Agent pursuant to an Assumption Agreement or a
Transfer Supplement.

         "PURCHASER GROUP" means, for each Conduit Purchaser, such Conduit
Purchaser, its Related Committed Purchasers and its related Purchaser Agent.

         "PURCHASER GROUP FEE LETTER" has the meaning set forth in SECTION 1.5
of the Agreement. "PURCHASERS' SHARE" of any amount means such amount multiplied
by the Purchased Interest at the time of determination.

         "RATABLE SHARE" means, for each Purchaser Group, such Purchaser
Group's aggregate Commitments divided by the aggregate Commitments of all
Purchaser Groups.

         "RATING AGENCY CONDITION" means, with respect to any material event or
occurrence, receipt by the Administrator (or the applicable Purchaser Agent) of
written confirmation from each of Standard & Poor's and Moody's that such event
or occurrence shall not cause the rating on the then outstanding Notes of any
applicable Purchaser to be downgraded or withdrawn.

         "RECEIVABLE" means any indebtedness and other obligations owed to the
Seller, AGSC or any Originator (excluding, until the Plus Mark Addition Date,
Plus Mark, Inc.) by, or any right of the Seller, AGSC or any Originator
(excluding, until the Plus Mark Addition Date, Plus Mark, Inc.) to


                                      I-17


payment from or on behalf of, an Obligor, whether constituting an account,
chattel paper, instrument or general intangible, arising in connection with the
sale of goods or the rendering of services by an Originator (excluding until the
Plus Mark Addition Date, Plus Mark, Inc.), and includes the obligation to pay
any finance charges, fees and other charges with respect thereto. Indebtedness
and other obligations arising from any one transaction, including indebtedness
and other obligations represented by an individual invoice or agreement, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other obligations arising from any other transaction; provided
that Receivables shall not include obligations in respect of payments
denominated in Canadian dollars due and owing from or on behalf of Obligors in
respect of businesses located in Canada.

         "RECEIVABLES BASED LOSS RESERVE PERCENTAGE" means, on any date the
percentage determined by the following formula:


         2.0 x (DDR x RP) / NRPB

         DDR   =     the highest Disputed Default Ratio for any three
                     consecutive calendar months during the twelve most
                     recent calendar months

         RP    =     the aggregate Outstanding Balance of all Pool
                     Receivables as of the date of such calculation

         NRPB  =     the Net Receivables Pool Balance as of the date of such
                     calculation

         "RECEIVABLES POOL" means, at any time, all of the then outstanding
Receivables purchased by the Seller pursuant to the Sale and Contribution
Agreement prior to the Facility Termination Date.

         "RECEIVABLES SALE AGREEMENT" means the Receivables Sale Agreement,
dated as of August 7, 2001, among Greetings and the Originators party thereto as
such agreement may be amended, amended and restated, supplemented or otherwise
modified from time to time.

         "RECEIVABLES SALE INDEMNIFIED AMOUNTS" has the meaning set forth in
SECTION 9.1 of the Receivables and Sale Agreement.

         "RECEIVABLES SALE INDEMNIFIED PARTY" has the meaning set forth in
SECTION 9.1 of the Receivables Sale Agreement.

         "RECEIVABLES SALE TERMINATION DATE" has the meaning set forth in
SECTION 1.4 of the Receivables Sale Agreement.

         "RECEIVABLES SALE TERMINATION EVENT" has the meaning set forth in
SECTION 8.1 of the Receivables Sale Agreement.


                                      I-18


         "RELATED COMMITTED PURCHASER" means each Person listed as such (and
its respective Commitment) for each Conduit Purchaser as set forth on the
signature pages of the Agreement or in any Assumption Agreement or Transfer
Supplement.

         "RELATED RIGHTS" has the meaning set forth in SECTION 1.1 of the Sale
and Contribution Agreement.

         "RELATED SECURITY" means, with respect to any Receivable:

                  (a) all of the Seller's, AGSC's and the Originator thereof's
         interest in any goods (including returned goods), and documentation of
         title evidencing the shipment or storage of any goods (including
         returned goods), relating to any sale giving rise to such Receivable,

                  (b) all instruments and chattel paper that may evidence such
         Receivable,

                  (c) all other security interests or liens and property subject
         thereto from time to time purporting to secure payment of such
         Receivable, whether pursuant to the Contract related to such Receivable
         or otherwise, together with all UCC financing statements or similar
         filings relating thereto, and

                  (d) all of the Seller's AGSC's and the Originator thereof's
         rights, interests and claims under the Contracts and all guaranties,
         indemnities, insurance and other agreements (including the related
         Contract) or arrangements of whatever character from time to time
         supporting or securing payment of such Receivable or otherwise relating
         to such Receivable, whether pursuant to the Contract related to such
         Receivable or otherwise.

         "SALE AND CONTRIBUTION AGREEMENT" means the Sale and Contribution
Agreement dated as of August 7, 2001 between AGSC, and Seller, as amended
through the date of the Agreement and as such agreement may be amended, amended
and restated, supplemented or otherwise modified from time to time.

         "SALE AND CONTRIBUTION INDEMNIFIED AMOUNTS" has the meaning set forth
in SECTION 9.1 of the Sale and Contribution Agreement.

         "SALE AND CONTRIBUTION INDEMNIFIED PARTY" has the meaning set forth in
SECTION 9.1 of the Sale and Contribution Agreement.

         "SALE AND CONTRIBUTION NOTE" has the meaning set forth in SECTION 3.1
of the Sale and Contribution Agreement.

         "SALE AND CONTRIBUTION TERMINATION DATE " has the meaning set forth in
SECTION 1.4 of the Sale and Contribution Agreement.


                                      I-19


         "SALE AND CONTRIBUTION TERMINATION EVENT" has the meaning set forth in
SECTION 8.1 of the Sale and Contribution Agreement.

         "SALES BASED LOSS RESERVE PERCENTAGE" means, on any date the
percentage determined by the following formula:

         2.0 x ((EDR x ESDH) + (SDR x SSDH)) / NRPB

         EDR       =       the highest Everyday Default Ratio for any three
                           consecutive calendar months during the twelve most
                           recent calendar months

         ESDH      =       the aggregate credit sales, other than Seasonal
                           Sales, made by the Originators during the six most
                           recent calendar months

         SDR       =       the highest Seasonal Default Ratio for any three
                           consecutive calendar months during the twelve most
                           recent calendar months

         SSDH      =       the aggregate Seasonal Sales made by the
                           Originators during the seven most recent calendar
                           months

         NRPB      =       the Net Receivables Pool Balance as of the date of
                           such calculation

         "SEASONAL DEFAULT RATIO" means the ratio (expressed as a percentage
and rounded to the nearest 1/100th of 1% with 5/1000th of 1% rounded upwards)
computed as of the last day of each calendar month by dividing (a) the aggregate
Outstanding Balance of all Seasonal Sales that became Defaulted Receivables
during such month, by (b) the aggregate Outstanding Balance of all Seasonal
Sales made by the Originators during the two months that are seven and eight
months before such month.

         "SEASONAL DILUTION ESTIMATE "means, at any time, the balance as of the
most recent calendar month-end of reserves or liabilities maintained on the
books and records of the Seller or Servicer in the ordinary course of business
according to policies consistently applied and reported on the Information
Package related to, or in anticipation of, seasonal returns affecting the
Receivables.

         "SEASONAL RECEIVABLE" means a Pool Receivable sold pursuant to the
Purchase and Sale Agreement which was included, should have been included or
should be included in the calculation of Seasonal Sales.

         "SEASONAL SALES" means those amounts identified by the Seller or
Servicer on the periodic Information Packages as invoices related to specific
seasonal shipments.

         "SELLER" has the meaning set forth in the preamble to the Agreement.


                                      I-20


         "SELLER'S SHARE" of any amount means the greater of: (a) $0 and (b)
such amount minus the product of (i) such amount multiplied by (ii) the
Purchased Interest.

         "SERVICER" has the meaning set forth in the preamble to the Agreement.

         "SERVICING FEE" shall mean the fee referred to in SECTION 4.6 of the
         Agreement.

         "SETTLEMENT DATE" means the 22nd Day of each calendar month or, if such
day is not a Business Day, the first Business Day thereafter or such other
Business Day as otherwise consented to by the Administrator, the Purchasers, the
Seller and the Servicer.

         "SIMPLE MAJORITY" means, at any time, Purchasers whose Commitments
aggregate 51% or more of the aggregate of the Commitments of all Purchasers.

         "SOLVENT" means, with respect to any Person at any time, a condition
under which:

                  (i) the fair value and present fair saleable value of such
         Person's total assets is, on the date of determination, greater than
         such Person's total liabilities (including contingent and unliquidated
         liabilities) at such time;

                  (ii) the fair value and present fair saleable value of such
         Person's assets is greater than the amount that will be required to pay
         such Person's probable liability on its existing debts as they become
         absolute and matured ("debts," for this purpose, includes all legal
         liabilities, whether matured or unmatured, liquidated or unliquidated,
         absolute, fixed, or contingent);

                  (iii) such Person is and shall continue to be able to pay all
         of its liabilities as such liabilities mature; and

                  (iv) such Person does not have unreasonably small capital with
         which to engage in its current and in its anticipated business.

         For purposes of this definition:

                  (A) the amount of a Person's contingent or unliquidated
         liabilities at any time shall be that amount which, in light of all the
         facts and circumstances then existing, represents the amount which can
         reasonably be expected to become an actual or matured liability;


                  (B) the "fair value" of an asset shall be the amount which may
         be realized within a reasonable time either through collection or sale
         of such asset at its regular market value;


                                      I-21


                  (C) the "regular market value" of an asset shall be the amount
         which a capable and diligent business person could obtain for such
         asset from an interested buyer who is willing to Purchase such asset
         under ordinary selling conditions; and

                  (D) the "present fair saleable value" of an asset means the
         amount which can be obtained if such asset is sold with reasonable
         promptness in an arm's-length transaction in an existing and not
         theoretical market.

         "SPECIFICALLY RESERVED DILUTION AMOUNT" means the greater of (A) the
sum of (i) $15,000,000 and (ii) 75% of the total credits issued for seasonal
returns in the 10th and 11th months prior to the current month or (B) the sum of
(i) the balance as of the most recent calendar month-end of reserves or
liabilities maintained on the books and records of the Seller or Servicer and
reported on the Information Package related to, or in anticipation of, (a)
advertising allowances, (b) volume rebates and (c) Plus Mark, Inc. specific
factors affecting the Receivables plus (ii) (a) the Seasonal Dilution Estimate
times (b) 106%.

         "STANDARD & POOR'S" means Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.

         "SUBSIDIARY" means, as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock of each class
or other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a contingency) to
elect a majority of the Board of Directors or other managers of such entity are
at the time owned, or management of which is otherwise controlled: (a) by such
Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and
one or more Subsidiaries of such Person.

         "TANGIBLE NET WORTH" means, with respect to any Person, the tangible
net worth of such Person as determined in accordance with GAAP.

         "TERMINATION DAY" means: (a) each day on which the conditions set forth
in Section 2 of EXHIBIT II to the Agreement are not satisfied or (b) each day
that occurs on or after the Facility Termination Date.

         "TERMINATION EVENT" has the meaning specified in EXHIBIT V to the
Agreement.

         "TERMINATION FEE" means, for any Yield Period, with respect to any
Purchaser, the amount, if any, by which: (a) the additional Discount related to
such Purchaser's Investment (calculated without taking into account any
Termination Fee or any shortened duration of such Yield Period) that would have
accrued during such Yield Period on the reductions of Investment relating to
such Yield Period had such reductions not been made, exceeds (b) the income, if
any, received by such Purchaser from investing the proceeds of such reductions
of Investment, as determined by the such Purchaser's Purchaser Agent, which
determination shall be binding and conclusive for all purposes, absent manifest
error.


                                      I-22


         "TOTAL RESERVES" means, at any time, the sum of (a) the Yield Reserve,
(b) the sum of the Loss Reserve and the Dilution Reserve and (c) the
Specifically Reserved Dilution Amount.

         "TRANSACTION DOCUMENTS" means the Agreement, the Lock-Box Agreements,
each Purchaser Group Fee Letter, the Receivables Sale Agreement, the Purchase
and Sale Agreement, the Sale and Contribution Agreement and all other
certificates, instruments, UCC financing statements, reports, notices,
agreements and documents executed or delivered under or in connection with any
of the foregoing, in each case as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the Agreement.

         "TRANSFER SUPPLEMENT" has the respective meanings set forth in
SECTIONS 6.3(c) and 6.3(e).

         "UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.

         "UNMATURED PURCHASE AND SALE TERMINATION EVENT" means any event which,
with the giving of notice or lapse of time, or both, would become a Purchase and
Sale Termination Event.

         "UNMATURED RECEIVABLES SALE TERMINATION EVENT" means any event which,
with the giving of notice or lapse of time, or both, would become a Receivables
Sale Termination Event.

         "UNMATURED SALE AND CONTRIBUTION TERMINATION EVENT" means any event
which, with the giving of notice or lapse of time, or both, would become a Sale
and Contribution Termination Event.

         "UNMATURED TERMINATION EVENT" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event.

         "YIELD PERIOD" means, with respect to each Portion of Investment: (a)
before the Facility Termination Date: (i) initially the period commencing on the
date of the initial Purchase pursuant to SECTION 1.2 of the Agreement (or in the
case of any fees payable hereunder, commencing on the Closing Date) and ending
on (but not including) the next Settlement Date, and (ii) thereafter, each
period commencing on such Settlement Date and ending on (but not including) the
next Settlement Date, and (b) on and after the Facility Termination Date, such
period (including a period of one day) as shall be selected from time to time by
the Administrator or, in the absence of any such selection, each period of 30
days from the last day of the preceding Yield Period.

         "YIELD RATE" for any Yield Period for any Portion of Investment of the
Purchased Interest (i) in the case of the Purchaser Group including Market
Street, means the Market Street Yield Rate, and (ii) in the case of each other
Purchaser Group, shall mean the rate set forth as the Yield Rate for such
Purchaser Group in the related Purchaser Group Fee Letter.

         "YIELD RESERVE" shall be equal to the Aggregate Investment multiplied
by a percentage equal to (i) the Yield Reserve Percentage divided by (ii) 100%
minus the Yield Reserve Percentage.


                                      I-23


         "YIELD RESERVE PERCENTAGE" means, on any date, an amount equal to (i)
the sum of the weighted average Base Rate for the most recent period plus 1.5%,
multiplied by (ii) the product of 1.5 times the Days Sales Outstanding, divided
by (iii) 360.

         OTHER TERMS. All accounting terms not specifically defined herein
shall be construed in accordance with generally accepted accounting principles.
All terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
Unless the context otherwise requires, "or" means "and/or," and "including" (and
with correlative meaning "include" and "includes") means including without
limiting the generality of any description preceding such term.



                                      I-24


                                   EXHIBIT II
                             CONDITIONS OF PURCHASES


         1. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial Purchase
under this Agreement is subject to the following conditions precedent that the
Administrator and each Purchaser Agent shall have received on or before the date
of such Purchase (other than with respect to the condition set forth in
PARAGRAPH (g), which such condition must be satisfied within 30 days of such
Purchase), each in form and substance (including the date thereof) satisfactory
to the Administrator and each Purchaser Agent:

                  (a) A counterpart of the Agreement and the other Transaction
         Documents executed by the parties thereto.

                  (b) Certified copies of: (i) the resolutions of the Board of
         Directors of each of the Seller, the Originators, AGSC and Greetings
         authorizing the execution, delivery and performance by the Seller, such
         Originator, AGSC and Greetings, as the case may be, of the Agreement
         and the other Transaction Documents to which it is a party; (ii) all
         documents evidencing other necessary organizational action and
         governmental approvals, if any, with respect to the Agreement and the
         other Transaction Documents and (iii) the certificate of incorporation
         and by-laws or certificate of formation and limited liability company
         agreement or any other organizational document, as applicable, of the
         Seller, each Originator, AGSC and Greetings.

                  (c) A certificate of the Secretary or Assistant Secretary of
         the Seller, the Originators, AGSC and Greetings certifying the names
         and true signatures of its officers who are authorized to sign the
         Agreement and the other Transaction Documents. Until the Administrator
         and each Purchaser Agent receives a subsequent incumbency certificate
         from the Seller, an Originator, AGSC or Greetings, as the case may be,
         the Administrator and each Purchaser Agent shall be entitled to rely on
         the last such certificate delivered to it by the Seller, such
         Originator, AGSC or Greetings, as the case may be.

                  (d) Acknowledgment copies, or time stamped receipt copies, of
         proper financing statements, duly filed on or before the date of such
         initial purchase under the UCC of all jurisdictions that the
         Administrator may deem necessary or desirable in order to perfect the
         interests of the Seller, Greetings and the Administrator (on behalf of
         each Purchaser) contemplated by the Agreement, the Sale and
         Contribution Agreement, the Receivables Sale Agreement and the Purchase
         and Sale Agreement.

                  (e) Acknowledgment copies, or time-stamped receipt copies, of
         proper financing statements, if any, necessary to release all security
         interests and other rights of any Person


                                      II-1


         in the Receivables, Contracts or Related Security previously granted by
         the Originators, AGSC, Greetings or the Seller.

                  (f) Completed UCC search reports, dated on or shortly before
         the date of the initial purchase hereunder, listing the financing
         statements filed in all applicable jurisdictions referred to in
         SUBSECTION (e) above that name the Originators, AGSC or the Seller as
         debtor, together with copies of such other financing statements, and
         similar search reports with respect to judgment liens, federal tax
         liens and liens of the Pension Benefit Guaranty Corporation in such
         jurisdictions, as the Administrator or any Purchaser Agent may request,
         showing no Adverse Claims on any Pool Assets.

                  (g) Copies of executed Lock-Box Agreements with each Lock-Box
         Bank (other than Lock-Box Banks with respect to Plus-Mark, Inc. prior
         to the Plus-Mark Addition Date).

                  (h) Favorable opinions of Jones Day Reavis & Pogue, counsel
         for the Seller, the Originators, AGSC, Greetings and the Servicer, in
         form and substance reasonably satisfactory to the Administrator and
         each Purchaser Agent.

                  (i) Satisfactory results of a review and audit (performed by
         representatives of each Purchaser Agent) of the Servicer's collection,
         operating and reporting systems, the Credit and Collection Policy of
         each Originator (other than Plus Mark, Inc.) and AGSC, historical
         receivables data and accounts, including satisfactory results of a
         review of the Servicer's operating location(s).

                  (j) A pro forma Information Package representing the
         performance of the Receivables Pool for the calendar month before
         closing.

                  (k) Evidence of payment by the Seller of all accrued and
         unpaid fees (including those contemplated by each Purchaser Group Fee
         Letter), costs and expenses to the extent then due and payable on the
         date thereof, including any such costs, fees and expenses arising under
         or referenced in SECTION 6.4 of the Agreement and the Fee Letter.

                  (l) Each Purchaser Group Fee Letter (received only by the
         related Purchaser Group Agent) duly executed by the Seller and the
         Servicer.

                  (m) Good standing certificates with respect to each of the
         Seller, AGSC, the Originators and the Servicer issued by the Secretary
         of State (or similar official) of the state of each such Person's
         organization and principal place of business.

                  (n) To the extent required by each Conduit Purchaser's
         commercial paper program, letters from each of the rating agencies then
         rating the Notes confirming the rating of such Notes after giving
         effect to the transaction contemplated by the Agreement.


                                      II-2


                  (o) Each Liquidity Agreement (received only by the related
         Purchaser Group Agent) and all other Transaction Documents duly
         executed by the parties thereto.

                  (p) A computer file containing all information with respect to
         the Receivables as the Administrator or any Purchaser Agent may
         reasonably request.

                  (q) Such other approvals, opinions or documents as the
         Administrator or any Purchaser Agent may reasonably request.

         2. CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS. Each
Purchase (including the initial Purchase) and each reinvestment shall be subject
to the further conditions precedent that:

                  (a) in the case of each purchase, the Servicer shall have
         delivered to the Administrator and each Purchaser Agent on or before
         such purchase, in form and substance satisfactory to the Administrator
         and such Purchaser Agent, a completed pro forma Information Package to
         reflect the level of Investment with respect to each Purchaser Group
         and related reserves and the calculation of the Purchased Interest
         after such subsequent purchase and a completed purchase notice in the
         form of Annex B; and

                  (b) on the date of such purchase or reinvestment the following
         statements shall be true (and acceptance of the proceeds of such
         purchase or reinvestment shall be deemed a representation and warranty
         by the Seller that such statements are then true):

                           (i) the representations and warranties contained in
                  Exhibit III to the Agreement are true and correct in all
                  material respects on and as of the date of such purchase or
                  reinvestment as though made on and as of such date (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); and

                           (ii) no event has occurred and is continuing, or
                  would result from such purchase or reinvestment, that
                  constitutes a Termination Event or an Unmatured Termination
                  Event.


                                      II-3


                                   EXHIBIT III
                         REPRESENTATIONS AND WARRANTIES



         1.       REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants as follows:

                  (a) The Seller is a corporation duly incorporated, validly
         existing and in good standing under the laws of the State of Delaware,
         and is duly qualified to do business and is in good standing as a
         foreign corporation in every jurisdiction where the nature of its
         business requires it to be so qualified, except where the failure to be
         so qualified would not have a Material Adverse Effect.

                  (b) The execution, delivery and performance by the Seller of
         the Agreement and the other Transaction Documents to which it is a
         party, including its use of the proceeds of purchases and
         reinvestments: (i) are within its corporate powers; (ii) have been duly
         authorized by all necessary corporate action; (iii) do not contravene
         or result in a default under or conflict with: (A) its charter or
         by-laws, (B) any law, rule or regulation applicable to it, (C) any
         indenture, loan agreement, mortgage, deed of trust or other material
         agreement or instrument to which it is a party or by which it is bound,
         or (D) any order, writ, judgment, award, injunction or decree binding
         on or affecting it or any of its property; and (iv) do not result in or
         require the creation of any Adverse Claim upon or with respect to any
         of its properties. The Agreement and the other Transaction Documents to
         which it is a party have been duly executed and delivered by the
         Seller.

                  (c) No authorization, approval or other action by, and no
         notice to or filing with, any Governmental Authority or other Person is
         required for its due execution, delivery and performance by the Seller
         of the Agreement or any other Transaction Document to which it is a
         party, other than the Uniform Commercial Code filings referred to in
         Exhibit II to the Agreement, all of which shall have been filed on or
         before the date of the first purchase hereunder.

                  (d) Each of the Agreement and the other Transaction Documents
         to which the Seller is a party constitutes its legal, valid and binding
         obligation of the Seller enforceable against the Seller 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.

                  (e) There is no pending or, to Seller's best knowledge,
         threatened action or proceeding affecting Seller or any of its
         properties before any Governmental Authority or arbitrator.



                                     III-1


                  (f) No proceeds of any purchase or reinvestment will be used
         to acquire any equity security of a class that is registered pursuant
         to Section 12 of the Securities Exchange Act of 1934.

                  (g) The Seller is the legal and beneficial owner of the Pool
         Receivables and Related Security, free and clear of any Adverse Claim.
         Upon each purchase or reinvestment, Administrator (for the benefit of
         each Purchaser) shall acquire a valid and enforceable perfected
         undivided percentage ownership or security interest, to the extent of
         the Purchased Interest, in each Pool Receivable then existing or
         thereafter arising and in the Related Security, Collections and other
         proceeds with respect thereto, free and clear of any Adverse Claim. The
         Agreement creates a security interest in favor of the Administrator
         (for the benefit of each Purchaser) in the Pool Assets, and the
         Administrator (for the benefit of each Purchaser) has a first priority
         perfected security interest in the Pool Assets, free and clear of any
         Adverse Claims. No effective financing statement or other instrument
         similar in effect covering any Pool Asset is on file in any recording
         office, except those filed in favor of Greetings pursuant to the
         Receivables Sale Agreement, AGSC pursuant to the Purchase and Sale
         Agreement, the Seller pursuant to the Sale and Contribution Agreement
         and the Administrator (for the benefit of each Purchaser) relating to
         the Agreement, or in respect of which the Administrator has received
         evidence satisfactory to the Administrator of acknowledgment copies, or
         time-stamped receipt copies, of proper financing statements releasing
         or terminating, as applicable, all security interests and other rights
         of any Person in such Pool Asset.

                  (h) Each Information Package (if prepared by the Seller or one
         of its Affiliates, or to the extent that information contained therein
         is supplied by the Seller or an Affiliate), information, exhibit,
         financial statement, document, book, record or report furnished or to
         be furnished at any time by or on behalf of the Seller to the
         Administrator or any Purchaser Agent in connection with the Agreement
         or any other Transaction Document to which it is a party is or will be
         complete and accurate in all material respects as of its date or as of
         the date so furnished, and does not and will not contain any material
         misstatement of fact or omit to state a material fact or any fact
         necessary to make the statements contained therein not misleading.

                  (i) [RESERVED].

                  (j) The names and addresses of all the Lock-Box Banks,
         together with the account numbers of the Lock-Box Accounts at such
         Lock-Box Banks, are specified in Schedule II to the Agreement (or at
         such other Lock-Box Banks and/or with such other Lock- Box Accounts as
         have been notified to the Administrator in accordance with the
         Agreement) and all Lock-Box Accounts are subject to Lock-Box Agreements
         (except as otherwise agreed to in writing by the Administrator and each
         Purchaser Agent or as provided in SECTION 4.3). Seller has not granted
         to any Person, other than the Administrator as contemplated by the


                                     III-2


         Agreement, dominion and control of any Lock-Box Account, or the right
         to take dominion and control of any such account at a future time or
         upon the occurrence of a future event.

                  (k) The Seller is not in violation of any order of any court,
         arbitrator or Governmental Authority.

                  (l) Neither the Seller nor any of its Affiliates has any
         direct or indirect ownership or other financial interest in any
         Purchaser.

                  (m) No proceeds of any purchase or reinvestment will be used
         for any purpose that violates any applicable law, rule or regulation,
         including Regulations T, U or X of the Federal Reserve Board.

                  (n) Each Pool Receivable included as an Eligible Receivable in
         the calculation of the Net Receivables Pool Balance is an Eligible
         Receivable.

                  (o) No event has occurred and is continuing that constitutes a
         Termination Event or an Unmatured Termination Event and no event would
         result from a purchase in respect of, or reinvestment in respect of,
         the Purchased Interest or from the application of the proceeds
         therefrom that constitutes a Termination Event or an Unmatured
         Termination Event.

                  (p) The Seller has complied in all material respects with the
         applicable Credit and Collection Policy.

                  (q) The Seller has complied in all material respects with all
         of the terms, covenants and agreements contained in the Agreement and
         the other Transaction Documents that are applicable to it and all laws,
         rules, regulations and orders that are applicable to it.

                  (r) The Seller's complete corporate name is set forth in the
         preamble to the Agreement, and it does not use and has not during the
         last six years used any other corporate name, trade name,
         doing-business name or fictitious name, except as set forth on Schedule
         III to the Agreement and except for names first used after the date of
         the Agreement and set forth in a notice delivered to the Administrator
         pursuant to SECTION 1(k)(iv) of EXHIBIT IV to the Agreement.

                  (s) The Seller is not an "investment company," or a company
         "controlled" by an "investment company" within the meaning of the
         Investment Company Act of 1940, as amended. In addition, the Seller is
         not a "holding company," a "subsidiary company" of a "holding company"
         or an "affiliate" of a "holding company" or of a "subsidiary company"
         of a "holding company" within the meaning of the Public Utility Holding
         Company Act of 1935, as amended.


                                     III-3


                  (t) With respect to each Receivable transferred to the Seller
         under the Sale and Contribution Agreement, Seller has given reasonably
         equivalent value to AGSC thereof in consideration therefor and such
         transfer was not made for or on account of an antecedent debt. No
         transfer by AGSC of any Receivable under the Sale and Contribution
         Agreement is or may be voidable under any section of the Bankruptcy
         Code.

                  (u) Each Contract with respect to each Receivable is effective
         to create, and has created, a legal, valid and binding obligation of
         the related Obligor to pay the Outstanding Balance of the Receivable
         created thereunder and any accrued interest thereon, enforceable
         against the Obligor in accordance with its terms, except as such
         enforcement may be limited by applicable bankruptcy, insolvency,
         reorganization or other similar laws relating to or limiting creditors'
         rights generally and by general principles of equity (regardless of
         whether enforcement is sought in a proceeding in equity or at law).

                  (v) Since its most recent fiscal year end, there has been no
         material adverse change in the business, operations, financial
         condition, properties or assets of the Seller.

         2.       REPRESENTATIONS AND WARRANTIES OF GREETINGS (INCLUDING IN ITS
CAPACITY AS THE SERVICER). Greetings, individually and in its capacity as the
Servicer, represents and warrants as follows:

                  (a) Greetings is a corporation duly incorporated, validly
         existing and in good standing under the laws of the State of Ohio, and
         is duly qualified to do business and is in good standing as a foreign
         corporation in every jurisdiction where the nature of its business
         requires it to be so qualified, except where the failure to be so
         qualified would not have a Material Adverse Effect.

                  (b) The execution, delivery and performance by Greetings, of
         the Agreement and the other Transaction Documents to which it is a
         party, including the Servicer's use of the proceeds of purchases and
         reinvestments: (i) are within its corporate powers; (ii) have been duly
         authorized by all necessary corporate action; (iii) do not contravene
         or result in a default under or conflict with: (A) its charter or
         by-laws, (B) any law, rule or regulation applicable to it, (C) any
         material indenture, loan agreement, mortgage, deed of trust or other
         material agreement or instrument to which it is a party or by which it
         is bound, or (D) any order, writ, judgment, award, injunction or decree
         binding on or affecting it or any of its property; and (iv) do not
         result in or require the creation of any Adverse Claim upon or with
         respect to any of its properties. The Agreement and the other
         Transaction Documents to which Greetings is a party have been duly
         executed and delivered by Greetings.

                  (c) No authorization, approval or other action by, and no
         notice to or filing with any Governmental Authority or other Person, is
         required for the due execution, delivery and performance by Greetings
         of the Agreement or any other Transaction Document to which it is a
         party.


                                     III-4


                  (d) Each of the Agreement and the other Transaction Documents
         to which Greetings is a party constitutes the legal, valid and binding
         obligation of Greetings enforceable against Greetings 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.

                  (e) The balance sheets of Greetings and its consolidated
         Subsidiaries as at February 28, 2001, and the related statements of
         income and retained earnings for the fiscal year then ended, copies of
         which have been furnished to the Administrator and each Purchaser
         Agent, fairly present the financial condition of Greetings and its
         consolidated Subsidiaries as at such date and the results of the
         operations of Greetings and its Subsidiaries for the period ended on
         such date, all in accordance with generally accepted accounting
         principles consistently applied, and since February 28, 2001, there has
         been no event or circumstances which have had a Material Adverse
         Effect.

                  (f) Except as disclosed in the most recent audited financial
         statements of Greetings furnished to the Administrator and each
         Purchaser Agent, there is no pending or, to its best knowledge,
         threatened action or proceeding affecting it or any of its Subsidiaries
         before any Governmental Authority or arbitrator that could reasonably
         be expected to have a Material Adverse Effect.

                  (g) No proceeds of any purchase or reinvestment will be used
         to acquire any equity security of a class that is registered pursuant
         to Section 12 of the Securities Exchange Act of 1934.

                  (h) Each Information Package (if prepared by Greetings or one
         of its Affiliates, or to the extent that information contained therein
         is supplied by Greetings or an Affiliate), information, exhibit,
         financial statement, document, book, record or report furnished or to
         be furnished at any time by or on behalf of the Servicer to the
         Administrator, any Purchaser or any Purchaser Agent in connection with
         the Agreement is or will be complete and accurate in all material
         respects as of its date or as of the date so furnished and does not and
         will not contain any material misstatement of fact or omit to state a
         material fact or any fact necessary to make the statements contained
         therein not materially misleading.

                  (i) The principal place of business and chief executive office
         (as such terms are used in the UCC) of Greetings and the office where
         it keeps its records concerning the Receivables are located at the
         address referred to in SECTION 2(b) of EXHIBIT IV to the Agreement.


                                     III-5


                  (j) Greetings is not in violation of any order of any court,
         arbitrator or Governmental Authority, which could have a Material
         Adverse Effect.

                  (k) Neither Greetings nor any of its Affiliates has any direct
         or indirect ownership or other financial interest in any Purchaser.

                  (l) The Servicer has complied in all material respects with
         the applicable Credit and Collection Policy.

                  (m) Greeting has complied in all material respects with all of
         the terms, covenants and agreements contained in the Agreement and the
         other Transaction Documents that are applicable to it.

                  (n) Greetings is not an "investment company" or a company
         "controlled" by an "investment company" within the meaning of the
         Investment Company Act of 1940, as amended. In addition, Greetings is
         not a "holding company," a "subsidiary company" of a "holding company,"
         or an "affiliate" of a "holding company" or of a "subsidiary company"
         of a "holding company" within the meaning of the Public Utility Holding
         Company Act of 1935, as amended.

                  (o) Since its most recent fiscal year end, there has been no
         change in the business, operations, financial condition, properties or
         assets of the Servicer which would have a Material Adverse Effect on
         its ability to perform its obligations under the Agreement or any other
         Transaction Document to which it is a party or materially and adversely
         affect the transactions contemplated under the Agreement or such other
         Transaction Documents.

                  (p) No license or approval is required for the Administrator
         or any successor Servicer to use any program used by the Servicer in
         the servicing of the Receivables, other than such licenses and
         approvals that have been obtained and are in full force and effect.


                                     III-6


                                   EXHIBIT IV
                                    COVENANTS



         1.       COVENANTS OF THE SELLER. Until the latest of the Facility
Termination Date, the date on which no Investment of or Discount in respect of
the Purchased Interest shall be outstanding or the date all other amounts owed
by the Seller under the Agreement to any Purchaser, Purchaser Agent, the
Administrator and any other Indemnified Party or Affected Person shall be paid
in full:

                  (a) COMPLIANCE WITH LAWS, ETC. The Seller shall comply with
         all applicable laws, rules, regulations and orders, and preserve and
         maintain its corporate existence, rights, franchises, qualifications
         and privileges, except to the extent that the failure so to comply with
         such laws, rules and regulations or the failure so to preserve and
         maintain such rights, franchises, qualifications and privileges would
         not have a Material Adverse Effect.

                  (b) OFFICES, RECORDS AND BOOKS OF ACCOUNT, ETC. The Seller:
         (i) shall not move its principal place of business and chief executive
         office (as such terms or similar terms are used in the UCC) and the
         office where it keeps its records concerning the Receivables to an
         address other than the address of the Seller set forth under its name
         on the signature page to the Agreement or, pursuant to CLAUSE (k)(iv)
         below, at any other locations in jurisdictions where all actions
         reasonably requested by the Administrator to protect and perfect the
         interest of the Administrator (for the benefit of the Purchasers) in
         the Receivables and related items (including the Pool Assets) have been
         taken and completed and (ii) shall provide the Administrator with at
         least 30 days' written notice before making any change in the Seller's
         name or making any other change in the Seller's identity or corporate
         structure (including a Change in Control) that could render any UCC
         financing statement filed in connection with this Agreement "seriously
         misleading" as such term (or similar term) is used in the UCC; each
         notice to the Administrator pursuant to this sentence shall set forth
         the applicable change and the effective date thereof. The Seller also
         will maintain and implement (or cause the Servicer to maintain and
         implement) administrative and operating procedures (including an
         ability to recreate records evidencing Receivables and related
         Contracts in the event of the destruction of the originals thereof),
         and keep and maintain (or cause the Servicer to keep and maintain) all
         documents, books, records, computer tapes and disks and other
         information reasonably necessary or advisable for the collection of all
         Receivables (including records adequate to permit the daily
         identification of each Receivable and all Collections of and
         adjustments to each existing Receivable). The Seller will (and will
         cause each Originator and AGSC to) on or prior to the date of the
         Agreement, mark its master data processing records and other books and
         records relating to the Purchased Interest (and at all times thereafter
         (until the latest of the Facility Termination Date or the date all
         other amounts owed by the Seller under the Agreement shall be paid in
         full) continue to maintain such records) with a legend, acceptable to
         the Administrator, describing the Purchased Interest.


                                      IV-1


                  (c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND
         COLLECTION POLICY. The Seller shall (and shall cause the Servicer to),
         at its expense, (i) timely perform and comply in all material respects
         with all provisions, covenants and other promises required to be
         observed by it under the Contracts related to the Receivables unless
         the failure to so perform or comply does not involve a material portion
         of such Receivables, and the Seller shall have complied with its
         obligations with respect to such Receivables set forth in SECTION
         1.4(e), and (ii) timely comply in all material respects with the
         applicable Credit and Collection Policies with regard to each
         Receivable.

                  (d) OWNERSHIP INTEREST, ETC. The Seller shall (and shall cause
         the Servicer to), at its expense, take all action necessary or
         desirable to establish and maintain a valid and enforceable undivided
         percentage ownership or security interest, to the extent of the
         Purchased Interest which shall not be greater than 100%, in the Pool
         Receivables, the Related Security and Collections with respect thereto,
         and a first priority perfected security interest in the Pool Assets, in
         each case free and clear of any Adverse Claim, in favor of the
         Administrator (for the benefit of the Purchasers), including taking
         such action to perfect, protect or more fully evidence the interest of
         the Administrator (for the benefit of the Purchasers) as the
         Administrator, may reasonably request.

                  (e) SALES, LIENS, ETC. The Seller shall not sell, assign (by
         operation of law or otherwise) or otherwise dispose of, or create or
         suffer to exist any Adverse Claim upon or with respect to, any or all
         of its right, title or interest in, to or under any Pool Assets
         (including the Seller's undivided interest in any Receivable, Related
         Security or Collections, or upon or with respect to any account to
         which any Collections of any Receivables are sent), or assign any right
         to receive income in respect of any items contemplated by this
         paragraph.

                  (f) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as provided
         in the Agreement, the Seller shall not, and shall not permit the
         Servicer to, extend the maturity or adjust the Outstanding Balance or
         otherwise modify the terms of any Pool Receivable, or amend, modify or
         waive any term or condition of any related Contract in any manner that
         would modify the terms of any Pool Receivable.

                  (g) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The
         Seller shall not make (or permit any Originator or AGSC to make) any
         change in the character of its business or any change in any Credit and
         Collection Policy that would have a Material Adverse Effect with
         respect to the Receivables. The Seller shall not make (or permit any
         Originator or AGSC to make) any other change in any Credit and
         Collection Policy without giving prior written notice thereof to the
         Administrator and each Purchaser Agent.

                  (h) AUDITS. The Seller shall (and shall cause each Originator
         and AGSC to), from time to time during regular business hours, as
         reasonably requested in advance (unless a Termination Event or
         Unmatured Termination Event exists) by the Administrator or any
         Purchaser, permit the Administrator, any Purchaser, any Purchaser
         Agent, or any agent or


                                      IV-2


         representatives of the foregoing: (i) to examine and make copies of and
         abstracts from all books, records and documents (including computer
         tapes and disks) in the possession or under the control of the Seller
         (or AGSC or any such Originator) relating to Receivables and the
         Related Security, including the related Contracts, and (ii) to visit
         the offices and properties of the Seller, AGSC and the Originators for
         the purpose of examining such materials described in CLAUSE (i) above,
         and to discuss matters relating to Receivables and the Related Security
         or the Seller's, Greetings', AGSC's or an Originator's performance
         under the Transaction Documents or under the Contracts with any of the
         officers, employees, agents or contractors of the Seller, Greetings,
         AGSC or an Originator having knowledge of such matters and (iii)
         without limiting CLAUSES (i) and (ii) above, to engage certified public
         accountants or other auditors acceptable to the Seller and the
         Administrator to conduct, at the Seller's expense, a review of the
         Seller's books and records with respect to such Receivables.

                  (i) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND PAYMENT
         INSTRUCTIONS TO OBLIGORS. The Seller shall not, and shall not permit
         the Servicer, AGSC or any Originator to, add or terminate any bank as a
         Lock-Box Bank or any account as a Lock-Box Account from those listed in
         SCHEDULE II to the Agreement, or make any change in its instructions to
         Obligors regarding payments to be made to the Seller, AGSC the
         Originators, the Servicer or any Lock-Box Account (or related post
         office box), unless the Administrator and a Simple Majority shall have
         consented thereto in writing, which consent shall not be unreasonably
         withheld or delayed, and the Administrator shall have received copies
         of all agreements and documents (including Lock-Box Agreements) that it
         may request in connection therewith. Notwithstanding anything contained
         in this PARAGRAPH (i) to the contrary, the Seller may add an account as
         a Lock-Box Account at a Lock-Box Bank, without the consent of the
         Administrator and the Purchasers upon delivery to the Administrator of
         a Lock-Box Agreement in form and substance reasonably acceptable to the
         Administrator.

                  (j) DEPOSITS TO LOCK-BOX ACCOUNTS. The Seller shall (or shall
         cause the Servicer to): (i) mail, wire or otherwise transfer, or cause
         to be so transferred, any Collections received by it, the Servicer,
         AGSC or any Originator to Lock-Box Accounts not later than one Business
         Day after receipt thereof and (ii) instruct all Obligors (other than,
         for a period no longer than 120 days after the Closing Date, Kinko's)
         to make payments of all Receivables to one or more Lock-Box Accounts or
         to post office boxes to which only Lock- Box Banks have access (and
         shall instruct the Lock-Box Banks to cause all items and amounts
         relating to such Receivables received in such post office boxes to be
         removed and deposited into a Lock-Box Account on a daily basis). Except
         as otherwise agreed to in writing by the Administrator and the Majority
         Purchasers, each Lock-Box Account shall at all times be subject to a
         Lock-Box Agreement. The Seller will not (and will not permit the
         Servicer to) deposit or otherwise credit, or cause or permit to be so
         deposited or credited, to any Lock-Box Account cash or cash proceeds
         other than Collections.



                                      IV-3


                  (k) REPORTING REQUIREMENTS. The Seller will provide to the
         Administrator (in multiple copies, if requested by the Administrator)
         and each Purchaser Agent the following:

                      (i) as soon as available and in any event within 120 days
                  after the end of each fiscal year of the Seller, unaudited
                  financial statements for such year certified as to accuracy by
                  the president or treasurer of the Seller;

                      (ii) as soon as possible and in any event within five days
                  after the occurrence of each Termination Event or Unmatured
                  Termination Event, a statement of the president or any vice
                  president of the Seller setting forth details of such
                  Termination Event or Unmatured Termination Event and the
                  action that the Seller has taken and proposes to take with
                  respect thereto;

                      (iii) promptly after the filing or receiving thereof,
                  copies of all reports and notices that the Seller or any
                  Affiliate files under ERISA with the Internal Revenue Service,
                  the Pension Benefit Guaranty Corporation or the U.S.
                  Department of Labor or that the Seller or any Affiliate
                  receives from any of the foregoing or from any multiemployer
                  plan (within the meaning of Section 4001(a)(3) of ERISA) to
                  which the Seller or any of its Affiliates is or was, within
                  the preceding five years, a contributing employer, in each
                  case in respect of the assessment of withdrawal liability or
                  an event or condition that could result in the imposition of
                  liability on the Seller and/or any such Affiliate;

                      (iv) at least 30 days before any change in the Seller's
                  name or any other change requiring the amendment of UCC
                  financing statements, a notice setting forth such changes and
                  the effective date thereof;

                      (v) promptly after the Seller obtains knowledge thereof,
                  notice of any: (A) adverse litigation, investigation or
                  proceeding that may exist at any time between the Seller and
                  any Person or (B) material litigation or proceeding relating
                  to any Transaction Document;

                      (vi) promptly after the occurrence thereof, notice of a
                  Material Adverse Effect in the business, operations, property
                  or financial or other condition of the Seller, the Servicer,
                  any Originator, AGSC or Greetings; and

                      (vii) such other information respecting the Receivables or
                  the condition or operations, financial or otherwise, of the
                  Seller, the Servicer, any Originator, AGSC or any of their
                  Affiliates as the Administrator or any Purchaser Agent may
                  from time to time reasonably request.

                  (l) CERTAIN AGREEMENTS. Without the prior written consent of
         the Administrator and the Majority Purchasers, the Seller will not (and
         will not permit any Originator,


                                      IV-4


         Greetings or AGSC to) amend, modify, waive, revoke or terminate any
         Transaction Document to which it is a party or any provision of
         Seller's certificate of incorporation or by- laws.

                  (m) RESTRICTED PAYMENTS. (i) Except pursuant to CLAUSE (ii)
         below, the Seller will not: (A) purchase or redeem any shares of its
         capital stock, (B) declare or pay any dividend or set aside any funds
         for any such purpose, (C) prepay, purchase or redeem any Debt, (D) lend
         or advance any funds or (E) repay any loans or advances to, for or from
         any of its Affiliates (the amounts described in CLAUSES (A) through (E)
         being referred to as "RESTRICTED PAYMENTS ").

                      (ii) Subject to the limitations set forth in CLAUSE (iii)
                  below, the Seller may make Restricted Payments so long as such
                  Restricted Payments are made only in one or more of the
                  following ways: (A) the Seller may make cash payments
                  (including prepayments) on the Sale and Contribution Notes in
                  accordance with their terms, and (B) if no amounts are then
                  outstanding under the Sale and Contribution Notes, the Seller
                  may declare and pay dividends.

                      (iii) The Seller may make Restricted Payments only out of
                  the funds it receives pursuant to SECTIONS 1.4(b)(ii) and (iv)
                  of the Agreement. Furthermore, the Seller shall not pay, make
                  or declare: (A) any dividend if, after giving effect thereto,
                  the Seller's tangible net worth would be less than $10,000,000
                  or (B) any Restricted Payment (including any dividend) if,
                  after giving effect thereto, any Termination Event or
                  Unmatured Termination Event shall have occurred and be
                  continuing.

                  (n) OTHER BUSINESS. The Seller will not: (i) engage in any
         business other than the transactions contemplated by the Transaction
         Documents; (ii) create, incur or permit to exist any Debt of any kind
         (or cause or permit to be issued for its account any letters of credit
         or bankers' acceptances) other than pursuant to this Agreement or the
         Sale and Contribution Notes; or (iii) form any Subsidiary or make any
         investments in any other Person; provided, however, that the Seller
         shall be permitted to incur minimal obligations to the extent necessary
         for the day-to-day operations of the Seller (such as expenses for
         stationery, audits, maintenance of legal status, etc.).

                  (o) USE OF SELLER'S SHARE OF COLLECTIONS. The Seller shall
         apply the Seller's Share of Collections to make payments in the
         following order of priority: (i) the payment of its expenses (including
         all obligations payable to the Purchaser Groups and the Administrator
         under the Agreement and under each Purchaser Group Fee Letter); (ii)
         the payment of accrued and unpaid interest on the Sale and Contribution
         Notes; and (iii) other legal and valid corporate purposes.

                  (p) TANGIBLE NET WORTH. The Seller will not permit its
         tangible net worth, at any time, to be less than $10,000,000.


                                      IV-5


         2.       COVENANTS OF THE SERVICER AND GREETINGS. Until the latest of
the Facility Termination Date, the date on which no Investment of or Discount in
respect of the Purchased Interest shall be outstanding or the date all other
amounts owed by the Seller under the Agreement to the Purchaser Agents, the
Purchasers, the Administrator and any other Indemnified Party or Affected Person
shall be paid in full:

                  (a) COMPLIANCE WITH LAWS, ETC. The Servicer and, to the extent
         that it ceases to be the Servicer, Greetings shall comply (and shall
         cause each Originator and AGSC to comply) in all material respects with
         all applicable laws, rules, regulations and orders, and preserve and
         maintain its corporate existence, rights, franchises, qualifications
         and privileges, except to the extent that the failure so to comply with
         such laws, rules and regulations or the failure so to preserve and
         maintain such existence, rights, franchises, qualifications and
         privileges would not have a Material Adverse Effect.

                  (b) OFFICES, RECORDS AND BOOKS OF ACCOUNT, ETC. Servicer and,
         to the extent that it ceases to be the Servicer, Greetings, shall keep
         (and shall cause each Originator and AGSC to keep) its principal place
         of business and chief executive office (as such terms or similar terms
         are used in the applicable UCC) and the office where it keeps its
         records concerning the Receivables at the address of the Servicer set
         forth under its name on the signature page to the Agreement or, upon at
         least 30 days' prior written notice of a proposed change to the
         Administrator, at any other locations in jurisdictions where all
         actions reasonably requested by the Administrator to protect and
         perfect the interest of the Administrator (for the benefit of each
         Purchaser) in the Receivables and related items (including the Pool
         Assets) have been taken and completed. The Servicer and, to the extent
         that it ceases to be the Servicer, Greetings, also will (and will cause
         each Originator and AGSC to) maintain and implement administrative and
         operating procedures (including an ability to recreate records
         evidencing Receivables and related Contracts in the event of the
         destruction of the originals thereof), and keep and maintain all
         documents, books, records, computer tapes and disks and other
         information reasonably necessary or advisable for the collection of all
         Receivables (including records adequate to permit the daily
         identification of each Receivable and all Collections of and
         adjustments to each existing Receivable).

                  (c) PERFORMANCE AND COMPLIANCE WITH CONTRACTS AND CREDIT AND
         COLLECTION POLICY. The Servicer and, to the extent that it ceases to be
         the Servicer, Greetings, shall (and shall cause each Originator and
         AGSC to), at its expense, (i) timely perform and comply in all material
         respects with all provisions, covenants and other promises required to
         be observed by it under the Contracts related to the Receivables unless
         the failure to so perform or comply does not involve a material portion
         of such Receivables, and the Seller shall have complied with its
         obligations with respect to such Receivables set forth in SECTION
         1.4(e), and (ii) timely comply in all material respects with the
         applicable Credit and Collection Policies with regard to each
         Receivable.


                                      IV-6


                  (d) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as provided
         in the Agreement, the Servicer and, to the extent that it ceases to be
         the Servicer, Greetings, shall not extend (and shall not permit any
         Originator or AGSC to extend), the maturity or adjust the Outstanding
         Balance or otherwise modify the terms of any Pool Receivable, or amend,
         modify or waive any term or condition of any related Contract in any
         manner that would modify the terms of any Pool Receivable.

                  (e) CHANGE IN BUSINESS OR CREDIT AND COLLECTION POLICY. The
         Servicer and, to the extent that it ceases to be the Servicer,
         Greetings, shall not make (and shall not permit any Originator to make)
         any change in the character of its business or in any Credit and
         Collection Policy that would have a Material Adverse Effect. The
         Servicer and, to the extent that it ceases to be the Servicer,
         Greetings, shall not make (and shall not permit any Originator or AGSC
         to make) any other change in any Credit and Collection Policy without
         giving prior written notice thereof to the Administrator and each
         Purchaser Agent.

                  (f) AUDITS. The Servicer and, to the extent that it ceases to
         be the Servicer, Greetings, shall (and shall cause each Originator and
         AGSC to), from time to time during regular business hours, (unless a
         Termination Event or Unmatured Termination Event exists) by the
         Administrator, Purchaser or any Purchaser Agent, permit (and cause each
         Originator and AGSC) the Administrator, any Purchaser, any Purchaser
         Agent or any agent or representative of the foregoing: (i) to examine
         and make copies of and abstracts from all books, records and documents
         (including computer tapes and disks) in its possession or under its
         control (or the control of AGSC or an Originator) relating to
         Receivables and the Related Security, including the related Contracts;
         and (ii) to visit its offices and properties (and the offices and
         property of AGSC and the Originators) for the purpose of examining such
         materials described in CLAUSE (i) above, and to discuss matters
         relating to Receivables and the Related Security or Greetings', AGSC's
         or any Originator's performance under the Transaction Documents or
         under the Contracts with any of their respective officers, employees,
         agents or contractors having knowledge of such matters and (iii)
         without limiting CLAUSES (i) and (ii) above, to engage certified public
         accountants or other auditors acceptable to the Servicer and the
         Administrator to conduct, at the Servicer's expense, a review of the
         Servicer's books and records with respect to such Receivables.

                  (g) CHANGE IN LOCK-BOX BANKS, LOCK-BOX ACCOUNTS AND PAYMENT
         INSTRUCTIONS TO OBLIGORS. The Servicer and, to the extent that it
         ceases to be the Servicer, Greetings, shall not (and shall not permit
         any Originator or AGSC to) add or terminate any bank as a Lock- Box
         Bank or any account as a Lock-Box Account from those listed in SCHEDULE
         II to the Agreement, or make any change in its instructions to Obligors
         regarding payments to be made to the Servicer or any Lock-Box Account
         (or related post office box), unless the Administrator and a Simple
         Majority shall have consented thereto in writing, which consent shall
         not be unreasonably withheld or delayed, and the Administrator shall
         have received copies of all agreements and documents (including
         Lock-Box Agreements) that it may request in connection therewith.
         Notwithstanding anything contained in this PARAGRAPH (g)


                                      IV-7


         to the contrary, the Servicer may add an account as a Lock-Box Account
         at a Lock-Box Bank, without the consent of the Administrator and the
         Purchasers upon delivery to the Administrator of a Lock-Box Agreement
         in form and substance reasonably acceptable to the Administrator.

                  (h) DEPOSITS TO LOCK-BOX ACCOUNTS. The Servicer shall: (i)
         mail, wire or otherwise transfer, or cause to be so transferred, any
         Collections received by it to Lock-Box Accounts not later than one
         Business Day after receipt thereof and (ii) instruct all Obligors
         (other than, for a period no longer than 120 days after the Closing
         Date, Kinko's) to make payments of all Receivables to one or more
         Lock-Box Accounts or to post office boxes to which only Lock-Box Banks
         have access (and shall instruct the Lock-Box Banks to cause all items
         and amounts relating to such Receivables received in such post office
         boxes to be removed and deposited into a Lock-Box Account on a daily
         basis). Except as otherwise agreed to in writing by the Administrator
         and the Majority Purchasers, each Lock-Box Account shall at all times
         be subject to a Lock-Box Agreement. The Servicer will not deposit or
         otherwise credit, or cause or permit to be so deposited or credited, to
         any Lock- Box Account cash or cash proceeds other than Collections.

                      (i) REPORTING REQUIREMENTS. Greetings shall provide to the
                  Administrator (in multiple copies, if requested by the
                  Administrator) and each Purchaser Agent the following:

                      (i) as soon as available and in any event within 60 days
                  after the end of the first three quarters of each fiscal year
                  of Greetings, balance sheets of Greetings and its consolidated
                  Subsidiaries, each Originator, AGSC and Seller as of the end
                  of such quarter and statements of income, retained earnings
                  and cash flow of Greetings and its consolidated Subsidiaries,
                  each Originator, and AGSC for the period commencing at the end
                  of the previous fiscal year and ending with the end of such
                  quarter, certified by the chief financial officer of such
                  Person;

                      (ii) as soon as available and in any event within 120 days
                  after the end of each fiscal year of Greetings and of Seller,
                  a copy of the annual report for such year for Greetings and
                  its consolidated Subsidiaries, each Originator, and AGSC,
                  containing financial statements for such year audited by
                  independent certified public accountants of nationally
                  recognized standing;

                      (iii) as to the Servicer only, as soon as available and in
                  any event not later than two Business Days prior to the
                  Settlement Date, an Information Package as of the last day of
                  such month or, within 10 Business Days of a request by the
                  Administrator or any Purchaser Agent, an Information Package
                  for such periods as is specified by the Administrator or such
                  Purchaser Agent (including on a semi-monthly, weekly or daily
                  basis);



                                      IV-8


                      (iv) as soon as possible and in any event within five days
                  after becoming aware of the occurrence of each Termination
                  Event or Unmatured Termination Event, a statement of the chief
                  financial officer of Greetings setting forth details of such
                  Termination Event or Unmatured Termination Event and the
                  action that such Person has taken and proposes to take with
                  respect thereto;

                      (v) promptly after the sending or filing thereof, copies
                  of all reports that Greetings sends to any of its security
                  holders, and copies of all reports and registration statements
                  that Greetings or any Subsidiary files with the Securities and
                  Exchange Commission or any national securities exchange;

                      (vi) promptly after the filing or receiving thereof,
                  copies of all reports and notices that Greetings or any of its
                  Affiliate files under ERISA with the Internal Revenue Service,
                  the Pension Benefit Guaranty Corporation or the U.S.
                  Department of Labor or that such Person or any of its
                  Affiliates receives from any of the foregoing or from any
                  multiemployer plan (within the meaning of Section 4001(a)(3)
                  of ERISA) to which such Person or any of its Affiliate is or
                  was, within the preceding five years, a contributing employer,
                  in each case in respect of the assessment of withdrawal
                  liability or an event or condition that could result in the
                  imposition of a liability on Greetings and/or any such
                  Affiliate;

                      (vii) at least thirty days before any change in
                  Greetings's, any Originator's or AGSC's name or any other
                  change requiring the amendment of UCC financing statements, a
                  notice setting forth such changes and the effective date
                  thereof;

                      (viii) promptly after Greetings obtains knowledge thereof,
                  notice of any: (A) litigation, investigation or proceeding
                  that may exist at any time between Greetings or any of its
                  Subsidiaries and any Governmental Authority that, if not cured
                  or if adversely determined, as the case may be, would
                  reasonably be expected to result in a Material Adverse Effect;
                  (B) litigation or proceeding adversely affecting such Person
                  or any of its Subsidiaries in which the amount involved is
                  more than $2,000,000 and not covered by insurance or in which
                  injunctive or similar relief is sought; or (C) litigation or
                  proceeding relating to any Transaction Document;

                      (ix) promptly after the occurrence thereof, notice of any
                  Material Adverse Effect;

                      (x) such other information respecting the Receivables or
                  the condition or operations, financial or otherwise, of
                  Greetings, any Originator or AGSC or any of their respective
                  Affiliates as the Administrator or any Purchaser Agent may
                  from time to time reasonably request; and


                                      IV-9


                      (xi) promptly after the occurrence thereof, notice of any
                  material acquisition or investment by Greetings of or in any
                  Person, business or operation.

         3.       SEPARATE EXISTENCE. Each of the Seller and Greetings hereby
acknowledges that the Purchasers, the Purchaser Agents, the Administrator and
the Liquidity Providers are entering into the transactions contemplated by this
Agreement and the other Transaction Documents in reliance upon the Seller's and
AGSC's identity as a legal entity separate from Greetings and its Affiliates.
Therefore, from and after the date hereof, each of the Seller and Greetings
shall take all steps specifically required by the Agreement or reasonably
required by the Administrator to continue the Seller's and AGSC's identity as a
separate legal entity and to make it apparent to third Persons that each of the
Seller and AGSC is an entity with assets and liabilities distinct from those of
Greetings and any other Person, and is not a division of Greetings, its
Affiliates or any other Person. Without limiting the generality of the foregoing
and in addition to and consistent with the other covenants set forth herein,
each of the Seller and Greetings shall take such actions as shall be required in
order that:

                  (a) The Seller will be a limited purpose corporation whose
         primary activities are restricted in its certificate of incorporation
         to: (i) purchasing or otherwise acquiring from the Originators, owning,
         holding, granting security interests or selling interests in Pool
         Assets, (ii) entering into agreements for the selling and servicing of
         the Receivables Pool, and (iii) conducting such other activities as it
         deems necessary or appropriate to carry out its primary activities;

                  (b) Seller shall not engage in any business or activity, or
         incur any indebtedness or liability, other than as expressly permitted
         by the Transaction Documents;

                  (c) Not less than one member of the Seller's Board of
         Directors (the "INDEPENDENT DIRECTOR") shall be an individual who is
         not a direct, indirect or beneficial stockholder, officer, director,
         employee, affiliate, associate or supplier of Greetings or any of its
         Affiliates. The certificate of incorporation of the Seller shall
         provide that: (i) the Seller's Board of Directors shall not approve, or
         take any other action to cause the filing of, a voluntary bankruptcy
         petition with respect to the Seller unless the Independent Director
         shall approve the taking of such action in writing before the taking of
         such action, and (ii) such provision cannot be amended without the
         prior written consent of the Independent Director;

                  (d) The Independent Director shall not at any time serve as a
         trustee in bankruptcy for the Seller, Greetings or any Affiliate
         thereof;

                  (e) Any employee, consultant or agent of the Seller or AGSC
         will be compensated from the Seller's or AGSC's (as appropriate) funds
         for services provided to the Seller or AGSC. Seller will not engage any
         agents other than its attorneys, auditors and other professionals and a
         servicer and any other agent contemplated by the Transaction Documents



                                     IV-10


         for the Receivables Pool, which servicer will be fully compensated for
         its services by payment of the Servicing Fee;

                  (f) The Seller will contract with the Servicer to perform for
         the Seller all operations required on a daily basis to service the
         Receivables Pool. The Seller will pay the Servicer the Servicing Fee
         pursuant to the Agreement. The Seller will not incur any material
         indirect or overhead expenses for items shared with Greetings (or any
         other Affiliate thereof) that are not reflected in the Servicing Fee.
         To the extent, if any, that the Seller, AGSC (or any Affiliate thereof)
         shares items of expenses not reflected in the Servicing Fee, such as
         legal, auditing and other professional services, such expenses will be
         allocated to the extent practical on the basis of actual use or the
         value of services rendered, and otherwise on a basis reasonably related
         to the actual use or the value of services rendered; it being
         understood that Greetings shall pay all expenses relating to the
         preparation, negotiation, execution and delivery of the Transaction
         Documents, including legal, agency and other fees;

                  (g) Neither the Seller's nor AGSC's operating expenses will be
         paid by Greetings or any other Affiliate thereof;

                  (h) All of the Seller's and AGSC's business correspondence and
         other communications shall be conducted in their respective names and
         on their own separate stationery;

                  (i) The Seller's and AGSC's books and records will be
         maintained separately from those of Greetings and any other Affiliate
         thereof;

                  (j) All financial statements of Greetings or any Affiliate
         thereof that are consolidated to include Seller or AGSC will contain
         detailed notes clearly stating that: (i) each is a special purpose
         corporation and a Subsidiary of Greetings, and (ii) the Originators
         have sold receivables and other related assets to AGSC (who has in turn
         sold receivables and related assets to Seller) or Seller that, in turn,
         has sold undivided interests therein to certain financial institutions
         and other entities;

                  (k) The Seller's and AGSC's assets will be maintained in a
         manner that facilitates their identification and segregation from those
         of Greetings or any Affiliate thereof;

                  (l) Each of the Seller and AGSC will strictly observe
         corporate formalities in its dealings with Greetings or any Affiliate
         thereof, and funds or other assets of the Seller and AGSC will not be
         commingled with those of Greetings or any Affiliate thereof except as
         permitted by the Agreement in connection with servicing the Pool
         Receivables. The Seller shall not maintain joint bank accounts or other
         depository accounts to which Greetings and/or any Affiliate thereof
         (other than Greetings in its capacity as the Servicer and any permitted
         Sub-Servicer) has independent access. Neither the Seller nor AGSC is
         named, and has entered into any agreement to be named, directly or
         indirectly, as a direct or contingent


                                     IV-11


         beneficiary or loss payee on any insurance policy with respect to any
         loss relating to the property of Greetings or any Subsidiary or other
         Affiliate of Greetings. Each of the Seller and AGSC will pay to the
         appropriate Affiliate their respective share of the marginal increase
         or, in the absence of such increase, the market amount of their
         respective share of the portion of the premium payable with respect to
         any insurance policy that covers the Seller and/or AGSC and such
         Affiliate;

                  (m) The Seller and AGSC will maintain arm's-length
         relationships with Greetings (and any Affiliate thereof). Any Person
         that renders or otherwise furnishes services to the Seller and/or AGSC
         will be compensated by the Seller or AGSC (as appropriate) at market
         rates for such services it renders or otherwise furnishes to the Seller
         or AGSC (as appropriate). Neither the Seller, AGSC nor Greetings will
         be or will hold itself out to be responsible for the debts of the other
         or the decisions or actions respecting the daily business and affairs
         of the other. The Seller, AGSC and Greetings will immediately correct
         any known misrepresentation with respect to the foregoing, and they
         will not operate or purport to operate as an integrated single economic
         unit with respect to each other or in their dealing with any other
         entity; and

                  (n) Greetings shall not pay the salaries of Seller's or AGSC's
         employees, if any.


                                     IV-12


                                    EXHIBIT V
                               TERMINATION EVENTS


         Each of the following shall be a "TERMINATION EVENT ":

         (a) (i) the Seller, Greetings, any Originator, AGSC or the Servicer
shall fail to perform or observe any term, covenant or agreement under the
Agreement or any other Transaction Document, (ii) the Seller or the Servicer
shall fail to make when due any payment or deposit to be made by it under the
Agreement and such failure shall continue unremedied for one Business Day or
(iii) Greetings shall resign as Servicer, and no successor Servicer reasonably
satisfactory to the Administrator and the Majority Purchasers shall have been
appointed; PROVIDED that at all times when Administrator is not permitted to
demand that the Servicer segregate Collections pursuant to SECTION 1.4(b), no
Termination Event or Unmatured Termination Event shall arise solely from the
Seller's or Servicer's (whether as Greetings or as Servicer) failure to comply
with the first sentence of SECTIONS 1(j) or 2(h) of Exhibit IV to this Agreement
(respectively) with respect to Collections received as wire transfers, unless
and until (A) during the period from the Closing Date until earlier of 120 days
following the Closing Date or Kinko's makes payments on Receivables owing from
it directly to a Lock-Box Account (the "INTERIM PERIOD '), the aggregate amount
of such Collections held by the Servicer shall exceed $300,000, (B) during the
Interim Period, the Servicer shall fail to transfer Collections received by it
during any calendar week no later than the second Business Day of the next
following calendar week, or (C) at all times after the Interim Period, the
Servicer shall fail to transfer Collections received by it at any time the
aggregate amount of such Collections during any calendar month and not
previously transferred shall exceed $100,000 for such calendar month; PROVIDED,
FURTHER, that with respect to the failure described in clause (a)(i)
hereinabove, if such failure may be cured without any potential or actual
detriment to any Purchaser, then the Seller, Greetings, any Originator, AGSC or
the Servicer, as applicable, shall have ten days from the earlier of (A) such
Person's knowledge of such failure and (B) notice to such Person of such failure
to so cure any such failure before a Termination Event shall occur, so long as
such Person is diligently attempting to effect such cure.

         (b) Greetings (or any Affiliate thereof) shall fail to transfer to any
successor Servicer when required any rights pursuant to the Agreement that
Greetings (or such Affiliate) then has as Servicer;

         (c) any representation or warranty made or deemed made by the Seller,
Greetings, AGSC or any Originator (or any of their respective officers) under or
in connection with the Agreement or any other Transaction Document, or any
information or report delivered by the Seller, Greetings, AGSC or any Originator
or the Servicer pursuant to the Agreement or any other Transaction Document,
shall prove to have been incorrect or untrue in any material respect when made
or deemed made or delivered; PROVIDED, HOWEVER, that if the representation and
warranty contained in SECTIONS 1(g), 1(n) or 1(v) of EXHIBIT III to this
Agreement shall prove to have been incorrect or



                                      V-1


untrue in any material respect when made or deemed made or delivered, such
breach shall not constitute a Termination Event if the Seller shall have
complied with its obligations with respect to such Receivable set forth in
SECTION 1.4(e); PROVIDED, FURTHER, that if such breach may be cured without any
potential or actual detriment to any Purchaser, then the Seller, Greetings, AGSC
or any Originator, as applicable, shall have ten days from the earlier of (A)
such Person's knowledge of such breach and (B) notice to such Person of such
breach to so cure any such breach before a Termination Event shall occur, so
long as such Person is diligently attempting to effect such cure.

         (d) the Seller or the Servicer shall fail to deliver the Information
Package pursuant to the Agreement, and such failure shall remain unremedied for
two Business Days;

         (e) the Agreement or any purchase or reinvestment pursuant to the
Agreement shall for any reason: (i) cease to create, or the Purchased Interest
shall for any reason cease to be, a valid and enforceable perfected undivided
percentage ownership or security interest to the extent of the Purchased
Interest in each Pool Receivable, the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim, or (ii) cease to create
with respect to the Pool Assets, or the interest of the Administrator (for the
benefit of the Purchasers) with respect to such Pool Assets shall cease to be, a
valid and enforceable first priority perfected security interest, free and clear
of any Adverse Claim;

         (f) the Seller, Greetings, AGSC or any Originator shall generally not
pay its debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the benefit
of creditors; or any proceeding shall be instituted by or against the Seller,
Greetings, AGSC or any Originator seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted against it
(but not instituted by it), either such proceeding shall remain undismissed or
unstayed for a period of 60 days, or any of the actions sought in such
proceeding (including the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or the Seller,
Greetings, AGSC or any Originator shall take any organizational action to
authorize any of the actions set forth above in this paragraph;

         (g) (i) (A) the Everyday Default Ratio shall exceed 5.0%, (B) the
Disputed Default Ratio shall exceed 3.0%, (C) the Seasonal Default Ratio shall
exceed 3.0%, (D) the Delinquency Ratio shall exceed 48% or (ii) the average for
three consecutive calendar months of (A) the Everyday Default Ratio shall exceed
4.0%, (B) the Disputed Default Ratio shall exceed 2.5%, (C) the Seasonal Default
Ratio shall exceed 2.5%, (D) the Delinquency Ratio shall exceed 44%, or (E) the
Dilution Ratio shall exceed 7%; or (iii) Days Sales Outstanding shall exceed
100.


                                      V-2


         (h) a Change in Control shall occur with respect to Seller, any
Originator, AGSC or Greetings;

         (i) at any time (i) the sum of (A) the Aggregate Investment plus (B)
the Total Reserves, exceeds (ii) the sum of (A) the Net Receivables Pool Balance
at such time plus (B) the Purchasers' Share of the amount of Collections then on
deposit in the Lock-Box Accounts (other than amounts set aside therein
representing Discount and Fees), and such circumstance shall not have been cured
within two Business Days;

         (j) (i) Greetings or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any of its Debt that is outstanding in a
principal amount of at least $10,000,000 in the aggregate when the same becomes
due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement, mortgage, indenture
or instrument relating to such Debt (and shall have not been waived); or (ii)
any other event shall occur or condition shall exist under any agreement,
mortgage, indenture or instrument relating to any such Debt and shall continue
after the applicable grace period, if any, specified in such agreement,
mortgage, indenture or instrument (and shall have not been waived), if, in
either case: (a) the effect of such non-payment, event or condition is to give
the applicable debtholders the right (whether acted upon or not) to accelerate
the maturity of such Debt, or (b) any such Debt shall be declared to be due and
payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to repay, redeem,
purchase or defease such Debt shall be required to be made, in each case before
the stated maturity thereof;

         (k) either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall file a notice of lien asserting a claim
or claims pursuant to the Internal Revenue Code with regard to any of the assets
of Seller, any Originator, AGSC, Greetings or any ERISA Affiliate and such lien
shall have been filed and not released within 10 days, or (iii) the Pension
Benefit Guaranty Corporation shall, or shall indicate its intention in writing
to the Seller, any Originator, AGSC, Greetings or any ERISA Affiliate to, either
file a notice of lien asserting a claim pursuant to ERISA with regard to any
assets of the Seller, any Originator, AGSC, Greetings or any ERISA Affiliate or
terminate any Benefit Plan that has unfunded benefit liabilities, or any steps
shall have been taken to terminate any Benefit Plan subject to Title IV of ERISA
so as to result in any liability in excess of $1,000,000 and such lien shall
have been filed and not released within 10 days;

         (l) one or more final judgments for the payment of money shall be
entered against the Seller or (ii) one or more final judgments for the payment
of money in an amount in excess of $20,000,000, individually or in the
aggregate, shall be entered against the Servicer on claims not covered by
insurance or as to which the insurance carrier has denied its responsibility,
and such judgment shall continue unsatisfied and in effect for sixty (60)
consecutive days without a stay of execution;


                                      V-3


         (m) the "Receivables Sale Termination Date" under and as defined in the
Receivables Sale Agreement shall occur under the Receivables Sale Agreement or
any Originator shall for any reason (other than as a result of or in connection
with its merger into, or its transfer of all or substantially all of its assets
or business to, another Originator) cease to transfer, or cease to have the
legal capacity to transfer, or otherwise be incapable of transferring
Receivables to AGSC under the Receivables Sale Agreement;

         (n) the "Purchase and Sale Termination Date" under and as defined in
the Purchase and Sale Agreement shall occur under the Purchase and Sale
Agreement or any Originator shall for any reason (other than as a result of or
in connection with its merger into, or its transfer of all or substantially all
of its assets or business to, another Originator) cease to transfer, or cease to
have the legal capacity to transfer, or otherwise be incapable of transferring
Receivables to AGSC under the Purchase and Sale Agreement;

         (o) the "Sale and Contribution Termination Date" under and as defined
in the Sale and Contribution Agreement shall occur under the Sale and
Contribution Agreement or AGSC or any Originator shall for any reason (other
than as a result of or in connection with its merger into, or its transfer of
all or substantially all of its assets or business to, another Originator) cease
to transfer, or cease to have the legal capacity to transfer, or otherwise be
incapable of transferring Receivables to the Seller under the Sale and
Contribution Agreement;

         (p) Moody's or Standard & Poor's shall request any amendment,
supplement or other modification of the Agreement or any other Transaction
Document which is not made within 10 Business Days after the applicable
Purchaser Agent has provided notice thereof to the parties hereto; or

         (q) the amount of dilutions recorded on any Information Package (i)
with respect to Receivables originated by any Originator other than Plus Mark,
Inc., for any of (a) seasonal returns, (b) advertising allowances or (c) volume
rebates or (ii) with respect to Receivables originated by Plus Mark, Inc., for
any of the Plus Mark, Inc. specific factors, exceeds the reserves or liabilities
reported on the immediately prior Information Package related to such dilution
category.



                                       V-4


                                   SCHEDULE I
                          CREDIT AND COLLECTION POLICY























































                                  Schedule I-1



                                   SCHEDULE II
                      LOCK-BOX BANKS AND LOCK-BOX ACCOUNTS





        Lock-Box Bank              Lock-Box                    Account
        -------------              --------                    -------















































                                  Schedule II-1


                                  SCHEDULE III
                                   TRADE NAMES






Organizational Name                    Trade Names / Fictitious Names
- -------------------                    ------------------------------














































                                 Schedule III-1



                                                                         ANNEX A
                                               TO RECEIVABLES PURCHASE AGREEMENT



                           FORM OF INFORMATION PACKAGE














































                                    Annex A-1



                                                                         ANNEX B
                                               TO RECEIVABLES PURCHASE AGREEMENT



                             FORM OF PURCHASE NOTICE



















































                                    Annex B-1




                                                                         ANNEX C
                                               TO RECEIVABLES PURCHASE AGREEMENT



                          FORM OF ASSUMPTION AGREEMENT


















































                                    Annex C-1




                                                                         ANNEX D
                                               TO RECEIVABLES PURCHASE AGREEMENT



                           FORM OF TRANSFER SUPPLEMENT



















































                                    Annex D-1



                                                                         ANNEX E
                                               TO RECEIVABLES PURCHASE AGREEMENT



                             FORM OF PAYDOWN NOTICE



















































                                    Annex D-1

EX-10.II.A.I

                                                          Exhibit (10)(ii)(A)(i)

                            SHAREHOLDERS' AGREEMENT

         This SHAREHOLDERS' AGREEMENT (this "Agreement") dated as of
November 19, 1984 among the individuals, fiduciaries and charitable
organizations which have become signatories hereto as permitted herein (as
"Participating Shareholders" described in Section 1.3 hereof) and
American Greetings Corporation, an Ohio corporation (the "Corporation").

                              W I T N E S S E T H:
                              - - - - - - - - - -

         WHEREAS, the Participating Shareholders own of record or beneficially
(including as beneficial owners of certain voting trust certificates) Class B
Common Shares, par value $1 per share ("Class B Common Shares"), of the
Corporation; and

         WHEREAS, the Participating Shareholders desire to ensure the continued
independence of the Corporation by subjecting the Class B Common Shares now
owned or hereafter acquired by them to certain mutually agreeable limitations;
and

         WHEREAS, the Board of Directors of the Corporation has approved certain
transactions as a result of which the terms of the Class B Common Shares are
proposed to be modified to impose certain restrictions on the transfer of such
Shares;

         NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and other good and valuable consideration had and received, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, hereby
agree as follows:


                                                                               2

1.       Definitions.
         ------------

         1.1 The term "Family Member" shall mean Jacob Sapirstein, founder of
the Corporation, his lineal descendants by blood or by legal adoption prior to
age 18, spouses of such descendants, the lineal descendants of any such spouses,
the spouses of any such spouses' lineal descendants and trusts (including voting
trusts) exclusively for the benefit of any such persons. In applying the term
"exclusively" for purposes of this Agreement, the interest of any Charity that
is a Participating Shareholder (or does not fail to become a Participating
Shareholder at the time provided in Section 1.3 hereof) or any contingent trust
interest having at the time of transfer an actuarial value (under valuation
tables then used for federal gift tax purposes for gifts between private
individuals) of not more than 5 percent of the value of the assets of the trust
or an unexercised power of appointment shall be ignored.

         1.2 The term "Charity" shall mean an organization contributions to
which are deductible for federal income, estate or gift tax purposes.

         1.3 The term "Participating Shareholder" shall mean any Family Member
or Charity which has signed or hereafter signs a counterpart of this Agreement,
delivered a copy thereof to all other Participating Shareholders (or to the
Depository (as defined in Section 7.1 hereof)) and is bound


                                                                               3


by the terms hereof. No Participating Shareholder shall be deemed to forfeit
such status upon divorce, remarriage or adoption. In the case of a trust (other
than a voting trust, which is governed by Section 6 hereof) exclusively for the
benefit of a Family Member or Members, the Trustee and all adult beneficiaries
having a current trust interest (as well as all ascertainable Charitable
beneficiaries having a current trust interest) shall sign this Agreement as
Participating Shareholders if the trust is to be considered a Participating
Shareholder. During his lifetime, the donor of a trust that is revocable by the
donor alone shall be considered the only beneficiary thereof so long as such
trust is so revocable. At such time, if any, as the trust shall have an adult
beneficiary having a current trust interest or an ascertainable Charitable
beneficiary having a current trust interest who or which shall fail or be unable
to sign this Agreement for a period of 30 days following notification to such
beneficiary of the terms of this Agreement by any Participating Shareholders or
by the Depository, the trust shall thereupon cease to be a Participating
Shareholder and Section 3 of this Agreement shall then apply as if the Class B
Common Shares held by the trust were then to be transferred. In the case of a
minor or incompetent beneficiary, the Trustee (or a Custodian under the
applicable Uniform Gifts to Minors Act or the practical equivalent thereof in
the case of Class B Common


                                                                               4



Shares held under such Act or equivalent) and a parent (in the case of a minor)
or legal guardian (in the case of a minor or an incompetent) of the beneficiary
shall sign on his behalf if the trust (or custodial arrangement) is to be
considered a Participating Shareholder. In the case of a minor or incompetent
beneficiary, the Trustee or custodian shall in any event be obligated to secure
the beneficiary's legally binding signature (or that of his legal guardian) to
this Agreement prior to an actual distribution of Class B Common Shares, and if
such signature is not so secured such beneficiary shall not be considered a
Participating Shareholder and such distribution shall be subject to Section 3 of
this Agreement.

2.       Permitted Transfers.
         --------------------

         2.1 Any Participating Shareholder may at any time sell, give or
otherwise transfer Class B Common Shares or any interest therein to any Family
Member who is a Participating Shareholder. Any Participating Shareholder may at
any time give Class B Common Shares or any interest therein to a Charity that is
a Participating Shareholder. Any Class B Common Shares so transferred shall
remain subject to this Agreement in the hands of the transferee.

         2.2 Any Participating Shareholder may pledge Class B Common Shares as
security for a loan if the pledgee (being competent to do so) agrees in writing
to be bound by this Agreement and to receive such Class B Common Shares subject




                                                                             5

to this Agreement and, in the event of default on such loan and levy upon the
collateral, to offer such Class B Common Shares to the Participating
Shareholders other than the pledgor in accordance with the procedures specified
in Section 4 hereof, and to convert into Class A Common Shares, par value $1 per
share ("Class A Common Shares"), of the Corporation in accordance with the
Articles of Incorporation of the Corporation any Class B Common Shares not
accepted by such Participating Shareholders.

3.       Transfers for Which First Refusal Procedure is
         ----------------------------------------------
         Required.
         ---------

         3.1 Any Participating Shareholder who desires to sell, give or
otherwise transfer Class B Common Shares (or the Class A Common Shares into
which they are convertible) or any interest therein otherwise than as provided
in Section 2 hereof shall first offer to sell or exchange such Class B Common
Shares to or with the other Participating Shareholders and the Corporation. Such
offer shall be made, and may be accepted, in accordance with the procedures
specified in Section 4 hereof. During a period of 30 days following the last to
expire of the rights of the other Participating Shareholders and the
Corporation, the Participating Shareholder desiring to transfer such Shares or
any interest therein shall have the right, in accordance with the Articles of
Incorporation of the Corporation, to convert any Class B Common Shares not
acquired by any other Participating Shareholder or the



                                                                             6

Corporation into Class A Common Shares and may transfer such Class A Common
Shares or any interest therein free of the limitations provided for herein, but
only to the person to whom such transfer was originally proposed to be made and
only on terms (except for price in the case of a gift) no more favorable to such
person than those upon which the Class B Common Shares were offered to the other
Participating Shareholders. The Participating Shareholder desiring to transfer
shares may not transfer the Class B Common Shares not acquired by any other
Participating Shareholder without first converting them into Class A Common
Shares, and if such conversion is not accomplished within such 30-day period,
such Class B Common Shares shall continue to be subject to the provisions of
this Agreement.

         3.2 Any Participating Shareholder who desires to convert Class B Common
Shares to Class A Common Shares (except as required by Section 3.1 or 3.3
hereof) in accordance with the Articles of Incorporation of the Corporation
shall first offer to transfer such Class B Common Shares to the other
Participating Shareholders and the Corporation in accordance with the procedures
specified in Section 4 hereof. During a period of 30 days following the last to
expire of the rights of the other Participating Shareholders and the
Corporation, the Participating Shareholder desiring to convert Class B Common
Shares may do so, but only to the extent such Class B Common Shares


                                                                               7


were not accepted by any other Participating Shareholder or the Corporation, and
the Class A Common Shares into which such Class B Common Shares are converted
shall be free from the limitations provided for herein.

                  3.3 Upon the death of a Participating Shareholder, any Class B
Common Shares then owned by such Participating Shareholder may be transferred in
accordance with Section 2.1 hereof to any other Participating Shareholder by the
personal representative of the estate of such deceased Participating Shareholder
(or by the trustee of any trust or by any other person (e.g., the trustee of a
profit sharing trust) by reason of the death of such deceased Participating
Shareholder). To the extent that any such personal representative, trustee or
other person is required or desires to transfer any Class B Common Shares (or
the Class A Common Shares into which they are convertible) owned by a deceased
Participating Shareholder, or any interest therein, otherwise than as permitted
by Section 2.1 hereof, such personal representative, trustee or other person
shall offer such Class B Common Shares to the other Participating Shareholders
and the Corporation in accordance with the procedures specified in Section 4
hereof. In the case of any Class B Common Shares that are so offered to the
other Participating Shareholders and the Corporation, upon completion of the
procedures specified in Section 4 hereof, those Class B Common Shares not
accepted


                                                                               8

by any other Participating Shareholder or the Corporation shall, in accordance
with the Articles of Incorporation of the Corporation, be converted into Class A
Common Shares, and thereafter such Class A Common Shares may be transferred to
the designated recipient thereof, free of the limitations provided for herein.
Each of the Participating Shareholders who is a natural person shall take all
steps appropriate to ensure that testamentary documents providing for
implementation upon such Participating Shareholder's death of the foregoing
procedures are in effect at all times after the date hereof.

4.       First Refusal Procedures.
         -------------------------

         4.1 A Participating Shareholder, the personal representative of the
estate of a deceased Participating Shareholder, the trustee of any trust
agreement of which a deceased Participating Shareholder is donor (or any other
person in possession of Class B Common Shares which are to pass by reason of the
death of a Participating Shareholder), or a pledgee who is required by Section
2.2 or Section 3 hereof to offer Class B Common Shares to other Participating
Shareholders and the Corporation (an "Offeror") shall deliver to each of the
other participating Shareholders, the Corporation and the Depository a written
notice, dated the date on which it is sent, containing the following
information:


                                                                               9

                  (a)  the number of Class B Common Shares proposed
       to be transferred (after conversion) or converted (the "Offered Shares");

                  (b)  whether the Offeror proposes to transfer under Section
       3.1 hereof or convert under Section 3.2 hereof the Offered Shares;

                  (c)  if the Offeror proposes to transfer the Offered Shares
       under Section 3.1 hereof, the name and address of each proposed
       transferee and the price per share, if any, payable to the Offeror upon
       such transfer;

                  (d)  the date on which the Offeror desires to carry out the
       proposed transfer or conversion of the Offered Shares, which shall be
       consistent with the procedures provided for in this Agreement
       (generally such date should be not less than 20 nor more than 50
       business days after the date of such notice).

If the Offeror proposes to make a transfer under Section 3.1 hereof, such
notice shall be accompanied by written evidence that any price per share payable
to the Offeror as specified in such notice is being offered for the Offered
Shares in good faith by the proposed transferee.

         4.2      The other Participating Shareholders shall thereupon have the
right and option to acquire the Offered Shares, or any of them, for the
consideration specified in Section 4.3 hereof. Such Participating Shareholders
may


                                                                              10

exercise such right, at any time before the expiration of 7 business days after
such written notice and accompanying evidence (if applicable) have been given to
the last of such Participating Shareholders and the Corporation, in proportion
to the respective holdings of Class B Common Shares of each such Participating
Shareholder compared to the aggregate holdings of all such Participating
Shareholders; and if any such Participating Shareholder entitled thereto fails
to exercise such Participating Shareholder's right to acquire the Offered Shares
to its full extent, then such right may be exercised (to the extent that it has
not been exercised by such Participating Shareholder) within a further period of
5 business days by the other such Participating Shareholders, in whatever
proportion they may agree upon and, if they cannot agree, in proportion to the
respective holdings of each compared to the aggregate holdings of all of them;
and if the Participating Shareholders fail to exercise their rights to acquire
the Offered Shares to their full extent, then such rights may be exercised (to
the extent of any Offered Shares remaining) within a further period of 3
business days by the Corporation. The right to acquire Offered Shares may be
exercised by a Participating Shareholder or by the Corporation by the delivery
of written notice to the Offeror and the Depository, dated the date it is sent,
specifying the number of Class B Common Shares such




                                                                              11

Participating Shareholder or the Corporation will acquire and the consideration
such Participating Shareholder or the Corporation will deliver in accordance
with Section 4.3 hereof. In applying the term "holdings" in this Section 4.2 in
the case of Class B Common Shares owned by a trust (other than a voting trust),
the trust shall be considered to own the holding; except that, if the trustee
fails to any extent to exercise a right to acquire Offered Shares, beneficiaries
of the trust who are Participating Shareholders owning more than 50% of either
the then current income or the remainder interest in the trust, and desiring to
exercise such right shall be considered to own the holding in such proportions
as such beneficiaries shall agree upon.

         4.3 Class B Common Shares accepted by a Participating Shareholder or
the Corporation in accordance with Section 4.2 hereof may be acquired, at the
election of such purchasing Participating Shareholder or the Corporation, as the
case may be, for cash, Class A Common Shares or a combination of such
considerations as follows:

          (a) to the extent such purchasing Participating Shareholder or the
     Corporation elects that the price be paid in Class A Common Shares, the
     number of Class A Common Shares that shall be delivered in exchange shall
     be equal to the number of Class B Common Shares to be exchanged,



                                                                              12

          (b) to the extent such purchasing Participating Shareholder or the
     Corporation elects that the price shall be paid in cash, the cash price for
     Class B Common Shares shall be equal to the average of the last sale price
     (if available) or, if not, the midpoints of the bid and asked prices, of
     the Class A Common Shares in the NASDAQ National Market (or in the
     principal national securities exchange or market on which the Class A
     Common Shares may then be traded) on the 5 trading days preceding the date
     of the Offeror's notice sent pursuant to Section 4.1 hereof, as reported
     in the Wall Street Journal (or, if such periodical is not then published,
     the most comparable periodical then being published) or, in the case of a
     transfer under Section 3.1 hereof, such higher price as may have been
     specified in such notice.

         4.4 The sale or exchange contemplated by these procedures shall be
closed at the principal corporate trust office of the Depository, by delivery of
a certified, cashier's or bank check for the amount of any cash payable and the
delivery of certificates representing the Class B Common Shares and any Class A
Common Shares (endorsed in blank with signature guaranteed), on the day which is
19 business days after the date of the notice given pursuant to Section 4.1
hereof or on such later day as all



                                                                              13

applicable legal requirements pertaining to such sale or exchange shall have
been met.

5.       Changes in Class B Common Shares.
         ---------------------------------

         5.1 In the event of any change in the terms of the Class B Common
Shares, or any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the Corporation, or
any merger, reorganization, consolidation or other corporate transaction having
an effect similar to the foregoing, the provisions of this Agreement shall
continue to apply to the Class B Shares of the Corporation or any securities of
any corporation issued in lieu thereof or with respect thereto subject, however,
to such equitable adjustment, if any, as may be necessary to reflect any change
in the relative rights and privileges of the Class A and Class B Common Shares.

         5.2 Without limiting the generality of Section 5.1, the Participating
Shareholders acknowledge that the Articles of Incorporation of the Corporation
may be modified (by amendment or merger) to impose restrictions on transfer and
conversion of the Class B Common Shares in terms substantially similar to those
set forth in Exhibit A to this Agreement. The Participating Shareholders shall
vote the Class A Common Shares and Class B Common Shares held by them (as voting
trustee or otherwise) in favor of such modification, and the provisions of this
Agreement



                                                                              14

shall continue to apply without adjustment to the Class B Common Shares of the
Corporation (or any shares of any corporation issued in lieu thereof or with
respect thereto) owned by them if such modification becomes effective.

6.       Reconciliation With Voting Trusts.
         ----------------------------------

         6.1 Certain of the Participating Shareholders are now holders or
beneficial owners of voting trust certificates issued pursuant to a Voting Trust
Agreement dated December 9, 1976. The parties to such agreement hereby agree to
terminate such agreement effective upon the taking effect of provisions of the
Articles of Incorporation of the Corporation substantially to the effect set
forth in Exhibit A hereto. Unless and until such provisions become effective,
such agreement shall remain in full force and effect.

         6.2 Certain of the Participating Shareholders are now holders or
beneficial owners of voting trust certificates issued pursuant to a Voting Trust
Agreement dated July 22, 1984 between Irving I. Stone, Judith S. Weiss and Morry
Weiss. Such agreement shall not be affected by this Agreement and shall remain
in full force and effect.

         6.3 For purposes of this Agreement, voting trust certificates issued
pursuant to the voting trust agreements referred to in Sections 6.1 and 6.2
shall be treated as certificates for Class B Common Shares, and the Class B
Common Shares represented thereby shall be included in the



                                                                              15

Class B Common Shares to which this Agreement relates, so that any Participating
Shareholder (or the personal representative of the estate of a deceased
Participating Shareholder, the trustee of any trust agreement or any other
person in possession of Class B Common Shares which are to pass by reason of the
death of a Participating Shareholder) who desires to transfer any of such voting
trust certificates (other than as permitted by Section 2.1) or to convert into
Class A Common Shares any of the Class B Common Shares represented thereby shall
do so only after compliance with the procedures set forth herein. Any notices
required to be given pursuant to Section 4.1 and 4.2 hereof by or to an Offeror
who is a holder of any of such voting trust certificates shall be given
simultaneously, and the periods specified in such Sections shall run
concurrently, with the corresponding notices and periods provided for in Section
6 of each such voting trust agreement unless the group of participating
Shareholders to whom an offering is required to be made under this Agreement
differs from the group to whom such offer is required to be made under either
such voting trust agreement, in which case the offering procedures required by
this Agreement shall commence only upon completion of the procedures thereunder
and shall apply only to Class B Common Shares not theretofore accepted by a
Participating



                                                                              16

Shareholder pursuant to the procedures applicable under such voting trust
agreement.

         6.4 Nothing herein shall prevent any of the Participating Shareholders
from depositing Class B Common Shares pursuant to the above-described voting
trust agreements or pursuant to such other voting trust agreements as they may
wish to enter into which are consistent with the terms of this Agreement and to
which Class B Common Shares are permitted to be transferred pursuant to Section
2.1 of this Agreement.

7.       Compliance Provisions.
         ----------------------

         7.1 Subject to the proviso stated below in this Section 7.1,
certificates representing the Class B Common Shares owned of record or
beneficially by the Participating Shareholders at the date of this Agreement
have been deposited with AmeriTrust Company National Association (the
"Depository"), and there has been marked on the face or the back of each such
certificate a legend to the following effect:

          The Class B Common Shares, par value $1 per share, of American
     Greeting Corporation (the "Corporation") represented by this Certificate
     are subject to a Shareholders' Agreement dated as of November 19, 1984 and
     originally entered into by the Corporation and Irving I. Stone, Morris S.
     Stone, Harry H. Stone, Morry Weiss and other parties. Pursuant to such
     Agreement, such Shares may not be sold, given or otherwise transferred or
     converted into Class A Common Shares, par value $1 per share, of the
     Corporation (except for transfers to certain persons specified in such
     Agreement) except upon compliance with certain procedures,


                                                                              17

     including, without limitation, offer of such Shares to certain other
     shareholders of the Corporation and the Corporation and, in certain
     situations, conversion into Class A Common Shares. The Corporation will
     mail to the holder hereof a copy of such Agreement without charge within
     five days after receipt of a written request therefor.

Each Participating Shareholder shall, to the extent legally able to do so,
forthwith upon becoming a Participating Shareholder by signing this Agreement
and thereafter upon becoming the record or beneficial owner of any other Class B
Common Shares, cause the certificates representing the same to be deposited with
the Depository for application of such legend, and the certificates representing
all Class B Common Shares now or hereafter owned (of record or beneficially) by
any of the Participating Shareholders shall continue to bear such legend and be
held by the Depository until such Class B Common Shares are converted into Class
A Common Shares in accordance with this Agreement or, if earlier, the
termination of this Agreement in accordance with the terms hereof; PROVIDED,
HOWEVER, that any Participating Shareholder may cause possession of such
certificates to be given to or retained by any pledgee to be held as security in
accordance with Section 2.2 hereof upon delivery to the Depository of the
written agreement of the pledgee referred to in such Section; and PROVIDED
FURTHER, that any Participating Shareholder owning any Class B Common Shares
held by a pledgee at the time such Participating Shareholder becomes a party to
this Agreement need only use reasonable


                                                                              18

     efforts to cause such legend to be applied and to cause such pledgee to
     agree in writing to be bound by the terms of this Agreement, and if such
     Participating Shareholder is unable to cause such results the certificates
     representing such Class B Common Shares may be retained by such pledgee
     without his signing this Agreement and without such legend being applied.
     Each Participating Shareholder shall at all times keep the Depository
     advised of the number of Class B Common Shares such Participating
     Shareholder owns.

                  7.2 The further rights and duties of the Depository shall be
     governed by the terms and conditions of escrow contained in Exhibit B
     attached hereto.

         8.       Amendment and Termination.
                  --------------------------

         This Agreement may be amended or the term thereof extended only by a
written instrument referring specifically to this Agreement and signed by all of
the Participating Shareholders, provided, however, that

         (a) any amendment to this Agreement for the purpose of including
additional persons among those to whom transfer of Class B Common Shares may be
made pursuant to Section 2.1 hereof,

         (b) any amendment to change the Depository or to change the terms and
conditions of escrow set forth in Exhibit B hereto,

         (c) any other amendment (not extending the term hereof) if no
Participating Shareholder files written objection thereto with the Depository
within 30 days after notice thereof (which notice shall include a statement that
Participating



                                                                              19

Shareholders have a right to file a written objection) is given
to all Participating Shareholders, and

                  (d)  any instrument of termination,
need only be signed by Participating Shareholders owning beneficially
75% or more of the Class B Common Shares owned by all of the Participating
Shareholders.  This Agreement, unless extended in accordance with the
immediately preceding sentence, shall terminate on December 31, 2014.  This
Agreement, moreover, shall terminate in any event 21 years after the death of
the last to die of the lineal descendants of Jacob Sapirstein living on the
date of this Agreement.

9.       Miscellaneous.
         -------------

                  9.1 Notwithstanding any provision hereof to the contrary,
Class B Common Shares may be sold to the Corporation at any time it may offer to
purchase the same, free of the limitations provided for in this Agreement.

                  9.2  For purposes of this Agreement, ownership of Class
B Common Shares shall include ownership through the Employees' Retirement Profit
Sharing Plan of the Corporation, but only through the Common Stock Fund held
thereunder, and each separate account in which such shares are held shall be
considered a separate trust; provided, however, that notwithstanding Section 7.1
hereof, certificates representing Class B Common Shares held by the Trustee for
the benefit of participants in such plan shall remain in the custody of such
Trustee.



                                                                           20

         9.3 As used herein, the term "spouse" includes a widow or a widower.

         9.4 As used herein, the term "current trust interest" means the
interest of any beneficiary of a trust to whom interest or principal is
currently distributable either in the discretion of the trustee or otherwise.

         9.5 As used herein, the term "business day" means any day other than
Saturday, Sunday or a federal holiday, and shall consist of the time period from
12:01 a.m. through 12:00 midnight, Eastern Standard Time. In computing any time
period for purposes of this Agreement, the date of the event which begins the
running of such time period shall be included except that if such event occurs
on other than a business day such period shall begin to run on and shall include
the first business day thereafter.

         9.6 As used herein, the term "personal representative" means the
executor, administrator or other personal representative of the estate of a
deceased Participating Shareholder.

         9.7 All notices and other communications required or permitted to be
given under this Agreement shall be in writing and shall be deemed given when
delivered in hand or 72 hours after being deposited in a United States Post
Office, postage prepaid, registered or certified mail, and addressed to the
addressee at the address corresponding to such addressee's signature below, or
to such other address



                                                                              21

as may have been specified by such addressee to the Depository.

         9.8  This Agreement shall inure to the benefit of and be binding
upon the Participating Shareholders and the Corporation, any pledgee who agrees
to be bound hereby pursuant to Section 2.2 hereof and their respective
successors, heirs, personal representatives, legatees and assigns. All
references herein to the Corporation shall include any other corporation to
which this Agreement may be assigned, by operation of law or otherwise, in
connection with any merger, reorganization, consolidation or other corporate
transaction having an effect similar to the foregoing, and all references herein
to the Articles of Incorporation of the Corporation shall refer to the Charter
of any such other corporation, however denominated.

         9.9 If any provision of this Agreement shall be found unenforceable by
any court of competent jurisdiction to any extent, such holding shall not
invalidate or render unenforceable such provision to any greater extent or to
render unenforceable or invalidate any other provision hereof.

         9.10 This Agreement may be executed in several counterparts, each of
which shall be an original and all of which shall constitute but one and the
same instrument, without production of the others.



                                                                              22

         9.11 This Agreement shall be construed in accordance with the
internal substantive laws of the State of Ohio or such other jurisdiction as may
at the time of construction be the jurisdiction of incorporation of the issuer
of the Class B Common Shares.

         IN WITNESS WHEREOF, the Participating Shareholders and the Corporation
have executed this Agreement or caused this Agreement to be executed in their
respective names, as the case may be, all as of the date and year first above
written.

  Signature                          Address
  ---------                          -------

/s/ Irving I. Stone             10500 American Road
- ------------------------        Cleveland, Ohio  44144
  Irving I. Stone

/s/ Morris S. Stone             10500 American Road
- ------------------------        Cleveland, Ohio  44144
  Morris S. Stone

/s/ Harry  H. Stone             1540 Leader Building
- ------------------------        Cleveland, Ohio  44114
  Harry H. Stone

/s/ Morry Weiss                 10500 American Road
- ------------------------        Cleveland, Ohio  44144
  Morry Weiss

/s/ Judith S. Weiss             4500 University Parkway
- ------------------------        University Heights, Ohio  44118
  Judith S. Weiss

/s/ Judith S. Weiss             4500 University Parkway
- ------------------------        University Heights, Ohio  44118
Judith S. Weiss,
as Trustee under Revocable
Trust Agreement originally
dated April 21, 1947 for
the benefit of
Irving I. Stone



                                                                              23

AMERITRUST COMPANY                             Corporate Trust Division
NATIONAL ASSOCIATION,                          900 Euclid Avenue
as Trustee under                               Cleveland, Ohio  44101
Trust Agreement
dated February 16,
1968 for the benefit
of Morris S. Stone

By /s/                     , VP
  --------------------------------
  Title:  Vice President

And /s/
   -------------------------------
   Title:   Trust Officer

/s/ Harry H. Stone                             1540 Leader Building
- -----------------------------------            Cleveland, Ohio  44114
/s/ Douglas B. Rose
- -----------------------------------
Harry H. Stone and
Douglas B. Rose,
as successor Trustees
under Trust Agreement
dated April 21, 1947
for the benefit of
Harry S. Stone


/s/ Irving I. Stone
- -----------------------------------
Irving I. Stone, as Trustee
under the Voting Trust Agreement
referred to in Sections 6.1 and
6.2 hereof

/s/ Morris S. Stone
- -----------------------------------
Morris S. Stone, as Trustee
under the Voting Trust Agreement
referred to in Section 6.1 hereof


/s/ Morry Weiss
- -----------------------------------
Morry Weiss as Trustee
under the Voting Trust Agreement
referred to in Section 6.2 hereof


/s/ Judith S. Weiss
- -----------------------------------
Judith S. Weiss, as Trustee
under the Voting Trust Agreement
referred to in Section 6.2 hereof


                                                                              24
AMERICAN GREETINGS               10500 American Road
                                 Cleveland, Ohio 44144
By  /s/ Morry Weiss
  ------------------------------
  Title:  President




                            SHAREHOLDERS' AGREEMENT
                            -----------------------

                           COUNTERPART SIGNATURE PAGE
                           --------------------------

         The undersigned, intending to become a party to and to be bound by the
Shareholders' Agreement dated as of November 19, 1984 (the "Agreement")
pertaining to Class B Common Shares, par value $1 per share, of American
Greetings Corporation, an Ohio Corporation, hereby executes this counterpart
signature page of the Agreement as of the 19th day of November, 1984.




                                                  /s/ Jacob Sapirstein
                                                  -----------------------------
                                                  JACOB SAPIRSTEIN, for himself
                                                  individually and as Trustee
                                                  under the Voting Trust
                                                  Agreement referred to in
                                                  Section 6.1 of the Agreement






         AmeriTrust Company National Association, by its duly authorized
officers, hereby acknowledges receipt of an executed counterpart of the
foregoing Shareholders' Agreement and agrees to act as Depository thereunder.

                                      AMERITRUST COMPANY NATIONAL
                                      ASSOCIATION, as Depository

                                      By  /s/
                                        ---------------------------
                                        Title:   Vice President

                                      And  /s/
                                          --------------------------
                                          Title:   Trust Officer

                                      Address: Corporate Trust Division
                                               900 Euclid Avenue
                                               Cleveland, Ohio  44101




                                   EXHIBIT A
                                   ---------

         FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is 54,500,000, consisting of 50,000,000 shares of Class
A Common Stock, par value $1 per share ("Class A Common Stock"), and 4,500,000
shares of Class B Common Stock, par value $1 per share ("Class B Common Stock").

         The powers, rights, privileges, qualifications, limitations and
restrictions of each class of common stock are as follows:

         1. Each share of Class A Common Stock shall be entitled to one vote
upon all matters presented to stockholders. Each share of Class B Common Stock
shall be entitled to ten votes upon all matters presented to stockholders. Any
proposal to amend this Certificate of Incorporation to increase the authorized
number of shares of Class A Common Stock or the authorized number of shares of
Class B Common Stock shall require for its adoption the affirmative vote of the
holders of at least two-thirds of the then outstanding shares of Class A Common
Stock, voting as a class, and the affirmative vote of at least two-thirds of the
then outstanding shares of Class B Common Stock, voting as a class.

         2. (a) Subject to and upon compliance with the provisions of this
Article FOURTH, the shares of Class B Common Stock shall be convertible at the
option of the holders thereof into shares of Class A Common Stock on the basis
of one share of Class A Common Stock for each share of Class B Common Stock so
converted.

         (b) The holders of shares of Class B Common Stock may exercise the
conversion privilege in respect thereof by delivering to any Transfer Agent of
the Class B Common Stock (i) the certificate for the shares of Class B Common
Stock to be converted and (ii) written notice that the holder elects to convert
such shares and stating the name or names (with address) in which the
certificate for the shares of Class A Common Stock is to be issued. Conversion
shall be deemed to have been effected on the date when such delivery is made,
and such date is referred to herein as the "conversion date." On the conversion
date or as promptly thereafter as practicable the Corporation shall issue and
deliver to the holder of the shares of Class B Common Stock surrendered for
conversion, or on his written order, a certificate for the number of full shares
of Class A Common Stock issuable upon the conversion of such shares of Class B
Common Stock. The person in whose name the




                                                                               2

stock certificate is to be issued shall be deemed to have become a holder of
shares of Class A Common Stock of record on the conversion date. The Corporation
hereby reserves and shall at all times reserve and keep available, out of its
authorized and unissued Class A Common Stock, for the purpose of effecting the
conversion of the Class B Common Stock, such number of its duly authorized
shares of Class A Common Stock as shall from time to time be sufficient to
effect the conversion of all outstanding shares of Class B Common Stock. Shares
of Class B Common Stock which are converted into shares of Class A Common Stock
as provided in this Article FOURTH shall not be reissued.

         3. (a) No person (other than the Corporation) holding shares of Class B
Common Stock (herein referred to as a "Class B Holder") may transfer, and the
Corporation shall not register the transfer of, shares of Class B Common Stock,
whether by sale, assignment, gift, bequest, appointment or otherwise, except to
the Corporation or a Permitted Transferee of such Class B Holder.

            (b) For purposes of this paragraph (3), the term
"Permitted Transferee" shall have the following meaning:

          (i) in the case of a Class B Holder who is a natural person holding
     record and beneficial ownership of the shares of Class B Common Stock in
     question, "Permitted Transferee" means:

          (A) a grandparent of such Class B Holder, (B) a lineal descendant of a
          grandparent of such Class B Holder, (C) a spouse of a lineal
          descendant of a grandparent of such Class B Holder, (D) a lineal
          descendant of any spouse of a lineal descendent of a grandparent of
          such Class B Holder or the spouse of any such spouse's lineal
          descendant, (E) a gratuitous transferee that is an organization
          contributions to which are deductible for federal income, estate or
          gift tax purposes (any such gratuitous transferee being herein
          referred to as a "Charitable Organization"), and (F) the trustee of a
          trust (including, without limitation, a voting trust) for the
          exclusive benefit of one or more of the foregoing if such trust by its
          terms prohibits transfer of shares of Class B Common Stock to persons
          other than Permitted Transferees referred to in the foregoing
          subclauses of this clause (i);

          (ii) in the case of a Class B Holder holding the shares of Class B
     Common Stock in question as trustee pursuant to a trust other than a trust
     described in clause (iii) below, "Permitted Transferee" means (A) the
     person


                                                                               3

     who established such trust, and (B) a Permitted Transferee of such person
     determined pursuant to clause (i) above;

          (iii) in the case of a Class B Holder holding the shares of Class B
     Common Stock in question as trustee pursuant to a trust which was
     irrevocable on the record date, for determining the persons to whom the
     Class B Common Stock is first distributed by the Corporation, "Permitted
     Transferee" means any person to whom or for whose benefit principal may be
     distributed either during or at the end of the term of such trust whether
     by power of appointment or otherwise;

          (iv) in the case of a Class B Holder holding record (but not
     beneficial) ownership of the shares of Class B Common Stock in question as
     nominee for the person who was the beneficial owner thereof on the record
     date, "Permitted Transferee" means such beneficial owner and any Permitted
     Transferee of such beneficial owner determined pursuant to clause (i),
     (ii), (iii), (v) or (vi) hereof, as the case may be;

          (v) in the case of a Class B Holder which is a partnership holding
     record and beneficial ownership of the shares of Class B Common Stock in
     question, "Permitted Transferee" means any partner of such partnership;

          (vi) in the case of a Class B Holder which is a corporation (other
     than a Charitable Organization described in subclause (E) of clause (i)
     above) holding record and beneficial ownership of the shares of Class B
     Common Stock in question, "Permitted Transferee" means any stockholder of
     such corporation receiving shares of Class B Common Stock through a
     dividend or redemption or through a distribution made upon liquidation of
     such corporation, and the survivor of a merger or consolidation of such
     corporation; and

          (vii) in the case of a Class B Holder which is the estate of a
     deceased Class B Holder, or which is the estate of a bankrupt or insolvent
     Class B Holder, and provided such deceased, bankrupt or insolvent Class B
     Holder, as the case may be, held record and beneficial ownership of the
     shares of Class B Common Stock in question, "Permitted Transferee" means a
     Permitted Transferee of such deceased, bankrupt or insolvent Class B Holder
     as determined pursuant to clause (i), (v) or (vi) above, as the case may
     be.

              (c) Notwithstanding anything to the contrary set forth herein, any
Class B Holder may pledge such Holder's shares of Class B Common Stock to a
pledgee pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee, provided that such shares


                                                                               4

shall not be transferred to or registered in the name of the pledgee and shall
remain subject to the provisions of this paragraph 3. In the event of
foreclosure or other similar action by the pledgee, such pledged shares of Class
B Common Stock may only be transferred to a Permitted Transferee of the pledgor
or converted into shares of Class A Common Stock, as the pledgee may elect.

              (d) For purposes of this paragraph 3:

          (i) the relationship of any person that is derived by or through legal
     adoption prior to age 18 shall be considered a natural one;

          (ii) the term "spouse" shall include a widow or widower;

          (iii) each grandparent of any joint owner of particular shares of
     Class B Common Stock shall be considered a grandparent of all joint owners
     of such shares;

          (iv) a minor for whom shares of Class B Common Stock are held pursuant
     to a Uniform Gifts to Minors Act or similar law shall be considered a Class
     B Holder of such shares;

          (v) in applying the term "exclusive benefit," a contingent trust
     interest having at the time of transfer an actuarial value (under actuarial
     tables then used for federal gift tax purposes for gifts between private
     individuals) of not more than five percent of the value of the assets of
     the trust shall be ignored; and

          (vi) unless otherwise specified, the term "person" means both natural
     persons and legal entities.

              (e) Any purported transfer of shares of Class B Common Stock not
permitted by this Article FOURTH shall be void and of no effect and the
purported transferee shall have no rights as a stockholder of the Corporation
and no other rights against or with respect to the Corporation. The Corporation
may, as a condition to the transfer or the registration of transfer of shares of
Class B Common Stock to a purported Permitted Transferee, require the furnishing
of such affidavits or other proof as it deems necessary to establish that such
transferee is a Permitted Transferee.

              (f) The Corporation shall conspicuously note on the certificates
representing shares of Class B Common Stock the restrictions on transfer and
registration of transfer imposed by this paragraph (3).


                                                                               5


         4. Subject to and upon compliance with the provisions of this
Article FOURTH, authorized and unissued shares of Class B Common Stock may be
issued (after the date shares of Class B Common Stock are first issued by the
Corporation) only simultaneously with the issuance of shares of Class A Common
Stock for cash at the same cash price (without deduction for any commissions
payable or discounts allowed) per share; provided, however, that the number of
shares of Class B Common Stock so issued shall not exceed the product of (i) the
number of shares of Class A Common Stock being so issued and (ii) the ratio of
the number of shares of Class B Common Stock issued and outstanding at the
record date fixed for determining the holders of Class B Common Stock who have
the right as provided below to purchase such shares of Class B Common Stock
being issued, to the number of shares of Class A Common Stock issued and
outstanding at such date, except that authorized and unissued shares of Class B
Common Stock may be issued without regard to the foregoing limitation pursuant
to any dividend reinvestment plan approved by the Board of Directors of the
Corporation.

         5. The holders of shares of Class B Common Stock, upon the sale for
cash of additional shares of Class B Common Stock, have the right to purchase
such shares in proportion to their respective holdings of shares of Class B
Common Stock at the price prescribed in the preceding paragraph (4) during such
reasonable time and on such reasonable terms as may be fixed by the Board of
Directors of the Corporation. Such terms may include provision for the purchase
of shares of Class B Common Stock offered to holders who do not timely exercise
such right by the other holders of shares of Class B Common Stock; provided,
however, that no shareholder shall have any preemptive right with respect to any
shares of Class B Common Stock issued pursuant to any dividend reinvestment plan
approved by the Board of Directors of the Corporation. The holders of shares of
Class A Common Stock and shares of Class B Common Stock shall have no other
preemptive right to purchase or have offered to them for purchase any additional
shares of stock of any class of the Corporation.

          6. No change of outstanding shares of Class A Common Stock or shares
of Class B Common Stock so as to effect a share dividend thereon or a split or
combination thereon shall be made unless a corresponding change is made with
respect to the shares of the stock of the other class.

          7. Except as above provided each share of Class A Common Stock and
each share of Class B Common Stock shall be identical and have similar rights,
privileges, qualifications, limitations and restrictions.



                                   EXHIBIT B
                                   ---------

                         TERMS AND CONDITIONS OF ESCROW

         SECTION 1. Upon receiving certificates representing Class B Common
Shares or Voting Trust Certificates representing Class B Common Shares (the
"Certificates") to be deposited with AmeriTrust Company National Association
(the "Depository") pursuant to the terms and conditions of the Agreement, the
Depository shall hold the same in escrow upon the terms and conditions
hereinafter set forth.

         SECTION 2. The Depository shall mark the appropriate legend on the face
or the back of each Certificate deposited hereunder in accordance with Section
7.1 of the Agreement.

         SECTION 3. The Depository shall hold the Certificates until such time
as it shall receive written notification, pursuant to the Agreement, that Class
B Common Shares are to be converted or transferred.

               (a) In the event that such written notification states that Class
          B Common Shares are to be converted or transferred otherwise than as
          provided under Section 2.1 of the Agreement, then the Depository shall
          deliver the Certificates and take such further action, as contemplated
          by the Agreement, in accordance with written instructions executed by
          the parties to the Agreement who are transferring, converting or
          acquiring the Class B Common Shares represented by such Certificates;

               (b) In the event that such written notification states that Class
          B Common Shares are to be transferred by a Participating Shareholder
          as provided under Section 2.1 of the Agreement, then the Depository
          shall deliver the Certificates and take such further action, as
          contemplated by the Agreement, in accordance with the written
          instructions of the Participating Shareholder making such transfer.
          The Depository may, as a condition to taking any such action, require
          the furnishing of affidavits, or other proof as it deems necessary to
          establish that such transfer is permitted by such Section 2.1.

               (c) In no event shall the Depository be required to take any
          action under this Section 3 until it shall have received proper
          written instructions as stated herein.


                                                                               2

         SECTION 4. DUTIES AND ADVERSE CLAIMS. The duties and obligations of the
Depository shall be determined solely by the express provisions of the Agreement
including this Exhibit "B" (hereinafter collectively referred to as the
Agreement). In the event of any disagreement or the presentation of any adverse
claim or demand in connection with the delivery of Certificates, the Depository
shall, at its option, be entitled to refuse to comply with any such claims or
demands during the continuance of such disagreement and may refrain from
delivering any Certificates affected hereby, and in so doing, the Depository
shall not become liable to any party to the Agreement or to any other person due
to its failure to comply with such adverse claim or demand. The Depository shall
be entitled to continue, without liability, to refrain and refuse to act:

               (a)  Until authorized to act by a court order from a court having
                    jurisdiction of the parties and the property, after which
                    time the Depository shall be entitled to act in conformity
                    with such adjudication; or

               (b)  Until all differences shall have been adjusted by agreement
                    and the Depository shall have been notified thereof and
                    shall have been directed in writing, signed jointly or in
                    counterpart by all persons making adverse claims or demands,
                    at which time the Depository shall be protected in acting in
                    compliance therewith.

         SECTION 5. DEPOSITORY'S LIABILITY LIMITED. The Depository shall not be
liable to anyone whatsoever by reason of any error of judgment or for any act
done or step taken or omitted by it in good faith or for any mistake of fact or
law or for anything which it may do or refrain from doing in connection herewith
unless caused by or arising out of its own gross negligence or willful
misconduct. The parties to the Agreement represent to the Depository that they
have and shall continue to solicit the advice of their respective counsel
regarding compliance with all applicable state and federal securities laws in
connection with the transactions contemplated by the Agreement and that they
will act in accordance with such advice. The Depository shall have no
responsibility to ensure compliance with any such securities laws, and such
responsibility rests solely with the parties to the Agreement.

         SECTION 6. RELIANCE BY DEPOSITORY ON DOCUMENTS, ETC. The Depository
shall be entitled to rely and shall be protected in acting in reliance upon any
instructions or directions furnished to it in writing pursuant to any provisions
of the




                                                                               3

Agreement and shall be entitled to treat as genuine, and as the document it
purports to be, any letter, paper or other document furnished to it and believed
by it to be genuine and to have been signed and presented by the proper party or
parties. Without limiting the generality of the foregoing, in the absence of
written notice received by the Depository to the contrary, the Depository shall
be entitled to rely upon its due receipt of any notice under the Agreement as
conclusive evidence that such notice was given to all other persons as required
by the Agreement if such notice so indicates by its terms.

         SECTION 7. INDEMNIFICATION AND LEGAL COUNSEL FOR DEPOSITORY. The
parties to the Agreement hereby agree to indemnify the Depository and save it
harmless from and against all losses, damages, costs, charges, payments,
liabilities and expenses, including the costs of litigation, investigation and
reasonable legal fees incurred by the Depository and arising directly or
indirectly out of its role as Depository pursuant to the Agreement, including
such losses, damages, costs, charges, payments, and suits made or asserted,
whether groundless or otherwise, against the Depository unless the same arise
out of the willful misconduct or gross negligence of the Depository. The parties
to the Agreement agree that the Depository does not assume any responsibility
for the failure of any of the parties to make payments or perform the conditions
of the Agreement, nor shall the Depository be responsible for the collection of
any monies provided to be paid to it. The Depository may consult with counsel of
its own choice and shall have full and complete authorization and protection for
any action taken or suffered by it hereunder in good faith and in accordance
with the opinion of such counsel. The provisions of this Section 7 shall survive
termination of the escrow arrangement contemplated hereby.

         SECTION 8. COMPENSATION. The parties to the Agreement agree to pay the
Depository reasonable compensation for the services to be rendered hereunder and
will pay or reimburse the Depository upon request for all expenses,
disbursements and advances, including reasonable attorneys fees, incurred or
made by it in connection with carrying out its duties hereunder.

         SECTION 9. LIENS. The Depository shall have a first lien on all items
held by it herewith for its compensation and for any costs, liability, expenses,
or fees it may incur and shall not be required to deliver or pay over any
instrument, money, or other property deposited with it under this Agreement
unless and until it shall have received full payment for its compensation,
costs, liability, expenses, or fees.


                                                                               4

         SECTION 10. RESIGNATION. The Depository shall have the right to resign
upon giving thirty (30) days written notice by mailing said written notice
thereof to the proper party or parties; provided that no such resignation shall
become effective until a successor has been duly appointed to act as Depository
by amendment to the Agreement and such successor has agreed so to act.

EX-10.II.A.II

                                                         Exhibit (10)(ii)(A)(ii)


                         AMERICAN GREETINGS CORPORATION

                 RESOLUTIONS OF BOARD OF DIRECTORS CONSTITUTING
                             EXECUTIVES' BONUS PLAN


Resolution Adopted January 27, 1950
- -----------------------------------

          RESOLVED that, until further order of this Board of Directors, the
     basic salaries of the President and Vice Presidents shall be at the
     following respective annual rates:

          Jacob Sapirstein, President     -      $40,000
          Irving I. Stone, Vice President -       40,000
          Morris S. Stone, Vice President -       40,000
          Harry H. Stone, Vice President  -       40,000
          Joe Zel, Vice President         -       23,000

     and that, within seventy-five days after the close of each fiscal year of
     the Corporation, beginning with its present fiscal year, there shall be
     paid to each of said officers a bonus computed by applying against his
     basic salary the percentage by which the net profits of the Corporation for
     that fiscal year exceed the sum of $1,100,000, the net profits, for the
     purposes of this resolution, being defined to be the net profits before
     adjustment for capital gains and losses, all taxes based on or measured by
     net income, all contributions made or to be made to the employees' current
     and deferred profit sharing plans as such plans now exist or may be
     amended, and these bonuses; provided, however, that if in any fiscal year
     the net profits, as above defined, are less than the sum of $1,100,000,
     then such deficiency shall, for the purpose of computing these bonuses, be
     carried over to the next succeeding fiscal year and applied to reduce the
     amount, if any, by which the net profits, as above defined, for that fiscal
     year exceed the sum of $1,100,000, and if there is no such excess in that
     year, or if such deficiency is not entirely absorbed by such application,
     then such deficiency or the unabsorbed remainder thereof, as the case may
     be, shall, for the purpose of computing these bonuses, be carried over to
     the second succeeding fiscal year and applied to reduce the amount, if any,
     by which the net profits, as above defined, for that fiscal year exceed the
     sum of $1,100,000, and if there is no such excess in that year, or if such
     deficiency is not entirely absorbed by such application, then such
     deficiency, or the unabsorbed remainder thereof, as the case may be,
     shall, for the purpose of computing these bonuses, be similarly carried
     over successively to the third and following fiscal years until entirely 50
     absorbed; provided, further, that no bonus shall be paid to any of said
     officers with respect to any fiscal year of the Corporation as of the end
     of which the Corporation does not have an excess of current assets over
     liabilities, as defined in the notes dated June 28, 1946 by the Corporation
     to The Cleveland Trust Company and The National City Bank of Cleveland in
     the amounts of $500,000 each, of at least $1,000,000 and a ratio of current
     assets to such liabilities of at least 1.75 to 1, all determined as
     provided in said notes; provided, further, that in no event shall the total
     of the basic salary and bonus to be paid to any said officer with respect
     to any fiscal year exceed by more than one-third the total



                                                                               2

     of the basic salary and bonus paid to such officer with respect to the next
     preceding fiscal year; and also provided, further, that all computations
     made pursuant to this resolution and all questions arising under this
     resolution shall be made and decided by Messrs. Ernst & Ernst, or such
     other firm of certified public accountants as may then be acting as the
     auditors of the Corporation, whose determination shall be final and
     conclusive upon all parties.


Resolution Adopted February 24, 1950
- ------------------------------------

          RESOLVED that, until further order of this Board of Directors, the
     basic salary of Joe Zel, Vice President, shall be at the rate of $25,000.00
     per annum, effective March 1, 1950, and that all other conditions of his
     compensation remain the same as stipulated in the resolution of the Board
     of Directors adopted at its January 27, 1950 meeting pertaining to the
     compensation of the President and the Vice Presidents of the Corporation.

Resolution Adopted June 30, 1950
- --------------------------------

          RESOLVED that the executives' bonus plan as set forth in the
     resolution with reference thereto adopted at the meeting of the Board of
     Directors of the Corporation held on January 27, 1950 be, and the same
     hereby is, amended to include, until further order of this Board, Louis
     F. Salchow, Controller, Assistant Secretary and Assistant Treasurer, at a
     basic salary at the annual rate of $13,500, such inclusion to begin with
     the present fiscal year of the Corporation, and such participation to be
     subject to all the terms, conditions, provisions and limitations of said
     executives' bonus plan as now or hereafter constituted.

Resolution Adopted February 23, 1951
- ------------------------------------

          RESOLVED that, until further order of this Board of Directors, the
     basic salary of Louis F. Salchow, Controller, Assistant Secretary and
     Assistant Treasurer, shall be at the annual rate of $16,000.00, effective
     March 1, 1951.

          FURTHER RESOLVED that the resolution with reference to the
     participation of Louis F, Salchow in the Executives' Bonus Plan as set
     forth and adopted at the meeting of the Board of Directors of the
     Corporation held on June 30, 1950, be and the same is hereby amended to
     increase, until further order of this Board, the basic salary at the annual
     rate of $13,500.00 to $16,000.00, effective March 1, 1951.

Resolution Adopted March 28, 1952
- ---------------------------------

          RESOLVED that the executives' bonus plan as set forth in the
     resolution with reference thereto adopted at the meeting of the Board of
     Directors held on January 27, 1950 and as amended by the resolutions with
     reference thereto adopted at the meetings of the Board of Directors held on
     February 24, 1950, June 30, 1950, and February 23, 1951, respectively, be;
     and the same hereby is;




                                                                               3

     further amended to provide that until further order of this Board any bonus
     payable under said resolution of January 27, 1950 for any fiscal year
     beginning after February 29, 1952 to any of the following officers, to
     wit, Jacob Sapirstein, President, Irving I. Stone, Vice President, Morris
     S. Stone, Vice President, and Harry H. Stone, Vice President, shall in no
     event exceed such amount which when added to the basic salary of such
     officer for the fiscal year involved and the amount payable to him for such
     fiscal year under the employees' current profit sharing plan of the
     Corporation, as such plan now exists or may be amended, shall constitute a
     total of $50,000 for such fiscal year.


Resolution Adopted February 4, 1953
- -----------------------------------

          RESOLVED that the executives' bonus plan as set forth in the
     resolution with reference thereto adopted at the meeting of the Board of
     Directors held on January 27, 1950 and as amended by the resolutions with
     reference thereto adopted at the meetings of the Board of Directors held on
     February 24, 1950, June 30, 1950, February 23, 1951, and March 28, 1952,
     respectively, be, and the same hereby is, further amended to provide that
     until further order of this Board any bonus payable under said resolution
     of January 27, 1950, as so amended, for any fiscal year beginning after
     February 29, 1952 to either of the following officers, to wit, Joe Zel,
     Vice President, and Louis F. Salchow, Vice President, shall in no event
     exceed such amount which when added to the basic salary of such officer for
     the fiscal year involved and the amount payable to him for such fiscal year
     under the employees' current profit sharing plan of the Corporation, as
     such plan now exists or may be amended, shall constitute in the case of
     said Joe Zel a total of $48,000.00, and in the case of said Louis F.
     Salchow a total of $30,000.00, for such fiscal year.

Resolution Adopted June 26, 1953
- --------------------------------

          RESOLVED that the executives' bonus plan as set forth in the
     resolution with reference thereto adopted at the meeting of the Board of
     Directors held on January 27, 1950 and as amended by the resolutions with
     reference thereto adopted at the meetings of the Board of Directors held on
     February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952, and
     February 4, 1953, respectively, be, and the same hereby is, further amended
     to provide that until further order of this Board the limitations imposed
     by said resolutions adopted at the meetings of the Board of Directors
     held on March 28, 1952 and February 4, 1953 with respect to the amount of
     bonus shall apply only to any bonus payable for a fiscal year for which the
     net profits of the Corporation as defined in said resolution of January
     27, 1950 shall not exceed the sum of $2,500,000, and that if the net
     profits of the Corporation as so defined shall for any fiscal year
     beginning after February 28, 1953 exceed said sum of $2,500,000, then any
     bonus payable for such fiscal year under said resolution of January 27,
     1950 as amended by the resolutions with reference thereto adopted at the
     meetings of the Board of Directors held on February 24, 1950, June 30,
     1950, and February 23, 1951 shall in no event exceed such amount which when
     added to the




                                                                               4



     basic salary of such officer for such fiscal year and the amount payable to
     him for such fiscal year under the employees' current profit sharing plan
     of the Corporation as such plan now exists or may be amended shall
     constitute a total sum which shall bear the same ratio in the case of each
     of Jacob Sapirstein, President, Irving I. Stone, Vice President, Morris S.
     Stone, Vice President, and Harry H. Stone, Vice President, to the sum of
     $50,000, and in the case of Joe Zel, Vice President, to the sum of $48,000,
     and in the case of Louis F. Salchow, Vice President, to the sum of $30,000,
     as such net profits for such fiscal year shall bear to the sum of
     $2,500,000.

Resolution Adopted August 27, 1954
- ----------------------------------

          RESOLVED that the executives' bonus plan as set forth in the
     resolution with reference thereto adopted at the meeting of the Board of
     Directors held on January 27, 1950 and as amended by the resolutions with
     reference thereto adopted at the meetings of the Board of Directors held on
     February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952,
     February 4, 1953 and June 26, 1953, respectively, be, and the same hereby
     is, further amended to provide that, until further order of this Board, if
     the net profits of the Corporation as defined in said resolution of January
     27, 1950 shall for any fiscal year beginning after February 28, 1954 exceed
     the sum of $2,500,000, then any bonus payable to any such officer for such
     fiscal year under said resolution of January 27, 1950 as amended by said
     resolutions of February 24, 1950, June 30, 1950, February 23, 1951, March
     28, 1952, February 4, 1953, and June 26, 1953 shall in no event exceed the
     greater of (i) an amount which when added to the basic salary of such
     officer for such year shall equal, in the case of each of Jacob Sapirstein,
     President, Irving I. Stone, Vice President, Morris S. Stone, Vice
     President, and Harry H. Stone, Vice President, the sum of $50,000, and in
     the case of Joe Zel, Vice President, the sum of $48,000, and in the case
     of Louis F. Salchow, Vice President, the sum of $30,000, or (ii) an
     amount determined by multiplying the basic salary of such officer for
     such year by one-half of the ratio which such net profits in excess of
     $2,500,000 bear to $2,500,000.

Resolution Adopted January 27, 1956
- -----------------------------------

          RESOLVED that the executives' bonus plan as set forth in the
     resolution with reference thereto adopted at the meeting of the Board of
     Directors held on January 27, 1950 and as amended by the resolutions with
     reference thereto adopted at the meetings of the Board of Directors held on
     February 24, 1950, June 30, 1950, February 23, 1951, March 1952, February
     1953, June 1953, 28, 4, 26, and August 27, 1954, respectively, be, and the
     same hereby is, further amended to provide that, until further order of
     this Board, the basic salary upon which the bonus payable thereunder (other
     than the bonus determined by applying the maximum limitations prescribed
     by such resolutions) to any officer for any fiscal year, beginning with
     the current fiscal year, is computed shall be his annual rate of salary
     at the end of such fiscal year.


                                                                               5

Resolution Adopted October 14, 1958
- -----------------------------------

     RESOLVED, that the executives' bonus plan as set forth in the resolutions
with reference thereto adopted at the meeting of the Board of Directors held on
January 27, 1950 and as amended by the resolutions with reference thereto
adopted at the meetings of the Board of Directors held on February 24, 1950,
June 30, 1950, February 23,1951, March 28, 1952, February 4, 1953, June 26,
1953, August 27, 1954 and January 27, 1956 be, and the same hereby is, further
amended to provide that, until further order of this Board, (1) the bonus
payable to Joe Zel for the current fiscal year of the Corporation shall not
exceed the lesser of (a) two-thirds of the amount which would be payable to him
under said plan without regard to the limitations on his bonus therein set
forth or the limitations of this resolution, or (b) two-thirds of the greater of
(i) the amount which when added to his basic salary for such year shall equal
the sum of $48,000 or (ii) the amount determined by multiplying his basic
salary (as defined in said resolution of January 27, 1956) for such year by
one-half the ratio which the net profits of the Corporation for such year (as
defined in said resolution of January 27, 1950) in excess of $2,500,000 bear
to $2,500,000; and (2) Joe Zel shall not be entitled to receive any bonus under
said plan for any subsequent fiscal year of the Corporation.


Resolution Adopted May 29, 1959
- -------------------------------

     FURTHER RESOLVED, that the executives' bonus plan as set forth in the
resolution with reference thereto adopted at the meeting of the Board of
Directors held on January 27, 1950 and as amended by the resolutions with
reference thereto adopted at the meetings of the Board of Directors held on
February 24, 1950, June 30, 1950, February 23, 1951, March 28, 1952, February 4,
1953, June 26,1953, August 27, 1954, January 27, 1956 and October 14, 1958 be
and the same hereby is further amended to provide that, until further order of
this Board, Jacob Sapirstein and Louis F. Salchow shall not be entitled to
receive any bonus under said plan for the current or any subsequent fiscal year
of the Corporation.


                                                                               6

Resolution Adopted August 7, 1959
- ---------------------------------


     RESOLVED, that the executives' bonus plan as set forth in the resolution
with reference thereto adopted at the meeting of the Board of Directors held on
January 27, 1950 and as amended by the resolutions with reference thereto
adopted at meetings of the Board of Directors held on February 24, 1950, June
30, 1950, February 23, 1951, March 28, 1952, February 4, 1953, June 26, 1953,
August 27, 1954, January 27, 1956, October 14, 1958 and May 29, 1959 be and the
same hereby is further amended so that, until further order of this Board, the
clause appearing in said resolution adopted at the meeting of the Board of
Directors held on January 27, 1950 that reads as follows:

     "provided, further, that no bonus shall be paid to any of said officers
     with respect to any fiscal year of the Corporation as of the end of which
     the Corporation does not have an excess of current assets over liabilities,
     as defined in the notes dated June 28, 1946 by the Corporation to The
     Cleveland Trust Company and The National City Bank of Cleveland in the
     amounts of $500,000 each, of at least $1,000,000 and a ratio of current
     assets to such liabilities of at least 1.75 to 1, all determined as
     provided in said notes"

shall be changed to read as follows:

     "provided, further, that no bonus shall be paid to any of said officers
     with respect to any fiscal year of the Corporation as of the end of which
     the Corporation does not have an excess of current assets over current
     liabilities of at least $1,000,000 and a ratio of current assets to current
     liabilities of at least 1.75 to 1".


Resolution Adopted July 24, 1969
- --------------------------------

     RESOLVED, that the Executive Bonus Plan adopted on January 27, 1950 and
as amended, be and the same hereby is further amended to provide that Harry H.
Stone shall not be entitled to receive any bonus under said Plan for the current
or any subsequent fiscal year of the Company.

Resolution Adopted January 12, 1979
- -----------------------------------

     FURTHER RESOLVED, that the Executive Bonus Plan as set forth in the
resolutions with reference thereto adopted at the meeting of the Board of
Directors held January 27, 1950 and as subsequently amended, is hereby further
amended as follows:

          "the term 'net profits' as appearing in said Plan shall be defined to
     mean 'the net profits of American Greetings Corporation before adjustment
     for equity gains and losses of any subsidiary corporation, any dividend
     received from any subsidiary corporation, capital gains and losses, all
     taxes based on or measured by net income, all contributions made or to be
     made to the American Greetings Corporation Employees' Retirement Profit
     Sharing Plan as such Plan now exists or may be amended and these
     bonuses;'"




                         AMERICAN GREETINGS CORPORATION



                     Action by Directors without a Meeting
                     -------------------------------------


               The undersigned, constituting all of the directors of the
Corporation, acting without a meeting pursuant to Section 1701.54 of the Ohio
General Code, hereby adopt, effective April 10, 1980, the following resolution:

               WHEREAS, in light of limitations applicable to the compensation
of other employees of the Corporation, such action is considered necessary and
appropriate and in the best interests of the Corporation,

               RESOLVED, that amounts payable to executives under the
          Executive Bonus Plan of the Corporation for its fiscal year
          ended February 29, 1980 shall be limited to the amounts payable
          under such plan to such executives, respectively, for the fiscal
          year ended February 28, 1979.



               FURTHER RESOLVED, that except as above set forth such Plan
          shall continue in force unchanged.


Date: April 28   , 1980           /s/ Frank E. Joseph
     ------------               -----------------------------
                                Frank E. Joseph

                                  /s/ Albert B. Ratner
Date: April 28   , 1980         ----------------------------
     ------------               Albert B. Ratner

Date: April 28   , 1980            /s/ Jacob Sapirstein
     -----------                -------------------------------
                                Jacob  Sapirstein

Date: April 10  ,  1980            /s/ Sy Scheckner
     -----------                -------------------------------
                                Sy Scheckner

Date: April 10  ,  1980              /s/ Harry H. Stone
     -----------                -------------------------------
                                Harry  H. Stone

Date: April 10  ,  1980            /s/ Irving I. Stone
     -----------                -------------------------------
                                Irving I. Stone

Date: April 10  ,  1980            /s/ Morris S. Stone
     -----------                -------------------------------
                                 Morris S. Stone


                                                                               2

Date: April 10  , 1980             /s/ Morry Weiss
     -----------                -------------------------------
                                Morry Weiss


Date: April 10  , 1980             /s/ Morton Wyman
     -----------                -------------------------------
                                Morton Wyman


                                                                            1912

                         AMERICAN GREETINGS CORPORATION

                      Action by Directors without a Meeting
                      -------------------------------------



      The undersigned, constituting all of the directors of the Corporation,
acting without a meeting pursuant to Section 1701.54 of the Ohio General Code,
hereby adopt, effective March 24, 1981, the following resolution:



      WHEREAS, the participants under the Executive Bonus Plan of the
Corporation have agreed to limit the amount of bonus to be paid to them pursuant
to such Plan for the fiscal year ended February 28, 1981 and such action is
considered acceptable, appropriate and in the best interest of the
Corporation,

            RESOLVED, that the amount payable to executives under the Executive
      Bonus Plan of the Corporation for its fiscal year ended February 28, 1981
      shall be limited to the amount of $210,000.

            FURTHER RESOLVED, that except as above set forth such Plan shall
      continue in force unchanged.



Date:  4/21/81             /s/ Morry Weiss for Jacob Sapirstein Attorney-in-fact
     --------------       -------------------------------
                          Jacob Sapirstein

Date:  Mar 30/1981         /s/ Irving I. Stone
     --------------       -------------------------------
                          Irving I. Stone

Date:   4-3-81             /s/ Morris S. Stone
     --------------       -------------------------------
                          Morris S. Stone

Date: 3/30/81              /s/ Harry H. Stone
     --------------       -------------------------------
                          Harry H. Stone

Date: 3/30/81              /s/ Morry Weiss
     --------------       -------------------------------
                          Morry Weiss

Date:  3/30/81             /s/ Morton Wyman
     --------------       -------------------------------
                          Morton Wyman

Date:   4/13/81            /s/ Frank E. Joseph
     --------------       -------------------------------
                          Frank E. Joseph

Date:   4/15/81            /s/ Albert B. Ratner
     --------------       -------------------------------
                          Albert B. Ratner

Date:  4/22/81             /s/ Sy Scheckner
     --------------       -------------------------------
                          Sy Scheckner

EX-10.II.A.III

                                                        Exhibit (10)(ii)(A)(iii)



                     EXECUTIVE INCENTIVE COMPENSATION PLAN
                (AS AMENDED AND RESTATED THROUGH MARCH 6, 1989)

BASIC PLAN
- ----------

American Greetings Corporation ("Corporation") has established this Executive
Incentive Compensation Plan for certain officers and other key management
personnel. The plan, as amended, is effective with the fiscal years beginning
March 1, 1988, for the Corporation or February 1, 1988, for certain subsidiaries
of the Corporation.

Under the Plan, the Board of Directors of the Corporation shall, prior to the
commencement of each fiscal year, or as promptly as possible thereafter,
establish a Profit Goal for each Division or subsidiary of the Corporation and
the desired pro forma pre-tax profit of each Division or subsidiary of the
Corporation for the fiscal year as determined by the Board of Directors of the
Corporation at its absolute discretion. The Consolidated Profit Goal for the
Corporation, however, shall be stated in terms of the pre-tax profit of the
Consolidated Corporation.

One or more of these profit goals are assigned to each Eligible Participant,
which becomes the Eligible Participant's target profit goal and on which the
participant is assigned a target bonus which in no instance may exceed 60% of
the Eligible Participant's base salary. If the target goal or goals are
achieved, cash bonuses are to be paid to the achieving Eligible Participants
equal to the individual Eligible Participant's target bonus. If actual
performance is above the target profit goal by a percentage not more than 10%,
or below the target profit goal by a percentage not more than 20%, the bonus is
increased or decreased by a percentage equal to twice the excess or shortfall.
If actual performance is less than 80% of the target profit goal, no bonus is
paid; if it is greater than 110% of the target profit goal, the bonus remains at
120% of the target bonus. For computation purposes, profit goals and actual
performance shall be rounded to the nearest thousand dollars or other local
currency unit and achievement of profit goals shall be computed with reference
to the nearest one-tenth of one percent. All bonuses hereunder will be paid in
cash.

For each Division or subsidiary corporation, the term "pro forma pre-tax profit"
as used herein shall mean its income before investment interest income, income
taxes, and actual interest expense, exclusive of: profits and losses on the sale
or disposal of assets classified on the Corporation's balance sheet as property,
plant and equipment (excluding display cabinets, in the case of greeting card
divisions); gains or losses resulting




from foreign currency transactions (excluding gains or losses resulting from
intra-Divisional transactions); bonus provisions or payments under this
Executive Incentive Compensation Plan; and, such other adjustments as may from
time to time be established by the Board of Directors of the Corporation in the
course of their determination of the Division's or subsidiary corporation's
performance goal for such fiscal year, less interest on the Division's or
subsidiary corporation's average monthly net capital employed. Net capital
employed is defined to be the total assets of a division or subsidiary
corporation excluding cash and marketable securities, intercompany balances and
investments, and goodwill, less all non-interest bearing liabilities excluding
income taxes deferred or payable. All bonus achievement computations shall be
determined by the independent accountants of each Division or subsidiary
corporation in accordance with generally accepted accounting principles, or in
the case of Divisions that are not audited by independent accountants, as
determined in accordance with generally accepted accounting principles and as
reviewed and approved by the Chief Financial Officer of the Corporation. For the
Consolidated Corporation, the term "pre-tax profit" shall mean the "consolidated
pre-tax, pre-interest profits" as defined above after adjustment for
consolidated investment interest income and actual interest expense.

The determination of which officers and key management personnel shall be
considered as Eligible Participants and which profit goals and target bonuses
they are assigned shall be the responsibility of the Chief Executive Officer of
the Corporation, subject, however, to whatever guidelines and policies may be
approved by the Board of Directors of the Corporation, or the Executive
Committee or Compensation Committee of the Board of Directors of the
Corporation.

Target bonuses under this Plan shall be based on a percentage of the Eligible
Participant's base salary. The term "base salary" as used herein shall mean all
compensation (exclusive of fringe benefits, benefits paid under any long-term
disability plan, or other forms of indirect compensation) actually paid to a
participant during the fiscal year, excluding amounts paid under this Plan. (For
purposes of this Plan, base salary is to be determined on the cash rather than
the accrual basis.)

If an employee becomes an Eligible Participant under this Plan subsequent to the
beginning of a fiscal year, his base salary upon which his target bonus is
derived shall include his base salary (as defined herein) paid to him from the
date of his eligibility, to the end of such fiscal year. If an Eligible
Participant ceases to be classified as an Eligible Participant by virtue of a
change in his work duties during a fiscal year but remains in the employ of the
Corporation, subsidiary of the Corporation, or Division, his base salary and
target bonus shall be similarly based on the actual period of his eligibility.




In the event an Eligible Participant leaves the employ of the Corporation,
subsidiary of the Corporation, or Division during the fiscal year, there shall
be no bonus paid to him for that fiscal year. However, if a participant leaves
the employ of the Corporation, subsidiary of the Corporation, or Division during
the fiscal year as a result of disability or death or upon retirement after
achieving at least 60 years of age, his base salary and target bonus shall be
based on the actual period of his eligibility as outlined above.

All bonuses payable under this Plan shall be paid on the date (or shortly
thereafter) that American Greetings Corporation announces its fiscal year end
results to the public, such date generally being during the first full week of
April.

All questions of interpretation and application of this Plan shall be decided by
the Chief Executive Officer of the Corporation or the Board of Directors of the
Corporation, whose decisions, made in good faith, shall be final and binding on
all parties. In the absence of bad faith or gross neglect of duty on their part,
neither the Chief Executive Officer of the Corporation or the Board of Directors
of the Corporation shall have any liability to the Corporation, subsidiary of
the Corporation, or any Division or to any of their employees arising out of or
in connection with the administration of this Plan.

SUPPLEMENTAL PLAN (FISCAL YEARS 1989, 1990 AND 1991)
- ----------------------------------------------------

In addition to the foregoing (but independent of the one year corporate,
divisional and subsidiary goals that are established annually under the Basic
Plan outlined above, if in the fiscal years ending February 28, 1989, 1990 and
1991, the original Profit Goals for those years as approved at the Board of
Directors meetings in January and April, 1988 (the Original Profit Goals) are
achieved in whole or in part, then a special supplemental bonus may be payable
under this Supplemental Plan. Terms and qualifications for the supplemental
bonus are as follows: To qualify for bonus participation in each year, an
Eligible Participant's Division or subsidiary must first achieve at least 80% of
its Original Profit Goal for that year. Secondly, 100% of the Original Corporate
Consolidated Profit Goal must be achieved for that year. If these qualifications
are achieved in all three years, then a bonus equal to 100% of the total of the
Targeted Bonuses for each of the three years shall be payable. However, if an
Eligible Participant qualifies for this supplemental bonus in only two of the
three fiscal years, then only 60% of the total of the Targeted Bonuses for each
of the three years shall be payable. If an Eligible Participant qualifies in
less than two of the three years, then no bonus will be paid under this
Supplemental Plan. All bonuses payable under this Supplemental Plan shall be
paid on the date (or shortly thereafter) that American Greetings Corporation
announces its Fiscal 1991 year end results to the public in April, 1991.

EX-10.II.A.IX

                                                         Exhibit (10)(ii)(A)(ix)


                         AMERICAN GREETINGS CORPORATION

                             Stock Option Agreement

                         1987 Class B Stock Option Plan
                         ------------------------------


        WHEREAS, MORRY WEISS                         (hereinafter called the
"Optionee") is President                        of American Greetings
Corporation, an Ohio corporation (the "Company"); and

        WHEREAS, the execution of this Stock Option Agreement pursuant to the
Company's 1987 Class B Stock Option Plan has been duly authorized by a
resolution of the Board of Directors of the Company duly adopted on January 25,
1988;

        NOW, THEREFORE, the Company hereby grants to the Optionee an option to
purchase 425,000 Class B Common Shares, par value $1 per share, of the Company
at the price of Fourteen and 5/16 Dollars ($14.3125) per share, and agrees to
cause certificates for any shares purchased hereunder to be delivered to the
Optionee upon payment of the purchase price in full, all subject, however, to
the terms and conditions hereinafter set forth.

        1.   This option (until terminated as hereinafter provided) shall be
exercisable only to the extent of one-quarter of the shares hereinabove
specified after the Optionee shall have been in the continuous employ of the
Company or any Subsidiary for one full year from the date hereof and to the
extent of an additional one-quarter of such shares after each of the next
three successive years thereafter during which the Optionee shall have been
in the continuous employ of the Company or any Subsidiary. If the Optionee
should retire at normal retirement age or at an early retirement age with the
consent of the Board of Directors, die or become permanently disabled after
having been in the continuous employ of the Company or any Subsidiary for a
period of at least ten years, this option shall, notwithstanding the preceding
sentence, immediately become exercisable in full. For the purposes of this
paragraph, leaves of absence approved by the Board of Directors or Stock
Option Committee of the Company for illness, military or governmental service,
or other cause, shall be considered as employment. To the extent exercisable,
this option may be exercised in whole or in part from time to time.

        2.   This Option shall terminate on the earliest of the following dates:

             (A) On the date on which the Optionee ceases to be an employee of
the Company or a Subsidiary, unless he ceases to be such employee by reason
of retirement as described in Section (1) above, death or permanent disability
or in a manner described in (B) below;



             (B) Three months after the Optionee ceases to be an employee of
the Company or a Subsidiary by reason of termination of employment under
circumstances determined by the Board of Directors to be for the convenience
of the Company;

             (C) One year after the death or permanent disability of the
Optionee if the Optionee dies or becomes permanently disabled while an
employee of the Company or a subsidiary or within the three-month period
referred to in (B) above;

             (D) Ten years and three months from the date on which this option
was granted.

Nothing contained in this Stock Option Agreement shall limit
whatever the right the Company or a Subsidiary might otherwise
have to terminate the employment of the Optionee.

        3.   This option is not transferable by the Optionee otherwise than by
will or the laws of descent and distribution, and is exercisable, during the
lifetime of the Optionee, only by him or his legal representative. The
purchase price payable upon exercise of this option may, at the election of
the Optionee, be paid (a) in cash or by check acceptable to the Company; (b)
if specifically approved at or prior to the time of exercise by the Board of
Directors, by the transfer to the Company by the Optionee of Class A or Class
B Common Shares of the Company that have been owned by him for at least six
months and have a value at the time of exercise equal to the total option
price or (c) by a combination of such methods of payment.

        4.   This option shall not be exercisable if such exercise would involve
a violation of any applicable federal or state securities law, and the Company
hereby agrees to make reasonable efforts to comply with such securities laws.
If the Ohio Securities Act shall be applicable to this option, it shall not be
exercisable unless under such Act at the time of exercise the Class B Common
Shares or other securities purchasable hereunder are exempt, are the subject
matter of an exempt transaction, are registered by description or by
qualification, or at such time are the subject matter of a transaction which
has been registered by description.

        5.   The Board of Directors shall make such adjustments in the option
price and in the number or kind of Class B Common Shares or other securities
covered by this option as such Board in its sole discretion, exercised in good
faith, may determine is equitably required to prevent dilution or enlargement
of the rights of the Optionee that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization or other
changes in the capital structure of the Company, or (b) any merger,
consolidation, separation, reorganization, partial or complete liquidation,
issuance of rights or warrants to purchase stock, or (c) any other corporate
transaction or event having an effect similar to any of the foregoing.


        EXECUTED at Cleveland, Ohio as of the 25th day of January, 1988.


                                          AMERICAN GREETINGS CORPORATION


                                          By     /s/ Henry Lowenthal
                                             ----------------------------------
                                             Title:  Senior Vice President
                                             and Chief Financial Officer


        The undersigned Optionee hereby acknowledges receipt of an executed
original of this Stock Option Agreement and accepts the option granted
thereunder.

        The Optionee acknowledges that he has been advised that the Class B
Common Shares covered by such Agreement have not been registered under the
Securities Act of 1933 and agrees that he will not make any disposition of
such shares unless either (a) such shares have been registered under such Act
or (b) an exemption from the registration provisions of such Act is applicable
to the Optionee's proposed disposition of such shares. The Optionee
understands that the certificates for such shares may bear a legend
substantially as follows:

            The shares evidenced by this Certificate have not been
            registered under the Securities Act of 1933. Such shares may
            not be sold or otherwise transferred until the same have been
            registered under such Act or until the Company shall have
            received an opinion of legal counsel or a copy of a letter
            from the Staff of the Division of Corporation Finance of the
            Securities and Exchange Commission, in either case
            satisfactory to the Company, that such shares may legally be
            sold or otherwise transferred without such registration."




                                                     /s/ Morry Weiss
                                               ---------------------------

EX-10.II.A.XIV

                                                        Exhibit (10)(ii)(A)(xiv)


                                   APPENDIX A

                                APPROVAL OF 1997
                         AMERICAN GREETINGS CORPORATION
                   1997 Equity and Performance Incentive Plan

1.   PURPOSE. The purpose of the 1997 Equity and Performance Incentive Plan (the
     "Plan") is to attract and retain directors, officers and other key
     employees for American Greetings Corporation (the "Company") and its
     Subsidiaries and to provide to such persons incentives and rewards for
     superior performance.

2.   DEFINITIONS. As used in this Plan,

     "Appreciation Right" means a right granted pursuant to Section 5 of this
     Plan, and shall include both Tandem Appreciation Rights and Free-Standing
     Appreciation Rights.

     "Board" means the Board of Directors of the Company and, to the extent of
     any delegation by the Board to a committee (or subcommittee thereof)
     pursuant to Section 16 of this Plan, such committee (or subcommittee).

     "Change in Control" shall have the meaning provided in Section 12 of this
     Plan.

     "Code" means the Internal Revenue Code of 1986, as amended from time to
     time.

     "Class A Common Shares" means Class A Common Shares, par value $1 per
     share, of the Company or any security into which such Common Shares may be
     changed by reason of any transaction or event of the type referred to in
     Section 11 of this Plan.

     "Class B Common Shares" means Class B Common Shares, par value $1 per
     share, of the Company or any security into which such Common Shares may be
     changed by reason of any transaction or event of the type referred to in
     Section 11 of this Plan.

     "Common Shares" means Class A Common Shares, Class B Common Shares or both.

     "Covered Employee" means a Participant who is, or is determined by the
     Board to be likely to become, a "covered employee" within the meaning of
     Section 162(m) of the Code (or any successor provision).

     "Date of Grant" means the date specified by the Board on which a grant of
     Option Rights, Appreciation Rights, Performance Shares or Performance Units
     or a grant or sale of Restricted Shares or Deferred Shares shall become
     effective (which date shall not be earlier than the date on which the Board
     takes action with respect thereto).

     "Deferral Period" means the period of time during which Deferred Shares are
     subject to deferral limitations under Section 7 of this Plan.

     "Deferred Shares" means an award made pursuant to Section 7 of this Plan of
     the right to receive Common Shares at the end of a specified Deferral
     Period.

     "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
     the rules and regulations thereunder, as such law, rules and regulations
     may be amended from time to time.

     "Exercise Right" means the price payable upon exercise of a Free-Standing
     Appreciation Right.

     "Free-Standing Appreciation Right" means an Appreciation Right not granted
     in tandem with an Option Right.

     "Incentive Stock Options" means Option Rights that are intended to qualify
     as "incentive stock options" under Section 422 of the Code or any successor
     provision.

     "Management Objectives" means the measurable performance objective or
     objectives established pursuant to this Plan for Participants who have
     received grants of Performance Shares or Performance Units or, when so
     determined by the Board, Option Rights, Appreciation Rights, Restricted
     Shares and dividend credits pursuant to this Plan. Management Objectives
     may be described in terms of Company-wide objectives or objectives that are
     related to the performance of the individual Participant or of the
     Subsidiary, division, department, region or function within the Company or
     Subsidiary in which the Participant is employed. The Management Objectives
     may be made relative to the performance of other corporations. The
     Management Objectives applicable to any award to a Covered Employee shall
     be based on specified levels of or growth in one or more of the following
     criteria:






              1.  cash flow/net assets ratio;
              2.  debt/capital ratio;
              3.  return on total capital;
              4.  return on equity;
              5.  earnings per share growth;
              6.  revenue growth; and
              7.  total return to shareholders.

     Except where a modification would result in an award no longer qualifying
     as performance based compensation within the meaning of Section 162(m) of
     the Code, the Board may in its discretion modify such Management Objectives
     or the related minimum acceptable level of achievement, in whole or in
     part, as the Board deems appropriate and equitable.

     "Market Value per Share" means, as of any particular date, the fair market
     value of the Class A Common Shares as listed on NASDAQ as of the close of
     business on such date or the latest such date in which there is a listing.

     "Non-Employee Director" means a Director of the Company who is not an
     employee of the Company or any Subsidiary.

     "Optionee" means the optionee named in an agreement evidencing an
     outstanding Option Right.

     "Option Price" means the purchase price payable on exercise of an Option
     Right.

     "Option Right" means the right to purchase Common Shares upon exercise of
     an option granted pursuant to Section 4 or Section 9 of this Plan.

     "Participant" means a person who is selected by the Board to receive
     benefits under this Plan and who is at the time an officer, or other key
     employee of the Company or any one or more of its Subsidiaries, or who has
     agreed to commence serving in any of such capacities within 90 days of the
     Date of Grant, and shall also include each Non-Employee Director who
     receives an award of Option Rights or Restricted Shares.

     "Performance Period" means, in respect of a Performance Share or
     Performance Unit, a period of time established pursuant to Section 8 of
     this Plan within which the Management Objectives relating to such
     Performance Share or Performance Unit are to be achieved.

     "Performance Share" means a bookkeeping entry that records the equivalent
     of one Common Share awarded pursuant to Section 8 of this Plan.

     "Performance Unit" means a bookkeeping entry that records a unit equivalent
     to $1.00 awarded pursuant to Section 8 of this Plan.

     "Reload Option Rights" means additional Option Rights granted automatically
     to an Optionee upon the exercise of Option Rights pursuant to Section 4(g)
     of this Plan.

     "Restricted Shares" means Common Shares granted or sold pursuant to
     Section 6 or Section 9 of this Plan as to which neither the substantial
     risk of forfeiture nor the prohibition on transfers referred to in such
     Section 6 has expired.

     "Rule l6b-3" means Rule 16b-3 of the Securities and Exchange Commission (or
     any successor rule to the same effect) as in effect from time to time.

     "Spread" means the excess of the Market Value per Share on the date when an
     Appreciation Right is exercised, or on the date when Option Rights are
     surrendered in payment of the Option Price of other Option Rights, over the
     Option Price or Exercise Price provided for in the related Option Right or
     Free-Standing Appreciation Right, respectively.

     "Subsidiary" means a corporation, company or other entity (i) more than 50%
     of whose outstanding shares or securities (representing the right to vote
     for the election of directors or other managing authority) are, or (ii)
     which does not have outstanding shares or securities (as may be the case in
     a partnership, joint venture or unincorporated association), but more than
     50% of whose ownership interest representing the right generally to make
     decisions for such other entity is, now or hereafter, owned or controlled,
     directly or indirectly, by the Company except that for purposes of
     determining whether any person may be a Participant for purposes of any
     grant of Incentive Stock Options, "Subsidiary" means any corporation in
     which at the time the Company owns or controls, directly or indirectly,
     more than 50% of the total combined voting power represented by all classes
     of stock issued by such corporation.








     "Tandem Appreciation Right" means an Appreciation Right granted in tandem
     with an Option Right.

     "Voting Power" means at any time, the total votes relating to the
     then-outstanding securities entitled to vote generally in the election of
     directors of the Company.

3.   SHARES AVAILABLE UNDER THE PLAN.

     (a) Subject to adjustment as provided in paragraph (b) below and Section 11
         of this Plan, the number of Class A Common Shares and Class B Common
         Shares that may be issued or transferred (i) upon the exercise of
         Option Rights or Appreciation Rights; (ii) as Restricted Shares and
         released from substantial risk of forfeiture thereof; (iii) as Deferred
         Shares; (iv) in payment of Performance Shares or Performance Units that
         have been earned; (v) as awards to Non-Employee Directors; or (vi) in
         payment of dividend equivalents paid with respect to awards made under
         the Plan, shall not exceed in the aggregate 4,500,000 Class A Common
         Shares and 500,000 Class B Common Shares, respectively, plus any shares
         described in paragraph (b) below. Such shares may be shares of original
         issuance or treasury shares or a combination of the foregoing.

     (b) The number of shares available in paragraph (a) above shall be adjusted
         to account for shares relating to awards that expire; are forfeited; or
         are transferred, surrendered, or relinquished upon the payment of any
         Option Price by the transfer to the Company of Common Shares or upon
         satisfaction of any withholding amount.

     (c) Notwithstanding anything in this Section 3 or elsewhere in this Plan to
         the contrary, the aggregate number of Common Shares actually issued or
         transferred by the Company upon the exercise of Incentive Stock Options
         shall not exceed 4,500,000 Class A Common Shares or 500,000 Class B
         Common Shares, respectively, subject to adjustments as provided in
         Section 11 of this Plan. Further, no Participant shall be granted
         Option Rights for more than 500,000 Common Shares during any period of
         five years, subject to adjustments as provided in Section 11 of this
         Plan.

     (d) Upon payment in cash of the benefit provided by any award granted under
         this Plan, any shares that were covered by that award shall again be
         available for issue or transfer hereunder.

     (e) Notwithstanding any other provision of this Plan to the contrary, in no
         event shall any Participant in any period of five years receive more
         than 500,000 Appreciation Rights, subject to adjustments as provided in
         Section 11 of this Plan.

     (f) Notwithstanding any other provision of this Plan to the contrary, the
         number of shares issued as Restricted Shares shall not in the aggregate
         exceed 450,000 Class A Common Shares and 50,000 Class B Common Shares,
         respectively, subject to adjustments as provided in Section 11 of this
         Plan; and, in no event shall any Participant in any period of five
         years receive more than 500,000 Restricted Shares or 500,000 Deferred
         Shares, subject to adjustments as provided in Section 11 of this Plan.

     (g) Notwithstanding any other provision of this Plan to the contrary, in no
         event shall any Participant in any calendar year receive an award of
         Performance Shares or Performance Units having an aggregate maximum
         value as of their respective Dates of Grant in excess of $3,000,000.

4.   OPTION RIGHTS. The Board may, from time to time and upon such terms and
     conditions as it may determine, authorize the granting to Participants of
     options to purchase Common Shares. Each such grant may utilize any or all
     of the authorizations, and shall be subject to all of the requirements,
     contained in the following provisions:

     (a) Each grant shall specify the number of Class A Common Shares or Class B
         Common Shares to which it pertains subject to the limitations set forth
         in Section 3 of this Plan.

     (b) Each grant shall specify an Option Price per share, which may not be
         less than the Market Value per Share on the Date of Grant.

     (c) Each grant shall specify whether the Option Price shall be payable (i)
         in cash or by check acceptable to the Company; (ii) by the actual or
         constructive transfer to the Company of nonforfeitable, unrestricted
         Common Shares owned by the Optionee (or other consideration authorized
         pursuant to subparagraph (d) below) having a value at the time of
         exercise equal to the total Option Price; or (iii) by a combination of
         such methods of payment.







     (d) The Board may determine, at or after the Date of Grant, that payment of
         the Option Price of any option (other than an Incentive Stock Option)
         may also be made in whole or in part in the form of Restricted Shares
         or other Common Shares that are forfeitable or subject to restrictions
         on transfer, Deferred Shares, Performance Shares (based, in each case,
         on the Market Value per Share on the date of exercise), other Option
         Rights (based on the Spread on the date of exercise) or Performance
         Units. Unless otherwise determined by the Board at or after the Date of
         Grant, whenever any Option Price is paid in whole or in part by means
         of any of the forms of consideration specified in this paragraph, the
         Common Shares received upon the exercise of the Option Rights shall be
         subject to such risk of forfeiture or restrictions on transfer as may
         correspond to any that apply to the consideration surrendered, but only
         to the extent of (i) the number of shares or Performance Shares;
         (ii) the Spread of any unexercisable portion of Option Rights; or
         (iii) the stated value of Performance Units surrendered.

     (e) Any grant may provide for deferred payment of the Option Price from the
         proceeds of sale through a bank or broker on a date satisfactory to the
         Company of some or all of the shares to which such exercise relates.

     (f) Any grant may provide for payment of the Option Price, at the election
         of the Optionee, in installments, with or without interest, upon terms
         determined by the Board.

     (g) Any grant may, at or after the Date of Grant, provide for the automatic
         grant of Reload Option Rights to an Optionee upon the exercise of
         Option Rights (including Reload Option Rights) using Common Shares or
         other consideration specified in paragraph (d) above. Reload Option
         Rights shall cover up to the number of Common Shares, Deferred Shares,
         Option Rights or Performance Shares (or the number of Common Shares
         having a value equal to the value of any Performance Units) surrendered
         to the Company upon any such exercise in payment of the Option Price or
         to meet any withholding obligations. Reload Options may have an Option
         Price that is no less than the applicable Market Value per Share at the
         time of exercise and shall be on such other terms as may be specified
         by the Directors, which may be the same as or different from those of
         the original Option Rights.

     (h) Successive grants may be made to the same Participant whether or not
         any Option Rights previously granted to such Participant remain
         unexercised.

     (i) Each grant shall specify the period or periods of continuous service by
         the Optionee with the Company or any Subsidiary following the grant
         which is necessary before the Option Rights or installments thereof
         will become exercisable and may provide for the earlier exercise of
         such Option Rights in the event of a Change in Control or other similar
         transaction or event.

     (j) Any grant of Option Rights may specify Management Objectives that must
         be achieved as a condition to the exercise of such rights.

     (k) Option Rights granted under this Plan may be (i) options, including,
         without limitation, Incentive Stock Options, that are intended to
         qualify under particular provisions of the Code; (ii) options that are
         not intended to so qualify; or (iii) combinations of the foregoing.

     (l) The Board may, at or after the Date of Grant of any Option Rights
         (other than Incentive Stock Options), provide for the payment of
         dividend equivalents to the Optionee on either a current or deferred or
         contingent basis or may provide that such equivalents shall be credited
         against the Option Price.

     (m) The exercise of an Option Right shall result in the cancellation on a
         share-for-share basis of any Tandem Appreciation Right authorized under
         Section 5 of this Plan.

     (n) No Option Right shall be exercisable more than ten years from the Date
         of Grant.

     (o) Each grant of Option Rights shall be evidenced by an agreement executed
         on behalf of the Company by an officer and delivered to the Optionee
         and containing such terms and provisions, consistent with this Plan, as
         the Board may approve.

5.   APPRECIATION RIGHTS.

     (a) The Board may also authorize the granting to any Optionee of Tandem
         Appreciation Rights in respect of Option Rights granted hereunder at
         any time prior to the exercise or termination of such related Option
         Rights; provided, however, that a Tandem Appreciation Right awarded in
         relation to an Incentive Stock Option must be granted concurrently with
         such Incentive Stock Option. A Tandem Appreciation Right shall be a
         right of the Optionee, exercisable by surrender of the related Option
         Right, to receive from the Company an amount determined by the Board,
         which shall be expressed as a percentage of the Spread (not exceeding
         100%) at the time of exercise.








     (b) The Board may also authorize the granting to any Participant of
         Free-Standing Appreciation Rights. A Free-Standing Appreciation Right
         shall be a right of the Participant to receive from the Company an
         amount determined by the Board, which shall be expressed as a
         percentage of the Spread (not exceeding 100%) at the time of exercise.

     (c) Each grant of Appreciation Rights may utilize any or all of the
         authorizations, and shall be subject to all of the requirements,
         contained in the following provisions:

         (i)   Any grant may specify that the amount payable on exercise of an
               Appreciation Right may be paid by the Company in cash, in Common
               Shares or in any combination thereof and may either grant to the
               Participant or retain in the Board the right to elect among those
               alternatives.

         (ii)  Any grant may specify that the amount payable on exercise of an
               Appreciation Right may not exceed a maximum specified by the
               Board at the Date of Grant.

         (iii) Any grant may specify waiting periods before exercise and
               permissible exercise dates or periods and shall provide that no
               Appreciation Right may be exercised except at a time when the
               related Option Right (if applicable) is also exercisable and at a
               time when the Spread is positive.

         (iv)  Any grant may specify that such Appreciation Right may be
               exercised only in the event of a Change in Control or other
               similar transaction or event.

         (v)   Each grant of Appreciation Rights shall be evidenced by an
               agreement executed on behalf of the Company by an officer and
               delivered to and accepted by the Participant, which agreement
               shall describe such Appreciation Rights, identify the related
               Option Rights (if applicable), state that such Appreciation
               Rights are subject to all the terms and conditions of this Plan,
               and contain such other terms and provisions, consistent with this
               Plan, as the Board may approve.

         (vi)  Any grant of Appreciation Rights may specify Management
               Objectives that must be achieved as a condition of the exercise
               of such rights.

6.   RESTRICTED SHARES. The Board may also authorize the grant or sale of
     Restricted Shares to Participants. Each such grant or sale may utilize any
     or all of the authorizations, and shall be subject to all of the
     requirements, contained in the following provisions:

     (a) Each such grant or sale shall constitute an immediate transfer of the
         ownership of Common Shares to the Participant in consideration of the
         performance of services, entitling such Participant to voting, dividend
         and other ownership rights, but subject to the substantial risk of
         forfeiture and restrictions on transfer hereinafter referred to.

     (b) Each such grant or sale may be made without additional consideration or
         in consideration of a payment by such Participant that is less than
         Market Value per Share at the Date of Grant.

     (c) Each such grant or sale shall provide that the Restricted Shares
         covered by such grant or sale shall be subject to a "substantial risk
         of forfeiture" within the meaning of Section 83 of the Code except (if
         the Board shall so determine) in the event of a Change in Control or
         other similar transaction or event, for a period of not less than three
         years to be determined by the Board at the Date of Grant.

     (d) Each such grant or sale shall provide that during the period for which
         such substantial risk of forfeiture is to continue, the transferability
         of the Restricted Shares shall be prohibited or restricted in the
         manner and to the extent prescribed by the Board at the Date of Grant
         (which restrictions may include, without limitation, rights of
         repurchase or first refusal in the Company or provisions subjecting the
         Restricted Shares to a continuing substantial risk of forfeiture in the
         hands of any transferee).

     (e) Any grant of Restricted Shares may specify Management Objectives which,
         if achieved, will result in termination or early termination of the
         restrictions applicable to such shares, and each grant may specify in
         respect of such specified Management Objectives, a minimum acceptable
         level of achievement and shall set forth a formula for determining the
         number of Restricted Shares on which restrictions will terminate if
         performance is at or above the minimum level, but falls short of full
         achievement of the specified Management Objectives.

     (f) Any such grant or sale of Restricted Shares may require that any or all
         dividends or other distributions paid thereon during the period of such
         restrictions be automatically deferred and reinvested in additional
         Restricted Shares, which may be subject to the same restrictions as the
         underlying award.







     (g) Each grant or sale of Restricted Shares shall be evidenced by an
         agreement executed on behalf of the Company by any officer and
         delivered to and accepted by the Participant and shall contain such
         terms and provisions, consistent with this Plan, as the Board may
         approve. Unless otherwise directed by the Board, all certificates
         representing Restricted Shares shall be held in custody by the Company
         until all restrictions thereon shall have lapsed, together with a stock
         power or powers executed by the Participant in whose name such
         certificates are registered, endorsed in blank and covering such
         shares.

7.   DEFERRED SHARES. The Board may also authorize the granting or sale of
     Deferred Shares to Participants. Each such grant or sale may utilize any or
     all of the authorizations, and shall be subject to all of the requirements,
     contained in the following provisions:

     (a) Each such grant or sale shall constitute the agreement by the Company
         to deliver Common Shares to the Participant in the future in
         consideration of the performance of services, but subject to the
         fulfillment of such conditions during the Deferral Period as the Board
         may specify.

     (b) Each such grant or sale may be made without additional consideration or
         in consideration of a payment by such Participant that is less than the
         Market Value per Share at the Date of Grant.

     (c) Each such grant or sale shall be subject to a Deferral Period of not
         less than one year, as determined by the Board at the Date of Grant
         except (if the Board shall so determine) in the event of a Change in
         Control or other similar transaction or event.

     (d) During the Deferral Period, the Participant shall have no right to
         transfer any rights under his or her award and shall have no rights of
         ownership in the Deferred Shares and shall have no right to vote them,
         but the Board may, at or after the Date of Grant, authorize the payment
         of dividend equivalents on such shares on either a current or deferred
         or contingent basis, either in cash or in additional Common Shares.

     (e) Each grant or sale of Deferred Shares shall be evidenced by an
         agreement executed on behalf of the Company by any officer and
         delivered to and accepted by the Participant and shall contain such
         terms and provisions, consistent with this Plan, as the Board may
         approve.

8.   PERFORMANCE SHARES AND PERFORMANCE UNITS. The Board may also authorize the
     granting of Performance Shares and Performance Units that will become
     payable to a Participant upon achievement of specified Management
     Objectives. Each such grant may utilize any or all of the authorizations,
     and shall be subject to all of the requirements, contained in the following
     provisions:

     (a) Each grant shall specify the number of Performance Shares or
         Performance Units to which it pertains, which number may be subject to
         adjustment to reflect changes in compensation or other factors;
         provided, however, that no such adjustment shall be made in the case of
         a Covered Employee.

     (b) The Performance Period with respect to each Performance Share or
         Performance Unit shall be such period of time (not less than three
         years, except in the event of a Change in Control or other similar
         transaction or event, if the Board shall so determine) commencing with
         the Date of Grant (as shall be determined by the Board at the time of
         grant).

     (c) Any grant of Performance Shares or Performance Units shall specify
         Management Objectives which, if achieved, will result in payment or
         early payment of the award, and each grant may specify in respect of
         such specified Management Objectives a minimum acceptable level of
         achievement and shall set forth a formula for determining the number of
         Performance Shares or Performance Units that will be earned if
         performance is at or above the minimum level, but falls short of full
         achievement of the specified Management Objectives. The grant of
         Performance Shares or Performance Units shall specify that, before the
         Performance Shares or Performance Units shall be earned and paid, the
         Board must certify that the Management Objectives have been satisfied.

     (d) Each grant shall specify a minimum acceptable level of achievement in
         respect of the specified Management Objectives below which no payment
         will be made and shall set forth a formula for determining the amount
         of payment to be made if performance is at or above such minimum but
         short of full achievement of the Management Objectives.

     (e) Each grant shall specify the time and manner of payment of Performance
         Shares or Performance Units which have been earned. Any grant may
         specify that the amount payable with respect thereto may be paid by the
         Company in cash, in Common Shares or in any combination thereof and may
         either grant to the Participant or retain in the Board the right to
         elect among those alternatives.







     (f) Any grant of Performance Shares may specify that the amount payable
         with respect thereto may not exceed a maximum specified by the Board at
         the Date of Grant. Any grant of Performance Units may specify that the
         amount payable or the number of Common Shares issued with respect
         thereto may not exceed maximums specified by the Board at the Date of
         Grant.

     (g) The Board may, at or after the Date of Grant of Performance Shares,
         provide for the payment of dividend equivalents to the holder thereof
         on either a current or deferred or contingent basis, either in cash or
         in additional Common Shares.

     (h) Each grant of Performance Shares or Performance Units shall be
         evidenced by an agreement executed on behalf of the Company by any
         officer and delivered to and accepted by the Participant, which
         agreement shall state that such Performance Shares or Performance Units
         are subject to all the terms and conditions of this Plan, and contain
         such other terms and provisions, consistent with this Plan, as the
         Board may approve.

9.   AWARDS TO NON-EMPLOYEE DIRECTORS. The Board may, from time to time and upon
     such terms and conditions as it may determine, authorize the granting to
     Non-Employee Directors of Option Rights and may also authorize the grant or
     sale of Restricted Shares to Non-Employee Directors.

     (a) Each grant of Option Rights awarded pursuant to this Section 9 shall be
         upon terms and conditions consistent with Section 4 of this Plan and
         shall be evidenced by an agreement in such form as shall be approved by
         the Board. Each grant shall specify an Option Price per share, which
         shall not be less than the Market Value per Share on the Date of Grant.
         Each such Option Right granted under the Plan shall expire not more
         than ten years from the Date of Grant and shall be subject to earlier
         termination as hereinafter provided. Unless otherwise determined by the
         Board, such Option Rights shall be subject to the following additional
         terms and conditions:

         (i)   Each grant shall specify the number of Common Shares to which it
               pertains, subject to the limitations set forth in Section 3 of
               this Plan.

         (ii)  Each such Option Right shall become exercisable to the extent of
               one-fourth of the number of shares covered thereby one year after
               the Date of Grant and to the extent of an additional one-fourth
               of such shares after each of the next three successive years
               thereafter. Such Option Rights shall become exercisable in full
               immediately in the event of a Change in Control or other similar
               transaction or event.

         (iii) In the event of the termination of service on the Board by the
               holder of any such Option Rights, other than by reason of
               disability or death, the then-outstanding Option Rights of such
               holder may be exercised to the extent that they would be
               exercisable on the date that is six months and one day after the
               date of such termination and shall expire six months and one day
               after such termination, or on their stated expiration date,
               whichever occurs first.

         (iv)  In the event of the death or disability of the holder of any such
               Option Rights, each of the then-outstanding Option Rights of such
               holder may be exercised at any time within one year after such
               death or disability, but in no event after the expiration date of
               the term of such Option Rights.

         (v)   If a Non-Employee Director subsequently becomes an employee of
               the Company or a Subsidiary while remaining a member of the
               Board, any Option Rights held under the Plan by such individual
               at the time of such commencement of employment shall not be
               affected thereby.

         (vi)  Option Rights may be exercised by a Non-Employee Director only
               upon payment to the Company in full of the Option Price of the
               Common Shares to be delivered. Such payment shall be made in cash
               or in Common Shares then-owned by the Optionee for at least six
               months, or in a combination of cash and such Common Shares.

         (vii) Common Shares acquired upon the exercise of these Option Rights
               may not be transferred for one year except in the case of the
               director's death, disability or other termination of service as a
               director.

     (b) Each grant or sale of Restricted Shares pursuant to this Section 9
         shall be upon terms and conditions consistent with Section 6 of this
         Plan.






10.  TRANSFERABILITY.

     (a) Except as otherwise determined by the Board on a case-by-case basis, no
         Option Right, Appreciation Right or other derivative security granted
         under the Plan shall be transferable by an Optionee other than by will
         or the laws of descent and distribution. Except as otherwise determined
         by the Board on a case-by-case basis, Option Rights and Appreciation
         Rights shall be exercisable during the Optionee's lifetime only by him
         or her or by his or her guardian or legal representative.

     (b) The Board may specify at the Date of Grant that part or all of the
         Common Shares that are (i) to be issued or transferred by the Company
         upon the exercise of Option Rights or Appreciation Rights, upon the
         termination of the Deferral Period applicable to Deferred Shares or
         upon payment under any grant of Performance Shares or Performance Units
         or (ii) no longer subject to the substantial risk of forfeiture and
         restrictions on transfer referred to in Section 6 of this Plan, shall
         be subject to further restrictions on transfer.

11.  ADJUSTMENTS. The Board may make or provide for such adjustments in the
     numbers of Common Shares covered by outstanding Option Rights, Appreciation
     Rights, Deferred Shares, and Performance Shares granted hereunder, in the
     prices per share applicable to such Option Rights and Appreciation Rights
     and in the kind of shares covered thereby, as the Board, in its sole
     discretion, exercised in good faith, may determine is equitably required to
     prevent dilution or enlargement of the rights of Participants or Optionees
     that otherwise would result from (a) any stock dividend, stock split,
     combination of shares, recapitalization or other change in the capital
     structure of the Company; or (b) any merger, consolidation, spin-off,
     split-off, spin-out, split-up, reorganization, partial or complete
     liquidation or other distribution of assets, issuance of rights or warrants
     to purchase securities; or (c) any other corporate transaction or event
     having an effect similar to any of the foregoing. Moreover, in the event of
     any such transaction or event, the Board, in its discretion, may provide in
     substitution for any or all outstanding awards under this Plan such
     alternative consideration as it, in good faith, may determine to be
     equitable in the circumstances and may require in connection therewith the
     surrender of all awards so replaced. The Board may also make or provide for
     such adjustments in the numbers of shares specified in Section 3 of this
     Plan as the Board, in its sole discretion, exercised in good faith, may
     determine is appropriate to reflect any transaction or event described in
     this Section 11.

12.  CHANGE IN CONTROL. For purposes of this Plan, a "Change in Control" shall
     mean if at any time any of the following events shall have occurred:

     (a) The Company is merged or consolidated or reorganized into or with
         another corporation or other legal person, and as a result of such
         merger, consolidation or reorganization less than a majority of the
         combined voting power of the then-outstanding securities of such
         corporation or person immediately after such transaction is held in the
         aggregate by the holders of Common Shares immediately prior to such
         transaction;

     (b) The Company sells or otherwise transfers all or substantially all of
         its assets to any other corporation or other legal person, and less
         than a majority of the combined voting power of the then-outstanding
         securities of such corporation or person immediately after such sale or
         transfer is held in the aggregate by the holders of Common Shares
         immediately prior to such sale or transfer;

     (c) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
         successor schedule, form or report), each as promulgated pursuant to
         the Exchange Act, disclosing that any person (as the term "person" is
         used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act) has
         become the beneficial owner (as the term "beneficial owner" is defined
         under Rule 13d-3 or any successor rule or regulation promulgated under
         the Exchange Act) of securities representing 20% or more of the Voting
         Power;

     (d) The Company files a report or proxy statement with the Securities and
         Exchange Commission pursuant to the Exchange Act disclosing in response
         to Form 8-K or Schedule 14A (or any successor schedule, form or report
         or item therein) that a change in control of the Company has or may
         have occurred or will or may occur in the future pursuant to any
         then-existing contract or transaction; or

     (e) If during any period of two consecutive years, individuals who at the
         beginning of any such period constitute the directors of the Company
         cease for any reason to constitute at least a majority thereof, unless
         the election, or the nomination for election by the Company's
         shareholders, of each director of the Company first elected during such
         period was approved by a vote of at least two-thirds of the directors
         of the Company then still in office who were directors of the Company
         at the beginning of any such period.






     Notwithstanding the foregoing provisions of Section 12(c) and (d) above, a
     "Change in Control" shall not be deemed to have occurred for purposes of
     this Plan (i) solely because (A) the Company; (B) a Subsidiary; (C) any
     Company-sponsored employee stock ownership plan or other employee benefit
     plan of the Company; or (D) any family member of Jacob Sapirstein
     (including lineal descendants, spouses of such descendants, the lineal
     descendants of any such spouses, the spouses of any such spouses' lineal
     descendants and trusts [including voting trusts]) either files or becomes
     obligated to file a report or proxy statement under or in response to
     Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any successor
     schedule, form or report or item therein) under the Exchange Act,
     disclosing beneficial ownership by it of shares, whether in excess of 20%
     of the Voting Power or otherwise, or because the Company reports that a
     Change in Control of the Company has or may have occurred or will or may
     occur in the future by reason of such beneficial ownership or (ii) solely
     because of a Change in Control of any Subsidiary.

13.  FRACTIONAL SHARES. The Company shall not be required to issue any
     fractional Common Shares pursuant to this Plan. The Board may provide for
     the elimination of fractions or for the settlement of fractions in cash.

14.  WITHHOLDING TAXES. To the extent that the Company is required to withhold
     federal, state, local or foreign taxes in connection with any payment made
     or benefit realized by a Participant or other person under this Plan, and
     the amounts available to the Company for such withholding are insufficient,
     it shall be a condition to the receipt of such payment or the realization
     of such benefit that the Participant or such other person make arrangements
     satisfactory to the Company for payment of the balance of such taxes
     required to be withheld, which arrangements (in the discretion of the
     Board) may include relinquishment of a portion of such benefit. The Company
     and a Participant or such other person may also make similar arrangements
     with respect to the payment of any taxes with respect to which withholding
     is not required.

15.  FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
     combination of grants under this Plan, the Board may provide for such
     special terms for awards to Participants who are foreign nationals or who
     are employed by the Company or any Subsidiary outside of the United States
     of America as the Board may consider necessary or appropriate to
     accommodate differences in local law, tax policy or custom. Moreover, the
     Board may approve such supplements to or amendments, restatements or
     alternative versions of this Plan as it may consider necessary or
     appropriate for such purposes, without thereby affecting the terms of this
     Plan as in effect for any other purpose, and the Secretary or other
     appropriate officer of the Company may certify any such document as having
     been approved and adopted in the same manner as this Plan. No such special
     terms, supplements, amendments or restatements, however, shall include any
     provisions that are inconsistent with the terms of this Plan as then in
     effect unless this Plan could have been amended to eliminate such
     inconsistency without further approval by the shareholders of the Company.

16.  ADMINISTRATION OF THE PLAN.

     (a) This Plan shall be administered by the Board, which may from time to
         time delegate all or any part of its authority under this Plan to a
         committee of the Board (or subcommittee thereof) consisting of not less
         than three Non-Employee Directors appointed by the Board. A majority of
         the committee (or subcommittee) shall constitute a quorum, and the
         action of the members of the committee (or subcommittee) present at any
         meeting at which a quorum is present, or acts unanimously approved in
         writing, shall be the acts of the committee (or subcommittee). To the
         extent of any such delegation, references in this Plan to the Board
         shall be deemed to be references to any such committee or subcommittee.

     (b) The interpretation and construction by the Board of any provision of
         this Plan or of any agreement, notification or document evidencing the
         grant of Option Rights, Appreciation Rights, Restricted Shares,
         Deferred Shares, Performance Shares or Performance Units and any
         determination by the Board pursuant to any provision of this Plan or of
         any such agreement, notification or document shall be final and
         conclusive. No member of the Board shall be liable for any such action
         or determination made in good faith.

17.  AMENDMENTS, ETC.

     (a) The Board may at any time and from time to time amend this Plan in
         whole or in part; provided, however, that any amendment which must be
         approved by the shareholders of the Company in order to comply with
         applicable law or the rules of the NASD or, if the Common Shares are
         not traded on NASDAQ, the principal national securities exchange upon
         which the Common Shares are traded or quoted, shall not be effective
         unless and until such approval has been obtained. Presentation of this
         Plan or any amendment hereof for shareholder approval shall not be
         construed to limit the Company's authority to offer similar or
         dissimilar benefits under other plans without shareholder approval.







     (b) The Board shall not, without the further approval of the shareholders
         of the Company, authorize the amendment of any outstanding Option Right
         to reduce the Option Price. Furthermore, no Option Right shall be
         cancelled and replaced with awards having a lower Option Price without
         further approval of the shareholders of the Company. This section 17(b)
         is intended to prohibit the repricing of "underwater" Option Rights and
         shall not be construed to prohibit the adjustments provided for in
         Section 11 of this Plan.

     (c) The Board also may permit Participants to elect to defer the issuance
         of Common Shares or the settlement of awards in cash under the Plan
         pursuant to such rules, procedures or programs as it may establish for
         purposes of this Plan. The Board also may provide that deferred
         issuances and settlements include the payment or crediting of dividend
         equivalents or interest on the deferral amounts.

     (d) The Board may condition the grant of any award or combination of awards
         authorized under this Plan on the surrender or deferral by the
         Participant of his or her right to receive a cash bonus or other
         compensation otherwise payable by the Company or a Subsidiary to the
         Participant.

     (e) In case of termination of employment by reason of death, disability or
         normal or early retirement, or in the case of hardship or other special
         circumstances, of a Participant who holds an Option Right or
         Appreciation Right not immediately exercisable in full, or any
         Restricted Shares as to which the substantial risk of forfeiture or the
         prohibition or restriction on transfer has not lapsed, or any Deferred
         Shares as to which the Deferral Period has not been completed, or any
         Performance Shares or Performance Units which have not been fully
         earned, or of a Participant who holds Common Shares subject to any
         transfer restriction imposed pursuant to Section 10(b) of this Plan,
         the Board may, in its sole discretion, accelerate the time at which
         such Option Right or Appreciation Right may be exercised or the time at
         which such substantial risk of forfeiture or prohibition or restriction
         on transfer will lapse or the time when such Deferral Period will end
         or the time at which such Performance Shares or Performance Units will
         be deemed to have been fully earned or the time when such transfer
         restriction will terminate or may waive any other limitation or
         requirement under any such award.

     (f) This Plan shall not confer upon any Participant any right with respect
         to continuance of employment or other service with the Company or any
         Subsidiary, nor shall it interfere in any way with any right the
         Company or any Subsidiary would otherwise have to terminate such
         Participant's employment or other service at any time.

     (g) To the extent that any provision of this Plan would prevent any Option
         Right that was intended to qualify as an Incentive Stock Option from
         qualifying as such, that provision shall be null and void with respect
         to such Option Right. Such provision, however, shall remain in effect
         for other Option Rights and there shall be no further effect on any
         provision of this Plan.

18.  TERMINATION. No grant shall be made under this Plan more than ten years
     after the date on which this Plan is first approved by the shareholders of
     the Company, but all grants made on or prior to such date shall continue in
     effect thereafter subject to the terms thereof and of this Plan.

EX-10.XVI

                                                               Exhibit (10)(xvi)


                                    AGREEMENT

         This Agreement ("Agreement") is made this 26th day of March 2002,
between William S. Meyer ("Meyer") and American Greetings Corporation ("AG" or
"Company").

         In consideration of the mutual promises contained herein, the parties
agree as follows:

         1. TERM. This Agreement will be in effect from March 26, 2002, until
March 31, 2006.

         2. POSITION. Meyer is employed by AG as the Company's Senior Vice
President and Chief Financial Officer. Meyer will perform any and all duties
commensurate with that position, including without limitation, assisting in the
hiring of a new Chief Financial Officer and orderly transition following that
hiring.

         3. END OF ACTIVE EMPLOYMENT. It is understood that Meyer's employment
with AG, whether pursuant to this Agreement or otherwise, is terminable at-will,
and may be terminated by either party at any time for any reason or for no
reason. If not sooner terminated, on April 1, 2003, Meyer will end his active
employment with AG ("End Date"). As of the End Date, Meyer will not be entitled
to or receive any benefits or privileges of employment or post-employment,
except for those specifically provided herein.

         4. COMPENSATION AND BENEFITS.

         a. PRE-END DATE. For the period March 26, 2002, through March 31, 2003,
         or until Meyer voluntarily resigns or is terminated for cause prior to
         March 31, 2003, the Company will pay Meyer as compensation for his
         services:

                  i. ANNUAL BASE. An annual base salary of $335,000, less
                  payroll taxes and other withholdings, which amount will be
                  reviewed and may be adjusted to an annual base salary of
                  $350,000 by Morry Weiss on September 1, 2002, based on Meyer's
                  performance;

                                       1


                  ii. BONUS. Meyer will participate in the FY03 bonus plan, the
                  actual pay out amount, if any, will be based upon a Senior
                  Vice-President level in enterprise management, and the
                  individual performance component, if any, will be calculated
                  at 100% of the FY03 target bonus for Senior Vice Presidents.
                  The actual pay out to Meyer will be less payroll taxes and
                  other withholdings;

                  iii. OPTIONS. Meyer will receive as of March 1, 2002, a grant
                  of options equal to the number of stock options granted to
                  Tier 3 Senior Vice Presidents. If a grant of stock options is
                  made generally to Senior Vice Presidents between the date of
                  this Agreement and July 1, 2003, Meyer will be granted such
                  number as are granted to other Senior Vice Presidents. If the
                  number of options granted depends in whole or in part on
                  Meyer's performance, he will receive such number of options as
                  are granted to Senior Vice Presidents who are eligible for
                  100% of their target bonus (currently these would be Tier 3
                  Senior Vice Presidents); and

                  iv. OTHER BENEFITS. The other regular benefits offered to
                  Senior Vice Presidents, including but not limited to, health,
                  life and disability, profit-sharing and 40l(k) benefits,
                  401(k) maximizer and profit-sharing restoration benefits.


         If Meyer voluntarily resigns or is terminated "for cause," as defined
         herein, between March 26, 2002, and March 31, 2003, he will no longer
         receive the compensation and benefits set forth under subparagraph 4.a.
         as of the effective date of such resignation or termination.

         b. POST-END DATE. If Meyer has not voluntarily resigned or been
         terminated for cause before April 1, 2003, the Company will pay Meyer
         or ensure that he will participate in the following:

                  i. SALARY CONTINUATION. From April 1, 2003, through March 31,
                  2006, an amount equal to Meyer's annual base salary as of
                  March 31, 2003, which shall not be lower than $335,000
                  annually, for each April 1-March 31 period through March 31,
                  2006, payable twice a month in the regular payroll cycle;

                  ii. HEALTH CARE. From April 1, 2003, through Meyer's 65th
                  birthday, AG will make available to Meyer and his wife, if
                  any, those health

                                       2


                  care alternatives made available by AG to active associates in
                  Meyer's then current area of residence. For this coverage,
                  Meyer will pay the full rate that would be paid by a pre-age
                  65 retiree who has Meyer's years of service as of March 31,
                  2003, and Meyer's actual age, for the health care coverage
                  chosen by Meyer. AG will pay to Meyer this same amount, less
                  the amount that an actively employed associate would pay for
                  this same coverage, grossed up by 40% to cover applicable
                  taxes. Following his 65th birthday, Meyer and his wife, if
                  any, will be eligible to participate in AG's health care plans
                  for AG retirees, if any, by paying the full amount for such
                  coverage for post age 65 retirees. These obligations by both
                  parties will be made as adjustments to the amounts paid to
                  Meyer hereunder. If these obligations cannot be satisfied by
                  such payments, Meyer shall promptly pay AG the balance due;

                  iii. OTHER PLANS. From April 1, 2003, through March 31, 2006,
                  participation in the life insurance coverages, including but
                  not limited to, the current basic and executive life
                  coverages, if and to the extent that any is available to
                  Senior Vice Presidents generally, with AG paying the full cost
                  of such coverages;

                  iv. SERP. Supplemental Executive Retirement Plan benefits
                  accorded participants who have vested and are age 55 or older
                  when they retire, payable pursuant to the terms of the plan as
                  of March 31, 2006; and

                  v. CAR. From April 1, 2003, until February 18, 2005, Meyer
                  will be entitled to use his existing company car. During this
                  time, AG will make all lease payments, insure the car and make
                  material repairs, and Meyer will pay for all gas and other
                  routine maintenance. On or before February 18, 2005, Meyer may
                  purchase the car from AG, free and clear of all liens and
                  encumbrances, upon payment of $28,574.00.

         If between April 1, 2003, and March 31, 2006, Meyer breaches the
         provisions in paragraphs 5. and/or 6. below, the payments and benefits
         set forth in paragraph 4.b.(i) and (ii) shall cease and any such future
         payments and benefits shall be forfeited.

                                       3


         The compensation and benefits set forth above in subparagraphs
         4.b.i.-v. constitutes the complete list of post-End Date compensation
         and benefits due, payable and available to Meyer.

         Meyer will not be deemed to have "voluntarily resigned" should he
         consent to a written request by AG to cease performing the duties and
         obligations of his position prior to April 1, 2003.

         c. STOCK OPTIONS VESTING AND EXERCISABILITY. All options in Company
         stock granted prior to and on July 1, 2003, shall vest on April 1,
         2006, if they have not already vested by April 1, 2006. All such vested
         options shall be exercisable for ten (10) years from the date of grant,
         unless the plan under which they were granted provides for a shorter
         period of exercisability after April 1, 2006.

         d. FOR CAUSE. "For cause" as used in this Agreement is defined as
         termination as a result of Meyer's personal dishonesty, gross
         incompetence, willful misconduct, breach of fiduciary duty involving
         personal profit, material and willful violation of any law, rule,
         regulation or AG policy (other than traffic violations or similar
         offenses) or final cease-and-desist order, or material breach of this
         Agreement.


         5. CONFIDENTIAL AND TRADE SECRET INFORMATION. Meyer acknowledges that
in the course of his employment with AG, he has and will have access to
confidential information and trade secrets, oral or written ("Confidential
Information"), misuse or disclosure of which could adversely affect AG's
business. Meyer agrees that he will not, either during his employment with AG or
at any time thereafter, use for himself or others, or disclose or convey to
others (except as is necessary in the ordinary course of his employment) any of
AG's Confidential Information. This paragraph shall not prohibit disclosure of
information, which has become public, unless it became public through Meyer's
breach of this Agreement.

         6. NON-COMPETITION; NON-DISPARAGEMENT. In consideration of AG's
agreement to employ Meyer under the terms of this Agreement, Meyer agrees that
he will not for the following periods engage anywhere in the United States or
Canada, directly or indirectly, in any business activities, either as principal,
agent or consultant or through any corporation, firm or organization in which he
may be an officer, director, employee, substantial shareholder, partner, member
or be otherwise affiliated that are in competition with AG's businesses at such
time:

                                       4


(i) for the period of his active employment from March 26, 2002, until March 31,
2003, and (ii) during the period he is receiving monies under paragraph 4.b.(i).
Further, Meyer agrees that at no time during or following his employment with AG
will he directly or indirectly disparage AG, its affiliates and subsidiaries or
any of AG's directors, officers, employees, agents and representatives.
Notwithstanding the provisions of subparagraph 8.d., AG may seek injunctive or
other equitable relief in any court of competent jurisdiction if Meyer breaches
the provisions of this paragraph 6.

         7. CONFLICT OF INTEREST. Meyer represents and warrants that he has no
interest or obligation that is inconsistent with or in conflict with this
Agreement or that would prevent, limit or impair his performance of any part of
this Agreement.

         8. MISCELLANEOUS.

         a. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement constitutes the
         entire understanding between Meyer and AG relating to the subject
         matter contained herein and effective March 26, 2002, this Agreement
         supersedes any previous oral or written agreement(s) and
         understandings, including without limitation, the employment agreement,
         dated December 1, 1987, between AG and Meyer. This Agreement may not be
         changed, modified, or altered without the express written consent of
         Meyer and AG.

         b. NO WAIVER. Either party's failure to insist upon strict adherence to
         any term of this Agreement on any occasion shall not be considered a
         waiver or deprive the other party of his/its rights thereafter to
         insist upon strict adherence to that term or any other term of this
         Agreement.

         c. SEVERABILITY. If any part or section of this Agreement is found to
         be contrary to law or unenforceable, the remainder shall remain in
         force and effect.

         d. GOVERNING LAW; DISPUTES. This Agreement will be governed by and
         construed in accordance with the law of the State of Ohio. Any disputes
         regarding this Agreement that cannot be resolved amicably shall be
         resolved through AG's "Solutions" alternative dispute resolution
         program or its successor, if any. If such dispute cannot be resolved
         through mediation under that program, it shall be resolved by binding
         arbitration in Cleveland in accordance with the applicable rules of the
         American Arbitration Association.

                                       5


         e. RETURN OF AG PROPERTY. Upon Meyer's retirement or termination,
         regardless of the reason, Meyer will promptly surrender to AG any of
         its property, except for his company car, in Meyer's possession
         including, but not limited to, all correspondence, memoranda, notes,
         records, reports, plans, computer printouts, reproductions, slides,
         electronic data, and any other papers or items, and copies thereof,
         received or made by Meyer in connection with his employment with AG.

         9. REVIEW BY ADVISORS. Meyer acknowledges that he has had ample
opportunity to consult with his legal and financial advisors, has carefully
considered this Agreement, and fully understands its provisions. He has not
relied on any other representations or statements, written or oral.


         10. SURVIVAL. The following paragraphs shall survive the expiration or
termination of this Agreement: subparagraphs 4.b.ii, 4.b.iv. and paragraphs 5,
6, and 8.



AMERICAN GREETINGS CORPORATION              WILLIAM S. MEYER

BY:  _______________________________        __________________________________

NAME:  ____________________________

TITLE:  ____________________________

                                       6

EX-10.XVII

                                                              Exhibit (10)(xvii)


                                              C O N F I D E N T A L
                                              ---------------------


                              EMPLOYMENT AGREEMENT

         This Agreement ("Agreement") is made this 1st day of March 2001,
between William R. Mason ("Mason") and American Greetings Corporation ("AG" or
"Company").

         In consideration of the mutual promises contained herein, the parties
agree as follows:

         1. POSITION: Mason is employed by AG as the Company's Senior Vice
President, Sales. Mason will perform any and all duties commensurate with that
position.

         2. TERM: This Agreement will be in effect for "rolling" three (3) year
terms commencing March 1, 2001; successive three (3) year terms will commence on
March 2, 2001, and on each day thereafter, and will terminate three (3) years
from each commencement date.

         3. TERMINATION: It is understood that Mason's employment with AG,
whether pursuant to this Agreement or otherwise, is terminable at-will, and may
be terminated by either party at any time for any reason or for no reason. This
Agreement will end on the date that Mason ends his employment with AG
("Termination Date"). As of the Termination Date, Mason will no longer be an
employee of AG and will not be entitled to or receive any benefits or privileges
of employment, except for those provided herein and those post-employment
benefits generally afforded such former employees under AG's then current
policies and procedures.

         4. COMPENSATION: During the term of this Agreement, in addition to the
other regular benefits offered to Executive Officers (as designated by the AG
Board of Directors or otherwise), including but not limited to, profit sharing,
40l(k), stock option plans, health benefits and life insurance, Mason will
receive the following salary and benefits:

              a. Beginning on March 1, 2001, Mason will be paid an annual base
salary of $299,304, plus an annual payment of $25,000, for a total of

                                       1


$324,304 considered base pay for purposes of determining AG's contribution to
Mason's account in the Retirement Profit Sharing and Savings Plan and for
purposes of his Supplemental Executive Retirement Plan account, but is not
considered base pay for purposes of determining the one year bonus and three
year bonus under the one and three year bonus plans referenced in subparagraphs
4.b. and 4.c. below or other bonuses under successor or additional plans, less
payroll taxes and other withholdings as required by law ("Base Salary"). Such
Base Salary will be reviewed at or around the end of each AG fiscal year
thereafter and at that time may be changed at the discretion of AG's President.
Unless Mason voluntarily resigns or is terminated "for cause," the then current
Base Salary will be paid for three years from the Termination Date payable in
installments on the same dates as Mason's Base Salary was paid immediately
before the Termination Date, but Mason will not be eligible for bonuses under
subparagraphs 4.b. or 4.c. below. Notwithstanding the foregoing, if Mason either
breaches the non-competition provisions in paragraph 6 below or otherwise
engages in any business activities that are in competition with AG's businesses
as defined in paragraph 6 below during such three year payment period, payments
of his Base Salary hereunder shall cease and any future payments shall be
forfeited. If Mason voluntarily resigns, he will receive no further Base Salary
or bonuses under subparagraphs 4.b. or 4.c. below after the Termination Date.
"For Cause" is defined as termination as a result of Mason's personal
dishonesty, incompetence, willful misconduct, any breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties, willful
violation of any law, rule, or regulation (other than traffic violations or
similar offenses) or final cease-and-desist order, or material breach of
paragraphs 5, 6, 7, or 8(e) of this Agreement.

                  b. For each AG fiscal year in which AG pays its officers and
certain key employees a one year cash bonus pursuant to the Company's regular
Executive Incentive Compensation Plan, Mason will receive such a bonus based
upon a target bonus of 35% of his then current annual base salary excluding the
annual payment of $25,000 set forth in the first sentence of this subparagraph
and the terms of such plan.

                  c. Mason shall further be eligible to receive a cash bonus, if
and when paid, under the terms of AG's current three year Special Bonus Plan or
other future long-term executive incentive compensation plans for officers and
certain key employees, in accordance with its/their terms. If the Special Bonus
Plan is not renewed or a similar plan is not instituted at the end of the
current three year Special Bonus Plan period, AG agrees to review, but not
necessarily act upon, the need for such a bonus as an element of Mason's
compensation

                                       2

package.

                  d. During the term of this Agreement, Mason shall own at
least 5,000 shares of AG Common Stock.

         5. CONFIDENTIAL AND TRADE SECRET INFORMATION: Mason acknowledges that
in the course of his employment with AG he has and will have access to
confidential information and trade secrets, oral or written which a reasonable
person would believe to be confidential to or a trade secret of AG
("Confidential Information"), misuse or disclosure of which could adversely
affect AG's business. Mason agrees that he will not, either during his
employment with AG or at any time thereafter, use for himself or others, or
disclose or convey to others (except as is necessary in the ordinary course of
his employment) any of AG's Confidential Information. This paragraph shall not
prohibit disclosure of information which has become public, unless it became
public through Mason's breach of this Agreement.

         6. NON-COMPETITION; NON-DISPARAGEMENT: In consideration of AG's
agreement to employ Mason under the terms of this Agreement, Mason agrees that
he will not for the following periods engage anywhere in the United States or
Canada, directly or indirectly, in any business activities, either as principal,
agent or consultant or through any corporation, firm or organization in which he
may be an officer, director, employee, substantial shareholder, partner, member
or be otherwise affiliated that are in competition with AG's businesses at such
time: (i) for the period of his employment hereunder, (ii) and for a period of
one (1) year after the Termination Date; provided, however, that unless Mason
voluntarily resigns or is terminated "For Cause" in which case the one (1) year
period runs from the Termination Date, the one (1) year period in subparagraph
(ii) above shall lapse on the thirtieth (30th) day after the date that Mason
gives written notice to AG that a payment is due Mason under paragraph 4.a.
above which remains unpaid on such thirtieth (30th) day. Further, Mason agrees
that at no time during or following his employment with AG will he directly or
indirectly disparage AG, its affiliates and subsidiaries or any of AG's
directors, officers, employees, agents and representatives.

         7. CONFLICT OF INTEREST: Mason represents and warrants that he has no
interest or obligation that is inconsistent with or in conflict with this
Agreement or that would prevent, limit or impair his performance of any part of
this Agreement.

8.       MISCELLANEOUS:

                                       3


                  a. This Agreement constitutes the entire understanding between
Mason and AG relating to the subject matter contained herein and effective March
1, 2001, this Agreement supersedes any previous oral or written agreement(s) and
understandings, including without limitation, the employment agreement, dated
July 1, 1984, between AG and Mason. This Agreement may not be changed, modified,
or altered without the express written consent of Mason and AG.

                  b. Either party's failure to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver or
deprive the other party of his/its rights thereafter to insist upon strict
adherence to that term or any other term of this Agreement.

                  c. If any part or section of this Agreement is found to be
contrary to law or unenforceable, the remainder shall remain in force and
effect.

                  d. This Agreement will be governed by and construed in
accordance with the law of the State of Ohio. Any disputes regarding this
Agreement that cannot be resolved amicably shall be resolved through AG's
"Solutions" alternative dispute resolution program or its successor, if any. If
such dispute cannot be resolved through mediation under that program, except as
otherwise provided under the terms of the Solutions program, it shall be
resolved by binding arbitration in Cleveland in accordance with the applicable
rules of the American Arbitration Association.

                  e. Upon Mason's termination, regardless of the reason, Mason
will promptly surrender to AG any of its property in Mason's possession
including, but not limited to, all correspondence, memoranda, notes, records,
reports, plans, computer printouts, reproductions, slides, and any other papers
or items, and copies of papers and other items, received or made by Mason in
connection with his employment with AG.

         9. REVIEW BY ADVISORS: Mason acknowledges that he has had ample
opportunity to consult with his legal and financial advisors, has carefully
considered this Agreement, and fully understands its provisions. He has not
relied on any other representations or statements, written or oral.


                                       4




         10. SURVIVAL: The following paragraphs shall survive the expiration or
termination of this Agreement; 3, 4.a., 5, 6, 7 and 8.



AMERICAN GREETINGS CORPORATION              WILLIAM R. MASON

BY:  _______________________________        __________________________________

NAME:  ____________________________         __________________________________

TITLE:  ____________________________        __________________________________

DATE:  _____________________________        __________________________________


                                       5

EX-21

                                                                      EXHIBIT 21


                         AMERICAN GREETINGS CORPORATION
                         Subsidiaries of the Registrant


                                                       State / Jurisdiction
               Subsidiary                               of Incorporation
- ----------------------------------------         -------------------------------

A.G. Industries, Inc.                                      North Carolina
American Greetings Service Corp.                           Delaware
AGC Funding Corporation                                    Delaware
Carlton Cards (Canada) Limited                             Canada
Carlton Cards (United Kingdom) Limited                     United Kingdom
Carlton Cards Retail, Inc.                                 Connecticut
AmericanGreetings.com                                      Ohio
Gibson Greetings, Inc.                                     Ohio
Hanson White Ltd.                                          United Kingdom
John Sands (Australia) Ltd.                                Delaware
John Sands (New Zealand) Ltd.                              Delaware
Magnivision, Inc.                                          Delaware
Plus Mark, Inc.                                            Ohio

EX-23

                                                                      EXHIBIT 23





                         Consent of Independent Auditors


We consent to the incorporation by reference in (i) Post-Effective Amendment
Number 1 dated May 27, 1986 to Registration Statement No. 2-89471 on Form S-3,
(ii) Post-Effective Amendment Number 1 dated May 31, 1984 to Registration
Statement No. 2-84911 on Form S-8, (iii) Registration Statement No. 33-975 on
Form S-8 dated November 7, 1985, (iv) Registration Statement No. 33-16180 on
Form S-8 dated July 31, 1987, (v) Registration Statement No. 33-45673 on Form
S-8 dated February 4, 1992, (vi) Registration Statement No. 33-58582 on Form S-8
dated February 22, 1993, (vii) Registration Statement No. 33-61037 on form S-8
dated July 14, 1995, (viii) Registration Statement No. 33-08123 on Form S-8
dated July 15, 1996, (ix) Registration Statement No. 333-41912 on Form S-8 dated
July 21, 2000, (x) Registration Statement No. 333-65534 dated July 20, 2001 on
Form S-8 and (xi) Amendment No. 1 dated October 19, 2001 to Registration
Statement No. 333-68526 on Form S-3 of our report dated March 26, 2002, with
respect to the consolidated financial statements and schedule of American
Greetings Corporation included in its Annual Report (Form 10-K) for the fiscal
year ended February 28, 2002.



                                             /s/ Ernst & Young LLP

Cleveland, Ohio
May 22, 2002