SC TO-I

As filed with the Securities and Exchange Commission on April 6, 2006

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE TO

Tender Offer Statement under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934

American Greetings Corporation

(Name of Subject Company (issuer))

American Greetings Corporation (Issuer)

(Name of Filing Person (offeror, issuer or other person))

7.00% Convertible Subordinated Notes due July 15, 2006

(Title of Class of Securities)

026375AH8

026375AJ4

(CUSIP Numbers of Class of Securities)

Catherine M. Kilbane, Esq.

Senior Vice President, General Counsel And Secretary

American Greetings Corporation

One American Road

Cleveland, Oh 44144

(216) 252-7300

(Name, Address and Telephone Number of Person Authorized to Receive Notices

and Communications on Behalf of the Person(s) Filing Statement)

Copy to:

John M. Gherlein, Esq.

Baker & Hostetler LLP

3200 National City Center

1900 East 9th St.

Cleveland, OH 44114-3485

CALCULATION OF FILING FEE

Transaction Valuation*	Amount of Filing Fee**
$175,000,000	$18,725.00

* For the purpose of calculating the filing fee only, this amount is based on the exchange of $175,000,000 of the existing and outstanding 7.00% Convertible Subordinated Notes due July 15, 2006 for $175,000,000 of new 7.00% Convertible Subordinated Notes due July 15, 2006.

** The amount of the filing fee calculated in accordance with the Securities Exchange Act of 1934, as amended, equals $107.00 for each $1,000,000 of value.

¨ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

Amount Previously Paid: ________________________

Form or Registration No: ________________________

Filing Party:  __________________________________

Date Filed: ___________________________________

¨ Check box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes to designate any transactions to which this statement relates:

¨ third party tender offer subject to Rule 14d-1

x issuer tender offer subject to Rule 13e-4

¨ going-private transaction subject to Rule l3e-3

¨ amendment to Schedule 13D under Rule 13d-2

Check the following box if the filing is a final amendment reporting the results of the tender offer.  ¨

This Issuer Tender Offer Statement on Schedule TO relates to an offer (the “Exchange Offer”) by American Greetings Corporation, an Ohio corporation (the “Company”) to exchange $1,000 principal amount of the Company’s 7.00% Convertible Subordinated Notes due July 15, 2006 (the “New Notes”) for each $1,000 principal amount of the Company’s outstanding 7.00% Convertible Subordinated Notes due July 15, 2006 (the “Old Notes”) validly tendered and accepted.

The Exchange Offer is made upon the terms and subject to the conditions contained in the offering memorandum dated April 6, 2006 (as may be amended and supplemented from time to time, the “Offering Memorandum”) and the related Letter of Transmittal, which are attached as exhibits hereto and are incorporated herein by reference.

This Issuer Tender Offer Statement on Schedule TO is being filed in satisfaction of the reporting requirements of Rule 13e-4(c)(2) promulgated under the Securities Exchange Act of 1934, as amended.

Item 1. Summary Term Sheet.

The information under the heading “Summary Term Sheet” in the Offering Memorandum is incorporated herein by reference in response to this Item 1.

Item 2. Subject Company Information.

a. Name and Address. The issuer of the securities subject to the Exchange Offer is American Greetings Corporation, an Ohio corporation. Its principal executive offices are located at One American Road, Cleveland, Ohio, 44144-1398. Its telephone number is (216) 252-7300.

b. Securities. The subject class of equity securities is the 7.00% Convertible Subordinated Notes due July 15, 2006 (the “Old Notes”) of American Greetings Corporation. As of the date of this Schedule, there was outstanding approximately $175,000,000 aggregate principal amount of Old Notes.

c. Trading Market and Price. The Old Notes are not listed on any national securities exchange or authorized to be quoted in any inter-dealer quotation system of any national securities association. Certain institutions and securities dealers do provide quotations for and engage in transactions in the Old Notes. However, there is no established trading market for the Old Notes, other than through these limited or sporadic quotations.

Item 3. Identity and Background of Filing Person.

The Company is the filing person. The business address and telephone number of the Company are set forth under Item 2(a) above.

The names of the executive officers and directors of the Company who are the persons specified in Instruction C to Schedule TO are set forth below:

Morry Weiss	Chairman
Scott S. Cowen	Director
Joseph S. Hardin, Jr.	Director
Stephen R. Hardis	Director
Harriet Mouchly-Weiss	Director
Charles A. Ratner	Director
Jerry Sue Thornton	Director
Zev Weiss	Director and Chief Executive Officer
Jeffrey Weiss	Director and President and Chief Operating Officer

John S. N. Charlton	Senior Vice President – International
Michael L. Goulder	Senior Vice President – Supply Chain
Thomas H. Johnston	Senior Vice President – President/Carlton Cards Retail
Catherine M. Kilbane	Senior Vice President, General Counsel and Secretary
William R. Mason	Senior Vice President – Wal-Mart
Michael J. Merriman, Jr.	Senior Vice President, Chief Financial Officer
Erwin Weiss	Senior Vice President – Seasonal Specialty
Steven S. Willensky	Senior Vice President – Sales and Marketing
Joseph B. Cipollone	Vice President, Corporate Controller
Josef Mandelbaum	Vice President – CEO AG Properties
Brian T. McGrath	Vice President – Human Resources
Douglas W. Rommel	Vice President – Information Resources
Stephen J. Smith	Vice President, Treasurer and Investor Relations

The address of each of the above individuals is: c/o American Greetings Corporation, One American Road, Cleveland, OH 44144-2398 and each such person’s telephone number is (216) 252-7300.

Item 4. Terms of the Transaction.

a. Material Terms. The information set forth in the Offering Memorandum, most specifically under the sections captioned “The Exchange Offer”, “Description of the New Notes” and “Certain United States Federal Income Tax Consequences,” is incorporated herein by reference.

b. Purchases. Old Notes will not be purchased from any officer, director or other affiliate of American Greetings Corporation.

Item 5. Past Contacts, Transactions, Negotiations and Agreements.

None.

Item 6. Purposes of the Transaction and Plans or Proposals.

a. Purposes. The information set forth in the Offering Memorandum, most specifically under the sections captioned “Summary Term Sheet—Why are we making the Exchange Offer?” and “The Exchange Offer,” is incorporated herein by reference.

b. Use of Securities Acquired. The Old Notes acquired pursuant to the Exchange Offer will be retired.

c. Plans. Not applicable.

Item 7. Source and Amount of Funds or Other Consideration.

a. Source of Funds. The information set forth in the Offering Memorandum, most specifically under the section captioned “The Exchange Offer,” is incorporated herein by reference.

b. Conditions. The information set forth in the Offering Memorandum, most specifically under the section captioned “The Exchange Offer,” is incorporated herein by reference.

d. Borrowed Funds. Not applicable.

Item 8. Interest in Securities of the Subject Company.

a. Securities Ownership. None of the persons named in Item 3 above (in response to Item 1003 of Regulation M-A), nor any associates or majority-owned subsidiaries of such persons, beneficially owns any of the subject securities.

b. Securities Transactions. There have been no transactions in the subject securities during the past 60 days by any of the persons listed in Instruction 1 to Regulation M-A 1008(b).

Item 9. Persons/Assets, Retained, Employed, Compensated or Used.

No persons or classes of persons have been directly or indirectly employed, retained or are to be compensated to make solicitations or recommendations in connection with the Exchange Offer.

Item 10. Financial Statements.

a. Financial Information. The following financial statements and financial information are incorporated herein by reference:

(1) The audited consolidated financial statements of American Greetings Corporation set forth in American Greetings Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005.

(2) The unaudited condensed consolidated financial statements of American Greetings Corporation set forth in American Greetings Corporation’s Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 2005.

(3) The information set forth in the Offering Memorandum, most specifically in the section captioned “Consolidated Ratio of Earnings to Fixed Charges.”

(4) The information set forth in the Offering Memorandum, most specifically in the section captioned “Book Value Per Class A Common Share.”

Copies of the financial statements incorporated herein by reference pursuant to clauses (1) and (2) of this paragraph 10(a) can be obtained as provided in the section of the Offering Memorandum captioned “Where You Can Find More Information.”

b. Pro Forma Information. Not material.

Item 11. Additional Information.

a. Agreements, Regulatory Requirements and Legal Proceedings.

(1) None.

(2) The Company is required to qualify under the Trust Indenture Act of 1939, as amended, the indenture pursuant to which the New Notes will be issued.

(3) Not applicable.

(4) Not applicable.

(5) Not applicable.

b. Other Material Information. None.

Item 12. Exhibits.

Exhibit No.	Description
(a)(1)(i)	Offering Memorandum, dated April 6, 2006.
(a)(1)(ii)	Letter of Transmittal, dated April 6, 2006.
(a)(1)(iii)	Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(1)(iv)	Item 2.02 of the Current Report on Form 8-K filed by the Company with the SEC on April 6, 2006 and incorporated herein by reference.
(a)(2)	None.
(a)(3)	None.
(a)(4)	None.
(a)(5)	None.
(b)	None.
(d)	Form of Indenture of American Greetings Corporation as Issuer for the New Notes.
(g)	None.
(h)	None.

Item 13. Information Required by Schedule 13E-3.

Not applicable.

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

American Greetings Corporation
By:	/s/Catherine M. Kilbane
Name:	Catherine M. Kilbane
Title:	Senior Vice President, General Counsel and Secretary

Dated: April 6, 2006

EX-99.(A).(1).(I)

Exhibit (a)(1)(i)

Offering Memorandum

American Greetings Corporation

Exchange Offer for all Outstanding

7.00% Convertible Subordinated Notes due July 15, 2006

(CUSIP Nos. 026375AH8 and 026375AJ4)

The Exchange Offer will expire at 5:00 p.m., New York City time, on May 12, 2006

unless extended or earlier terminated by us (the “Expiration Date”).

Terms of the Exchange Offer

We are offering to exchange new 7.00% Convertible Subordinated Notes due July 15, 2006 (“New Notes”) for all of our currently outstanding 7.00% Convertible Subordinated Notes due July 15, 2006 (“Old Notes”).

The terms of the New Notes will be identical in all material respects to the terms of the Old Notes, except that the New Notes will include a net share settlement feature that will require us upon conversion to pay cash up to the principal amount of the New Notes and pay any conversion consideration in excess of the principal amount in our Class A common shares. The Old Notes require us to settle all conversions in Class A common shares only. The New Notes will have the same financial terms and covenants as the Old Notes.

Subject to the satisfaction or waiver of specified conditions described in this offering memorandum and the related Letter of Transmittal (which together constitute, and we refer to herein as, the “Exchange Offer”), we will exchange the New Notes for all Old Notes that are validly tendered and not withdrawn by you at any time prior to the Expiration Date as described in this offering memorandum. If the Exchange Offer is consummated, holders who tender their Old Notes and do not withdraw them prior to the consummation will receive an exchange fee in cash in an amount equal to $3.75 per $1,000 of principal amount of the Old Notes that they tender. Each $1,000 of Old Notes tendered will be exchanged for $1,000 principal amount of New Notes. Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer.

Any outstanding Old Notes not validly tendered will not contain the additional terms of the New Notes and such holders of the Old Notes not validly tendered will not receive an exchange fee.

The New Notes will be freely transferable by any person that is not our affiliate and not subject to any transfer restrictions. Similarly, all of our Class A common shares issuable upon conversion of the New Notes will be freely transferable and not subject to any transfer restrictions.

The New Notes will not be listed on any securities exchange or included in any automatic quotation system.

We will not receive any proceeds for the exchange. We reserve the right to extend or amend the Exchange Offer in our sole discretion. We may terminate the Exchange Offer if any of the conditions listed in “The Exchange Offer—Conditions” occur, or the occurrence thereof has not been waived by us in our sole discretion. The Exchange Offer is open to all holders of Old Notes and, as more fully explained in this offering memorandum, is subject to customary conditions.

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 11 OF THIS OFFERING MEMORANDUM BEFORE DECIDING TO TENDER YOUR OLD NOTES.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or this transaction, passed upon the merits or fairness of this transaction or determined if this offering memorandum is truthful or complete. Any representation to the contrary is a criminal offense.

The Information Agent for the Exchange Offer is:

Global Bondholder Services Corporation

The date of this offering memorandum is April 6, 2006

ABOUT THIS OFFERING MEMORANDUM

You should rely only on the information contained in this offering memorandum or to which we have referred you. We have not authorized anyone to provide you with information that is different or to make any representations about us or the transaction we discuss in this offering memorandum. If you receive information about these matters that is not included in this offering memorandum, you must not rely on that information. This offering memorandum does not constitute an offer to sell or a solicitation of an offer to buy to any person in any jurisdiction where it is unlawful to make such an offer or solicitation. The Exchange Offer is not being made to, nor will tenders be accepted from or on behalf of, holders in any jurisdiction in which the making or acceptance of the Exchange Offer would not be in compliance with the laws of such jurisdiction. However, we may, in our sole judgment, take such action as we may deem necessary to extend the Exchange Offer to holders in such jurisdiction. The information in this document may only be accurate on the date of this document.

TABLE OF CONTENTS

	Page
Where You Can Find More Information	ii
Incorporation by Reference	iii
Forward-Looking Statements and Information	iv
Summary Term Sheet	1
Summary Description of Our Business	5
Summary Description of the Notes	6
Summary Historical Consolidated Financial and Operating Data	9
Risk Factors	11
Use of Proceeds	22
Capitalization	22
Consolidated Ratio of Earnings to Fixed Charges	23
Book Value Per Class A Common Share	23
Price Range and Dividend Policy of Our Class A Common Shares	23
Description of the New Notes	25
The Exchange Offer	40
Description of Our Capital Stock	48
Certain United States Federal Income Tax Consequences	50
Audited Consolidated Financial Statements	55

We are relying on Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), to exempt the Exchange Offer from the registration requirements of the Securities Act. Section 3(a)(9) provides that the registration requirements of the Securities Act will not apply to “any security exchanged by the issuer with its existing security holders exclusively where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.” We have no contract, arrangement or understanding relating to, and will not, directly or indirectly, pay any commission or other remuneration to any broker, dealer, salesperson, agent or

i

any other person for soliciting tenders in the Exchange Offer. Regular employees of our company, who will not receive additional compensation therefor, may solicit tenders from holders. In addition neither our financial advisor nor any broker, dealer, salesperson, agent or any other person, is engaged or authorized to express any statement, opinion, recommendation or judgment with respect to the relative merits and risks of the Exchange Offer. You must comply with all applicable laws and regulations in force in any applicable jurisdiction, and you must obtain any consent, approval or permission required for the purchase, offer or sale by you of the New Notes under the laws and regulations in force in the jurisdiction to which you are subject or in which you make such purchase, offer or sale, and we will not have any responsibility therefor. We are not making any representation to any participant in this offering regarding the legality of this exchange under any investment or similar laws or regulations.

No dealer, salesman or other person has been authorized to give any information or to make any representations with respect to the matters described in this offering memorandum, other than those contained in this offering memorandum (including the documents incorporated by reference into this offering memorandum). If given or made, such information or representations may not be relied upon as having been authorized by us.

This offering memorandum is submitted to holders for informational use solely in connection with their consideration of the Exchange Offer described in this offering memorandum. Its use for any other purpose is not authorized. The offering memorandum may not be copied or reproduced in whole or in part nor may it be distributed or any of its contents be disclosed to anyone other than the holder to whom it is submitted.

In making an investment decision, holders must rely on their own examination of us and the terms of the Exchange Offer, including the merits and risks involved. The information contained in this offering memorandum is correct as of the date hereof and neither the delivery of this offering memorandum nor the consummation of the Exchange Offer shall create the implication that the information contained herein is correct at any time after the date hereof. Our business, financial condition, results of operations and prospects may have changed since that date. No representation is made to any holder regarding the legality of an investment in the New Notes under any applicable legal investment or similar laws or regulations. The contents of this offering memorandum are not to be construed as legal, business or tax advice. Holders should consult their own attorney, business advisor or tax advisor as to legal, business or tax advice with respect to the Exchange Offer.

All inquiries relating to this offering memorandum and the Exchange Offer should be directed to Global Bondholder Services Corporation, the information agent for the Exchange Offer, at the telephone number or the address listed on the back cover page of this offering memorandum. Questions regarding the procedures for tendering in the Exchange Offer and requests for assistance in tendering your Old Notes should be directed to Global Bondholder Services Corporation, the exchange agent, at the telephone number or the address listed on the back cover page of this offering memorandum. Requests for additional copies of this offering memorandum, any documents incorporated by reference into this offering memorandum or the enclosed Letter of Transmittal may be directed to either the information agent or the exchange agent at their respective telephone numbers and addresses listed on the back cover page of this offering memorandum.

WHERE YOU CAN FIND MORE INFORMATION

As required by law, we file reports, proxy statements and other information with the Securities and Exchange Commission, or SEC (SEC file number: 1-13859). These reports, proxy statements and other information contain additional information about us. You can inspect and copy these materials at the SEC’s Public Reference Room at 100 F Street, N.E., Judiciary Plaza, Washington, D.C. 20549. You can obtain information about the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet website that contains reports, proxy and information statements and other information regarding companies that file electronically with the SEC. The SEC’s Internet address is http://www.sec.gov.

ii

INCORPORATION BY REFERENCE

We “incorporate by reference” into this offering memorandum information that we have filed with the SEC, which means that we are disclosing important information by referring you to another document filed separately with the SEC. This information incorporated by reference is considered part of this offering memorandum, except to the extent that the information is superseded by information in this offering memorandum or by information we later file with the SEC. Accordingly, we incorporate into this offering memorandum the following documents we have filed with the SEC:

• Annual Report on Form 10-K for the year ended February 28, 2005;

• Quarterly Report on Form 10-Q for the quarter ended May 30, 2005

• Quarterly Report on Form 10-Q for the quarter ended August 31, 2005;

• Quarterly Report on Form 10-Q for the quarter ended November 30, 2005;

• Current Reports on Form 8-K filed on March 3, 2005, March 24, 2005, June 29, 2005, August 8, 2005, August 19, 2005, December 19, 2005, February 1, 2006, February 21, 2006 and April 6, 2006 (including information furnished under Item 2.02 thereof); and

• the information contained under Item 1.01 of the Current Report on Form 8-K filed on April 15, 2005, Item 2.06 of the Current Report on Form 8-K filed on December 12, 2005, and Item 1.01 of the Current Report on Form 8-K filed on February 1, 2006.

We are also incorporating by reference the information contained in all other documents that we file with the SEC pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) between the date of this offering memorandum and the earlier of the Expiration Date or termination of this Exchange Offer; provided, however, that we are not incorporating, in each case, any documents or information that has been furnished and not filed in accordance with SEC rules.

Any statement contained in this offering memorandum or in a document incorporated or deemed to be incorporated by reference herein will be deemed to be modified or superseded for purposes of this offering memorandum to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this offering memorandum. Statements contained in this offering memorandum as to the contents of any contract or other document referred to in this offering memorandum do not purport to be complete and, where reference is made to the particular provisions of such contract or other document, such provisions are qualified in all respects by reference to all of the provisions of such contract or other document.

If you would like to receive a copy of any document incorporated by reference into this offering memorandum (which will not include any of the exhibits to the document other than those exhibits that are themselves specifically incorporated by reference into this offering memorandum), you should call or write to American Greetings Corporation, One American Road, Cleveland, Ohio 44144, Attention: Secretary (telephone (216) 252-7300). We will provide these documents, without charge, by first class mail.

Our Class A common shares are quoted on the New York Stock Exchange. Our reports, proxy statements and other information we file with the SEC can also be inspected at the office of the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

iii

FORWARD-LOOKING STATEMENTS AND INFORMATION

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

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

• a weak retail environment;

• consumer acceptance of products as priced and marketed;

• the impact of technology on core product sales;

• competitive terms of sale offered to customers;

• successful implementation of supply chain improvements and achievement of projected cost savings from those improvements;

• increases in the cost of material, energy and other production costs;

• our ability to comply with our debt covenants;

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

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

• escalation in the cost of providing employee health care;

• our ability to execute share repurchase programs or the ability to achieve the desired accretive effect from such repurchases;

• the timing and impact of any changes we may make to our capital structure;

• successful integration of acquisitions; and

• the outcome of any legal claims known or unknown.

Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators and the public’s acceptance of online greetings and other social expression products and the ability of the mobile division to compete effectively in the wireless content aggregation market.

The risks and uncertainties identified above are not the only risks we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial also may adversely affect us. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects our business, financial condition and results of operations. We assume no obligation or duty to update any of the forward-looking statements included in this offering memorandum except to the extent required by law.

iv

SUMMARY TERM SHEET

The following are some of the questions you may have as a holder of the Old Notes and our answers to those questions. The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information set forth in this offering memorandum and to which we refer you for more complete information about us and the Exchange Offer. Because the following is a summary, it may not contain all the information that may be important to you. You should read the entire offering memorandum, as well as the information incorporated by reference herein, before making a decision whether to participate in the Exchange Offer.

Q: Who is making the Exchange Offer?

A: American Greetings Corporation, the issuer of the Old Notes, is making the Exchange Offer. See “Summary Description of Our Business” for more information on our company.

Q: Why are we making the Exchange Offer?

A: The purpose of the Exchange Offer is to change certain terms of the Old Notes by completing the Exchange Offer and thereby have New Notes outstanding that will include a net share settlement feature that will require us upon conversion to pay cash up to the principal amount of the New Notes and pay any conversion consideration in excess of the principal amount in our Class A common shares. We believe that this net share settlement modification will enable us to facilitate, in the most economical manner, the conversion of the New Notes, which we believe will help us to improve our capital structure by limiting the additional amount of Class A common shares that will be issued upon conversion of the New Notes, thereby reducing the share dilution associated with conversion of the New Notes.

Q: When will the Exchange Offer expire?

A: The Exchange Offer will expire at 5:00 p.m. New York City time, on May 12, 2006, unless extended or earlier terminated by us. We may extend the Expiration Date for any reason in our sole discretion. If we decide to extend it, we will announce any extensions by press release or other permitted means no later than 9:00 a.m. on the next business day after the scheduled expiration of the Exchange Offer. We may terminate the Exchange Offer if any of the conditions listed in “The Exchange Offer—Conditions” occurs, or the occurrence thereof has not been waived by us in our sole discretion.

Q: What will you receive in the Exchange Offer if you tender your Old Notes and they are accepted?

A: For each $1,000 principal amount of Old Notes that we accept in the exchange, you will, upon the terms and subject to the conditions set forth in this document and the related Letter of Transmittal, receive $1,000 principal amount of New Notes, which will be issued promptly after the Expiration Date. You will also receive, if the Exchange Offer is consummated and you do not withdraw your tender of Old Notes before the Expiration Date, an exchange fee in cash in an amount equal to $3.75 per $1,000 of principal amount of the Old Notes that you tender as soon as practicable after the consummation of the Exchange Offer. The exchange fee will be paid from available cash. Interest on the New Notes will accrue from January 15, 2006, the last date on which interest was paid on the Old Notes, and is payable on July 15, 2006. The New Notes will also mature on July 15, 2006, at which time your right to convert the New Notes will terminate. Because July 15, 2006 is a Saturday, payment of principal and interest on the New Notes, and, if you elect to convert the New Notes, your delivery of New Notes for conversion, need not be made on such day, but may be made on the next business day, July 17, 2006, with the same force and effect as if made on July 15, 2006.

1

Q: If the Exchange Offer is consummated but you do not tender your Old Notes, how will your rights be affected?

A: If you do not exchange your Old Notes in this Exchange Offer, or if your Old Notes are not accepted for exchange, you will continue to hold your Old Notes and will be entitled to all the rights and subject to all the limitations applicable to the Old Notes. The trading market in the unexchanged Old Notes is likely to become more limited due to the reduction in the amount of Old Notes outstanding after the consummation of this Exchange Offer.

Q: What amount of Old Notes are we seeking in the Exchange Offer?

A: We are seeking to exchange all of the approximately $175,000,000 in aggregate principal amount of our outstanding Old Notes.

Q: Does the success of the Exchange Offer depend on the participation of any minimum number of holders?

A: No, the Exchange Offer is not conditioned upon the valid tender of any minimum aggregate principal amount of Old Notes.

Q: Will we exchange all of the Old Notes validly tendered?

A: Yes. All of the Old Notes validly tendered pursuant to the terms of the Exchange Offer will be accepted for exchange, upon the terms and subject to the conditions in this offering memorandum and the Letter of Transmittal.

Q: What are the conditions to the completion of the Exchange Offer?

A: The Exchange Offer is subject to a limited number of conditions, some of which we may waive in our sole discretion. Most significantly, we must not have terminated or withdrawn the Exchange Offer. If any of these conditions are not satisfied, we will not be obligated to accept and exchange any tendered Old Notes. Prior to the Expiration Date, we reserve the right to terminate or withdraw the Exchange Offer if any of the conditions listed in “The Exchange Offer—Conditions” occur, or the occurrence thereof has not been waived by us in our sole discretion. We describe the conditions to the Exchange Offer in greater detail in the section titled “The Exchange Offer—Conditions.”

Q: Who may participate in the Exchange Offer?

A: All holders of the Old Notes may participate in the Exchange Offer.

Q: Do you have to tender all of your Old Notes to participate in the Exchange Offer?

A: No. You do not have to tender all of your Old Notes to participate in the Exchange Offer.

Q: Will the New Notes have registration rights similar to the Old Notes?

A: The New Notes do not need registration rights since they will be freely transferable and not subject to any transfer restrictions. All of the Old Notes are freely transferable, either because they have been resold pursuant to a resale shelf registration statement or because they have been held by non-affiliates of American Greetings for over two years and therefore are eligible for resale without restriction pursuant to Rule 144(k) under the Securities Act of 1933. Accordingly, all of the New Notes issued in this Exchange Offer will be freely transferable by any person that is not our affiliate and will be represented by a single unrestricted CUSIP number. Similarly, our Class A common shares issuable upon conversion of the New Notes will be freely transferable by any person that is not our affiliate and not subject to any transfer restrictions.

2

Q: Will the New Notes be listed?

A: We have not applied and do not intend to apply for listing or quotation of the New Notes on any securities exchange or included in any automatic quotation system.

Q: What risks should you consider in deciding whether or not to tender your Old Notes?

A: In deciding whether to participate in the Exchange Offer, you should carefully consider the discussion of risks and uncertainties affecting American Greetings, the New Notes and our Class A common shares described in the section of this offering memorandum entitled “Risk Factors,” beginning on page 11, and the documents incorporated by reference into this offering memorandum.

Q: How do you participate in the Exchange Offer?

A: In order to exchange Old Notes, you must tender the Old Notes together with a properly completed Letter of Transmittal and the other agreements and documents described in the Letter of Transmittal, however, the Letter of Transmittal need not be completed if the Old Notes are being tendered by book-entry transfer to the account maintained by the exchange agent at The Depository Trust Company pursuant to the procedures set forth in “The Exchange Offer—Procedures for Tendering” and an “agent’s message” is delivered to the exchange agent as described in “The Exchange Offer—Procedures for Tendering—Letter of Transmittal.” If you own Old Notes that are held through a broker or other third party, or in “street name,” you will need to follow the instructions in the Letter of Transmittal on how to instruct them to tender the Old Notes on your behalf, as well as submit a Letter of Transmittal and the other agreements and documents described in this document. We describe the procedures for participating in the Exchange Offer in more detail in the section titled “The Exchange Offer—Procedures for Tendering.”

Q: May you withdraw your tender of Old Notes?

A: Yes. You may withdraw any tendered Old Notes at any time prior to 5:00 p.m., New York City time, on the Expiration Date of the Exchange Offer. However, if you withdraw your tender of the Old Notes prior to the Expiration Date, you will not receive the exchange fee.

Q: What happens if your Old Notes are not accepted in the Exchange Offer?

A: If we do not accept your Old Notes for exchange for any reason, the Old Notes tendered by book entry transfer into the account of Global Bondholder Services Corporation, our exchange agent, at The Depository Trust Company will be credited to your account at DTC.

Q: If you decide to tender your Old Notes, will you have to pay any fees or commissions to us or the exchange agent?

A: We will pay transfer taxes, if any, applicable to the transfer of Old Notes pursuant to the Exchange Offer. Additionally, we will pay all other expenses related to the Exchange Offer, except any commissions or concessions of any broker or dealer.

Q: Will we receive any cash proceeds from the Exchange Offer?

A: No. We will not receive any cash proceeds in connection with the issuance of the New Notes pursuant to the Exchange Offer. Old Notes that are validly tendered and exchanged pursuant to the Exchange Offer will be retired and canceled, so our issuance of New Notes will not result in any cash proceeds to us. See “Use of Proceeds.”

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Q: Has the board of directors or any committee of the board of directors adopted a position on the Exchange Offer?

A: Our board of directors approved the making of the Exchange Offer. However, neither our board of directors nor any committee thereof makes any recommendation as to whether you should tender Old Notes and, if so, how many Old Notes to tender. We have not obtained any third-party determination that the Exchange Offer is fair to holders of the Old Notes. In making your decision, we urge you to carefully read this document and the other documents to which we refer you in their entirety, including the discussions of risks and uncertainties set forth in the section of this offering memorandum entitled “Risk Factors.”

Q: What are the other benefits to us of the Exchange Offer?

A: We expect there to be potential accounting benefits to us with New Notes relative to Old Notes including the following:

• The reduction to share dilution associated with net share settlement upon conversion of the New Notes may result in higher reported earnings per share.

• Prior to potential conversions of the New Notes, the method of computing diluted earnings per share for the New Notes, in accordance with EITF 90-19 would result in higher reported diluted earnings per share.

Q: Who can you call with questions about how to tender your Old Notes?

A: You should direct any questions regarding procedures for tendering Old Notes and requests for additional copies of this offering memorandum, the Letter of Transmittal or the documents incorporated by reference in this offering memorandum to Global Bondholder Services Corporation, our information agent. Its address and telephone number are listed on the back cover page of this offering memorandum. See “The Exchange Offer—Information Agent.”

Q: Where should you send your Letter of Transmittal and other required documents?

A: You should send your Letter of Transmittal and other required documents to our exchange agent. Its address and telephone number are listed on the back cover page of this offering memorandum. See “The Exchange Offer—Exchange Agent.”

Q: When can your New Notes be converted?

A: Similar to the Old Notes, you may convert the New Notes any time on or before the July 15, 2006 expiration date. However, because July 15, 2006 is a Saturday, if you elect to convert the New Notes, your delivery of New Notes for conversion need not be made on such day, but may be made on the next business day, July 17, 2006, with the same force and effect as if made on July 15, 2006. See “Description of the New Notes—Conversion Rights.”

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SUMMARY DESCRIPTION OF OUR BUSINESS

This summary is not complete and does not contain all the information you should consider. You should read this entire offering memorandum carefully, including without limitation, the documents incorporated by reference in this offering memorandum and the section entitled “Risk Factors” beginning on page 11 and in such documents incorporated by reference. In this offering memorandum, unless the context requires otherwise “AG,” “American Greetings,” and “we,” “us” and “our” refer to American Greetings Corporation and its consolidated subsidiaries.

Our Company

Founded in 1906, we operate predominantly in a single industry: the design, manufacture and sale of everyday and seasonal greeting cards and other social expression products. We manufacture and sell greeting cards, gift wrap, party goods, candles, stationery and giftware in North America, including the United States, Canada and Mexico, and throughout the world, primarily in the United Kingdom, Australia, New Zealand and South Africa. In addition, AG Interactive, Inc. (which is now wholly owned by us and was formerly known as AmericanGreetings.com, Inc.) markets e-mail greetings, personalized printable greeting cards and other social expression products through our Web sites www.americangreetings.com, www.bluemountain.com, and www.egreetings.com; co-branded Web sites and on-line services. In 2005, AG Interactive launched its AG Mobile unit, which specializes in the distribution of ringtones for cellular telephones, graphics, games, alerts and other social messaging products and applications to mobile devices. Our subsidiary, Learning Horizons, Inc. distributes supplemental educational products. Design licensing and character licensing are done primarily by our subsidiaries, A.G.C. Inc. and Those Characters From Cleveland, Inc., respectively. The Hatchery, LLC (50% of which is owned by us) also develops and produces original family and children’s entertainment for all media. Our A.G. Industries, Inc. subsidiary manufactures custom display fixtures for our products and products of others. As of February 28, 2006, we also owned and operated 503 card and gift shops throughout North America.

Presentation of Financial Information

Our fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2005 refers to the year ended February 28, 2005. Historically, our AG Interactive subsidiary was consolidated on a two-month lag corresponding with its fiscal year-end of December 31. In fiscal 2006, AG Interactive changed its year end to coincide with our fiscal year end. Fiscal 2006 will include fourteen months of AG Interactive’s operations as a result of the change. We do not expect this change to materially impact fiscal 2006 consolidated results of operations.

Principal Executive Office

Our principal executive office is located at One American Road, Cleveland, Ohio 44144. Our telephone number is (216) 252-7300. Our web site address is www.corporate.americangreetings.com. Information on our web site does not constitute part of this offering memorandum.

Recent Developments

On April 6, 2006, we issued an earnings release announcing results for our fourth quarter and year ended February 28, 2006.

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SUMMARY DESCRIPTION OF THE NOTES

The Old Notes

The Old Notes On June 29, 2001, we sold $150,000,000, and on July 25, 2001 we sold $25,000,000 aggregate principal amount of our 7.00% Convertible Subordinated Notes due July 15, 2006 (the “Old Notes”), of which approximately $175,000,000 aggregate principal amount remains outstanding as of the date of this offering memorandum. The Old Notes were offered to qualified institutional buyers under Rule 144A. A registration statement on Form S-3 was filed with the SEC on August 28, 2001, to permit the resale from time to time of the Old Notes and any common shares issued upon conversion of the Old Notes. Under the Registration Rights Agreement dated June 29, 2001 by and between us, Goldman, Sachs & Co., NatCity Investments, Inc. and McDonald Investments Inc., we are no longer obligated to keep such registration statement effective.

The New Notes

Issuer American Greetings Corporation, an Ohio corporation.

Securities Offered Up to $175,000,000 aggregate principal amount of 7.00% Convertible Subordinated Notes due July 15, 2006 to be issued under a new indenture to be entered into with U.S. Bank, National Association, as indenture trustee, prior to the issuance of the New Notes.

Maturity July 15, 2006.

Interest Rate The New Notes will bear interest at the rate of 7.00% per year, payable in arrears on July 15, 2006. The New Notes will also mature on July 15, 2006, and, as a result, July 15, 2006 will be the only date on which interest is paid on the New Notes. Interest on the New Notes will accrue from January 15, 2006, the last interest payment date on which interest was paid on the Old Notes. Because July 15, 2006 is a Saturday, payment of principal and interest on the New Notes will be made on the next business day, July 17, 2006, with the same force and effect as if made on July 15, 2006.

Use of Proceeds We will receive no cash proceeds in connection with the issuance of the New Notes pursuant to the Exchange Offer. See “Use of Proceeds.”

Conversion Rights The New Notes are convertible at the option of the holder at any time before the close of business on July 15, 2006, into a combination of cash and our Class A common shares. Because July 15, 2006 is a Saturday, a holder of the New Notes may deliver for conversion the New Notes at any time on or before the close of business on the next business day, July 17, 2006, with the same force and effect as if made on July 15, 2006.

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Repurchase at the Option of the Holders upon a Change of Control If we experience a change in control as specified in the new indenture under which the New Notes will be issued, a holder of New Notes will have the right, subject to certain conditions and restrictions, to require us to repurchase, with cash or Class A common shares, some or all of the New Notes at a price equal to 100% of the principal amount plus accrued and unpaid interest to the repurchase date. The repurchase price is payable in cash or, at our option and subject to the satisfaction of certain conditions, in Class A common shares. If we pay the repurchase price in Class A common shares, the shares will be valued at 95% of the average closing sales prices of the Class A common shares for the five trading days preceding and including the third trading day prior to the repurchase date. See “Description of New Notes—Repurchase at Option of Holders Upon a Change of Control.”

Subordination The New Notes are subordinated to our senior indebtedness, as that term is defined in “Description of New Notes—Subordination.” The New Notes also are effectively subordinated in right of payment to all indebtedness and other liabilities of our subsidiaries. As of February 28, 2006, we had outstanding senior indebtedness of approximately $300 million, and our subsidiaries had approximately $82 million of indebtedness and other liabilities outstanding (including trade payables). The new indenture under which the New Notes will be issued does not restrict the incurrence of senior indebtedness or any other indebtedness, by us or any of our subsidiaries. See “Description of New Notes—Subordination.”

No Transfer Restrictions The New Notes will not be subject to transfer restrictions. The New Notes will be freely transferable by any person that is not our affiliate and represented by a single unrestricted CUSIP number. Similarly, our Class A common shares issuable upon conversion of the New Notes will be freely transferable by any person that is not our affiliate and not subject to any transfer restrictions.

Risk Factors You should consider carefully all of the information set forth in this offering memorandum and, in particular, you should evaluate the specific factors set forth under “Risk Factors” beginning on page 11 before deciding to tender your Old Notes.

U.S. Federal Income Tax Considerations See “Certain Material United States Federal Income Tax Considerations” for a summary of the material United States federal income tax consequences or potential consequences that may result from the Exchange Offer.

Governing Law The new indenture and the New Notes are governed by, and construed in accordance with, the laws of the State of New York.

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Form of Notes The New Notes will be issued in fully registered form. The New Notes will be represented by one or more global notes, deposited with a trustee as custodian for The Depository Trust Company and registered in the name of Cede & Co., DTC’s nominee. Beneficial interests in the global notes will be shown on, and any transfers will be effected only through, records maintained by DTC and its participants. See “Description of the New Notes—Form, Denomination, Transfer, Exchange and Book-Entry Procedure.”

Trustee, Paying Agent and Conversion Agent U.S. Bank National Association

Trading The New Notes are not listed, and we do not plan to make application to list the New Notes, on any securities exchange or included in any automated quotation system. There is currently no established market for the New Notes, and we cannot assure you as to the development or liquidity of any market for the New Notes. Our Class A common shares are quoted on the New York Stock Exchange under the symbol “AM.”

Material Differences Between the Old Notes and New Notes

The only material difference between the Old Notes and New Notes is the nature of the consideration payable upon conversion. Upon conversion of the Old Notes, the holder would receive only shares of our Class A common shares and cash in lieu of fractional shares. Upon conversion of the New Notes, the holder will receive a combination of cash and Class A common shares, depending on the value of our Class A common shares during a ten-trading day period beginning the second trading day after the conversion date. For a more detailed description of the consideration payable upon conversion of the New Notes, see “Description of the New Notes—Conversion Rights—Payment.” Because the New Notes are subordinated to our senior indebtedness and effectively subordinated in right of payment to all indebtedness and other liabilities of our subsidiaries, during circumstances when we are prohibited from making payments on account of principal of, premium, if any, or interest on the New Notes, you would not be permitted to receive any cash consideration payable on conversion of your New Notes. See “Description of the New Notes—Subordination.” Because holders of Old Notes are only entitled to receive our Class A common shares upon conversion of Old Notes (together with cash in lieu of any fraction of shares), which are junior securities, there are no such limitations on the rights of a holder of Old Notes to receive the consideration payable upon conversion.

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA

The following summary historical consolidated financial data for the years ended February 28, 2005, February 29, 2004 and February 28, 2003 and the nine-month periods ended November 30, 2005 and 2004 should be read in conjunction with this offering memorandum and our financial statements and the related notes which are included in our Annual Report on Form 10-K for the year ended February 28, 2005,⁽¹⁾ and the Quarterly Report on Form 10-Q for the quarter ended November 30, 2005.⁽¹⁾ See “Where You Can Find Additional Information.” In the opinion of management, our unaudited interim consolidated financial data includes all adjustments considered necessary for a fair presentation of the financial information. The results for past accounting periods are not necessarily indicative of the results to be expected for any future accounting period.

	Fiscal Year Ended February 28 or 29									Nine Months Ended November 30
	2003			2004			2005			2004			2005
	(Dollars in thousands, except per share amounts)
Statement of Operations:(1)
Net sales	$	1,923,483		$	1,937,540		$	1,883,367		$	1,397,862		$	1,376,425
Material, labor and other production costs		847,383			904,552			895,110			653,641			627,236
Selling, distribution and marketing		603,291			629,663			648,120			462,188			464,904
Administrative and general		233,134			217,381			249,984			184,210			178,452
Goodwill impairment		—			—			—			—			43,153
Interest		78,972			85,690			79,397			70,589			26,664
Other expense (income)—net		(25,458	)		(58,267	)		(96,069	)		(52,178	)		(39,862	)
Income from continuing operations before income taxes		186,161			158,521			106,825			79,412			75,878
Income tax expense		74,327			61,862			37,328			31,042			36,383
Income from continuing operations		111,834			96,659			69,497			48,370			39,495
Income from discontinued operations, net of tax		9,272			8,011			25,782			25,539			3,087
Net income	$	121,106		$	104,670		$	95,279		$	73,909		$	42,582
Earnings per share—basic:
Income from continuing operations	$	1.71		$	1.45		$	1.01		$	0.71		$	0.59
Income from discontinued operations		0.14			0.12			0.38			0.37			0.05
Net income	$	1.85		$	1.57		$	1.39		$	1.08		$	0.64
Earnings per share—assuming dilution:
Income from continuing operations	$	1.51		$	1.30		$	0.94		$	0.66		$	0.56
Income from discontinued operations		0.12			0.10			0.31			0.31			0.04
Net income	$	1.63		$	1.40		$	1.25		$	0.97		$	0.60
Weighted average number of shares outstanding (thousands)		65,637			66,509			68,545			68,391			67,041
Weighted average number of shares outstanding (thousands)—assuming dilution		78,981			80,088			82,017			81,875			80,386

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	As of February 28 or 29						As of November 30
	2003		2004		2005		2004		2005
	(Dollars in thousands, except per share amounts)
Balance Sheet Data:(1)
Cash and cash equivalents	$	208,259	$	284,743	$	247,799	$	221,149	$	75,805
Short-term investments		—		—		208,740		—		208,740
Working capital		564,030		782,181		804,234		820,953		782,639
Property, plant and equipment, net		375,033		353,287		336,828		328,603		309,415
Total assets		2,574,147		2,475,535		2,524,207		2,459,310		2,359,220
Short-term debt		133,180		—		—		—		—
Long-term debt		726,451		665,835		486,087		483,970		475,965
Shareholders’ equity		1,077,464		1,267,540		1,386,780		1,384,501		1,268,067
Cash dividends declared per share		—		—		0.12		0.06		0.24

(1) During the quarter ended February 28, 2006 (as discussed in our April 6, 2006 earnings release), we committed to a plan to sell our South African business unit. As a result, the summary historical consolidated financial data has been changed to reflect our South African business unit as a discontinued operation for all periods presented.

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RISK FACTORS

An investment in the New Notes involves a number of risks. Some of these risks are shared with any investor in our securities; others are related to the nature of the New Notes themselves or to the Exchange Offer. Before making a decision to exchange your Old Notes for New Notes, you should carefully consider the following information. In consultation with your own financial and legal advisors, you should carefully consider, among other matters, the rights of the New Notes compared to the Old Notes, as well as the discussion of risks in our periodic reports before deciding whether an investment in the New Notes is suitable for you. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of the New Notes, the Old Notes and our Class A common shares could decline due to any of these risks, and you may lose all or part of your investment.

Risks Relating to the Exchange Offer

The United States federal income tax consequences of the Exchange Offer are not entirely certain; if the IRS disagrees with the position we are taking, you could be subject to additional tax liabilities as a result of the Exchange Offer.

The U.S. federal income tax consequences of the Exchange Offer are not entirely certain. We intend to take the position that the exchange of Old Notes for New Notes will be an exchange of securities pursuant to a recapitalization of American Greetings. That position, however, is subject to uncertainty and could be challenged by the IRS. Consistent with our position, we believe that no gain or loss will be recognized by a holder who exchanges Old Notes for New Notes pursuant to the Exchange Offer, apart from the receipt of the exchange fee. If, contrary to our position, the exchange is not treated as an exchange of securities pursuant to a recapitalization, the tax consequences to you could materially differ. A holder could be required to recognize gain in an amount equal to the excess of the fair market value of the New Notes received in the exchange over the holder’s adjusted tax basis in the Old Notes. See “Certain United States Federal Income Tax Considerations—Exchange of Old Notes for New Notes” for more information.

We intend to treat payment of the exchange fee as ordinary income to holders participating in the Exchange Offer and to report such payments to holders and the IRS for information purposes in accordance with such treatment. Therefore, the receipt of the exchange fee by a Non-U.S. Holder (as defined in “Certain United States Federal Income Tax Considerations”) participating in the Exchange Offer may be subject to U.S. federal withholding tax. See “Certain United States Federal income Tax Considerations—Exchange of Old Notes for New Notes” for more information.

If you exchange your Old Notes, we cannot assure you that an active market in the New Notes will develop and the New Notes may be less liquid than the Old Notes.

We cannot assure you that an active trading market in the New Notes will exist or be maintained and we cannot assure you as to the prices at which the New Notes may be traded. If a significant number of Old Notes are not exchanged in the Exchange Offer, the liquidity of the trading market for the New Notes, if any, after the completion of the Exchange Offer may be limited.

We have not obtained a third-party determination that the Exchange Offer is fair to holders of the Old Notes.

We are not making a recommendation as to whether holders of the Old Notes should exchange them. We have not retained and do not intend to retain any unaffiliated representative to act solely on behalf of the holders of the Old Notes for purposes of negotiating the terms of the Exchange Offer or preparing a report concerning the fairness of the Exchange Offer. We cannot assure holders of the Old Notes that the value of the New Notes received in the Exchange Offer will in the future equal or exceed the value of the Old Notes tendered and we do not take a position as to whether you ought to participate in the Exchange Offer.

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Risks Related to the New Notes

The market-trading price of the New Notes could be significantly affected by the market price of our Class A common shares.

We expect that the market-trading price of the New Notes will be significantly affected by the market-trading price of our Class A common shares. This may result in greater volatility in the market-trading price of the New Notes than would be expected for nonconvertible debt securities. The market-trading price of our Class A common shares will likely continue to fluctuate in response to factors including the following, many of which are beyond our control:

• announcements of developments related to our business;

• fluctuations in our results of operations;

• sales of substantial amounts of our securities into the marketplace;

• general conditions in our industry or the worldwide economy;

• an outbreak of war or hostilities;

• a shortfall in revenues or earnings compared to securities analysts’ expectations;

• changes in analysts’ recommendations or projections; and

• announcements of new acquisitions or other projects by us.

In addition, the stock markets in general, including the New York Stock Exchange, are subject to significant price and trading fluctuations. These fluctuations have resulted in volatility in the market-trading prices of securities that often has been unrelated or disproportionate to changes in operating performance. These broad market fluctuations may affect adversely the market-trading prices of the New Notes and our common shares.

The net share settlement feature of the New Notes may have adverse consequences.

The net share settlement feature of the New Notes, as described under “Description of the New Notes—Conversion Rights—Payment upon Conversion,” may:

• result in holders receiving no shares upon conversion or fewer shares relative to the net share conversion value of the New Notes;

• reduce our liquidity;

• delay holders’ receipt of the proceeds upon conversion; and

• subject holders to market risk before receiving any shares upon conversion.

The net share conversion value that you will receive upon conversion of the New Notes, if convertible, will be determined on the basis of the conversion rate then in effect and the average of the daily volume-weighted average price per share of our common shares for each of the ten consecutive trading days beginning on the second trading day after the day the New Notes are tendered for conversion. Accordingly, you will not be able to determine the net share conversion value at the time you tender your New Notes for conversion. Except as described in the indenture governing the New Notes, we will pay the net share conversion value in cash, up to the principal amount of the New Notes being converted, and the residual net share conversion value, if any, in common shares valued at this ten-day average price per share. The indenture relating to the New Notes provides for adjustments to the conversion rate only in certain circumstances.

We may issue additional common shares or securities convertible or exchangeable for our common shares and thereby materially and adversely affect the price of our common shares.

We are not restricted from issuing additional Class A common shares or securities convertible or exchangeable for our Class A common shares during the life of the New Notes. If we issue additional Class

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A common shares or securities convertible or exchangeable for our Class A common shares, it may materially and adversely affect the price of our common shares and, in turn, the price of the New Notes.

The New Notes will be junior to our senior debt.

The New Notes will be subordinated in right of payment to all of our current and future senior debt. Upon any distribution to our creditors in a liquidation or dissolution, the holders of senior debt are entitled to be paid in full before any payment may be made with respect to the New Notes, including any payments due upon conversion of the New Notes. In addition, the subordination provisions of the new indenture provide that payments with respect to the New Notes will be blocked in the event of a payment default on senior debt and may be blocked for up to 179 days each year in the event of certain non-payment defaults on senior debt. In the event of our bankruptcy, liquidation or reorganization, holders of the New Notes will participate ratably with all holders of subordinated indebtedness that is deemed to be of the same class as the New Notes and potentially with all other general creditors, based upon the respective amounts owed to each holder or creditor, in our remaining assets. In any of the foregoing events, there can be no assurance that there would be sufficient assets to pay amounts due on the New Notes, including any cash due upon conversion. As a result, holders of New Notes may receive less, ratably, than the holders of senior debt. In addition, under the subordination provisions of the new indenture, payments that would otherwise be made to holders of the New Notes will instead be paid to holders of senior debt under certain circumstances. As a result of these provisions, other creditors (including trade creditors) that are not holders of senior debt may recover more, ratably, than the holders of the New Notes. As of February 28, 2006, we had approximately $300 million of senior debt outstanding and its subsidiaries had approximately $82 million of outstanding debt and other liabilities (including trade payables). In addition, we are able to incur a significant amount of additional senior indebtedness under our existing credit facilities. The new indenture will also permit us and our subsidiaries to incur substantial amounts of additional indebtedness, including senior debt.

The New Notes are effectively subordinated to the debt of our subsidiaries.

We derive much of our revenue from our subsidiaries. The new indenture governing the New Notes will permit us and our subsidiaries to incur substantial additional indebtedness, and will not require our subsidiaries to guarantee the New Notes. In the event of a bankruptcy, liquidation or reorganization of a subsidiary, holders of any of such subsidiary’s indebtedness will have a claim to the assets of the subsidiary that is prior to our interest in those assets. As of February 28, 2006, the aggregate amount of indebtedness and other liabilities of our subsidiaries (including trade payables) was approximately $82 million. If any subsidiary indebtedness were to be accelerated, there can be no assurance that the assets of such subsidiary would be sufficient to repay such indebtedness or that our assets and the assets of our other subsidiaries would be sufficient to repay in full its indebtedness, including the New Notes.

An adverse rating of the New Notes may cause their trading price to fall.

If a rating agency rates the New Notes, it may assign a rating that is lower than investors’ expectations. Rating agencies also may lower any such ratings on the New Notes in the future. If rating agencies assign a lower-than-expected rating or reduce, or indicate that they may reduce, their ratings in the future, the trading price of the New Notes could significantly decline.

A holder of New Notes will not be entitled to any rights with respect to our Class A common shares, but upon conversion will be subject to all changes made with respect to our common shares.

A holder of New Notes will not be entitled to any rights with respect to our Class A common shares (including, without limitation, voting rights and rights to receive any dividends or other distributions on our Class A common shares), but upon conversion will be subject to all changes affecting our Class A common shares. Holders will only be entitled to rights in our Class A common shares if and when we deliver Class A common shares to holders upon conversion of New Notes. For example, in the event that an amendment is proposed to our articles of incorporation requiring shareholder approval and the record date for determining the

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shareholders of record entitled to vote on the amendment occurs prior to delivery of our Class A common shares, holders will not be entitled to vote on the amendment, although they will nevertheless be subject to any changes in the powers, preferences or special rights of our Class A common shares.

The conversion rate of the New Notes may not be adjusted for all dilutive events.

As with the Old Notes, the conversion rate of the New Notes is subject to adjustment for certain events, including, but not limited to, the issuance of stock dividends on our common shares, the issuance of rights or warrants, subdivisions, combinations, distributions of capital stock, indebtedness or assets, certain cash dividends and certain tender or exchange offers as described under “Description of the New Notes—Conversion Rights—Conversion Rate Adjustments.” The conversion rate will not be adjusted for other events, such as an issuance of common shares for cash, that may adversely affect the trading price of the New Notes or our common shares. There can be no assurance that an event that adversely affects the value of the New Notes, but does not result in an adjustment to the conversion rate, will not occur.

The New Notes will not and the Old Notes do not contain certain restrictive covenants, and there is limited protection in the event of a change of control.

The new indenture under which the New Notes will be issued will not contain restrictive covenants that would protect you from several kinds of transactions that may adversely affect you. In particular, the new indenture for the New Notes will not (and the old indenture for the Old Notes does not) contain covenants that will limit our ability to pay dividends or make distributions on or redeem our capital stock or limit our ability to incur additional indebtedness and, therefore, protect you in the event of a highly leveraged transaction or other similar transaction. In addition, the requirement that we offer to repurchase the New Notes upon a change of control is limited to the transactions specified in the definition of a “Change of Control” in the new indenture. See “Description of the New Notes—Repurchase at Option of Holders Upon a Change of Control.” Accordingly, we could enter into certain transactions, such as acquisitions, refinancings or a recapitalization, that could affect our capital structure and the value of our Class A common shares but would not constitute a “Change of Control.”

We may not be in a position to repurchase the New Notes for cash pursuant to their terms or to pay the amounts due upon conversion of the New Notes when required.

In certain circumstances you may require us to repurchase all or a portion of your New Notes for cash. In addition, upon conversion of the New Notes, we are obligated to satisfy part of our conversion obligation with respect to the New Notes in cash. If you were to require us to repurchase your New Notes, including following a change in control or other event that constitutes a repurchase event, or at your option on a repurchase date or you were to convert your New Notes, we cannot assure you that we will be able to pay the amount required. Our ability to repurchase the New Notes may be limited by law, by the indenture governing the New Notes, and by indebtedness and agreements that we may enter into in the future which may replace, supplement or amend our existing or future debt. In addition, while we could seek to obtain third-party financing to pay for any amounts due in cash upon conversion of the New Notes, we cannot be sure that such third-party financing will be available on commercially reasonable terms, if at all. Our failure to repurchase the New Notes or make the required payments upon conversion would constitute an event of default under the indenture under which we will issue the New Notes, which might constitute a default under the terms of our other indebtedness at that time.

Risks Related to Retention of the Old Notes

If you do not exchange your Old Notes, the Old Notes you retain may become substantially less liquid as a result of the Exchange Offer.

If a significant number of Old Notes are exchanged in the Exchange Offer, the liquidity of the trading market for the Old Notes, if any, after the completion of the Exchange Offer may be substantially reduced. Any Old Notes exchanged will reduce the aggregate number of Old Notes outstanding. As a result, the Old Notes may

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trade at a discount to the price at which they would trade if the transactions contemplated by this offering memorandum were not consummated, subject to prevailing interest rates, the market for similar securities and other factors. We cannot assure you that an active market in the Old Notes will exist or be maintained and we cannot assure you as to the prices at which the Old Notes may be traded.

Risks Relating to American Greetings

The growth of our greeting card business is critical to future profitability and cash flow.

One of our key business strategies is to gain profitable market share by spending approximately $100 million to revamp our greeting card business over the next few years, with the majority of the expense occurring during fiscal 2007 in our core greeting card business. We expect approximately one-third of this amount to be related to converting additional customers to the scan-based trading business model, with the remainder associated with creative initiatives, process changes, and a reduction of certain retailers’ inventory in order to flow future new product changes more quickly. These expenditures will impact net sales, earnings and cash flows over future periods. Moreover, our long-term success will depend in part on how well we implement our strategy to revamp the greeting card business and we cannot assure you that this strategy will either increase our revenue or profitability. Even if we are able to implement, to a significant degree, this strategy, we may experience systemic, cultural, and operational challenges that may prevent any significant increase in profitability or that may otherwise negatively influence our cash flow. In addition, our strategy may have flaws and may not be successful. For example, we may not be able to anticipate or respond in a timely manner to changing customer demands and preferences for greeting cards. If we misjudge the market, we may significantly overstock unpopular products and be forced to grant significant credits or accept significant returns, which would have a negative impact on our results of operations and cash flow. Conversely, shortages of key items could have a materially adverse impact on our results of operations and financial condition.

We rely on a few mass-market retail customers for a significant portion of our sales.

A few of our customers are material to our business and operations. Net sales to our five largest customers, which include mass merchandisers and major drug stores, accounted for approximately 35% of net sales in fiscal year 2006 and approximately 32% of net sales for fiscal years 2005 and 2004. Net Sales to Wal-Mart Stores, Inc., accounted for approximately 16%, 15%, and 13% of net sales in fiscal years 2006, 2005, and 2004, respectively. No other customer accounted for 10% or more of our net sales. There can be no assurance that our large customers will continue to purchase our products in the same quantities that they have in the past. The loss of sales to one of our large customers could materially and adversely affect our business, results of operations, and financial condition.

We operate in extremely competitive markets, and our business, results of operations and financial condition will suffer if we are unable to compete effectively.

We operate in highly competitive industries. There are an estimated 3,000 greeting card publishers in the United States ranging from small family-run organizations to major corporations. In general, however, the greeting card business is extremely concentrated. We believe that we are one of only two main suppliers offering a full line of social expression products that, together, are estimated to encompass approximately 85% of the overall market. Our main competitor, Hallmark Cards, Inc., may have substantially greater financial, technical or marketing resources, a greater customer base, stronger name recognition and a lower cost of funds than we do. That competitor may also have longstanding relationships with certain large customers to which it may offer products that we do not provide, putting us at a competitive disadvantage. As a result, this competitor or others may be able to:

• adapt to changes in customer requirements more quickly;

• take advantage of acquisitions and other opportunities more readily;

• devote greater resources to the marketing and sale of its products; and

• adopt more aggressive pricing policies.

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

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

With the growing trend toward retail trade consolidation, we are increasingly dependent upon a reduced number of key retailers whose bargaining strength is growing. We may be negatively affected by changes in the policies of our retail trade customers, such as inventory de-stocking, limitations on access to shelf space, scan-based trading and other conditions. Increased consolidations in the retail industry could result in other changes that could damage our business. In addition, as the bargaining strength of our retail customers grow, we may be required to grant greater credits, discounts, allowances and other incentive considerations to these customers. We may not be able to recover the costs of these incentives if the customer does not purchase a sufficient amount of products during the term of its agreement with us, which could materially and adversely affect our business, results of operations and financial condition.

Our business, results of operations and financial condition may be adversely affected by volatility in the demand for our products.

Our success depends on the sustained demand for our products. Many factors affect the level of consumer spending on our products, including, among other things, general business conditions, interest rates, the availability of consumer credit, taxation, the effects of war, terrorism or threats of war or terrorism, fuel prices and consumer confidence in future economic conditions. Our business, and that of most of our customers, may experience periodic downturns in direct relation to downturns in the general economy. A general slowdown in the economies in which we sell our products, or even an uncertain economic outlook, could adversely affect consumer spending on discretionary items, such as our products, and, in turn, could adversely affect our sales, results of operations and financial condition.

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

A portion of our business and results of operations depends upon the appeal of our licensed character properties, which are used to create various toy and entertainment items for children. Consumer preferences, particularly among children, are continuously changing. The children’s entertainment industry experiences significant, sudden and often unpredictable shifts in demand caused by changes in the preferences of children to more “on trend” entertainment properties. In recent years, there have been trends towards shorter life cycles for individual youth entertainment products. Our ability to maintain our current market share and increase our market share in the future depends on our ability to satisfy consumer preferences by enhancing existing entertainment properties and developing new entertainment properties. If we are not able to successfully meet these challenges in a timely and cost-effective manner, demand for our collection of entertainment properties could decrease and our business, results of operations and financial condition may be materially and adversely affected.

Our results of operations fluctuate on a seasonal basis.

The social expression industry is a seasonal business, with sales generally being much stronger in the second half of our fiscal year than the first half of our fiscal year due to the concentration of major holidays during the second half of our fiscal year. Consequently, our overall results of operations in the future may fluctuate substantially based on seasonal demand for our products. Such variations in demand could have a material adverse effect on the timing of cash flow and therefore our ability to meet our obligations with respect to our debt and other financial commitments. Seasonal fluctuations also affect our inventory levels, since we usually order and manufacture merchandise in advance of peak selling periods and sometimes before new trends are confirmed

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by customer orders or consumer purchases. We must carry significant amounts of inventory, especially before the holiday season selling period. If we are not successful in selling the inventory during the holiday period, we may have to sell the inventory at significantly reduced prices, or we may not be able to sell the inventory at all.

We depend on mall traffic and the availability of suitable lease space.

Many of our retail stores are located in shopping malls. Sales at these stores are derived, in part, from the high volume of traffic attributable to mall “anchor” tenants (generally large department stores) and other area attractions, as well as from the continued appeal of malls as shopping destinations. Sales volume related to mall traffic may be adversely affected by economic downturns in a particular area, competition from non-mall retailers or from other malls where we do not have stores, or from the closing of anchor department stores. In addition, a decline in the popularity of a particular mall, or a decline in the appeal of mall shopping generally among our target consumers, would adversely affect our business. Our ability to grow our Retail Operations is dependent on our ability to open new stores in desirable locations with capital investment and lease costs that allow us to earn a reasonable return. We cannot be sure as to when or whether such desirable locations will become available at reasonable costs. In addition, to the extent that shopping mall owners are not satisfied with the profitability of our current retail stores, we may lose existing store locations.

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

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

• political instability and civil unrest;

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

• currency and foreign exchange risks; and

• potential delays or disruptions in transportation.

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

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

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

Our trademarks, trade secrets, copyrights, patents and all of our other intellectual property rights are important assets. We rely on copyright and trademark laws in the United States and other jurisdictions and on

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confidentiality agreements with some employees and others to protect our proprietary rights. If any of these rights were infringed or invalidated, our business could be materially and adversely affected. In addition, our activities could infringe upon the proprietary rights of others, who could assert infringement claims against us. We could face costly litigation if we are forced to defend these claims. If we are unsuccessful in doing so, our business, results of operations and financial condition may be materially and adversely affected.

We seek to register our trademarks in the United States and elsewhere. These registrations could be challenged by others or invalidated through administrative process or litigation. In addition, our confidentiality agreements with some employees or others may not provide adequate protection in the event of unauthorized use or disclosure of our proprietary information, or if our proprietary information otherwise becomes known, or is independently developed by competitors.

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

An important part of our business involves obtaining licenses to produce products based on various popular brands, character properties, design and other licensed material owned by third parties. Such license agreements usually require that we pay an advance and/or provide a minimum royalty guarantee that may be substantial, and in some cases may be greater than what we will be able to recoup in profits from actual sales, which could result in write-offs of such amounts that would adversely effect our results of operations. In addition, we may acquire or renew licenses requiring minimum guarantee payments that may result in us paying higher effective royalties, if the overall benefit of obtaining the license outweighs the risk of potentially losing, not renewing or otherwise not obtaining a valuable license. When obtaining a license, we realize there is no guaranty that a particular licensed property will make a successful greeting card or other product in the eye of the ultimate consumer. Furthermore, there can be no assurance that a successful licensed property will continue to be successful or maintain a high level of sales in the future. In the event that we are not able to acquire or maintain advantageous licenses, our business, results of operations and financial condition may be materially and adversely affected.

We cannot assure you that we will have adequate liquidity to fund our ongoing cash needs.

One of our key business strategies is to gain profitable market share by spending approximately $100 million to revamp our greeting card business over the next several years, primarily in our core greeting card business, with the majority of the expenses occurring during fiscal year 2007. In addition, we may have additional funding needs during or after that period that are not currently known. There can be no assurance that additional financing will be available to us or, if available, that it can be obtained on terms acceptable to management or within limitations that are contained in our current or future financing arrangements. Failure to obtain any necessary additional financing could result in the delay or abandonment of some or all of our plans, negatively impact our ability to make capital expenditures and result in our failure to meet our obligations.

The terms of our indebtedness may restrict our ability to pursue our growth strategy.

The terms of our credit agreement impose restrictions on our ability to, among other things, borrow and make investments, acquire other businesses, and make capital expenditures and distributions on our capital stock. In addition, our credit agreement requires us to satisfy specified financial covenants. Our ability to comply with these provisions depends, in part, on factors over which we may not have control. These restrictions could adversely affect our ability to pursue our growth strategy. If we were to breach any of our financial covenants or fail to make scheduled payments, our creditors could declare all amounts owed to them to be immediately due and payable. We may not have available funds sufficient to repay the amounts declared due and payable, and may have to sell our assets to repay those amounts. Our credit agreement is secured by substantially all of our assets, including the stock of certain of our subsidiaries. If we cannot repay all amounts that we have borrowed under our credit agreement, our lenders could proceed against our assets.

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

Many of our largest customers are mass-market retailers. The mass-market retail channel in the U.S. has experienced significant shifts in market share among competitors in recent years, causing large retailers to experience liquidity problems and file for bankruptcy protection. There is a risk that these key customers will not pay us, or that payment may be delayed because of bankruptcy or other factors beyond our control, which could increase our exposure to losses from bad debts. Additionally, our business, results of operations and financial condition could be materially and adversely affected if these mass-market retailers were to cease doing business as a result of bankruptcy, or significantly reduce the number of stores they operate.

Difficulties in integrating potential acquisitions could adversely affect our business.

We regularly evaluate potential acquisition opportunities to support and strengthen our business. We cannot be sure that we will be able to locate suitable acquisition candidates, acquire candidates on acceptable terms or integrate acquired businesses successfully. Future acquisitions may require us to incur additional debt and contingent liabilities, which may materially and adversely affect our business, results of operations and financial condition. Furthermore, the process of integrating acquired businesses effectively involves the following risks:

• unexpected difficulty in assimilating operations and products;

• diverting management’s attention from other business concerns;

• entering into markets in which we have limited or no direct experience; and

• losing key employees of an acquired business.

Increases in raw material and energy costs may materially raise our cost of goods sold and materially impact our profitability.

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

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

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

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

We are party to collective bargaining contracts with our labor unions, which represent a significant number of our employees. In particular, approximately 2,700 of our employees are unionized and are covered by collective bargaining agreements. Although we believe our relations with our employees are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining

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agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work related stoppage, we could incur higher ongoing labor costs or experience a significant disruption of operations, which could have a material adverse effect on our business.

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

Our business is subject to numerous federal, state, provincial, local and foreign laws and regulations, including regulations with respect to air emissions, wastewater and storm water discharges and the generation, handling, storage, transportation, treatment and disposal of waste materials, including hazardous materials. Although we believe that we are in substantial compliance with all applicable laws and regulations, because legal requirements frequently change and are subject to interpretation, we are unable to predict the ultimate cost of compliance with these requirements, which may be significant, or the effect on our operations. We cannot be certain that existing laws or regulations, as currently interpreted or reinterpreted in the future, or future laws or regulations, will not have a material and adverse effect on our business, results of operations and financial condition.

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

We are subject to regulations by the Consumer Product Safety Commission and other regulatory agencies. Concerns about product safety may lead to a recall of selected products. We have experienced, and in the future may experience, defects or errors in products after their production and sale to customers. Such defects or errors could result in the rejection of our products by consumers, damage to our reputation, lost sales, diverted development resources and increased customer service and support costs, any of which could harm our business. Individuals could sustain injuries from our products, and we may be subject to claims or lawsuits resulting from such injuries. There is a risk that these claims or liabilities may exceed, or fall outside the scope of, our insurance coverage. Additionally, we may be unable to obtain adequate liability insurance in the future. Recalls, post-manufacture repairs of our products, absence or cost of insurance, and administrative costs associated with recalls could harm our reputation, increase costs or reduce sales.

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

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

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

Our authorized capital stock consists of Class A common shares and Class B common shares. The economic rights of each class of common shares are identical, but the voting rights differ. Class A common shares are entitled to one vote per share, and Class B common shares are entitled to ten votes per share. There is no public trading market for the Class B Common Shares, which are held by members of the extended family of American Greetings’ founder, officers and directors of American Greetings and their extended family members, family trusts, institutional investors and certain other persons. As of March 31, 2006, Morry Weiss, the Chairman of the Board of Directors, Zev Weiss, the Chief Executive Officer, Jeffery Weiss, the President and Chief Operating

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Officer, and Erwin Weiss, Senior Vice President, Seasonal Specialty, together with other members of the Weiss family and certain trusts and foundations established by the Weiss family beneficially owned approximately 73% in the aggregate of our outstanding Class B common shares, which, together with Class A common shares beneficially owned by them, represents approximately 35% of the voting power of our outstanding capital stock. Accordingly, these members of the Weiss family, together with the trusts and foundations established by them, would be able to significantly influence the outcome of stockholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our Articles of Incorporation or Code of Regulations, and the approval of mergers and other significant corporate transactions, and their interests may not be aligned with your interests. The existence of these levels of ownership concentrated in a few persons makes it less likely that any other shareholder will be able to affect our management or strategic direction. These factors may also have the effect of delaying or preventing a change in our management or voting control or its acquisition by a third party.

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

Certain provisions of Ohio law and our Articles of Incorporation could have the effect of making it more difficult or discouraging for a third party to acquire or attempt to acquire control of American Greetings. Our Articles of Incorporation provide for the Board of Directors to be divided into three classes of directors serving staggered three-year terms. Such classification of the Board of Directors expands the time required to change the composition of a majority of directors and may tend to discourage a proxy contest or other takeover bid for the Company. In addition, the Articles of Incorporation provide for Class B Common Shares, which have ten votes per share.

As an Ohio corporation, we are subject to the provisions of Section 1701.831 of the Ohio Revised Code, known as the “Ohio Control Share Acquisition Statute.” The Ohio Control Share Acquisition Statute provides that notice and information filings, and special shareholder meeting and voting procedures, must occur prior to any person’s acquisition of an issuer’s shares that would entitle the acquirer to exercise or direct the voting power of the issuer in the election of directors within specified ranges of share ownership. The Ohio Control Share Acquisition Statute does not apply to a corporation if its articles of incorporation or code of regulations so provide. We have not opted out of the application of the Ohio Control Share Acquisition Statute.

We are also subject to Chapter 1704 of the Ohio Revised Code, known as the “Merger Moratorium Statute.” If a person becomes the beneficial owner of 10% or more of an issuer’s shares without the prior approval of its board of directors, the Merger Moratorium Statute prohibits a merger, consolidation, combination or majority share acquisition between us and such shareholder or an affiliate of such shareholder for a period of three years from the date on which the shareholder first became a beneficial owner of 10% or more of the issuer’s shares. The prohibition imposed by Chapter 1704 continues indefinitely after the initial three-year period unless the transaction is approved by the holders of at least two-thirds of the voting power of the issuer or satisfies statutory conditions relating to the fairness of the consideration to be received by the shareholders. The Merger Moratorium Statute does not apply to a corporation if its articles of incorporation or code of regulations so provide. We have not opted out of the application of the Merger Moratorium Statute.

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USE OF PROCEEDS

We will not receive any cash proceeds from the issuance of the New Notes. The Old Notes that are surrendered in exchange for the New Notes will be retired and canceled and cannot be reissued. As a result, the issuance of the New Notes will not increase or decrease our indebtedness. We will bear the expenses of the Exchange Offer. No underwriter is being used in connection with the Exchange Offer.

CAPITALIZATION

The following table sets forth our consolidated capitalization (1) as of November 30, 2005 and (2) as adjusted to give effect to the issuance of the New Notes, assuming that all holders of Old Notes accept the Exchange Offer. You should read the following data together with the consolidated financial statements and notes to the consolidated financial statements and other financial and operating data included elsewhere in this offering memorandum or incorporated in this offering memorandum by reference.

	November 30, 2005(1)(2)
	Actual		As Adjusted
	(in thousands)
Cash and cash equivalents	$	75,805	$	75,805
Short-term investments		208,740		208,740
	$	284,545	$	284,545
Long-term debt:
6.10% senior notes, due 2028	$	298,806	$	298,806
7.00% convertible subordinated notes, due 2006		174,792		174,792
Other		2,367		2,367
Total long-term debt		475,965		475,965
Total shareholders’ equity		1,268,067		1,268,067
Total capitalization	$	1,744,032	$	1,744,032

⁽¹⁾ On April 4, 2006, we replaced our existing credit agreement with a new $650 million credit facility. Simultaneously with the commencement of this Exchange Offer, we also commenced a tender offer and consent solicitation with respect to our 6.10% Senior Notes due August 1, 2028. In connection with the tender offer for the 6.10% Senior Notes, we expect to raise additional financing in a public offering or a private placement of senior notes.

⁽²⁾ During the quarter ended February 28, 2006, we committed to a plan to sell our South African business unit. As a result, the consolidated capitalization data has been changed to reflect our South African business unit as a discontinued operation for the periods presented.

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CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth our consolidated ratio of earnings to fixed charges on a historical basis for each of the periods indicated:

	For the Nine Months Ended November 30,		For the Year Ended February 28/29,
	2005	2004	2005	2004
Consolidated Ratio of Earnings to Fixed Charges(1)	2.8	1.9	2.1	2.5

⁽¹⁾ Ratio of earnings to fixed charges is computed by dividing fixed charges into earnings plus fixed charges. For purposes of determining this ratio, earnings have been calculated as pretax income from continuing operations before adjustment for minority interests in consolidated subsidiaries. Fixed charges consist of interest expense (including amortized premiums, discounts and capitalized expenses related to indebtedness) and the estimated interest component of rent expense. The information presented has been changed to reflect our South African business unit as a discontinued operation.

BOOK VALUE PER CLASS A COMMON SHARE

The following table sets forth our book value per Class A common share on a historical basis for each of the periods indicated:

	For the Nine Months Ended November 30,				For the Years Ended February 28/29,
	2005		2004		2005		2004		2003
Book value per Class A common share	$	21.00	$	21.41	$	21.38	$	20.16	$	17.58

PRICE RANGE AND DIVIDEND POLICY OF OUR CLASS A COMMON SHARES

Our Class A common shares are quoted on the New York Stock Exchange under the symbol “AM.” The following table sets forth, for the periods indicated, the high and low sale price for our Class A common shares, as reported on the New York Stock Exchange Composite Tape:

Fiscal year ended February 28, 2005	HIGH		LOW
First Quarter	$	23.45	$	19.09
Second Quarter		24.18		20.87
Third Quarter		28.16		23.98
Fourth Quarter		27.92		23.19
Fiscal year ended February 28, 2006	HIGH		LOW
First Quarter	$	26.60	$	22.31
Second Quarter		27.16		24.31
Third Quarter		28.02		23.82
Fourth Quarter		26.45		20.32
Fiscal year ended February 28, 2007	HIGH		LOW
First Quarter (through April 5, 2006)	$	22.07	$	20.55

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On April 5, 2006, the last reported sales price of our Class A common shares on the New York Stock Exchange was $22.07. As of April 3, 2006, there were 53,941,903 shares of our Class A common shares issued and outstanding held by approximately 4,959 holders of record.

Dividends on our Class A common shares are paid as declared by our board of directors. On April 3, 2006, our board of directors declared a dividend of $0.08 per share payable on May 1, 2006, to shareholders of record on April 21, 2006. The payment of dividends has been and will continue to be at the discretion of the board of directors and will depend on numerous factors, including our cash flow, our financial condition, capital requirements, restrictions imposed by financing arrangements and such other factors as our board of directors deems relevant. Our credit facility restricts our ability to pay dividends.

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DESCRIPTION OF THE NEW NOTES

The New Notes will be issued under a new indenture between us and U.S. Bank National Association, as trustee. The following description of provisions of the New Notes is not complete and is subject to, and qualified by reference to, the New Notes and the new indenture. We will furnish any holder a copy of the new indenture, which has in it the form of the New Notes, without charge, upon written request made to American Greetings Corporation, One American Road, Cleveland, Ohio 44144, Attention: Secretary. A copy of the form of the new indenture was filed as an exhibit to our Schedule TO, which we filed with the SEC on April 6, 2006, relating to the Exchange Offer. You should read the new indenture for a full description of the terms of the New Notes. Whenever reference is made to particular defined terms, those defined terms are incorporated by reference herein.

General

The New Notes will be general, unsecured obligations of American Greetings. The New Notes will be subordinated, which means that they will rank behind certain of our indebtedness, as described below. The aggregate principal amount of the New Notes will be up to approximately $175,000,000. We are required to repay the principal amount of the New Notes in full on July 15, 2006. The New Notes will bear interest at the rate of 7.00% per annum from January 15, 2006, the last interest payment date on which interest was paid on the Old Notes. No accrued and unpaid interest from January 15, 2006 or any future interest will be paid on the Old Notes which are exchanged for the New Notes. Interest will be computed on the basis of a 360-day year of twelve thirty-day months. We will pay interest on the New Notes only on July 15, 2006. Because July 15, 2006 is also the maturity date of the New Notes, July 15, 2006 will be the only date on which we pay interest on the New Notes.

Subject to the conditions described below, at any time prior to the close of business on July 15, 2006, the maturity date, unless the New Notes have been previously repurchased, holders, at their option, may convert each of their New Notes into an amount of cash and stock initially equal to 71.9466 Class A common shares per $1,000 principal amount of New Notes, which represents the initial conversion rate for the New Notes, and is subject to adjustment as described below.

If there is a Change in Control of American Greetings, holders of the New Notes may have the right to require us to repurchase their New Notes as described below under “—Repurchase at Option of Holders Upon a Change in Control.”

Form, Denomination, Transfer, Exchange and Book-Entry Procedures

The New Notes will be issued only in fully registered form, without interest coupons and in denominations of $1,000 and greater multiples.

The New Notes will be evidenced by one or more global notes deposited with the Trustee as custodian for The Depository Trust Company (“DTC”) and registered in the name of Cede & Co. (“Cede”), as nominee of DTC. Except as set forth below, record ownership of the global note may be transferred, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee.

The global note will not be registered in the name of any person, or exchanged for New Notes that are registered in the name of any person, other than DTC or its nominee unless either of the following occurs:

• DTC notifies us that it is unwilling, unable or no longer qualified to continue acting as the depositary for the global note; or

• an Event of Default with respect to the New Notes represented by the global note has occurred and is continuing.

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In those circumstances, DTC will determine in whose names any securities issued in exchange for the global note will be registered.

DTC or its nominee will be considered the sole owner and holder of the global note for all purposes, and as a result:

• you cannot have New Notes registered in your name if they are represented by the global note;

• you cannot receive certificated (physical) New Notes in exchange for your beneficial interest in the global notes;

• you will not be considered to be the owner or holder of the global note or any note it represents for any purpose; and

• all payments on the global note will be made to DTC or its nominee.

The laws of some jurisdictions require that certain kinds of purchasers (for example, certain insurance companies) can only own securities in definitive (certificated) form. These laws may limit your ability to transfer your beneficial interests in the global note to these types of purchasers.

Only institutions (such as a securities broker or dealer) that have accounts with DTC or its nominee (called “participants”) and persons that may hold beneficial interests through participants can own a beneficial interest in the global note. The only place where the ownership of beneficial interests in the global note will appear and the only way the transfer of those interests can be made will be on the records kept by DTC (for their participants’ interests) and the records kept by those participants (for interests of persons held by participants on their behalf).

Secondary trading in bonds and notes of corporate issuers is generally settled in clearinghouse (that is, next-day) funds. In contrast, beneficial interests in a global note usually trade in DTC’s same-day funds settlement system, and settle in immediately available funds. We make no representation as to the effect that settlement in immediately available funds will have on trading activity in those beneficial interests.

We will make cash payments of interest on and principal of and the redemption or repurchase price of the global note, in respect of the New Notes, to Cede, the nominee for DTC, as the registered owner of the global note. We will make these payments by wire transfer of immediately available funds on each payment date.

Beneficial owners of interests in global notes who desire to convert their interests into cash and common shares should contact their brokers or other participants or indirect participants through whom they hold such beneficial interests to obtain information on procedures, including proper forms and cut-off times, for submitting requests for conversion.

We been informed that DTC’s practice is to credit participants’ accounts on the payment date with payments in amounts proportionate to their respective beneficial interests in the New Notes represented by the global note as shown on DTC’s records, unless DTC has reason to believe that it will not receive payment on that payment date. Payments by participants to owners of beneficial interests in New Notes represented by the global note held through participants will be the responsibility of those participants, as is now the case with securities held for the account of customers registered in “street name.”

We will send any redemption notices to Cede. We understand that if less than all the New Notes are being redeemed, DTC’s practice is to determine by lot the amount of the holdings of each participant to be redeemed.

We also understand that neither DTC nor Cede will consent or vote with respect to the New Notes. We have been advised that under its usual procedures, DTC will mail an “omnibus proxy” to us as soon as possible after the record date. The omnibus proxy assigns Cede’s consenting or voting rights to those participants to whose accounts the New Notes are credited on the record date identified in a listing attached to the omnibus proxy.

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Because DTC can only act on behalf of direct participants, who in turn act on behalf of indirect participants, the ability of a person having a beneficial interest in the principal amount represented by the global note to pledge the interest to persons or entities that do not participate in the DTC book-entry system, or otherwise take actions in respect of that interest, may be affected by the lack of a physical certificate evidencing its interest.

DTC has advised us that it will take any action permitted to be taken by a holder of New Notes (including the presentation of New Notes for exchange) only at the direction of one or more participants to whose account with DTC interests in the global note are credited and only in respect of such portion of the principal amount of the New Notes represented by the global note as to which such participant or participants has or have given such direction.

DTC has also advised us as follows:

• DTC is a limited purpose trust company organized under the laws of the State of New York,

• a member of the Federal Reserve System,

• a “clearing corporation” within the meaning of the Uniform Commercial as amended, and,

• a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act.

DTC was created to hold securities that its participants deposit with DTC. DTC also facilitates the settlement among participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in participants’ accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is owned by a number of its direct participants and by the New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the National Association of Securities Dealers, Inc. Access to the DTC system is also available to others such as securities brokers and dealers, banks and trust companies that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly. The rules applicable to DTC and its participants are on file with the SEC.

The policies and procedures of DTC, which may change periodically, will apply to payments, transfers, exchanges and other matters relating to beneficial interests in the global note. Neither American Greetings nor the Trustee have any responsibility or liability for any aspect of DTC’s or any participants’ records relating to beneficial interests in the global note, including for payments made on the global note, and neither American Greetings nor and the Trustee are responsible for maintaining, supervising or reviewing any of those records.

Conversion Rights

General

Subject to the conditions described below, at any time prior to the close of business on the maturity date, unless the New Notes have been previously repurchased, holders, at their option, may convert each of their New Notes into an amount of cash and stock initially equal to 71.9466 Class A common shares per $1,000 principal amount of New Notes, which represents the initial conversion rate for the New Notes. The conversion rate and the equivalent conversion value for the New Notes, as determined below, in effect at any given time are referred to as the “conversion rate” and the “conversion value,” respectively, and will be subject to adjustment as described below. Holders may convert fewer than all of their New Notes so long as the New Notes converted are an integral multiple of $1,000. The right to convert a New Note delivered for repurchase will terminate at the close of business on the repurchase date for that New Note, unless we default in making the payment due upon repurchase.

Holders of New Notes may convert all or part of any New Note by delivering the New Note at the Corporate Trust Office of the Trustee at 60 Livingston Avenue, Mail Code EP-MN-WS3T, in the city of St. Paul, Minnesota, 55107, accompanied by a duly signed and completed notice of conversion, a copy of which may be

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obtained by the Trustee. New Notes surrendered for conversion must also be accompanied by any payments with respect to interest or taxes as described below. The conversion date will be the date on which the note and the duly signed and completed notice of conversion are so delivered. The Trustee will, on the holder’s behalf, convert the New Notes into cash and (depending on the applicable conversion value) our Class A common shares. Cash payable upon conversion, together with, if applicable, a certificate, or a book-entry transfer through DTC for our Class A common shares into which any New Notes are converted, will be delivered through the Trustee as soon as practicable following the conversion date. Any Class A common shares issuable upon conversion of the New Notes will be fully paid and nonassessable and will rank equally with other Class A common shares.

If a holder surrenders a New Note for conversion on a date that is not July 15, 2006 (the “Interest Payment Date”), the holder will not be entitled to receive any interest for the period from January 15, 2006, the last interest payment date on which interest was paid on the Old Notes, to the conversion date, except as described below in this paragraph. Any New Note surrendered for conversion during the period from the close of business on July 1, 2006 (the “Regular Record Date”) to the opening of business on the Interest Payment Date (except New Notes (or portions thereof) to be repurchased on the repurchase date for which the right to convert would terminate during such period) must be accompanied by payment of an amount equal to the interest payable on the Interest Payment Date on the principal amount of the New Notes being surrendered for conversion. In the case of any New Note which has been converted after the Regular Record Date but before the Interest Payment Date, interest payable on the Interest Payment Date shall be payable on such Interest Payment Date notwithstanding such conversion, and such interest shall be paid to the holder of such New Note on such Regular Record Date.

No other payment or adjustment for interest, or for any dividends in respect of Class A common shares, will be made upon conversion. Holders of Class A common shares issued upon conversion will not be entitled to receive any dividends payable to holders of Class A common shares as of any record time or date before the close of business on the conversion date.

Holders of the New Notes will not be required to pay any taxes or duties relating to the issue or delivery of any Class A common shares on conversion but will be required to pay any tax or duty relating to any transfer involved in the issue or delivery of Class A common shares in a name other than the holder’s name. Certificates representing any Class A common shares will not be issued or delivered unless all taxes and duties, if any, payable by you have been paid.

Payment Upon Conversion

Upon conversion of any New Note, the holder will receive cash and, if applicable, shares of our Class A common shares, the aggregate value of which (the “conversion value”) will be equal to, rounded to the nearest whole cent, the product of x and y and z, where:

• x is equal to the aggregate principal amount of New Notes to be converted divided by 1,000;

• y is equal to the then applicable conversion rate (currently 71.9466); and

• z is equal to the arithmetic average, rounded to the nearest whole cent, of the Daily Volume Weighted Average Price of our Class A common shares (appropriately adjusted to take into account the occurrence during such period of stock splits and similar events) for the ten consecutive trading days beginning on the second trading day immediately following the day the New Notes are tendered for or deemed tendered for conversion (the “Ten Day Weighted Average Price”). “Daily Volume Weighted Average Price” means, for any trading day the volume weighted average price per share of our Class A common shares on the New York Stock Exchange or, if our Class A common shares are not listed on the New York Stock Exchange, on the principal exchange or over-the-counter market on which our Class A common shares are then listed or traded (including, for this purpose, the Nasdaq National Market), during regular trading hours for that trading day, as displayed by Bloomberg (or any successor) or, if such volume weighted average price is not available, the last reported sale price for that trading day.

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We will deliver the conversion value to converting holders as follows:

(i) an amount in cash (the “Principal Return”) equal to the lesser of (A) the conversion value and (B) the aggregate principal amount of the New Notes being converted; and

(ii) if the conversion value exceeds the Principal Return (such excess, the “Net Share Amount”), we will (A) deliver the number of whole Class A common shares (the “Net Shares”), determined as set forth below, and (B) pay Additional Cash, determined as set forth below, in lieu of fractional shares.

The number of Net Shares to be delivered will be the integer part of the number obtained by dividing the Net Share Amount by the Ten Day Weighted Average Price. Additional Cash will be an amount in U.S. dollars, rounded to the nearest whole cent, equal to the difference between (i) the Net Share Amount and (ii) the number of Net Shares multiplied by the Ten Day Weighted Average Price. Holders of Notes will not receive fractional shares upon conversion of Notes. In lieu of fractional shares, holders will receive the Additional Cash described in the second preceding sentence.

The following provides a hypothetical illustration of the conversion value calculation for the New Notes. The illustration is based on hypothetical data and should, therefore, be used solely for the purpose of obtaining an understanding of the calculation of the conversion value, based on the hypothetical data, and should not be used or relied upon for any other purpose.

Assumed aggregate principal amount of New Notes to be converted	$130,000
x – assumed aggregate principal amount of New Notes to be converted divided by $1,000	130
y – assumed conversion rate at the time of conversion	71.9466
z – the hypothetical Ten Day Weighted Average Price	$22.07
Conversion value	$206,421.99
Principal Return	$130,000
Net Share Amount	$76,421.99
Net Shares	3,462
Additional Cash	$15.65

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Conversion Rate Adjustments

The conversion rate will be subject to adjustment for, among other things:

• dividends (and other distributions) payable in Class A common shares on shares of our capital stock;

• the issuance to all holders of our Class A common shares of rights, options or warrants entitling them to subscribe for or purchase our Class A common shares at less than the then Current Market Price of such Class A common shares (determined as provided in the new indenture) as of the record date for shareholders entitled to receive such rights, options or warrants;

• subdivisions, combinations and reclassifications of our Class A common shares;

• distributions to all holders of our Class A common shares of evidences of indebtedness of American Greetings, capital stock, cash or assets (including securities, but excluding those dividends, rights, options, warrants and distributions referred to above, dividends and distributions paid exclusively in cash and distributions upon mergers or consolidations as discussed below);

• distributions consisting exclusively of cash (excluding any cash portion of distributions referred to in the immediately preceding clause, or cash distributed upon a merger or consolidation as discussed below) to all holders of our Class A common shares in an aggregate amount that, combined together with (1) other such all-cash distributions made within the preceding 12 month period in respect of which no adjustment has been made and (2) any cash and the fair market value of other consideration payable in connection with any tender offer by us or any of our subsidiaries for our Class A common shares concluded within the preceding 12 month period in respect of which no adjustment has been made, exceeds 10% of our market capitalization (being the product of the Current Market Price per share of the Class A common shares on the record date for such distribution and the number of shares of Class A common shares then outstanding); and

• the successful completion of a tender offer made by us or any of our subsidiaries for our Class A common shares which involves an aggregate consideration that, together with any cash and other consideration payable in a tender offer by us or any of our subsidiaries for our Class A common shares expiring within the 12 month period preceding the expiration of such tender offer in respect of which no adjustment has been made, exceeds 10% of our market capitalization on the expiration of such tender offer.

We reserve the right to effect such increases in the conversion rate in addition to those required by the foregoing provisions as we consider to be advisable in order that any event treated for United States federal income tax purposes as a dividend of stock or stock rights will not be taxable to the recipients. We will not be required to make any adjustment to the conversion rate until the cumulative adjustments amount to 1.0% or more of the conversion rate. We will compute all adjustments to the conversion rate and will give notice by mail to holders of the registered New Notes of any adjustments.

In case of any consolidation or merger of American Greetings with or into another entity or any merger of another entity into American Greetings (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of our Class A common shares), or in case of any sale or transfer of all or substantially all our assets, each New Note then outstanding will become convertible only into the value of the kind and amount of securities, cash and other property (the “Reference Property”) receivable upon such consolidation, merger, conveyance, sale, transfer or lease by a holder of a number of Class A common shares equal to a fraction whose denominator is one thousand (1,000) and whose numerator is the product of the principal amount of such Note and the Conversion Rate in effect immediately prior to such consolidation, merger, conveyance, sale, transfer or lease. After the effective time of such consolidation, merger, conveyance, sale, transfer or lease, the Principal Return payable upon conversion of a Note will continue to be payable in cash. The Principal Return and the Net Share Amount, if any, will be calculated based on a conversion value which has been calculated by substituting the fair value of the Reference Property payable with respect to one Class A common share in connection with such consolidation, merger, conveyance, sale, transfer or lease as of

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the date of such event (adjusted, if appropriate, to take into account the occurrence during the period between the date of such consolidation, merger, conveyance, sale, transfer or lease and the applicable conversion date of any stock dividends, stock splits, stock combinations or other similar events, the “Reference Property Value”) for the Ten Day Weighted Average Price and otherwise in accordance with the provisions applicable to such conversion prior to such consolidation, merger, conveyance, sale, transfer or lease. The obligation to deliver the Net Shares, if any, in respect of the Net Share Amount in connection with such conversion, will be satisfied by payment in the form of the Reference Property and based on the Reference Property Value.

We may increase the conversion rate for any period of at least 20 days, upon at least 15 days’ notice, if our board of directors determines that the increase would be in our best interest. The board of directors’ determination in this regard will be conclusive. We will give holders of New Notes at least 15 days’ notice of such an increase in the conversion rate. Any increase, however, will not be taken into account for purposes of determining whether the closing price of our Class A common shares exceeds the conversion price by 105% in connection with an event which otherwise would be a Change in Control, as defined below.

We may also increase the conversion rate for the remaining term of the New Notes or any shorter period in order to avoid or diminish any income tax to any holders of Class A common shares resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock or from any event treated as such for income tax purposes. If at any time we make a distribution of property to our shareholders that would be taxable to such shareholders as a dividend for United States federal income tax purposes, such as distributions of evidences of indebtedness or assets of American Greetings, but generally not stock dividends on Class A common shares or rights to subscribe for Class A common shares, and, pursuant to the adjustment provisions of the new indenture, the conversion price (as defined in the new indenture) of the New Notes is reduced, that reduction may be deemed for United States federal income tax purposes to be the payment of a taxable dividend to holders of Notes. See “Certain United States Federal Income Tax Considerations—Dividends on Class A common shares.”

Subordination

The New Notes are subordinated and, as a result, the payment of the principal of, and any premium and interest on the New Notes, including the Principal Return due upon conversion together with any amount payable on any redemption or repurchase, will be subordinated to the prior payment in full, in cash or other payment satisfactory to holders of all our Senior Indebtedness. The New Notes are also effectively subordinated to any debt or other liabilities of our subsidiaries. As of February 28, 2006, we had approximately $300 million of senior debt outstanding and the aggregate amount of liabilities of our subsidiaries was approximately $82 million, including trade payables.

“Senior Indebtedness” is defined in the new indenture to mean: the principal of (and premium, if any) and interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such proceeding) on, and all fees and other amounts payable in connection with, the following, whether absolute or contingent, secured or unsecured, due or to become due, outstanding on the date of the new indenture or thereafter created, incurred or assumed:

• all of our indebtedness evidenced by a credit or loan agreement, note, bond, debenture or other written obligation;

• all of our obligations for money borrowed;

• all of our obligations evidenced by a security or similar instrument given in connection with the acquisition of any businesses, properties or assets of any kind;

• all of our obligations (1) as lessee under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles and (2) as lessee under other leases for facilities,

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capital equipment or related assets, whether or not capitalized, entered into or leased for financing purposes;

• all of our obligations under interest rate and currency swaps, caps, floors, collars, hedge agreements, forward contracts or similar agreements or arrangements;

• all of our obligations with respect to letters of credit, bankers’ acceptances and similar facilities (including reimbursement obligations with respect to the foregoing);

• all of our obligations issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business);

• all obligations of the type referred to in the above clauses of another person and all dividends of another person, the payment of which, in either case, we have assumed or guaranteed, or for which we are responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise, or which are secured by a lien on our property; and

• renewals, extensions, modifications, replacements, restatements and refundings of, or any indebtedness or obligation issued in exchange for, any such indebtedness or obligation described in the above clauses of this definition.

Senior Indebtedness will not include the New Notes, the Old Notes or any other indebtedness or obligation if its terms or the terms of the instrument under which or pursuant to which it is issued expressly provide that it is not superior in right of payment to the New Notes.

We may not make any payment on account of principal, premium, if any, or interest on the New Notes (including, without limitation, payment of the Principal Return due upon conversion), or redemption or repurchase of the New Notes, if either of the following occurs:

• we default in our obligations to pay principal, premium, interest or other amounts on our Senior Indebtedness, including a default under any redemption or repurchase obligation, and the default continues beyond any grace period that we may have to make those payments; or

• any other default occurs and is continuing on any Designated Senior Indebtedness (as defined below) and (1) the default permits the holders of the Designated Senior Indebtedness to accelerate its maturity and (2) the Trustee has received a notice (a “Payment Blockage Notice”) of the default from American Greetings, the holder of such debt or such other person permitted to give such notice under the new indenture.

If payments of the New Notes have been blocked by a payment default on Senior Indebtedness, payments on the New Notes may resume when the payment default has been cured or waived or ceases to exist. If payments on the New Notes have been blocked by a nonpayment default, payments on the New Notes may resume on the earlier of (1) the date the nonpayment default is cured or waived or ceases to exist or (2) 179 days after the Payment Blockage Notice is received if the maturity of the Designated Senior Indebtedness has not been accelerated.

No nonpayment default that existed on the day a Payment Blockage Notice was delivered to the Trustee can be used as the basis for any subsequent Payment Blockage Notice. In addition, once a holder of Designated Senior Indebtedness has blocked payment on the New Notes by giving a Payment Blockage Notice, no new period of payment blockage can be commenced pursuant to a subsequent Payment Blockage Notice until both of the following are satisfied:

• 365 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice; and

• all scheduled payments of principal, any premium and interest with respect to the New Notes that have come due have been paid in full in cash.

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“Designated Senior Indebtedness” means our obligations under any particular Senior Indebtedness in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or related agreements or documents to which we are a party), whether or not executed contemporaneously with the incurrence of such Senior Indebtedness, expressly provides that such indebtedness shall be “Designated Senior Indebtedness” for purposes of the new indenture. The instrument, agreement or other document evidencing any Designated Senior Indebtedness may place limitations and conditions on the right of such Senior Indebtedness to exercise the rights of Designated Senior Indebtedness.

In addition, upon any acceleration of the principal due on the New Notes as a result of an Event of Default or upon any payment or distribution of our assets to creditors upon any dissolution, winding up, liquidation or reorganization, whether voluntary or involuntary, marshaling of assets, assignment for the benefit of creditors, or in bankruptcy, insolvency, receivership or other similar proceedings, all principal, premium, if any, interest and other amounts due on all Senior Indebtedness must be paid in full before holders of New Notes are entitled to receive any payment. By reason of such subordination, in the event of insolvency, our creditors who are holders of Senior Indebtedness are likely to recover more, ratably, than the holders of New Notes are, and holders of the New Notes will be likely to experience a reduction or elimination of payments on the New Notes.

Further, the New Notes will be “structurally subordinated” to all indebtedness and other liabilities, including trade payables and lease obligations, of our subsidiaries. This occurs because our right to receive any assets of our subsidiaries upon their liquidation or reorganization, and the right of the holders of the New Notes to participate in those assets, will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors, except to the extent that we are recognized as a creditor of such subsidiary, in which case its claims would still be subordinate to any security interest in the assets of the subsidiary and any indebtedness of the subsidiary senior to that held by us.

The new indenture does not limit our ability to incur Senior Indebtedness or our ability or the ability of our subsidiaries to incur any other indebtedness.

Redemption

We may not optionally redeem the New Notes at any time.

No sinking fund is provided for the New Notes.

We may, to the extent permitted by applicable law, at any time purchase New Notes in the open market, by tender at any price or by private agreement. Any New Notes that we purchase may, to the extent permitted by applicable law, be re-issued or resold or may, at our option, be surrendered to the Trustee for cancellation. Any New Note surrendered for cancellation may not be re-issued or resold and will be canceled promptly.

Payment of Principal and Interest

We will make all payments of principal and interest on the registered New Notes by U.S. dollar check drawn on an account maintained at a bank in New York City. If a holder of the New Notes holds the registered New Note with a face value greater than $2,000,000, at the holder’s request we will make payments of principal or interest to the holder of the New Notes by wire transfer to an account maintained by the holder at a bank in New York City. Payment of any interest on the New Notes will be made to the person in whose name the New Notes, or any predecessor New Notes, is registered at the close of business on the July 1, 2006, the Regular Record Date (whether or not a business day). If holders of the New Notes hold a registered New Note with a face value in excess of $2,000,000 and holders of the New Notes would like to receive payments by wire transfer, holders will be required to provide the Trustee with wire transfer instructions at least 15 days prior to the relevant payment date.

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Payments on any global New Note registered in the name of DTC or its nominee will be payable by the Trustee to DTC or its nominee in its capacity as the registered holders under the new indenture. Under the terms of the new indenture, we and the Trustee will treat the persons in whose names the New Notes, including any global note, are registered as the owners for the purpose of receiving payments and for all other purposes. Consequently, neither we, the Trustee nor any of its agents or the Trustee’s agents has or will have any responsibility or liability for (1) any aspect of DTC’s records or any participant’s or indirect participant’s records relating to or payments made on account of beneficial ownership interests in the global note, or for maintaining, supervising or reviewing any of DTC’s records or any participant’s or indirect participant’s records relating to the beneficial ownership interests in the global note, or (2) any other matter relating to the actions and practices of DTC or any of its participants or indirect participants.

We will not be required to make any payment on the New Notes due on any day which is not a business day until the next succeeding business day. The payment made on the next succeeding business day will be treated as though it were paid on the original due date and no interest will accrue on the payment for the additional period of time.

All moneys deposited with the Trustee or any paying agent, or then held by us, in trust for the payment of principal of, premium, if any, or interest on any New Note which remains unclaimed at the end of two years after the payment has become due and payable will be repaid to us, and holders of the New Notes will then look only to us for payment.

Paying Agent and Conversion Agent

We have appointed the Trustee as paying agent and conversion agent. We may terminate the appointment of any paying agent or conversion agent and appoint additional or other paying agents and conversion agents. However, until the New Notes have been delivered to the Trustee for cancellation, or moneys sufficient to pay the principal of, premium, if any, and interest on the New Notes has been made available for payment and either paid or returned to us as provided in the new indenture, the Trustee will maintain an office or agency in the Borough of Manhattan, The City of New York for surrender of the New Notes for conversion. Notice of any termination or appointment and of any change in the office through which any paying agent or conversion agent will act will be given in accordance with “—Notice to Investors” below.

Repurchase at Option of Holders Upon a Change in Control

If a Change in Control (as defined below) occurs, holders of the New Notes will have the right, at their option, to require us to repurchase all of their New Notes, or any portion of the principal amount thereof, that is equal to $1,000 or an integral multiple of $1,000. The price we are required to pay is 100% of the principal amount of the New Notes to be repurchased plus interest and liquidated damages, if any, accrued to the repurchase date.

At our option, instead of paying the repurchase price in cash, we may pay the repurchase price in our Class A common shares valued at 95% of the average of the closing prices of our Class A common shares for the five trading days immediately preceding and including the third trading day prior to the repurchase date. We may only pay the repurchase price in our common shares if we satisfy conditions provided in the new indenture.

Within 30 days after the occurrence of a Change in Control, we are obligated to give to holders of the New Notes notice of the Change in Control and of the repurchase right arising as a result of the Change in Control and to make a public announcement thereof by release made to Reuters Economic Services and Bloomberg Business News. We must also deliver a copy of this notice to the Trustee. To exercise the repurchase right, holders of the New Notes must deliver on or before the 30th day after the date of our notice irrevocable written notice to the Trustee exercising their repurchase right, together with the New Note with respect to which the right is being exercised. We are required to repurchase the New Notes on the date that is 45 days after the date of our notice.

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The new indenture provides that a Change in Control will be deemed to have occurred at the time after the New Notes are originally issued that any of the following occurs:

1. any person, including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act, acquires beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of our capital stock entitling the person to exercise 50% or more of the total voting power of all shares of such capital stock that is entitled to vote generally in elections of directors, other than (i) an acquisition by us, any of our subsidiaries or any of our employee benefit plans or (ii) any such acquisition by Morry Weiss, Judith A. Weiss, Harry H. Stone, Gary Weiss, Jeffrey Weiss, Zev Weiss, Elie Weiss and the Irving I. Stone Limited Liability Co. (collectively, the “Principals”) or any person controlled by any of the Principals, so long as any such acquisition does not result, directly or indirectly, in a “going private transaction” within the meaning of the Exchange Act; or

2. We merge or consolidate with or into any other person, any other person merges into us, or we convey, sell, transfer or lease all or substantially all of our assets to another person, other than any such transaction:

• that does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of our capital stock, and pursuant to which the holders of our Class A common shares immediately prior to such transaction are entitled to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving corporation immediately after such transaction, or

• which is effected solely to change our jurisdiction of incorporation and results in a reclassification, conversion or exchange of our outstanding Class A common shares solely into common shares of the surviving entity.

However, a Change in Control will not be deemed to have occurred if either (A) the closing price per share of our Class A common shares for any five trading days within the period of 10 consecutive trading days ending immediately after the later of the Change in Control or the public announcement of the Change in Control, in the case of a Change in Control relating to an acquisition of capital stock, or the period of 10 consecutive trading days ending immediately before the Change in Control, in the case of a Change in Control relating to a merger, consolidation or asset sale, equals or exceeds 105% of the conversion price of the New Notes in effect on each of those trading days or (B) all of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights) in a merger or consolidation otherwise constituting a Change in Control under clause (1) and/or clause (2) above consists of shares of the acquirer’s common stock traded on a national securities exchange or quoted on The Nasdaq National Market (or will be so traded or quoted immediately following such merger or consolidation) and as a result of such merger or consolidation the New Notes become convertible into the Principal Return and such common stock (if any), in each case, calculated assuming such common stock is the Reference Property.

For purposes of these provisions:

• the conversion price is equal to $1,000 divided by the conversion rate;

• whether a person is a “beneficial owner” will be determined in accordance with Rule 13d-3 under the Exchange Act; and

• “person” includes any syndicate or group that would be deemed to be a “person” under Section 13 (d)(3) of the Exchange Act.

Rule 13e-4 under the Exchange Act requires the dissemination of prescribed information to security holders in the event of an issuer tender offer and may apply in the event that the repurchase option becomes available to you. We will comply with this rule to the extent it applies at that time.

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The definition of Change in Control includes a phrase relating to the conveyance, transfer, sale, lease or disposition of “all or substantially all” of its assets. There is no precise, established definition of the phrase “substantially all” under applicable law. Accordingly, the ability of holders of the New Notes to require us to repurchase their New Notes as a result of conveyance, transfer, sale, lease or other disposition of less than all of our assets may be uncertain.

The foregoing provisions would not necessarily provide holders of the New Notes with protection if we are involved in a highly leveraged or other transaction that may adversely affect holders of the New Notes.

Our ability to repurchase the New Notes upon the occurrence of a Change in Control is subject to important limitations. Some of the events constituting a Change in Control could result in or cause an event of default under, or be prohibited or limited by, the terms of our Senior Indebtedness. As a result, unless we were to obtain a waiver, a repurchase of the New Notes could be prohibited under the subordination provisions of the new indenture until the Senior Indebtedness is paid in full. Although we have the right to repurchase the New Notes with our Class A common shares, subject to certain conditions, we cannot assure holders of the New Notes that we would have the financial resources, or would be able to arrange financing, to pay the repurchase price in cash for all the New Notes that might be delivered by holders of the New Notes seeking to exercise the repurchase right. If we were to fail to repurchase the New Notes when required following a Change in Control, an Event of Default under the new indenture would occur, whether or not such repurchase were permitted by the subordination provisions of the new indenture. Any such default may, in turn, cause a default under our Senior Indebtedness. See “—Subordination.”

Mergers and Sales of Assets

We may not consolidate with or merge into any other person or convey, transfer, sell or lease our properties and assets substantially as an entirety to any person unless:

• the person formed by such consolidation or into or with which we are merged or the person to which our properties and assets are so conveyed, transferred, sold or leased, shall be a corporation, limited liability company, partnership or trust organized and existing under the laws of the United States, any State within the United States or the District of Columbia and, if we are not the surviving person, the surviving person assumes the payment of the principal of, premium, if any, and interest on the New Notes and the performance of its other covenants under the new indenture; and

• immediately after giving effect to the transaction, no Event of Default, and no event that, after notice or lapse of time or both, would become an Event of Default, will have occurred and be continuing.

Events of Default

The following will be Events of Default under the new indenture:

• we fail to pay principal of or premium, if any, on any New Note when due, whether or not prohibited by the subordination provisions of the new indenture;

• we fail to pay any interest on any New Note when due, which failure continues for 30 days, whether or not prohibited by the subordination provisions of the new indenture;

• we fail to provide notice of a Change in Control, whether or not such payment is prohibited by the subordination provisions of the new indenture;

• we fail to perform any other covenant in the new indenture, which failure continues for 60 days after written notice as provided in the new indenture;

• any indebtedness under any bonds, debentures, notes or other evidences of indebtedness for money borrowed (or any guarantee thereof) by American Greetings in an aggregate principal amount in excess

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of $20,000,000 is not paid when due either at its stated maturity or upon acceleration thereof, and such indebtedness is not discharged, or such acceleration is not rescinded or annulled, within a period of 60 days after notice as provided in the new indenture; and

• certain events of bankruptcy, insolvency or reorganization involving American Greetings.

Subject to the provisions of the new indenture relating to the duties of the Trustee in case an Event of Default shall occur and be continuing, the Trustee will be under no obligation to exercise any of its rights or powers under the new indenture at the request or direction of any holder of the New Notes, unless the holder of the New Notes shall have offered reasonable indemnity to the Trustee. Subject to providing indemnification of the Trustee, the holders of a majority in aggregate principal amount of the outstanding New Notes will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee.

If an Event of Default, other than an Event of Default arising from events of insolvency, bankruptcy or reorganization with respect to American Greetings occurs and is continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding New Notes may, subject to the subordination provisions of the new indenture, accelerate the maturity of the New Notes. However, after such acceleration, but before a judgment or decree based on acceleration, the holders of a majority in aggregate principal amount of the outstanding New Notes may, under certain circumstances, rescind and annul the acceleration if all Events of Default, other than the non-payment of principal of the New Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in the new indenture. If an Event of Default arising from events of insolvency, bankruptcy or reorganization with respect to us occurs, then the principal of, and accrued interest on, the New Notes will automatically become immediately due and payable without any declaration or other act on the part of the Holders of the New Notes or the Trustee. For information as to waiver of defaults, see “—Meetings, Modification and Waiver.”

Holders of the New Notes will not have any right to institute any proceeding with respect to the new indenture, or for any remedy under the new indenture, unless holders of the New Notes give the Trustee written notice of a continuing Event of Default and the holders of at least 25% in aggregate principal amount of the outstanding New Notes has made written request, and offered reasonable indemnity, to the Trustee to institute proceedings, and the Trustee has not received from the holders of a majority in aggregate principal amount of the outstanding New Notes a direction inconsistent with the written request and shall have failed to institute such proceeding within 60 days. However, these limitations do not apply to a suit instituted by holders of the New Notes for the enforcement of payment of the principal of, premium, if any, or interest on the New Notes on or after the respective due dates expressed in the New Notes or a New Note holder’s right to convert the New Notes in accordance with the new indenture.

We will be required to furnish to the Trustee annually a statement as to our performance of certain of our obligations under the new indenture and as to any default in such performance.

Meetings, Modification and Waiver

The new indenture contains provisions for convening meetings of the holders of the New Notes to consider matters affecting their interests.

Certain limited modifications of the new indenture may be made without the necessity of obtaining the consent of the holders of the New Notes. Other modifications and amendments of the new indenture may be made, and certain past defaults by us may be waived, either (i) with the written consent of the holders of not less than a majority in aggregate principal amount of the New Notes at the time outstanding or (ii) by the adoption of a resolution, at a meeting of holders of the New Notes at which a quorum is present, by the holders of at least 66 ²/3% in aggregate principal amount of the New Notes represented at such meeting. The quorum at any meeting

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called to adopt a resolution will be persons holding or representing a majority in aggregate principal amount of the New Notes at the time outstanding and, at any reconvened meeting adjourned for lack of a quorum, 25% of such aggregate principal amount.

However, a modification or amendment requires the consent of the holders of each outstanding New Note affected if it would:

• change the stated maturity of the principal of or interest on a New Note;

• reduce the principal amount of, or any premium or interest on, any New Note;

• reduce the amount payable upon a redemption or mandatory repurchase;

• modify the provisions with respect to the repurchase rights of holders of the New Notes in a manner adverse to the holders;

• change the place or currency of payment on a New Note;

• impair the right to institute suit for the enforcement of any payment on any New Note;

• modify the obligation to maintain an office or agency in New York City;

• adversely affect the right to convert the New Notes;

• reduce the above-stated percentage of the principal amount of the holders of the New Notes whose consent is needed to modify or amend the new indenture;

• reduce the percentage of the principal amount of the holders of the New Notes whose consent is needed to waive compliance with certain provisions of the new indenture or to waive certain defaults; or

• reduce the percentage required for the adoption of a resolution or the quorum required at any meeting of holders of the New Notes at which a resolution is adopted.

The holders of the New Notes either through written consent of a majority in aggregate principal amount of the outstanding New Notes or by the adoption of a resolution, at a meeting of holders of the outstanding New Notes at which a quorum is present, by the holders of at least 66 ²/3% in aggregate principal amount of the New Notes represented at such meeting may waive any past default under the new indenture, except a default in the payment of principal, premium, if any, or interest which has not been cured or in respect of a provision which cannot be modified or amended without the consent of all the holders of the New Notes affected.

Notice to Investors

Notice to holders of the registered New Notes will be given by mail to the addresses as they appear in the security register. Such notices will be deemed to have been given at the time delivered by hand, if personally delivered; five business days after being deposited in the mail, registered or certified with postage prepaid, if mailed; when answered back if telexed; when receipt acknowledged, if telecopied; and the next business day after timely delivery to the courier, if sent by nationally recognized overnight air courier guaranteeing next day delivery.

Replacement of New Notes

We will replace any New Note that becomes mutilated, destroyed, stolen or lost at the expense of the holder upon delivery to the Trustee of the mutilated New Note or evidence of the loss, theft or destruction satisfactory to us and the Trustee. In the case of a lost, stolen or destroyed New Note, indemnity satisfactory to the Trustee and us may be required at the expense of the holder of the New Note before a replacement note will be issued.

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Payment of Stamp and Other Taxes

We will pay all stamp and other duties, if any, which may be imposed by the United States or any political subdivision thereof or taxing authority thereof or therein with respect to the issuance of the New Notes. We will not be required to make any payment with respect to any other tax, assessment or governmental charge imposed by any government or any political subdivision thereof or taxing authority thereof or therein.

Governing Law

The new indenture and the New Notes are governed by, and construed in accordance with, the law of the State of New York.

Information Concerning the Trustee and Transfer Agent

U.S. Bank National Association, as trustee under the new indenture, has been appointed by us as paying agent, conversion agent and registrar with regard to the New Notes. The New Notes are effectively subordinated to the prior claim of the trustee to receive compensation and reimbursement for reasonable expenses, disbursements and advances and to be indemnified by us as provided in the new indenture. National City Bank is the transfer agent and registrar for our Class A common shares and our Class B common shares. The trustee or its affiliates may from time to time in the future provide banking and other services to us in the ordinary course of their business.

No Transfer Restrictions

The New Notes will be freely transferable by any person that is not our affiliate and not subject to any transfer restrictions. The New Notes will be represented by a single CUSIP number. Similarly, all of our Class A common shares issuable upon conversion of the New Notes will be freely transferable by any person that is not our affiliate and not subject to any transfer restrictions.

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THE EXCHANGE OFFER

General

We are relying on Section 3(a)(9) of the Securities Act, to exempt the Exchange Offer from the registration requirements of the Securities Act. Securities that are obtained in a Section 3(a)(9) exchange generally assume the same character (i.e., restricted or unrestricted) as the securities that have been surrendered. All of the Old Notes are freely transferable, either because they have been resold pursuant to the shelf registration statement referred to below filed with the SEC on August 28, 2001 or because they have been held by non-affiliates of American Greetings for over two years and therefore are eligible for resale without restriction pursuant to Rule 144(k) under the Securities Act. Accordingly, all of the New Notes issued in this Exchange Offer will be freely transferable and will be represented by a single unrestricted CUSIP number.

On July 25, 2001, we completed the original offering of Old Notes. The offering was made pursuant to Rule 144A under the Securities Act and was not registered under the Securities Act. We filed a registration statement with the SEC covering resales of the Old Notes and our common shares issuable upon exchange of the Old Notes that became effective on October 23, 2001. Under the Registration Rights Agreement dated June 29, 2001 by and between us, Goldman, Sachs & Co., NatCity Investments, Inc. and McDonald Investments Inc., our obligation to keep such registration statement effective has ended.

Securities Subject to the Exchange Offer

We are offering, upon the terms and subject to the conditions set forth in this offering memorandum and the accompanying Letter of Transmittal, to exchange $1,000 principal amount at maturity of New Notes for each $1,000 principal amount at maturity of validly tendered and accepted Old Notes. We are offering to exchange all of the Old Notes. However, the Exchange Offer is subject to the conditions described in this offering memorandum.

You may tender all, some or none of your Old Notes, subject to the terms and conditions of the Exchange Offer. Holders of Old Notes must tender their Old Notes in a minimum $1,000 principal amount and multiples thereof.

The Exchange Offer is not being made to, and we will not accept tenders for exchange from, holders of Old Notes in any jurisdiction in which the Exchange Offer or the acceptance of the offer would not be in compliance with the securities or blue sky laws of that jurisdiction.

Our board of directors approved the making of the Exchange Offer. However, neither our board of directors nor any committee thereof makes any recommendation as to whether you should tender Old Notes pursuant to the Exchange Offer. You must make the decision whether to tender Old Notes and, if so, how many Old Notes to tender.

We expect there to be potential accounting benefits to us with New Notes relative to Old Notes:

• The reduction to share dilution associated with net share settlement upon conversion of the New Notes may result in higher reported earnings per share.

• Prior to potential conversions of the New Notes, the method of computing diluted earnings per share for the New Notes, in accordance with EITF 90-19 would result in higher reported diluted earnings per share.

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Conditions

Notwithstanding any other provision of the Exchange Offer, we will not be required to accept for exchange Old Notes tendered pursuant to the Exchange Offer and may terminate the Exchange Offer on or prior to the Expiration Date, if any of the following conditions has occurred, or the occurrence thereof has not been waived by us in our sole discretion, on or prior to the Expiration Date:

• there shall have been any action taken or threatened, or any statute, rule, regulation, judgment, order, stay, decree or injunction promulgated, enacted, entered, enforced or deemed applicable to the Exchange Offer, by or before any court or governmental, regulatory or administrative agency or authority or tribunal, domestic or foreign, which (1) challenges the making of the Exchange Offer or might directly or indirectly prohibit, prevent, restrict or delay consummation of the Exchange Offer or otherwise adversely affects in any material manner the Exchange Offer or (2) in our reasonable judgment will, or is reasonably likely to, materially adversely affect our business, condition (financial or otherwise), income, operations, properties, assets, liabilities or prospects, or materially impair the contemplated benefits of the Exchange Offer;

• there shall have occurred or be reasonably likely to occur any event affecting our business, condition (financial or otherwise), income, operations, properties, assets, liabilities or prospects that, in our reasonable judgment, would or might prohibit, prevent, restrict or delay consummation of the Exchange Offer, or is reasonably likely to, materially impair the contemplated benefits of the Exchange Offer to us;

• there shall have occurred any development which would, in our reasonable judgment, adversely affect our business;

• there shall have occurred, in each case, in our reasonable judgment:

• any general suspension of or limitation on trading in securities in the United States securities or financial markets (whether or not mandatory),

• any material adverse change in the price of the Old Notes,

• a material impairment in the trading market for debt securities,

• a declaration of a banking moratorium or any suspension of payments in respect of banks by federal or state authorities in the United States (whether or not mandatory),

• any limitation (whether or not mandatory) by any governmental authority on, or other event having a reasonable likelihood of affecting, the extension of credit by banks or other lending institutions in the United States,

• a commencement of a war, armed hostilities, act of terrorism or other national or international crisis directly or indirectly relating to the United States,

• any material adverse change in United States securities or financial markets generally,

• any change in U.S. or international financial, political or economic conditions or currency exchange rates or exchange controls as would be likely to materially impair the contemplated benefits of the Exchange Offer, or

• in the case of any of the foregoing existing at the time of the commencement of the Exchange Offer, an acceleration or worsening thereof; or

• the Trustee for the Old Notes shall have objected in any respect to, or taken any action that could, in our reasonable judgment, adversely affect the consummation of the Exchange Offer, or shall have taken any action that challenges the validity or effectiveness of the procedures used by us in making the Exchange Offer or the acceptance of, or the exchange for, the Old Notes.

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The conditions to the Exchange Offer are for our sole benefit and may be asserted by us in our reasonable discretion or may be waived by us, in whole or in part, in our reasonable discretion, whether or not any other condition of the Exchange Offer also is waived. We have not made a decision as to what circumstances would lead us to waive any such condition, and any such waiver would depend on circumstances prevailing at the time of such waiver. Any determination by us concerning the events described in this section will be final and binding upon all persons.

If any of the foregoing conditions occurs, we may, at any time before the expiration of the Exchange Offer:

• terminate the Exchange Offer and return all tendered Old Notes to the holders thereof;

• modify, extend or otherwise amend the Exchange Offer and retain all tendered Old Notes until the Expiration Date, as may be extended, subject, however, to the withdrawal rights of holders (see “—Expiration Date; Extensions; Amendments; Termination” and “—Withdrawal of Tenders” below); or

• waive the occurrence of the condition and accept at the expiration of the Exchange Offer all Old Notes tendered and not previously validly withdrawn.

Except for the requirements of applicable United States federal and state securities laws, we know of no federal or state regulatory requirements to be complied with or approvals to be obtained by us in connection with the Exchange Offer which, if not complied with or obtained, would have a material adverse effect on us.

Expiration Date; Extensions; Amendments; Termination

The Expiration Date for the Exchange Offer is 5:00 p.m., New York City time, on May 12, 2006, unless the period for the Exchange Offer is extended, in which case, the Expiration Date shall mean the latest date and time to which the Exchange Offer is extended.

To extend the Expiration Date, we will notify the exchange agent of any extension by oral or written notice and will notify the holders of the Old Notes by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. Such announcement may state that we are extending the Exchange Offer for a specified period of time.

We reserve the right, in our sole discretion, to (1) delay acceptance of any Old Notes, (2) extend the Exchange Offer, (3) terminate the Exchange Offer or (4) amend the Exchange Offer, by giving oral (promptly confirmed in writing) or written notice of such delay, extension, termination or amendment to the exchange agent. Any such extension, termination or amendment will be followed promptly by oral or written notice thereof to the exchange agent.

If the Exchange Offer is amended in a manner determined by us to constitute a material change, we will (1) promptly disclose such amendment in a manner reasonably calculated to inform the holders of the Old Notes of such amendment and (2) extend the Exchange Offer for a period of five to twenty business days, depending on the significance of the amendment, if the Exchange Offer would otherwise have expired during such five to twenty business day period.

Without limiting the manner in which we may choose to make public announcement of any delay, extension, amendment or termination of the Exchange Offer, we shall have no obligation to publish, advertise, or otherwise communicate any such public announcement, other than by making a timely release to an appropriate news agency.

Interest on the New Notes

Interest on the New Notes will accrue from January 15, 2006, the last date on which interest was paid on the Old Notes. Interest on the New Notes is payable on July 15, 2006, which, as the maturity date will also be the

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only date on which interest is paid on the New Notes. Because July 15, 2006, is a Saturday, payment of interest on the New Notes will be made on the next business day, July 17, 2006, with the same force and effect as if made on July 15, 2006. No interest will accrue on the payment for the additional period of time.

Exchange Fee

Subject to consummation of the Exchange Offer, if you validly tender your Old Notes and do not withdraw your tender prior to the Expiration Date, you will receive an exchange fee equal to $3.75 per $1,000 of principal amount of the Old Notes that you tender as soon as practicable after the consummation of the Exchange Offer. If your Old Notes are not received by the exchange agent prior to the Expiration Date, or if you withdraw your tender of the Old Notes prior to the Expiration Date, you will not receive the exchange fee. The maximum amount of funds that may be used if the entire approximately $175,000,000 aggregate principal of the Old Notes are tendered in the Exchange Offer and not withdrawn prior to the consummation will be approximately $656,250. The source of the funds will come from cash on hand.

Procedures for Tendering

To tender in the Exchange Offer, a holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon medallion guaranteed if required by the Letter of Transmittal, and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with any other required documents, to the exchange agent prior to 5:00 p.m., New York City time, on the Expiration Date. In addition, a timely confirmation of a book-entry transfer (a “Book-Entry Confirmation”) of such Old Notes into the exchange agent’s account at The Depository Trust Company (the “Book-Entry Transfer Facility”) pursuant to the procedure for book-entry transfer described below, must be received by the exchange agent prior to the Expiration Date. THE METHOD OF DELIVERY OF LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTERS OF TRANSMITTAL OR OTHER REQUIRED DOCUMENTS SHOULD BE SENT TO US. Delivery of all documents must be made to the exchange agent at its address set forth below. Holders may also request their respective brokers, dealers, commercial banks, trust companies or nominees to effect such tender for such holders.

The Letter of Transmittal need not be completed if the Old Notes are being tendered by book-entry transfer to the account maintained by the exchange agent at The Depository Trust Company pursuant to the procedures set forth below and an “agent’s message” is delivered to the exchange agent as described below.

The tender by a holder of Old Notes will constitute an agreement between such holder and us in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered holder promptly and instruct such registered holder to tender on its behalf.

Signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, must be medallion guaranteed by any member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an “eligible guarantor” institution within the meaning of Rule 17Ad-15 under the Exchange Act (each an “Eligible Institution”) unless the Old Notes tendered pursuant thereto are tendered for the account of an Eligible Institution.

If the Letter of Transmittal is signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such person should so indicate

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when signing, and unless waived by American Greetings, evidence satisfactory to us of their authority to so act must be submitted with the Letter of Transmittal.

All questions as to the validity, form, eligibility (including time of receipt) and withdrawal of the tendered Old Notes will be determined by us, in our sole discretion, which determination will be final and binding. We reserve the absolute right to reject any and all Old Notes not properly tendered or any Old Notes which, if accepted, would, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any irregularities or conditions of tender as to particular Old Notes. Our interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as we shall determine. Neither we, the exchange agent nor any other person shall be under any duty to give notification of defects or irregularities with respect to tenders of Old Notes, nor shall any of them incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such irregularities have been cured or waived. Any Old Notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned without cost to such holder by the exchange agent, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date.

In addition, we reserve the right, in our sole discretion, subject to the provisions of the old indenture, to purchase or make offers for any Old Notes that remain outstanding subsequent to the Expiration Date and to the extent permitted by applicable law, purchase Old Notes in the open market, in privately negotiated transactions or otherwise. The terms of any such purchases or offers could differ from the terms of the Exchange Offer.

Letter of Transmittal

Subject to and effective upon the acceptance for exchange and exchange of New Notes for Old Notes tendered by a Letter of Transmittal, by executing and delivering a Letter of Transmittal (or agreeing to the terms of a Letter of Transmittal pursuant to an agent’s message), a tendering holder of Old Notes:

• irrevocably sells, assigns and transfers to or upon the order of American Greetings all right, title and interest in and to, and all claims in respect of or arising or having arisen as a result of the holder’s status as a holder of the Old Notes tendered thereby;

• waives any and all rights with respect to the Old Notes;

• releases and discharges American Greetings and the Trustee with respect to the Old Notes from any and all claims such holder may have, now or in the future, arising out of or related to the Old Notes;

• represents and warrants that the Old Notes tendered were owned as of the date of tender, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind;

• designates an account number of a DTC participant in which the New Notes are to be credited; and

• irrevocably appoints the exchange agent the true and lawful agent and attorney-in-fact of the holder with respect to any tendered Old Notes, with full powers of substitution and revocation (such power of attorney being deemed to be an irrevocable power coupled with an interest) to cause the Old Notes tendered to be assigned, transferred and exchanged in the Exchange Offer.

Proper Execution and Delivery of Letter of Transmittal

If you wish to participate in the Exchange Offer, delivery of your Old Notes, signature guarantees and other required documents is your responsibility. Delivery is not complete until the required items are actually received by the exchange agent. If you mail these items, we recommend that you (1) use registered mail with return receipt requested, properly insured, and (2) mail the required items sufficiently in advance of the Expiration Date with respect to the Exchange Offer to allow sufficient time to ensure timely delivery.

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Except as otherwise provided below, all signatures on a Letter of Transmittal or a notice of withdrawal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program or the Stock Exchange Medallion Program. Signatures on a Letter of Transmittal need not be guaranteed if:

• the Letter of Transmittal is signed by a participant in DTC whose name appears on a security position listing of DTC as the owner of the Old Notes and the holder(s) has not completed the portion entitled “Special Issuance and Payment Instructions” on the Letter of Transmittal; or

• the Old Notes are tendered for the account of an “Eligible Guarantor Institution” (defined in Instruction 3 of the Letter of Transmittal).

Acceptance of Old Notes for Exchange; Delivery of New Notes

Upon satisfaction or waiver of all of the conditions to the Exchange Offer, all Old Notes properly tendered will be accepted promptly after the Expiration Date, and the New Notes will be issued promptly after acceptance of the Old Notes. See “The Exchange Offer—Conditions.” For purposes of the Exchange Offer, the Old Notes shall be deemed to have been accepted as validly tendered for exchange when American Greetings gives oral or written notice to the exchange agent.

In all cases, issuance of New Notes for Old Notes that are accepted for exchange pursuant to the Exchange Offer will be made only after the exchange agent has timely received a Book-Entry Confirmation of such Old Notes into its account at the Book-Entry Transfer Facility and a properly completed and duly executed Letter of Transmittal and all other required documents. If any tendered Old Notes are not accepted for any reason set forth in the terms and conditions of the Exchange Offer, such unaccepted or such non-exchanged Old Notes will be credited to an account maintained with such Book-Entry Transfer Facility promptly after the expiration or termination of the Exchange Offer.

Book-Entry Transfer

The exchange agent will make a request to establish an account with respect to the Old Notes at the Book-Entry Transfer Facility for purposes of the Exchange Offer within two business days after the date of this offering memorandum. Any financial institution that is a participant in the Book-Entry Transfer Facility’s systems may make book-entry delivery of Old Notes by causing the Book-Entry Transfer Facility to transfer such Old Notes into the exchange agent’s account at the Book-Entry Transfer Facility in accordance with such Book-Entry Transfer Facility’s procedures for transfer. However, the Letter of Transmittal (or facsimile) thereof with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the exchange agent at the address listed on the back cover page of this offering memorandum, on or prior to the Expiration Date.

Effect of Tender

Any valid tender by a holder of Old Notes that is not validly withdrawn prior to the Expiration Date of the Exchange Offer will constitute a binding agreement between that holder and American Greetings upon the terms and subject to the conditions of this offering memorandum and the Letter of Transmittal. The acceptance of the Exchange Offer by a tendering holder of Old Notes will constitute the agreement by that holder to deliver good and marketable title to the tendered Old Notes pursuant to the Exchange Offer, free and clear of all liens, charges, claims, encumbrances, interests and restrictions of any kind.

Withdrawal of Tenders

Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. If you withdraw your tender of the Old Notes prior to the Expiration Date, you will not receive the exchange fee.

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For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent prior to 5:00 p.m., New York City time, on the Expiration Date at one of the addresses set forth under “The Exchange Offer—Exchange Agent.” Any such notice of withdrawal must specify:

• the name and number of the account at the Book-Entry Transfer Facility from which the Old Notes were tendered;

• identify the principal amount of the Old Notes to be withdrawn; and

• specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes and otherwise comply with the procedures of such Book-Entry Transfer Facility.

All questions as to the validity, form and eligibility (including time of receipt) of such notice will be determined by American Greetings, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer. Any Old Notes which have been tendered for exchange but which are not exchanged for any reason will be credited to an account maintained with such Book-Entry Transfer Facility for the Old Notes promptly after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described under “The Exchange Offer—Procedures for Tendering” and “The Exchange Offer—Book-Entry Transfer” at any time on or prior to the Expiration Date.

Transfer Taxes

We will pay all transfer taxes, if any, applicable to the transfer and exchange of Old Notes to us in the Exchange Offer. If transfer taxes are imposed for any other reason, the amount of those transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. Other reasons transfer taxes could be imposed include:

• if New Notes in book-entry form are to be registered in the name of any person other than the person signing the Letter of Transmittal; or

• if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal.

If satisfactory evidence of payment of or exemption from those transfer taxes is not submitted with the Letter of Transmittal, the amount of those transfer taxes will be billed directly to the tendering holder and/or withheld from any payments due with respect to the Old Notes tendered by such holder.

Exchange Agent

Global Bondholder Services Corporation has been appointed the exchange agent for the Exchange Offer. Any Letter of Transmittal and all correspondence in connection with the Exchange Offer should be sent or delivered by each holder of Old Notes, or a beneficial owner’s custodian bank, depositary, broker, trust company or other nominee, to the exchange agent at the address listed on the back cover page of this offering memorandum.

Information Agent

Global Bondholder Services Corporation has been appointed as the information agent for the Exchange Offer. Questions concerning tender procedures and requests for additional copies of this offering memorandum or the Letter of Transmittal should be directed to the information agent at the address listed on the back cover page of this offering memorandum. Holders of Old Notes may also contact their custodian bank, depositary, broker, trust company or other nominee for assistance concerning the Exchange Offer.

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Financial Advisor

We have retained UBS Securities LLC as our exclusive financial advisor in connection with the Exchange Offer. We are paying UBS Securities LLC customary fees for its services and have agreed to indemnify them for certain liabilities. UBS Securities LLC’s compensation is in no way contingent on the results or the success of the Exchange Offer. UBS Securities LLC has not been retained to, and will not, solicit acceptances of the Exchange Offer or make any recommendation with respect thereto.

Fees and Expenses

We will bear the expenses of the Exchange Offer. We will pay the exchange agent and the information agent reasonable and customary fees for their services and will reimburse them for their reasonable out-of-pocket expenses. Such expenses include fees and expenses of the trustee, accounting and legal fees and printing costs, among others.

Tendering holders of Old Notes will not be required to pay any expenses of soliciting tenders in the Exchange Offer. If, however, a tendering holder handles the transaction through its broker, dealer, commercial bank, trust company or other institution, such holder may be required to pay brokerage fees or commissions.

Solicitation

The Exchange Offer is being made by us in reliance on the exemption from the registration requirements of the Securities Act afforded by Section 3(a)(9) thereof. We, therefore, will not pay any commission or other remuneration to any broker, dealer, salesman or other person for soliciting tenders of the Old Notes. We have not retained any dealer, manager or other agent to solicit tenders with respect to the Exchange Offer. The principal solicitation is being made by mail. The exchange agent will mail solicitation materials on our behalf. Additional solicitation may be made by telephone, facsimile or in person by officers and regular employees of American Greetings and our subsidiaries.

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DESCRIPTION OF OUR CAPITAL STOCK

Common Shares

American Greetings Corporation, an Ohio corporation, has authorized capital stock consisting of 203,432,968 common shares, classified as 187,600,000 Class A common shares, par value $1.00 per share, and 15,832,968 Class B common shares, par value $1.00 per share. As of April 3, 2006, 53,941,903 Class A common shares were issued and outstanding and held by approximately 4,959 holders of record. These shares are listed on the New York Stock Exchange under the ticker symbol “AM.” Each Class A common share is entitled to one vote on all matters presented to shareholders. Holders of Class A common shares have no pre-emptive rights to purchase or have offered to them for purchase any stock of any class of American Greetings, and the Class A common shares are neither redeemable nor convertible into any other securities.

As of April 3, 2006, 4,217,067 Class B common shares were issued and outstanding and held by approximately 146 holders of record. There is no public trading market for the Class B common shares, which are held by members of our founder’s extended family, our officers and directors and their extended family members, family trusts, institutional investors and certain other persons. Each Class B common share is entitled to ten votes on all matters presented to shareholders and is convertible at the option of the holder to one Class A common share; provided, however, that the holder must first tender the share to American Greetings pursuant to its right to repurchase the share at the then-market value for the Class A common shares. Class B common shares may only be transferred by the holder to American Greetings or certain permitted transferees, a group which generally includes members of the holder’s extended family, family trusts and certain charities. Subject to the restrictions below, we may issue or transfer Class B common shares to any person, including pursuant to our employee and dividend reinvestment plans. We may not issue additional Class B common shares, unless at the same time we also issue Class A common shares in an amount sufficient to prevent any reduction in the then existing relative voting power of the holders of Class A common shares and reserve a sufficient number of additional authorized but unissued Class A common shares for issuance on conversion of the newly issued Class B common shares. This limitation does not apply to issuances of Class B common shares held in treasury. Each holder of Class B common shares has a pre-emptive right to purchase any Class B common shares (other than treasury shares) offered by us for cash, in proportion to his respective holdings of all Class B common shares.

Any proposal to amend our Articles of Incorporation to increase the authorized number of Class A common shares or Class B common shares requires the approval of at least two-thirds of the then outstanding shares of each class, voting separately as a class.

Generally, in all other respects Class A common shares and Class B common shares are identical and have similar rights, privileges, qualifications, limitations and restrictions. Management may not declare a share dividend, split or combination with respect to either class of our capital stock, unless a corresponding action is taken with respect to the other class. Holders of each class are entitled to receive ratably such dividends as may be declared by our board of directors out of funds legally available therefor. Upon liquidation, dissolution or winding up of American Greetings, a holder of shares of either class of our capital stock is entitled to share ratably in the entire net assets of American Greetings, after payment in full of all of our liabilities. All outstanding shares are fully paid and nonassessable.

Anti-Takeover Provisions

Articles of Incorporation and Regulations

Our articles of incorporation and code of regulations contain provisions that may have anti-takeover effects. For example, under our code or regulations, our board of directors is classified into three classes consisting of not less than three directors each, with one class being elected each year. These provisions regarding directors may be amended only by holders entitled to vote at least two-thirds of the voting power of American Greetings on

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such matter. Under certain circumstances, including adequate notice to American Greetings in advance of a shareholders’ meeting to vote for the election of directors, a holder of either class of our capital stock may cause cumulative voting in such election of directors to be invoked. Additionally, our code of regulations has special advance notice requirements to nominate directors. These provisions may also have the effect of delaying, deferring or preventing a takeover attempt or change in control.

Ohio’s Anti-Takeover Laws

As an Ohio corporation, we are subject to the provisions of Section 1701.831 of the Ohio Revised Code, known as the “Ohio Control Share Acquisition Statute.” The Ohio Control Share Acquisition Statute provides that notice and information filings, and special shareholder meeting and voting procedures, must occur prior to any person’s acquisition of an issuer’s shares that would entitle the acquirer to exercise or direct the voting power of the issuer in the election of directors within any of the following ranges:

• one-fifth or more but less than one-third of the voting power;

• one-third or more but less than a majority of the voting power;

• a majority or more of the voting power.

The Ohio Control Share Acquisition Statute does not apply to a corporation if its articles of incorporation or code of regulations so provide. We have not opted out of the application of the Ohio Control Share Acquisition Statute.

We are also subject to Chapter 1704 of the Ohio Revised Code, known as the “Merger Moratorium Statute.” If a person becomes the beneficial owner of 10% or more of an issuer’s shares without the prior approval of its board of directors, the Merger Moratorium Statute prohibits the following types of transactions for at least three years if they involve both the issuer and either the acquirer or anyone affiliated or associated with the acquirer:

• the sale or acquisition of an interest in assets owned or controlled by the issuer or the acquirer meeting thresholds specified in the statute;

• mergers and similar transactions;

• a voluntary dissolution;

• the issuance or transfer of shares or any rights to acquire shares of the issuer having a fair market value at least equal to 5% of the aggregate fair market value of the issuer’s outstanding shares;

• a transaction that increases the acquirer’s proportionate ownership of the issuer; and

• the provision of any other benefit to the acquirer that is not shared proportionately by all shareholders.

The prohibition imposed by Chapter 1704 continues indefinitely after the initial three-year period unless the transaction is approved by the holders of at least two-thirds of the voting power of the issuer or satisfies statutory conditions relating to the fairness of the consideration to be received by the shareholders. The Merger Moratorium Statute does not apply to a corporation if its articles of incorporation or code of regulations so provide. We have not opted out of the application of the Merger Moratorium Statute.

Transfer Agent and Registrar

The transfer agent and registrar for our Class A common shares is National City Bank. National City’s mailing address is P.O. Box 92301, Cleveland, Ohio 44193-0900 and its telephone number is 800-622-6757.

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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

TO ENSURE COMPLIANCE WITH INTERNAL REVENUE SERVICE CIRCULAR 230, HOLDERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF FEDERAL TAX ISSUES IN THIS STATEMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON BY HOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON HOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

The following is a summary of certain United States federal income tax consequences to holders who participate, or determine not to participate, in the Exchange Offer. This summary is based upon the provisions of the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations promulgated thereunder, administrative rulings and judicial decisions, all as of the date hereof and all of which are subject to change, possibly with retroactive effect. This summary does not discuss all aspects of United States federal income taxation which may be important to particular investors in light of their individual investment circumstances, such as investors subject to special tax rules (e.g., financial institutions, insurance companies, broker-dealers, partnerships and their partners, and tax-exempt organizations (including private foundations)) or to persons that hold the Old Notes, or will hold the New Notes, as part of a straddle, hedge, conversion, constructive sale, or other integrated security transaction for United States federal income tax purposes, or that have a functional currency other than the United States dollar, all of whom may be subject to tax rules that differ significantly from those summarized below. In addition, this summary does not discuss any (i) United States federal income tax consequences to a Non-U.S. Holder (as defined below) that (A) is engaged in the conduct of a United States trade or business, (B) is a “controlled foreign corporation” for United States federal income tax purposes, or (C) is a nonresident alien individual and such holder is present in the United States for 183 or more days during the taxable year, or (ii) state, local, or foreign tax considerations. This summary assumes that a holder has held its Old Notes and will hold its New Notes as “capital assets” (generally, property held for investment). Each holder is urged to consult its tax advisor regarding the United States federal, state, local, and foreign income and other tax consequences to holders who participate, or determine not to participate, in the Exchange Offer.

For purposes of this summary, a “U.S. Holder” is a beneficial owner of notes that is, for United States federal income tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation, partnership, or other entity created in, or organized under the law of, the United States or any State or political subdivision thereof, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United States persons who have the authority to control all substantial decisions of the trust or (B) that was in existence on August 20, 1996, was treated as a United States person on the previous day, and elected to continue to be so treated. A beneficial owner of a New Note that is not a U.S. Holder is referred to herein as a “Non-U.S. Holder.”

General

Characterization of the Exchange

Under United States federal income tax law, an exchange of an old debt instrument for a new debt instrument will be treated as an exchange which may be subject to tax if the terms of the new debt instrument differ from the terms of the old debt instrument in a manner that is “significant” taking into account all of the pertinent facts and circumstances. In the case of an exchange offer where the issuer of an old debt instrument pays a fee to induce a holder to participate in the exchange, such as in the case of the Exchange Offer, the Treasury regulations require that the fee be taken into account in determining whether the effect of the exchange is economically significant to the parties. The Treasury regulations provide that where the yield to maturity

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taking into account the fee of the debt instrument increases by more than 25 basis points over the remaining term of the instrument, the modification of the debt instrument will be treated as “significant” and the exchange may be subject to tax.

Although the exchange is a significant modification of the Old Note and may be subject to tax, we intend to treat the exchange of the New Note for the Old Note as a tax-free exchange of “securities” pursuant to the “recapitalization” of American Greetings. Whether the exchange is a “recapitalization” depends on, among other things, whether the Old Note and the New Note are “securities” for federal income tax purposes. The rules for determining whether a debt instrument is a “security” are not entirely clear. The determination of whether a debt instrument is a “security” is based on an overall evaluation of the facts and circumstances particular to the debt instrument.

While the matter is not free from doubt, we believe, based on a published Internal Revenue Service (“IRS”) ruling addressing analogous circumstances, that, the New Notes represent a continuation of the Old Note holder’s investment in American Greetings in substantially the same form as the Old Note and therefore the New Notes should be treated as a “securities” received in exchange for “securities” in a “recapitalization” of American Greetings. Holders of the Old Notes should consult their tax advisors concerning the appropriate tax treatment of the exchange.

Consequences to Tendering U.S. Holders

Receipt of Exchange Fee

Although the treatment of the exchange fee for United States federal income purposes is unclear, we intend to treat the exchange fee as the payment of a “fee,” in consideration for modifying the terms of the Old Notes. Accordingly, under this treatment, a U.S. Holder will be required to include the exchange fee in ordinary income, for United States federal income tax purposes, in the taxable year in which the exchange fee is accrued or received in accordance with such U.S. Holder’s regular method of tax accounting.

Exchange of Old Notes for New Notes

Assuming the Old Notes and New Notes are “securities,” the exchange is treated as a “recapitalization” and the payment of the exchange fee is not treated as part of the exchange, a U.S. Holder who exchanges Old Notes for New Notes pursuant to the Exchange Offer will generally (i) not recognize any gain or loss as a result of such exchange, (ii) have a holding period for the New Notes that includes the holding period of the Old Notes, and (iii) have a aggregate tax basis in the New Notes equal to the adjusted tax basis in the Old Notes tendered in exchange therefore. If the exchange fee is treated as part of the exchange and not as a separate payment, it would be treated as taxable to a U.S. Holder as capital gain up to the amount of any gain realized in the exchange, and the remainder would reduce the holder’s basis in the New Notes. In addition, if any portion of the New Notes is treated as having been issued in respect of accrued and unpaid interest on the Old Notes, such portion would be treated as interest received by an exchanging U.S. Holder, which would be treated as ordinary income. Although there is no direct authority, we believe no portion of the New Notes will be treated as issued in respect of accrued and unpaid interest on the Old Notes, and therefore, U.S. Holders should not recognize interest income as a result of the exchange.

We believe that the Old Notes and New Notes will be treated as “publicly traded” under the Treasury regulations and, therefore, if contrary to our belief, either an Old Note or a New Note is not treated as a “security” or the exchange is not treated as “recapitalization” for federal income tax purposes, a holder will be treated as having disposed of the Old Note for property with a fair market value equal to the fair market value of the New Note and will recognize gain equal to the difference between the fair market value of the New Note and the adjusted tax basis in the Old Note. In that case, the holder will have an adjusted tax basis in the New Note equal to the fair market value of the New Note and the holding period in the New Note will commence the day after the exchange.

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Market Discount

Assuming the Old Notes and the New Notes are “securities” and the exchange is treated as a “recapitalization,” a New Note will be treated as having market discount in the hands of a holder if such holder had originally purchased the Old Note that was tendered in exchange for such New Note (other than at original issue) at a discount to the stated principal amount at maturity of such Old Note in excess of a statutorily defined de minimis amount.

Conversion of New Notes for Class A Common Shares and Cash

If a U.S. Holder converts New Notes, and we deliver a combination of cash and common shares in satisfaction of our conversion obligation, the U.S. Holder will generally not recognize loss, but will generally recognize any gain, which would be treated as capital gain (except to the extent of accrued “market discount” not previously included in income), on New Notes so converted in an amount equal to the lesser of the amount of (i) gain “realized” (i.e., the excess, if any, of the fair market value of the Class A common shares received upon the exchange plus cash received over the adjusted tax basis in New Notes tendered in exchange therefor) or (ii) cash received. Such gain will be long-term if the holder’s holding period in respect of such New Notes is more than one year. A holder’s tax basis in the Class A common shares received should generally equal the adjusted tax basis in New Notes tendered in exchange therefor, decreased by the cash received, and increased by any gain recognized. A holder’s holding period in the Class A common shares received upon conversion of New Notes will generally include the holding period of New Notes so converted.

Sale, Exchange, or other Disposition of New Notes or Class A Common Shares

Upon the sale, exchange, or other disposition of New Notes (other than a conversion of New Notes into our Class A common shares and cash, as described above) or our Class A common shares previously received pursuant to a conversion of New Notes, a U.S. Holder will generally recognize gain, which would be treated as capital gain (except to the extent of accrued market discount not previously included in income), or loss equal to the difference between (i) the amount of cash and the fair market value of any property received upon such disposition and (ii) the holder’s adjusted tax basis in New Notes or Class A common shares previously received pursuant to a conversion of New Notes. Such gain or loss will be long-term if the holder’s holding period in respect of such New Notes or Class A common stock is more than one year.

Sale, or Other Disposition of New Notes Amounts Received Attributable to Accrued But Unpaid Interest

Class A common shares or cash received upon a sale or other disposition of New Notes which is attributable to accrued but unpaid interest on New Notes will be excluded from the amount realized upon such disposition. Any such cash or Class A common shares received will be deemed to be a payment in respect of such accrued but unpaid interest and, in the case of a cash method holder, will be subject to tax as ordinary interest income upon receipt. The holder’s tax basis in any such Class A common shares received will be equal to the amount of the interest income attributable thereto and the holding period of the Class A common shares will commence on the day after the date of disposition.

Repurchase of New Notes Upon a Change of Control Using Class A Common Shares

If holders of the New Notes exercise their right to require us to repurchase the New Notes upon a change of control, we may, in lieu of paying the repurchase price in cash, use Class A common shares to repurchase the New Notes if certain conditions are met. In the event we elect to use stock (rather than cash) to repurchase the New Notes, the U.S. federal income tax treatment of the receipt of the stock to the holders of the New Notes will depend upon whether the New Notes are “securities” within the meaning of the Code provisions relating to tax-free reorganizations. If the New Notes are “securities,” the repurchase of the New Notes with stock should qualify as a tax-free recapitalization. If, on the other hand, the New Notes are not “securities” within the meaning

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of such provisions, the repurchase of the New Notes with the stock will be a fully taxable transaction. The determination of whether a debt instrument is a “security” is based on an overall evaluation of the facts and circumstances particular to the debt instrument.

Although not free from doubt, in the event we use stock to repurchase a U.S. Holder’s New Notes, we believe that the transaction should qualify as a tax-free recapitalization and, accordingly, a holder of the New Notes will not recognize any gain or loss, except to the extent the Class A common shares are attributable to accrued interest on the New Notes, which will be recognized as ordinary interest income to the extent holders of the New Notes have not previously included the accrued interest in income. A holder’s tax basis in Class A common shares attributable to accrued interest generally will equal the amount of such accrued interest included in income and the holding period of such Class A common shares will begin on the day following the exchange date.

If, on the other hand, the repurchase of the New Notes with the Class A common shares does not qualify as a tax-free recapitalization, a U.S. Holder should recognize gain or loss on the repurchase of the New Notes using Class A common shares in an amount equal to the fair market value of the Class A common shares and any cash received in the repurchase minus such holder’s adjusted tax basis in the surrendered New Notes. Any such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the New Notes have been held for more than one year. The deductibility of capital losses is subject to limitations. Holders of the New Notes must recognize ordinary interest income to the extent any Class A common shares or cash received is attributable to any interest accrued on the New Notes repurchased, to the extent such interest has not been included in the income of the holder. A holder’s initial tax basis in the Class A common shares received would be equal to its fair market value on the exchange date, and the holding period for the Class A common shares would begin on the day immediately after the exchange date.

Constructive Dividends

Holders of convertible debt instruments such as the New Notes may, in certain circumstances, be deemed to have received distributions of stock if the conversion price of such instruments is adjusted. However, adjustments to the conversion price made pursuant to a bona fide reasonable adjustment formula which has the effect of preventing the dilution of the interest of the holders of the debt instruments generally will not be deemed to result in a constructive distribution of stock. Certain of the possible adjustments provided in the New Notes (including, without limitation, adjustments in respect of taxable dividends to our stockholders) may not qualify as being pursuant to a bona fide reasonable adjustment formula. If such adjustments are made, holders may be deemed to have received constructive distributions includible in income in the manner described below under “—Distributions Paid on Common Shares” even though such holders have not received any cash or property as a result of such adjustments. In addition, in certain circumstances, the failure to provide for such an adjustment may also result in a constructive distribution.

Distributions Paid on Common Shares

Cash distributions, if any, paid on our Class A common shares generally will be treated as dividend income to the extent of our current or accumulated earnings and profits as determined for United States federal income tax purposes. Cash distributions in excess of our current and accumulated earnings and profits will be treated as a tax-free return of capital to the extent of the holder’s adjusted tax basis in the common shares and thereafter as capital gain from the sale or exchange of such common shares. Dividends received by a corporate U.S. Holder may be eligible for a dividends received deduction. Dividends received by individual U.S. Holders before January 1, 2009, will generally be subject to tax at the lower applicable capital gains rate, provided certain holding period requirements are satisfied.

Consequences to Tendering Non-U.S. Holders

Receipt of Exchange Fee

As described above with respect to U.S. Holders, we currently intend to treat the exchange fee as a “fee” for United States federal income tax purposes. Accordingly, the exchange fee paid to a Non-U.S. Holder will be

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treated as subject to withholding of United States federal income tax at a 30% rate (or such lower rate as prescribed by an applicable United States income tax treaty). To claim the benefits of a treaty, a Non-U.S. Holder must provide a properly executed IRS Form W-8BEN prior to the payment of the exchange fee. A Non-U.S. Holder may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS.

Exchange of Old Notes for New Notes

A Non-U.S. Holder participating in the Exchange Offer will generally not be subject to United States federal income tax on the gain, if any, recognized on exchange of the Old Notes for the New Notes.

Interest

Payments of interest on New Notes made to a Non-U.S. Holder will not be subject to United States federal income or withholding tax provided that the statement requirements set forth in section 871(h) or 881(c) of the Code are satisfied. Such statement requirements generally will be satisfied if the beneficial owner of New Notes certifies on IRS Form W-8BEN, under penalties of perjury, that it is not a U.S. person and provides its name and address or otherwise satisfies applicable documentation requirements.

Dividends and Constructive Dividends

Dividends paid or constructive dividends deemed paid (see “Certain United States Federal Income Tax Consequences-Consequences to Tendering U.S. Holders-Constructive Dividends” above) to a Non-U.S. Holder generally will be subject to United States federal withholding tax at a 30% rate (or such lower rate as prescribed by an applicable United States income tax treaty). To claim the benefits of a treaty, a Non-U.S. Holder must provide a properly executed IRS Form W-8BEN prior to the payment of the exchange fee. A Non-U.S. Holder may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS.

Sale, Exchange, Redemption, or Conversion of New Notes or Common Shares Received Upon Conversion of New Notes

Subject to the discussion of United States real property holding corporations below, a Non-U.S. Holder generally will not be subject to United States federal income tax on gain recognized on a sale, exchange, redemption, a conversion of New Notes for stock and cash, or other disposition of New Notes or Class A common shares received upon conversion of New Notes (including the receipt of cash in lieu of a fractional share).

Certain special rules apply in the case of the sale, exchange or redemption of common stock if we are or have been at any time, within the shorter of the five-year period preceding such sale, exchange or redemption and the period the non-U.S. holder held the note, a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code. However, such rules should not apply because we believe that we are not, and do not anticipate becoming in the future, a “United States real property holding corporation.” Even if we were, or were to become, a United States real property holding corporation, the tax relating to the common stock of a United States real property holding corporation would not apply to a Non-U.S. Holder if, on the date the common stock was acquired by such Non-U.S. Holder, the fair market value of such common stock was equal to 5% or less of the fair market value of the common stock of the United States real property holding corporation, provided that the common stock is regularly traded on an established securities market.

Consequences to Non-Tendering Holders

If you do not tender your Old Notes, you will not recognize any gain or loss and you will have the same adjusted tax basis, holding period and accrued market discount, if any, (as described above) in the Old Notes immediately before the Exchange Offer.

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Backup Withholding and Information Reporting

Information returns may be filed with the IRS in connection with payments on the New Notes or our common stock and the proceeds from a sale or other disposition of the New Notes or our common shares. A U.S. Holder may be subject to U.S. backup withholding tax on these payments if it fails to provide its taxpayer identification number to the paying agent and comply with certain certification procedures or otherwise establish an exemption from backup withholding. A Non-U.S. Holder may be subject to U.S. backup withholding tax on these payments unless the Non-U.S. Holder complies with certification procedures to establish that it is not a U.S. person. The certification procedures required to claim the exemption from withholding tax on certain payments on the New Notes, described above, will satisfy the certification requirements necessary to avoid the backup withholding tax as well. The amount of any backup withholding from a payment will be allowed as a credit against the holder’s U.S. federal income tax liability and may entitle the holder to a refund, provided that the required information is timely furnished to the IRS.

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements and schedule of American Greetings Corporation as of February 28, 2005 and February 29, 2004, and for each of the three years in the period ended February 28, 2005, incorporated herein by reference from American Greetings Corporation’s Annual Report (Form 10-K) for the year ended February 28, 2005, have been audited by an independent registered public accounting firm, as set forth in the report filed therein.

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Manually signed copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and any other required documents should be sent or delivered by each noteholder or such noteholder’s broker, dealer commercial bank or other nominee to the exchange agent at the address set forth below:

The Exchange Agent for the Exchange Offer is:

Global Bondholder Services Corporation

By Mail:	By Facsimile Transmission:	By Hand or Overnight Courier:
65 Broadway — Suite 723 New York, NY 10006	(For Eligible Institutions only): (212) 430-3775 Confirmation: (212) 430-3774	65 Broadway — Suite 723 New York, NY 10006

Questions and requests for assistance or for additional copies of this Exchange Offer and the Letter of Transmittal may be directed to the information agent or the Dealer Manager at their respective telephone numbers and locations listed below. You may also contact your broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Exchange Offer.

The Information Agent for the Exchange Offer is:

Global Bondholder Services Corporation

65 Broadway — Suite 723

New York, New York 10006 Attn: Corporate Actions

Banks and Brokers call: (212) 430-3774

Toll free (866) 795-2200

Request for additional copies of the offering memorandum, or our 2005 Annual Report on Form 10-K and other documents incorporated into this offering memorandum by reference or the Letter of Transmittal may be directed to the information agent or the exchange agent at the respective telephone numbers and addresses listed above.

EX-99.(A).(1).(II)

Exhibit (a)(1)(ii)

LETTER OF TRANSMITTAL

Offer to Exchange

7.00% Convertible Subordinated Notes due July 15, 2006

for any and all outstanding

7.00% Convertible Subordinated Notes due July 15, 2006

(CUSIP Nos. 026375AH8 and 026375AJ4)

of

American Greetings Corporation

Pursuant to, and subject to the terms and conditions described in,

the Offering Memorandum dated April 6, 2006

THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MAY 12, 2006, UNLESS EXTENDED OR EARLIER TERMINATED BY US (THE “EXPIRATION DATE”)

The Exchange Agent for the Exchange Offer is:

Global Bondholder Services Corporation

By Mail:	By Facsimile Transmission:	By Hand or Overnight Courier:
65 Broadway—Suite 723	(For Eligible Institutions only):	65 Broadway—Suite 723
New York, NY 10006	(212) 430-3775	New York, NY 10006
	Confirmation:
	(212) 430-3774

DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE VALID DELIVERY.

Capitalized terms used but not defined herein shall have the same meaning given them in the offering memorandum of American Greetings Corporation (“American Greetings”), dated April 6, 2006 (as may be amended and supplemented from time to time, the “Offering Memorandum”).

This Letter of Transmittal (“Letter”) need not be completed if (a) 7.00% Convertible Subordinated Notes due July 15, 2006 of American Greetings (the “Old Notes”), are being tendered by book-entry transfer to the account maintained by the Exchange Agent at Depository Trust Company (“DTC”) pursuant to the procedures set forth in the Offering Memorandum under “The Exchange Offer—Procedures for Tendering” and (b) an “agent’s message” is delivered to the Exchange Agent as described in the Offering Memorandum under “The Exchange Offer—Procedures for Tendering—Letter of Transmittal.”

THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. If Old Notes are registered in different names, a separate Letter of Transmittal must be submitted for each registered owner. See Instruction 2 below.

This Letter relates to the offer (the “Exchange Offer”) of American Greetings to exchange $1,000 principal amount of the Company’s 7.00% Convertible Notes due July 15, 2006 (the “New Notes”), for each $1,000 principal amount of validly tendered and accepted outstanding Old Notes. If the Exchange Offer is consummated, holders who tender their Old Notes and do not withdraw them prior to the consummation will receive an exchange fee in cash in an amount equal to $3.75 per $1,000 principal amount of the Old Notes that they tender. The Exchange Offer is made upon the terms and subject to the conditions contained in the Offering Memorandum.

All tenders of Old Notes pursuant to the Exchange Offer must be received by the Exchange Agent prior to 5:00 p.m., New York City time, on May 12, 2006, unless extended or earlier terminated by us (the “Expiration Date”). American Greetings will notify holders of the Old Notes of any extension by means of a press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date.

The Exchange Offer is subject to certain conditions precedent as set forth in the Offering Memorandum under the caption “The Exchange Offer—Conditions.”

This Letter is to be completed by a holder of Old Notes if a tender is to be made by book-entry transfer to the account maintained by the Exchange Agent at DTC pursuant to the procedures set forth in the Offering Memorandum under “The Exchange Offer—Procedures for Tendering,” but only if an agent’s message is not delivered through DTC’s Automated Tender Offer Program (“ATOP”). Tenders by book-entry transfer may also be made through ATOP. DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC through ATOP. DTC will then verify the acceptance and execute a book-entry delivery to the Exchange Agent’s account at DTC. DTC will also send an agent’s message to the Exchange Agent for its acceptance. The agent’s message will state that DTC has received an express acknowledgment from the tendering holder of Old Notes, which acknowledgment will confirm that such holder of Old Notes received and agrees to be bound by, and makes each of the representations and warranties contained in, this Letter, and that American Greetings may enforce this Letter against such holder of Old Notes. Delivery of the agent’s message by DTC will satisfy the terms of the Exchange Offer in lieu of execution and delivery of this Letter by the DTC participant identified in the agent’s message. Accordingly, this Letter need not be completed by a holder tendering through ATOP.

DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.

The undersigned has completed, executed and delivered this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer.

List below the Old Notes to which this Letter relates. If Old Notes are registered in different names, a separate Letter of Transmittal must be submitted for each registered owner. See Instruction 2 below.

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DESCRIPTION OF RESTRICTED OLD NOTES (CUSIP NO.026375AH8)
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank)	Certificate Number(s)/Account Number(s)*	Aggregate Principal Amount of Old Notes	Principal Amount Tendered**
	Total
*  Need not be completed by holders tendering by book-entry transfer   **  Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the notes indicated in column 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. See Instruction l of the Letter of Transmittal.

DESCRIPTION OF UNRESTRICTED OLD NOTES (CUSIP NO.026375AJ4)
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank)	Certificate Number(s)/Account Number(s)*	Aggregate Principal Amount of Old Notes	Principal Amount Tendered**
	Total
*  Need not be completed by holders tendering by book-entry transfer   **  Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Old Notes represented by the notes indicated in column 2. Old Notes tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. See Instruction l of the Letter of Transmittal.

PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS

Ladies and Gentlemen:

By execution hereof, the undersigned acknowledges that he or she has received the Offering Memorandum and this Letter of Transmittal, which together constitute the Exchange Offer, to exchange $1,000 principal amount of New Notes for each $1,000 principal amount of validly tendered and accepted Old Notes, on the terms and subject to the conditions of the Offering Memorandum.

Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to American Greetings the principal amount of Old Notes indicated above pursuant to the Exchange Offer.

Subject to, and effective upon, the acceptance of Old Notes tendered hereby, by executing and delivering this Letter (or agreeing to the terms of this Letter pursuant to an agent’s message) the undersigned: (i) irrevocably exchanges, assigns, and transfers to, or upon the order of, American Greetings all right, title and interest in and to, and all claims in respect of or arising or having arisen as a result of the undersigned’s status as a holder of, the Old Notes tendered thereby; (ii) waives any and all rights with respect to the Old Notes tendered; and (iii) releases and discharges American Greetings and the Trustee with respect to the Old Notes from any and all claims such holder may have, now or in the future, arising out of or related to the Old Notes. The undersigned acknowledges and agrees that the tender of Old Notes made hereby may not be withdrawn except in accordance with the procedures set forth in the Offering Memorandum.

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The undersigned represents and warrants that it has full power and authority to legally tender, exchange, assign and transfer the Old Notes tendered hereby and to acquire the New Notes issuable upon the exchange of such tendered Old Notes, and that, when and if the Old Notes tendered hereby are accepted for exchange, American Greetings will acquire good and unencumbered title to the tendered Old Notes free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim or right. The undersigned also warrants that it will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or American Greetings to be necessary or desirable to transfer ownership of such Old Notes on the account books maintained by DTC.

The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of the undersigned (with full knowledge that the Exchange Agent also acts as the agent of American Greetings with respect to such Old Notes) with full power of substitution to: (i) transfer ownership of such Old Notes on the account books maintained by DTC to, or upon the order of American Greetings; (ii) present such Old Notes for transfer of ownership on the books of American Greetings; (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes; and (iv) deliver, in book-entry form, the New Notes issuable upon acceptance of the Old Notes tendered hereby, together with any Old Notes not accepted in the Exchange Offer, to the DTC account designated herein by the undersigned, all in accordance with the terms and conditions of the Exchange Offer as described in the Offering Memorandum.

The undersigned acknowledges that the Exchange Offer is being made in reliance upon Section 3(a)(9) of the Securities Act of 1933, as amended (the “Securities Act”), to exempt the Exchange Offer from the registration requirements of the Securities Act. We have no contract, arrangement or understanding relating to, and will not, directly or indirectly, pay any commission or other remuneration to any broker, dealer, salesperson, agent or any other person for soliciting tenders in the Exchange Offer. In addition neither our financial advisor nor any broker, dealer, salesperson, agent or any other person, is engaged or authorized to express any statement, opinion, recommendation or judgment with respect to the relative merits and risks of the Exchange Offer.

All authority conferred or agreed to be conferred in this Letter shall survive the death or incapacity of the undersigned and all obligations of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned.

The Exchange Offer is subject to certain conditions as set forth in the Offering Memorandum under the caption “The Exchange Offer—Conditions.” The undersigned recognizes that as a result of these conditions (which may be waived by American Greetings, in whole or in part, in the sole discretion of American Greetings, as more particularly set forth in the Offering Memorandum), American Greetings may not be required to accept all or any of the Old Notes tendered hereby.

We reserve the right to extend or amend the Exchange Offer in our sole discretion. We reserve the right to terminate the Exchange Offer, if any of the conditions listed in “The Exchange Offer—Conditions” occur, or the occurrence thereof has not been waived by us in our sole discretion.

The undersigned understands that a valid tender of Old Notes not made in acceptable form and risk of loss therefor does not pass until receipt by the Exchange Agent of this Letter (or an agent’s message in lieu thereof) or a facsimile hereof, duly completed, dated and signed, together with all accompanying evidences of authority and any other required documents and signature guarantees in form satisfactory to American Greetings (which may delegate power in whole or in part to the Exchange Agent). All questions as to validity, form and eligibility of any tender of the Old Notes hereunder (including time of receipt) and acceptance of tenders and withdrawals of Old Notes will be determined by American Greetings in its sole judgment (which may delegate power in whole or in part to the Exchange Agent) and such determination shall be final and binding.

Unless otherwise indicated in the “Special Issuance and Payment Instructions” box below, the New Notes will be credited to the DTC account number specified above. In the event that the “Special Issuance and Payment

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Instructions” box is completed, the undersigned hereby understands and acknowledges that any Old Notes tendered but not accepted in the Exchange Offer will be issued in the name(s), and delivered by book-entry transfer to the DTC account number(s), indicated in such box. However, the undersigned understands and acknowledges that American Greetings has no obligation pursuant to the “Special Issuance and Payment Instructions” box to transfer any Old Notes from the name(s) of the registered holders thereof to the person indicated in such box, if American Greetings does not accept any Old Notes so tendered. The undersigned acknowledges and agrees that American Greetings and the Exchange Agent may, in appropriate circumstances, defer effecting transfer of Old Notes, and may retain such Old Notes, until satisfactory evidence of payment of transfer taxes payable on account of such transfer by the undersigned, or exemption therefrom, is received by the Exchange Agent.

Your bank or broker can assist you in completing this form. The instructions included with this Letter must be followed. Questions and requests for assistance or for additional copies of the Offering Memorandum and this Letter may be directed to the Information Agent, whose address and telephone number appear on the final page of this Letter. See Instruction 7 below.

METHOD OF DELIVERY

¨ CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING:

Name of Tendering Institution                                                                                                                                                                 

Account Number                                                                                                                                                                                           

Transaction Code Number                                                                                                                                                                          

Signature(s) of Holder(s) of Old Notes

Must be signed by registered holders of Old Notes exactly as such participant’s name appears on a security position listing as the owner of Old Notes, or by person(s) authorized to become holder(s) by endorsements and documents transmitted with this Letter. If signing is by attorney, executor, administrator, trustee or guardian, agent or other person acting in a fiduciary or representative capacity, please set forth full title. See Instructions 2 & 3.

Date                                                                                                                                                                                                                    

Name(s)                                                                                                                                                                                                             

Capacity                                                                                                                                                                                                            

Address (Include Zip Code)                                                                                                                                                                       

DTC Account to which New Notes should be delivered                                                                                                                 

Tax Identification or Social Security Number (See Instruction 8)                                                                                               

Telephone Number (Include Area Code)                                                                                                                                              

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SPECIAL ISSUANCE AND PAYMENT INSTRUCTIONS

(See Instructions 2 & 6)

To be completed ONLY if some portion of Old Notes listed above are not tendered for exchange or New Notes are to be returned by credit to a DTC account number other than the account number specified above.

Issue New Notes and/or unexchanged Old Notes to:

Name                                                                                                                                                                                                                  

DTC Account #                                                                                                                                                                                             

Address (Including Zip Code)                                                                                                                                                                  

(Tax Identification or Social Security Number)

(See Instruction 8)

MEDALLION SIGNATURE GUARANTEE

(SEE INSTRUCTIONS 2 & 3 BELOW)

(CERTAIN SIGNATURES MUST BE GUARANTEED BY AN

ELIGIBLE INSTITUTION)

Name of Eligible Institution Guaranteeing Signatures                                                                                                                    

Address (Including Zip Code)                                                                                                                                                                   

Telephone Number (Including Area Code)                                                                                                                                          

Authorized Signature                                                                                                                                                                                   

Printed Name                                                                                                                                                                                                  

Title                                                                                                                                                                                                                    

Date                                                                                                                                                                                                                    

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INSTRUCTIONS

FORMING PART OF THE

TERMS AND CONDITIONS OF THE EXCHANGE OFFER

1. Delivery of Letter of Transmittal. To tender Old Notes in the Exchange Offer, book-entry transfer of the Old Notes into the Exchange Agent’s account with DTC, as well as a properly completed and duly executed copy or manually signed facsimile of this Letter, or an agent’s message in lieu of this Letter, and any other documents required by this Letter, must be received by the Exchange Agent, at its address set forth herein, prior to 5:00 p.m New York City time on the Expiration Date. Tenders of Old Notes in the Exchange Offer may be made prior to the Expiration Date in the manner described in the preceding sentence and otherwise in compliance with this Letter. Old Notes tendered hereby must be in denominations of principal amount of $1,000 or any integral multiple thereof. Unless otherwise indicated in the Letter of Transmittal, a holder will be deemed to have tendered ALL of the Old Notes represented by the notes listed in the tables entitled “Description of Unrestricted Old Notes” and “Description of Restricted Old Notes” in the Letter of Transmittal.

THE METHOD OF DELIVERY OF THIS LETTER, AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT, INCLUDING DELIVERY THROUGH DTC OF ANY ACCEPTANCE OF AN AGENT’S MESSAGE TRANSMITTED THROUGH DTC’S AUTOMATED TENDER PROGRAM, IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER OF OLD NOTES. IF SUCH DELIVERY IS MADE BY MAIL, IT IS RECOMMENDED THAT THE HOLDER USE PROPERLY INSURED, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO ALTERNATIVE, CONDITIONAL OR CONTINGENT TENDERS OF OLD NOTES WILL BE ACCEPTED. EXCEPT AS OTHERWISE PROVIDED BELOW, DELIVERY WILL BE MADE WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. THIS LETTER AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT ONLY TO THE EXCHANGE AGENT, NOT TO AMERICAN GREETINGS OR DTC.

Old Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior to 5:00 p.m. New York City time on the Expiration Date, unless the Exchange Offer is extended, in which case tenders of Old Notes may be withdrawn under the conditions described in the Offering Memorandum under the caption “The Exchange Offer—Expiration Date; Extensions; Amendments; Termination.” In order to be valid, notice of withdrawal of tendered Old Notes must comply with the requirements set forth in the Offering Memorandum under the caption “The Exchange Offer—Withdrawal of Tenders.”

2. Signatures on Letter of Transmittal, Powers and Endorsements. This Letter must be signed by or on behalf of the registered holder(s) of the Old Notes tendered hereby. The signature(s) on this Letter must be exactly the same as the name(s) that appear(s) on the security position listing of DTC in which such holder of Old Notes is a participant, without alteration or enlargement or any change whatsoever. Except as provided below, ALL SIGNATURES ON LETTERS OF TRANSMITTAL MUST BE GUARANTEED BY A MEDALLION SIGNATURE GUARANTOR.

If any of the Old Notes tendered hereby are registered in the name of two or more holders, all such holders must sign this Letter. If any tendered Old Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are names in which certificates are held.

If this Letter or any Old Notes or powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by American Greetings, proper evidence satisfactory to American Greetings of its authority so to act must be submitted with this Letter.

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3. Guarantee of Signatures. Except as otherwise provided below, all signatures on a letter of transmittal or a notice of withdrawal must be guaranteed by a recognized participant in the Securities Transfer Agents Medallion Program or the Stock Exchange Medallion Program. Signatures on this Letter need not be guaranteed if:

• this Letter is signed by a participant in DTC whose name appears on a security position listing of DTC as the owner of the Old Notes and the holder(s) has not completed the portion entitled “Special Issuance and Payment Instructions” on the Letter of Transmittal; or

• the Old Notes are tendered for the account of an Eligible Guarantor Institution (defined below).

If this Letter is not signed by the holder, the holder must transmit a separate, properly completed power with this Letter (in either case, executed exactly as the name(s) of the participant(s) appear(s) on such security position listing), with the signature on the endorsement or power guaranteed by a Medallion Signature Guarantor, unless such powers are executed by an Eligible Guarantor Institution (defined below).

An Eligible Guarantor Institution (as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), means:

(i) Banks (as defined in Section 3(a) of the Federal Deposit Insurance Act);

(ii) Brokers, dealers, municipal securities dealers, municipal securities brokers, government securities dealers, and government securities brokers, as those terms are defined under the Exchange Act;

(iii) Credit unions (as that term is defined in Section 19b(l)(A) of the Federal Reserve Act);

(iv) National securities exchanges, registered, securities associations, and clearing agencies, as those terms are used under the Exchange Act; and

(v) Savings associations (as that term is defined in Section 3(b) of the Federal Deposit Insurance Act).

For a correction of name or a change in name which does not involve a change in ownership, you may proceed as follows: for a change in name by marriage, etc., this Letter should be signed, e.g., “Mary Doe, now by marriage, Mary Jones.” For a correction in name, this Letter should be signed, e.g., “James E. Brown, incorrectly inscribed as J. E. Brown.” In any such case, the signature on this Letter must be guaranteed as provided above, and the holder must complete the Special Issuance and Payment Instructions above.

You should consult your own tax advisor as to possible tax consequences resulting from the issuance of New Notes, as described above, in a name other than that of the registered holder(s) of the tendered Old Notes.

4. Transfer Taxes. American Greetings will pay all transfer taxes, if any, applicable to the transfer and exchange of Old Notes in the Exchange Offer. If transfer taxes are imposed for any other reason, the amount of those transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. Other reasons transfer taxes could be imposed include:

• if New Notes in book-entry form are to be registered in the name of any person other than the person signing this Letter; or

• if tendered Old Notes are registered in the name of any person other than the person signing this Letter.

If satisfactory evidence of payment of or exemption from those transfer taxes is not submitted with the Letter, the amount of those transfer taxes will he billed directly to the tendering holder and/or withheld from any payments due with respect to the Old Notes tendered by such holder.

5. Validity of Tender; Irregularities. All questions as to validity, form and eligibility (including time of receipt) of any tender of the Old Notes hereunder will be determined by American Greetings, in its sole judgment (which may delegate power in whole or in part to the Exchange Agent), and such determination shall be final and binding. American Greetings reserves the absolute right to waive any irregularities or defects in the tender of any

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Old Notes and its interpretations of the terms and conditions of this Letter (including these instructions) with respect to such irregularities or defects shall be final and binding. A tender will not be deemed to have been made until all irregularities have been cured or waived.

6. Special Issuance and Payment Instructions and Special Delivery Instructions. Indicate the name in which ownership of the New Notes on the DTC security listing position is to be recorded if different from the name of the person(s) signing this Letter. A Social Security Number or Tax Identification Number will be required.

7. Additional Copies. Additional copies of this Letter may be obtained from the Information Agent at the address listed below.

8. Substitute Form W-9. You are required, unless an exemption applies, to provide the Exchange Agent with a correct Taxpayer Identification Number (“TIN”), generally the holder’s social security number or employer identification number, and with certain other information, on Substitute Form W-9, which is provided herewith and to certify under penalties of perjury, that such TIN is correct and that you are not subject to backup withholding. Failure to provide the information on the form may subject the holder (or other payee) to a penalty of $50 imposed by the Internal Revenue Service (“IRS”) and a United States federal income tax backup withholding on the payment of the amounts due. The box in Part 3 of the form may be checked if you have not been issued a TIN and have applied for a number or intend to apply for a number in the near future. If the box in Part 3 is checked, the Exchange Agent will backup withhold on all payments until a TIN is provided to the Exchange Agent but not longer than 60 days, after which time the funds will be turned over to the IRS.

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IF FURTHER INSTRUCTIONS ARE DESIRED, CONTACT THE

INFORMATION AGENT:

Global Bondholder Services Corporation

65 Broadway—Suite 723

New York, New York 10006

Attn: Corporate Actions

Banks and Brokers Call: (212) 430-3774

Toll-Free: (866) 795-2200

IMPORTANT TAX INFORMATION

Under United States federal income tax law, a holder whose Old Notes are accepted for exchange is required by law to provide the Exchange Agent with such holder’s correct TIN on the Substitute Form W-9 and to certify that the TIN provided is correct (or that such holder is awaiting a TIN). If such holder is an individual, the TIN is his or her social security number. If the Exchange Agent is not provided with the correct TIN, the holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the “IRS”) and backup withholding in an amount equal to 28% of the gross proceeds received pursuant to the Exchange Offer.

Certain holders (including, among others, all corporations and certain foreign individuals and entities) may be exempted from these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that holder must submit a statement, signed under penalties of perjury, attesting to that individual’s exempt status (Form W-8BEN). Such statements can be obtained from the Exchange Agent. Holders are urged to consult their own tax advisors to determine whether they are exempt from these backup withholding and reporting requirements.

If backup withholding applies, the Exchange Agent may be required to backup withhold on any such payments made to the holder. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the IRS. The Exchange Agent cannot refund amounts withheld by reason of backup withholding.

What Number to Give the Paying Agent

The holder is required to give the Exchange Agent the TIN, generally the social security number or employer identification number, of the record owner of the tendered Old Notes. If the Old Notes are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. If the holder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should check the box in Part 3 of the Substitute Form W-9, sign and date the Substitute Form W-9 and complete the Certificate of Awaiting Taxpayer Identification Number in order to avoid backup withholding. If the box in Part 3 is checked, the Exchange Agent will backup withhold on all payments until a TIN is provided to the Exchange Agent but not longer than 60 days, after which time the funds will be turned over to the IRS.

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PAYOR’S NAME: GLOBAL BONDHOLDER SERVICES CORPORATION
SUBSTITUTE Form W-9 Payor’s Request for Taxpayer Identification Number (“TIN”) and Certification	Part I—PLEASE PROVIDE YOUR TIN IN THE BOX AT THE RIGHT AND CERTIFY BY SIGNING AND DATING BELOW.	TIN: Social Security Number or Employer Identification Number
	PART II—For Payees exempt from backup withholding, see the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as instructed therein
	PART III—CERTIFICATION—Under penalties of perjury, I certify that: (1)    The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me); and (2)    I am not subject to backup withholding because: (a) I am exempt from backup withholding; or (b) I have not been notified by the Internal Revenue Service (“IRS”) that I am subject to backup withholding as a result of a failure to report all interest or dividends; or (c) the IRS has notified me that I am no longer subject to backup withholding; and (3)    I am a U.S. person (including a U.S. resident alien); and (4)    All information provided in this form is true, correct and complete.
	SIGNATURE:	DATE:

Certification Instructions—You must cross out item (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding, you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). (Also see the instructions in the enclosed Guidelines.)

NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF A PORTION OF ALL REPORTABLE PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN.

CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER

I certify under penalties of perjury that a TIN has not been issued to me, and either (a) I have mailed or delivered an application to receive a TIN to the appropriate IRS Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a TIN by the time of payment, a portion of all reportable payments made to me will be withheld.

Signature Date

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EX-99.(A).(1).(III)

Exhibit (a)(1)(iii)

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payer.—Social Security numbers and IRS individual taxpayer identification numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer.

For this type of account:		Give name and SSN of:	For this type of account:		Give name and EIN of:
1.	Individual	The individual	6.	Sole proprietorship	The owner(3)
2.	Two or more individuals (joint account)	The actual owner of the account or, if combined funds, the first individual on the account(1)	7. 8.	A valid trust, estate, or pension trust Corporate	Legal entity(4) The corporation
3.	Custodian account of a minor (Uniform Gift to Minors Act)	The minor(2)	9.	Association, club, religious, charitable, educational, or other tax-exempt organization	The organization
4.	a. The usual revocable savings trust (grantor is also trustee)	The grantor-trustee(1)	10.	Partnership	The partnership
	b. So-called trust account that is not a legal or valid trust under state law	The actual owner(1)	11.	A broker or registered nominee	The broker or nominee
5.	Sole proprietorship	The owner(3)	12.	Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments	The public entity

(1) List first and circle the name of the person whose number you furnish. If only one person on a joint account has a SSN, that person’s number must be furnished.

(2) Circle the minor’s name and furnish the minor’s SSN.

(3) You must show your individual name, but you may also enter your business or “DBA” name. You may use either your SSN or EIN (if you have one).

(4) List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.)

Note: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.

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GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION

NUMBER ON SUBSTITUTE FORM W-9

Name. If you are an individual, you must generally enter the name shown on your social security card. However, if you have changed your last name, for instance, due to marriage without informing the Social Security Administration of the name change, enter your first name, the last name shown on your social security card, and your new last name.

If the account is in joint names, list first and then circle the name of the person or entity whose number you enter in Part I of the form.

Sole proprietor. Enter your individual name as shown on your social security card on the “Name” line. You may enter your business, trade, or “doing business as (DBA)” name on the “Business name” line.

Limited liability company (LLC). If you are a single-member LLC (including a foreign LLC with a domestic owner) that is disregarded as an entity separate from its owner under Treasury regulations section 301.7701-3, enter the owner’s name on the “Name” line. Enter the LLC’s name on the “Business name” line.

Other entities. Enter your business name as shown on required Federal tax documents on the “Name” line. This name should match the name shown on the charter or other legal document creating the entity. You may enter any business, trade, or DBA name on the “Business name” line.

Exempt from backup withholding. If you are exempt, enter your name as described above, then check the “Exempt from backup withholding” box in the line following the business name, sign and date the form.

Individuals (including sole proprietors) are not exempt from backup withholding. Corporations are exempt from backup withholding for certain payments, such as interest and dividends. For more information on exempt payees, see the Instructions for the Requester of Form W-9.

If you are a nonresident alien or a foreign entity not subject to backup withholding, give the requester the appropriate completed Form W-8.

Note: If you are exempt from backup withholding, you should still complete this form to avoid possible erroneous backup withholding.

PART I—Taxpayer Identification Number (TIN)

Enter your TIN in the appropriate box.

If you are a resident alien and you do not have and are not eligible to get a SSN, your TIN is your IRS individual taxpayer identification number (ITIN). Enter it in the Social Security number box. If you do not have an ITIN, see How to get a TIN below.

If you are a sole proprietor and you have an EIN, you may enter either your SSN or EIN. However, the IRS prefers that you use your SSN.

If you are an LLC that is disregarded as an entity separate from its owner (see Limited liability company (LLC) above), and are owned by an individual, enter your SSN (or “pre-LLC” EIN, if desired). If the owner of a disregarded LLC is a corporation, partnership, etc., enter the owner’s EIN.

Note: See the chart on previous page for further clarification of name and TIN combinations.

How to get a TIN. If you do not have a TIN, apply for one immediately. To apply for a SSN, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration office. Get Form W-7, Application for IRS Individual Taxpayer Identification Number, to apply for an ITIN, or Form SS-4, Application for Employer Identification Number, to apply for an EIN. You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM (1-800-829-3676) or from the IRS Web Site at www.irs.gov.

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If you are asked to complete Form W-9 but do not have a TIN, write “Applied For” in the space for the TIN, sign and date the form and give it to the requester. For interest and dividend payments, and certain payments made with respect to readily tradable instruments, generally you will have 60 days to get a TIN and give it to the requester before you are subject to backup withholding on payments. The 60-day rule does not apply to other types of payments. You will be subject to backup withholding on all such payments until you provide your TIN to the requester.

Note: Writing “Applied For” means that you have already applied for a TIN or that you intend to apply for one soon.

Caution: A disregarded domestic entity that has a foreign owner must use the appropriate Form W-8.

Part II—Certification

To establish to the withholding agent that you are a U.S. person, or resident alien, sign Form W-9. You may be requested to sign by the withholding agent even if items 1, 3, and 5 below indicate otherwise.

For a joint account, only the person whose TIN is shown in Part I should sign (when required). Exempt recipients, see Exempt from backup withholding above.

Signature requirements. Complete the certification as indicated in 1 through 5 below.

1. Interest, dividend, and barter exchange accounts opened before 1984 and broker accounts considered active during 1983. You must give your correct TIN, but you do not have to sign the certification.

2. Interest, dividend, broker, and barter exchange accounts opened after 1983 and broker accounts considered inactive during 1983. You must sign the certification or backup withholding will apply. If you are subject to backup withholding and you are merely providing your correct TIN to the requester, you must cross out item 2 in the certification before signing the form.

3. Real estate transactions. You must sign the certification. You may cross out item 2 of the certification.

4. Other payments. You must give your correct TIN, but you do not have to sign the certification unless you have been notified that you have previously given an incorrect TIN. “Other payments” include payments made in the course of the requester’s trade or business for rents, royalties, goods (other than bills for merchandise), medical and health care services (including payments to corporations), payments to a nonemployee for services, payments to certain fishing boat crew members and fishermen, and gross proceeds paid to attorneys (including payments to corporations).

5. Mortgage interest paid by you, acquisition or abandonment of secured property, cancellation of debt, qualified tuition program payments (under section 529), IRA or Archer MSA contributions or distributions, and pension distributions. You must give your correct TIN, but you do not have to sign the certification.

Privacy Act Notice

Section 6109 of the Internal Revenue Code requires you to give your correct TIN to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt, or contributions you made to an IRA or Archer MSA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation, and to cities, states, and the District of Columbia to carry out their tax laws.

You must provide your TIN whether or not you are required to file a tax return. Payers must generally withhold 28% of taxable interest, dividend, and certain other payments to a payee who does not give a TIN to a payer. Certain penalties may also apply.

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EX-99.(D)

Exhibit (d)

AMERICAN GREETINGS CORPORATION

ISSUER

TO

U.S. BANK NATIONAL ASSOCIATION

TRUSTEE

INDENTURE

Dated as of May [    ], 2006

7.00% CONVERTIBLE SUBORDINATED NOTES

DUE JULY 15, 2006

TABLE OF CONTENTS

		Page
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION		1
SECTION 1.1	Definitions.	1
SECTION 1.2	Compliance Certificates and Opinions.	10
SECTION 1.3	Form of Documents Delivered to the Trustee.	11
SECTION 1.4	Acts of Holders of Notes.	11
SECTION 1.5	Notices, Etc. to Trustee and Company.	14
SECTION 1.6	Notice to Holders of Notes; Waiver.	14
SECTION 1.7	Effect of Headings and Table of Contents.	15
SECTION 1.8	Successors and Assigns.	15
SECTION 1.9	Separability Clause.	15
SECTION 1.10	Benefits of Indenture.	15
SECTION 1.11	Governing Law.	15
SECTION 1.12	Legal Holidays.	15
SECTION 1.13	Conflict with Trust Indenture Act.	16
ARTICLE II SECURITY FORMS		16
SECTION 2.1	Form Generally.	16
SECTION 2.2	Form of Note.	17
SECTION 2.3	Form of Certificate of Authentication.	27
SECTION 2.4	Form of Conversion Notice	27
SECTION 2.5	Form of Assignment.	29
ARTICLE III THE SECURITIES		30
SECTION 3.1	Title and Terms.	30
SECTION 3.2	Denominations.	30
SECTION 3.3	Execution, Authentication, Delivery and Dating.	30
SECTION 3.4	Global Notes; Non-Global Notes; Book-Entry Provisions.	31
SECTION 3.5	Registration; Registration of Transfer and Exchange; Restrictions on Transfer.	33
SECTION 3.6	Mutilated, Destroyed, Lost or Stolen Notes.	34
SECTION 3.7	Payment of Interest; Interest Rights Preserved.	35
SECTION 3.8	Persons Deemed Owners.	36
SECTION 3.9	Cancellation.	37
SECTION 3.10	Computation of Interest.	37
SECTION 3.11	CUSIP Numbers.	37
ARTICLE IV SATISFACTION AND DISCHARGE		37
SECTION 4.1	Satisfaction and Discharge of Indenture.	37
SECTION 4.2	Application of Trust Money.	38
ARTICLE V REMEDIES		39
SECTION 5.1	Events of Default.	39

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SECTION 5.2	Acceleration of Maturity; Rescission and Annulment.	40
SECTION 5.3	Collection of Indebtedness and Suits for Enforcement by Trustee.	41
SECTION 5.4	Trustee May File Proofs of Claim.	42
SECTION 5.5	Trustee May Enforce Claims Without Possession of Notes.	43
SECTION 5.6	Application of Money Collected.	43
SECTION 5.7	Limitation on Suits.	43
SECTION 5.8	Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert.	44
SECTION 5.9	Restoration of Rights and Remedies.	44
SECTION 5.10	Rights and Remedies Cumulative.	44
SECTION 5.11	Delay or Omission Not Waiver.	45
SECTION 5.12	Control by Holders of Notes.	45
SECTION 5.13	Waiver of Past Defaults.	45
SECTION 5.14	Undertaking for Costs.	46
SECTION 5.15	Waiver of Stay, Usury or Extension Laws.	46
ARTICLE VI THE TRUSTEE		46
SECTION 6.1	Certain Duties and Responsibilities.	46
SECTION 6.2	Notice of Defaults.	47
SECTION 6.3	Certain Rights of Trustee.	48
SECTION 6.4	Not Responsible for Recitals or Issuance of Notes.	49
SECTION 6.5	May Hold Notes, Act as Trustee Under Other Indentures.	49
SECTION 6.6	Money Held in Trust.	49
SECTION 6.7	Compensation and Reimbursement.	49
SECTION 6.8	Corporate Trustee Required; Eligibility.	51
SECTION 6.9	Resignation and Removal; Appointment of Successor.	51
SECTION 6.10	Acceptance of Appointment by Successor.	52
SECTION 6.11	Merger, Conversion, Consolidation or Succession to Business.	53
SECTION 6.12	Authenticating Agents.	53
SECTION 6.13	Disqualification; Conflicting Interests.	54
SECTION 6.14	Preferential Collection of Claims Against Company.	54
ARTICLE VII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE		55
SECTION 7.1	Company May Consolidate, Etc., Only on Certain Terms.	55
SECTION 7.2	Successor Substituted.	55
ARTICLE VIII SUPPLEMENTAL INDENTURES		56
SECTION 8.1	Supplemental Indentures Without Consent of Holders of Notes.	56
SECTION 8.2	Supplemental Indentures with Consent of Holders of Notes.	57
SECTION 8.3	Execution of Supplemental Indentures.	58
SECTION 8.4	Effect of Supplemental Indentures.	58
SECTION 8.5	Reference in Notes to Supplemental Indentures.	58
SECTION 8.6	Notice of Supplemental Indentures.	58
ARTICLE IX MEETINGS OF HOLDERS OF SECURITIES		59
SECTION 9.1	Purposes for Which Meetings May Be Called.	59
SECTION 9.2	Call, Notice and Place of Meetings.	59

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SECTION 9.3	Persons Entitled to Vote at Meetings.	59
SECTION 9.4	Quorum; Action.	59
SECTION 9.5	Determination of Voting Rights; Conduct and Adjournment of Meetings.	60
SECTION 9.6	Counting Votes and Recording Action of Meetings.	61
ARTICLE X COVENANTS		61
SECTION 10.1	Payment of Principal, Premium and Interest.	61
SECTION 10.2	Maintenance of Offices or Agencies.	62
SECTION 10.3	Money for Note Payments To Be Held in Trust.	62
SECTION 10.4	Existence.	63
SECTION 10.5	Maintenance of Properties.	64
SECTION 10.6	Payment of Taxes and Other Claims.	64
SECTION 10.7	Registration and Listing.	64
SECTION 10.8	Statement by Officers as to Default.	65
SECTION 10.9	Intentionally Omitted.	65
SECTION 10.10	Intentionally Omitted.	65
SECTION 10.11	Intentionally Omitted.	65
SECTION 10.12	Waiver of Certain Covenants.	65
ARTICLE XI CONVERSION OF SECURITIES		66
SECTION 11.1	Conversion Privilege and Conversion Rate.	66
SECTION 11.2	Exercise of Conversion Privilege.	67
SECTION 11.3	Fractions of Shares.	68
SECTION 11.4	Adjustment of Conversion Rate.	68
SECTION 11.5	Notice of Adjustments of Conversion Rate.	73
SECTION 11.6	Notice of Certain Corporate Action.	73
SECTION 11.7	Company to Reserve Common Stock.	74
SECTION 11.8	Taxes on Conversions.	75
SECTION 11.9	Covenant as to Common Stock.	75
SECTION 11.10	Cancellation of Converted Notes.	75
SECTION 11.11	Provision in Case of Consolidation, Merger or Sale of Assets.	75
SECTION 11.12	Responsibility of Trustee for Conversion Provisions.	77
ARTICLE XII SUBORDINATION OF SECURITIES		77
SECTION 12.1	Notes Subordinate to Senior Indebtedness.	77
SECTION 12.2	No Payment in Certain Circumstances, Payment Over of Proceeds Upon Dissolution, Etc.	77
SECTION 12.3	Prior Payment to Senior Indebtedness Upon Acceleration of Notes.	79
SECTION 12.4	Payment Permitted If No Default.	80
SECTION 12.5	Subrogation to Rights of Holders of Senior Indebtedness.	80
SECTION 12.6	Provisions Solely to Define Relative Rights.	80
SECTION 12.7	Trustee to Effectuate Subordination.	81
SECTION 12.8	No Waiver of Subordination Provisions.	81
SECTION 12.9	Notice to Trustee.	81
SECTION 12.10	Reliance on Judicial Order or Certificate of Liquidating Agent.	82

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SECTION 12.11	Trustee Not Fiduciary for Holders of Senior Indebtedness.	82
SECTION 12.12	Reliance by Holders of Senior Indebtedness on Subordination Provisions.	83
SECTION 12.13	Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee’s Rights.	83
SECTION 12.14	Article Applicable to Paying Agents.	83
SECTION 12.15	Certain Conversions and Repurchases Deemed Payment.	83
ARTICLE XIII REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE IN CONTROL		84
SECTION 13.1	Right to Require Repurchase.	84
SECTION 13.2	Conditions to the Company’s Election to Pay the Repurchase Price in Common Stock.	85
SECTION 13.3	Notices; Method of Exercising Repurchase Right, Etc.	85
SECTION 13.4	Certain Definitions.	88
SECTION 13.5	Consolidation, Merger, Etc.	89
ARTICLE XIV HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE		90
SECTION 14.1	Company to Furnish Trustee Names and Addresses of Holders.	90
SECTION 14.2	Preservation of Information.	90
SECTION 14.3	No Recourse Against Others.	91
SECTION 14.4	Reports by Trustee.	91
SECTION 14.5	Reports by Company.	91
ARTICLE XV IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS		92
SECTION 15.1	Indenture and Notes Solely Corporate Obligations.	92

iv

INDENTURE, dated as of [            ], 2006, between AMERICAN GREETINGS CORPORATION, a corporation duly organized and existing under the laws of the State of Ohio, having its principal office at One American Road, Cleveland, Ohio 44144-2398 (herein called the “Company”), and U.S. BANK NATIONAL ASSOCIATION, as Trustee hereunder (herein called the “Trustee”).

RECITALS OF THE COMPANY

The Company has duly authorized the creation of an issue of its 7.00% Convertible Subordinated Notes due July 15, 2006 (herein called the “Notes”) of substantially the tenor and amount hereinafter set forth, and to provide therefor the Company has duly authorized the execution and delivery of this Indenture.

All things necessary to make the Notes, when the Notes are executed by the Company and authenticated and delivered hereunder, the valid obligations of the Company, and to make this Indenture a valid agreement of the Company, in accordance with their and its terms, have been done. Further, all things necessary to duly authorize the issuance of the Class A Common Stock of the Company issuable upon the conversion of the Notes, and to duly reserve for issuance of the number of shares of Class A Common Stock issuable upon such conversion, have been done.

This Indenture is subject to, and shall be governed by, the provisions of the Trust Indenture Act of 1939, as amended, that are required to be a part of and to govern indentures qualified under the Trust Indenture Act of 1939, as amended.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Holders of the Notes, as follows:

ARTICLE I

DEFINITIONS AND OTHER PROVISIONS

OF GENERAL APPLICATION

SECTION 1.1 Definitions.

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(1) the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;

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(2) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles in the United States, and, except as otherwise herein expressly provided, the term “generally accepted accounting principles” with respect to any computation required or permitted hereunder shall mean such accounting principles as are generally accepted at the date of such computation; and

(3) the words “herein”, “hereof’ and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.

“Act”, when used with respect to any Holder of a Note, has the meaning specified in Section 1.4.

“Additional Cash” has the meaning specified in Section 11.1.

“Affiliate” of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, “control”, as used with respect to any specified Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting notes, by agreement or otherwise; provided that beneficial ownership of 10% or more of the Voting Stock of a Person shall be deemed to be control. For purposes of this definition, the terms “controlling,” “controlled by” and “under common control with” have meanings correlative to the foregoing.

“Agent Member” means any member of, or participant in, the Depositary.

“Applicable Procedures” means, with respect to any notice, transfer or transaction involving a Global Note or beneficial interest therein, the rules and procedures of the Depositary, Euroclear and Clearstream that apply to such transfer or exchange, in each case to the extent applicable to such transaction and as in effect from time to time.

“Authenticating Agent” means any Person authorized pursuant to Section 6.12 to act on behalf of the Trustee to authenticate Notes.

“Board of Directors” means either the board of directors of the Company or any duly authorized committee of that board.

“Board Resolution” means a resolution duly adopted by the Board of Directors, a copy of which, certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification, shall have been delivered to the Trustee.

“Business Day”, when used with respect to any Place of Payment, Place of Conversion or any other place, as the case may be, means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in such Place of Payment,

2

Place of Conversion or other place, as the case may be, are authorized or obligated by law or executive order to close; provided, however, that a day on which banking institutions in New York, New York or London, England are authorized or obligated by law or executive order to close shall not be a Business Day for purposes of Section 12.9.

“Change in Control” has the meaning specified in Section 13.4(2).

“Clearstream” means Clearstream Banking Corporation.

“Closing Price Per Share” means, with respect to the Common Stock, for any day, (i) the last reported sale price regular way on the New York Stock Exchange or, (ii) if the Common Stock is not listed on the New York Stock Exchange, the last reported sale price regular way per share or, in case no such reported sale takes place on such day, the average of the reported closing bid and asked prices regular way, in either case, on the principal national securities exchange on which the Common Stock is listed or admitted to trading, or (iii) if the Common Stock is not quoted on the New York Stock Exchange or listed or admitted to trading on any national securities exchange, the average of the closing bid prices in the over-the-counter market as furnished by any New York Stock Exchange member firm selected from time to time by the Company for that purpose.

“Code” has the meaning specified in Section 2.l.

“Commission” means the United States Securities and Exchange Commission, as from time to time constituted, created under the Exchange Act, or, if at any time after the execution of this instrument such Commission is not existing and performing the duties now assigned to it under the Trust Indenture Act, then the body performing such duties at such time.

“Common Stock” means the Class A Common Shares, par value $1.00 per share, of the Company authorized at the date of this instrument as originally executed. Subject to the provisions of Section 11.11, shares issuable on conversion or repurchase of Notes shall include only shares of Common Stock or shares of any class or classes of common stock resulting from any reclassification or reclassifications thereof; provided, however, that if at any time there shall be more than one such resulting class, the shares so issuable on conversion of the Notes shall include shares of all such classes, and the shares of each such class then so issuable shall be substantially in the proportion which the total number of shares of such class resulting from all such reclassifications bears to the total number of shares of all such classes resulting from all such reclassifications.

“common stock” includes any stock of any class of capital stock which has no preference in respect of dividends or of amounts payable in the event of any voluntary or involuntary liquidation, dissolution or winding up of the issuer thereof and which is not subject to redemption by the issuer thereof.

“Company” means American Greetings Corporation, and any and all successors thereto.

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“Company Notice” has the meaning specified in Section 13.3.

“Company Request” or “Company Order” means a written request or order signed in the name of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President, an Executive Vice President or a Vice President, and by its principal financial officer, Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

“Constituent Person” has the meaning specified in Section 11.11.

“Conversion Agent” means any Person authorized by the Company to convert Notes in accordance with Article XII. The Company has initially appointed the Trustee as its Conversion Agent pursuant to Section 10.2 hereof.

“Conversion Date” has the meaning specified in Section 11.2.

“Conversion Price” has the meaning specified in Section 13.4(3).

“Conversion Rate” has the meaning specified in Section 11.1.

“Conversion Value” has the meaning provided in Section 11.1.

“Corporate Trust Office” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered (which at the date of this Indenture is located at 1350 Euclid Avenue, CN-OH-RN11, Cleveland, Ohio 44115, Attention: Corporate Trust Department.

“Corporation” means a corporation, company, association, joint-stock company or business trust.

“Daily Volume Weighted Average Price” means, for any Trading Day, the volume weighted average price per share of the Common Stock rounded up to the nearest cent on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, the principal U.S. exchange or over-the-counter market on which the Common Stock is then listed or traded (including for this purpose, the Nasdaq National Market), during regular trading hours for that Trading Day, as displayed by Bloomberg (or any successor) or, if such volume weighted average price is not available, the Last Reported Sale Price for that day.

“Defaulted Interest” has the meaning specified in Section 3.7.

“Depositary” means, with respect to any Notes issuable or issued in whole or in part in global form, the Person specified as the Depository with respect to the Notes, and any and all successors thereto appointed as depository hereunder and having become such pursuant to the applicable provision of this Indenture.

4

“Designated Senior Indebtedness” means the Company’s obligations under any particular Senior Indebtedness in which the instrument creating or evidencing the same or the assumption or guarantee thereof (or related agreements or documents to which the Company is a party), whether or not executed contemporaneously with the incurrence of such Senior Indebtedness, expressly provides that such Senior Indebtedness shall be “Designated Senior Indebtedness” for purposes of this Indenture (provided that such instrument, agreement or other document may place limitations and conditions on the right of such Senior Indebtedness to exercise the rights of Designated Senior Indebtedness).

“Determination Period” has the meaning specified in Section 11.1.

“Dollar” or “U.S. $” means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts.

“DTC” means The Depository Trust Company, a New York corporation.

“Event of Default” has the meaning specified in Section 5.1.

“Exchange Act” means the United States Securities Exchange Act of 1934 (or any successor statute), as amended from time to time.

“Global Note” means a Note that is registered in the Note Register in the name of a Depositary or a nominee thereof.

“Holder” means the Person in whose name the Note is registered in the Note Register.

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof, including, for all purposes of this instrument and any such supplemental indenture, the provisions of the Trust Indenture Act that are deemed to be a part of and govern this instrument and any such supplemental indenture, respectively.

“Interest Payment Date” means the Stated Maturity of an installment of interest on the Notes.

“Issue Date” means May [    ], 2006.

“Last Reported Sale Price” of the Common Stock on any date means the closing sale price per share (or if no closing sale price is reported, the average of the bid and ask prices or, if more than one in either case, the average of the average bid and the average asked prices) on that date as reported in composite transactions for the principal U.S. securities exchange on which the Common Stock is traded or, if the Common Stock is not listed on a U.S. national or regional securities exchange, as reported by the Nasdaq National Market. If the Common Stock is not listed for trading on a U.S. national or regional securities exchange and not reported by the

5

Nasdaq National Market on the relevant date, the “Last Reported Sale Price” will be the last quoted bid price for the Common Stock in the over-the-counter market on the relevant date as reported by the National Quotation Bureau or similar organization. If the Common Stock is not so quoted, the “Last Reported Sale Price” will be the average of the mid-point of the last bid and ask prices for the Common Stock on the relevant date quoted by each of at least three nationally recognized independent investment banking firms selected by the Company for this purpose. The Last Reported Sale Price shall be determined without reference to extended or after hours trading.

“Maturity”, when used with respect to any Note, means the date on which the principal of such Note becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, exercise of the repurchase right set forth in Article XIII or otherwise.

“Net Share Amount” has the meaning provided in Section 11.1.

“Net Shares” has the meaning provided in Section 11.1.

“Non-electing Share” has the meaning specified in Section 11.11.

“Note Register” and “Note Registrar” have the respective meanings specified in Section 3.5.

“Notes” has the meaning ascribed to it in the first paragraph under the caption “Recitals of the Company”.

“Notice of Default” has the meaning specified in Section 5.1.

“Officers’ Certificate” means a certificate signed on behalf of the Company by two Officers of the Company, one of whom must be the principal executive officer, the principal financial officer, the treasurer or the principal accounting officer of the Company.

“Opinion of Counsel” means a written opinion of counsel, who may be counsel for the Company and who shall be acceptable to the Trustee.

“Outstanding”, when used with respect to the Notes, means, as of the date of determination, all Notes theretofore authenticated and delivered under this Indenture, except:

(i) Notes theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(ii) Notes for the payment of which money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent) for the Holders of such Notes;

6

(iii) Notes which have been paid pursuant to Section 3.6 or in exchange for or in lieu of which other Notes have been authenticated and delivered pursuant to this Indenture, other than any such Notes in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Notes are held by a bona fide purchaser in whose hands such Notes are valid obligations of the Company; and

(iv) Notes converted into Common Stock pursuant to Article XI;

provided, however, that in determining whether the Holders of the requisite principal amount of Outstanding Notes are present at a meeting of Holders of Notes for quorum purposes or have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such determination as to the presence of a quorum or upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes, which the Trustee knows to be so owned, and which a Responsible Officer of the Trustee has been notified in writing to be so owned, shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee is not the Company or any other obligor upon the Notes or any Affiliate of the Company or such other obligor, and the Trustee shall be protected in relying upon an Officer’s Certificate to such effect.

“Paying Agent” means any Person authorized by the Company to pay the principal of or interest on any Notes on behalf of the Company and, except as otherwise specifically set forth herein, such term shall include the Company if it shall act as its own Paying Agent. The Company has initially appointed the Trustee as its Paying Agent pursuant to Section 10.2 hereof.

“Payment Blockage Notice” has the meaning specified in Section 12.2.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, trust, estate, unincorporated organization or government or any agency or political subdivision thereof.

“Place of Conversion” has the meaning specified in Section 3.1.

“Place of Payment” has the meaning specified in Section 3.1.

“Predecessor Note” of any particular Note means every previous Note evidencing all or a portion of the same debt as that evidenced by such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note. For the avoidance of doubt, a Predecessor Note shall not include any note or security issued under that certain Indenture, dated as of June 29, 2001, of American Greetings Corporation, as Issuer, to U.S. Bank National Association, as Trustee, with respect to a separate issuance of 7.00% Convertible Subordinated Notes due July 15, 2006.

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“Principal Return” has the meaning provided in Section 11.1.

“Principals” means Morry Weiss, Judith A. Weiss, Harry H. Stone, Gary Weiss, Jeffrey Weiss, Zev Weiss, Elie Weiss and the Irving I. Stone Limited Liability Co.

“Record Date” means any Regular Record Date or Special Record Date.

“Record Date Period” means the period from the close of business of the Regular Record Date next preceding any Interest Payment Date to the opening of business on such Interest Payment Date.

“Reference Property” has the meaning provided in Section 11.11.

“Reference Property Value” has the meaning provided in Section 11.11.

“Regular Record Date” for interest payable in respect of any Note on the Interest Payment Date means July 1, 2006.

“Representative” means the (a) indenture trustee or other trustee, agent or representative for any Senior Indebtedness or (b) with respect to any Senior Indebtedness that does not have any such trustee, agent or other representative, (i) in the case of such Senior Indebtedness issued pursuant to an agreement providing for voting arrangements as among the holders or owners of such Senior Indebtedness, any holder or owner of such Senior Indebtedness acting with the consent of the required persons necessary to bind such holders or owners of such Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness, the holder or owner of such Senior Indebtedness.

“Repurchase Date” has the meaning specified in Section 13.1.

“Repurchase Price” has the meaning specified in Section 13.1.

“Responsible Officer”, when used with respect to the Trustee, means any officer within the Corporate Trust Office of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge and familiarity with the particular subject.

“Securities Act” means the United States Securities Act of 1933 (or any successor statute), as amended from time to time.

“Senior Indebtedness” means the principal of (and premium, if any) and interest (including all interest accruing subsequent to the commencement of any bankruptcy or similar proceeding, whether or not a claim for post-petition interest is allowable as a claim in any such

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proceeding) on, and all fees and other amounts payable in connection with, the following, whether absolute or contingent, secured or unsecured, due or to become due, outstanding on the date of the Indenture or thereafter created, incurred or assumed: (a) indebtedness of the Company evidenced by a credit or loan agreement, security, bond, debenture or other written obligation, (b) all obligations of the Company for money borrowed, (c) all obligations of the Company evidenced by a security or similar instrument given in connection with the acquisition of any businesses, properties or assets of any kind, (d) obligations of the Company (i) as lessee under leases required to be capitalized on the balance sheet of the lessee under generally accepted accounting principles and (ii) as lessee under other leases for facilities, capital equipment or related assets, whether or not capitalized, entered into or leased for financing purposes, (e) all obligations of the Company under interest rate and currency swaps, caps, floors, collars, hedge agreements, forward contracts or similar agreements or arrangements, (f) all obligations of the Company with respect to letters of credit, bankers’ acceptances and similar facilities (including reimbursement obligations with respect to the foregoing), (g) all obligations of the Company issued or assumed as the deferred purchase price of property or services (but excluding trade accounts payable and accrued liabilities arising in the ordinary course of business), (h) all obligations of the type referred to in clauses (a) through (g) above of another Person and all dividends of another Person, the payment of which, in either case, the Company has assumed or guaranteed, or for which the Company is responsible or liable, directly or indirectly, jointly or severally, as obligor, guarantor or otherwise, or which is secured by a lien on the property of the Company, and (i) renewals, extensions, modifications, replacements, restatements and refundings of, or any indebtedness or obligation issued in exchange for, any such indebtedness or obligation described in clauses (a) through (h) of this paragraph; provided, however, that Senior Indebtedness shall not include the Notes, the 7.00% Convertible Subordinated Notes due July 15, 2006 issued on July 21, 2001 or any such indebtedness or obligation if the terms of such indebtedness or obligation (or the terms of the instrument under which, or pursuant to which it is issued) expressly provide that such indebtedness or obligation is not superior in right of payment to the Notes.

“Significant Subsidiary” means, with respect to any Person, a Subsidiary of such Person that would constitute a “significant subsidiary” as such term is defined under Rule 1-02 of Regulation S-X under the Securities Act.

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Company pursuant to Section 3.7.

“Stated Maturity”, when used with respect to any Note or any installment of interest thereon, means the date specified in such Note as the fixed date on which the principal of such Note or such installment of interest is due and payable.

“Subsidiary” means, with respect to any specified Person, any corporation, association or other business entity of which more than 50% of the total voting stock is owned, directly or indirectly, by the Company or by one or more other Subsidiaries, or by the Company and one or more other Subsidiaries. For the purposes of this definition, “voting stock” means stock or other similar interests in the corporation which ordinarily has or have voting power for

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the election of directors, or persons performing similar functions, whether at all times or only so long as no senior class of stock or other interests has or have such voting power by reason of any contingency.

“Successor Note” of any particular Note means every Note issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Note; and, for the purposes of this definition, any Note authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Note.

“Ten Day Weighted Average Price” has the meaning provided in Section 11.1.

“Trading Day” means a day during which trading in notes generally occurs on the New York Stock Exchange or, if the Common Stock is not listed on the New York Stock Exchange, on the principal other national or regional securities exchange on which the Common Stock is then listed or, if the Common Stock is not listed on a national or regional securities exchange, on the Nasdaq National Market or, if the Common Stock is not then quoted on the Nasdaq National Market, on the principal other market on which the Common Stock is then traded.

“Trust Indenture Act” means the Trust Indenture Act of 1939, and the rules and regulations thereunder, as in force at the date as of which this instrument was executed, provided, however, that in the event the Trust Indenture Act of 1939 is amended after such date, “Trust Indenture Act” means, to the extent required by any such amendment, the Trust Indenture Act of 1939, and the rules and regulations thereunder, as so amended.

“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean such successor Trustee.

“United States” means the United States of America (including the States and the District of Columbia), its territories, its possessions and other areas subject to its jurisdiction (its “possessions” including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands).

SECTION 1.2 Compliance Certificates and Opinions.

Upon any application or request by the Company to the Trustee to take any action under any provision of this Indenture, the Company shall furnish to the Trustee such certificates and opinions as may be required under the Trust Indenture Act including but not necessarily limited to an Officers’ Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or opinion need be furnished.

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Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture (including certificates provided for in Section 10.8) shall include:

(1) a statement that each individual or firm signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;

(2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

(3) a statement that, in the opinion of such individual, or such firm, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(4) a statement as to whether, in the opinion of each such individual, or such firm, such condition or covenant has been complied with.

SECTION 1.3 Form of Documents Delivered to the Trustee.

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which such certificate or opinion is based are erroneous. Any such certificate or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company or any other Person stating that the information with respect to such factual matters is in the possession of the Company or such other Person, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

SECTION 1.4 Acts of Holders of Notes.

(1) Any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given or taken by Holders of Notes

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may be embodied in and evidenced by (A) one or more instruments of substantially similar tenor signed by such Holders in person or by an agent or proxy duly appointed in writing by such Holders or (B) the record of Holders of Notes voting in favor thereof, either in person or by proxies duly appointed in writing, at any meeting of Holders of Notes duly called and held in accordance with the provisions of Article IX. Such action shall become effective when such instrument or instruments or record is delivered to the Trustee and, where it is hereby expressly required, to the Company. The Trustee shall promptly deliver to the Company copies of all such instruments and records delivered to the Trustee. Such instrument or instruments and record (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders of Notes signing such instrument or instruments and so voting at such meeting. Proof of execution of any such instrument or of a writing appointing any such agent or proxy, or of the holding by any Person of a Note, shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company if made in the manner provided in this Section. The record of any meeting of Holders of Notes shall be proved in the manner provided in Section 9.6.

(2) The fact and date of the execution by any Person of any such instrument or writing may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him the execution thereof. Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.

(3) The principal amount and serial number of any Note held by any Person, and the date of his holding the same, shall be proved by the Note Register.

(4) The fact and date of execution of any such instrument or writing and the authority of the Person executing the same may also be proved in any other manner which the Trustee deems sufficient; and the Trustee may in any instance require further proof with respect to any of the matters referred to in this Section 1.4.

(5) The Company may, in the circumstances permitted by the Trust Indenture Act, set any day as the record date for the purpose of determining the Holders entitled to give or take any request, demand, authorization, direction, notice, consent, waiver or other action, or to vote on any action, authorized or permitted by this Indenture to be given or taken by Holders. Promptly and in any case not later than ten days after setting a record date, the Company shall notify the Trustee and the Holders of such record date. If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such action, or, in the case of any such vote, prior to such vote, the record date for any such action or vote shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 14.1) prior to such first solicitation or vote, as the case may be. With regard to any record date, the Holders on such date (or their duly appointed agents or proxies), and only such Persons, shall be entitled to give or take, or vote on, the relevant action, whether or not such Holders remain Holders after such record date. Notwithstanding the foregoing, the Company shall not set a record date for, and the provisions of this paragraph shall not apply with respect to, any notice, declaration or direction referred to in the next paragraph.

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Upon receipt by the Trustee from any Holder of (i) any notice of default or breach referred to in Section 5.1(4), if such default or breach has occurred and is continuing and the Trustee shall not have given such a notice to the Company, (ii) any declaration of acceleration referred to in Section 5.2, if an Event of Default has occurred and is continuing and the Trustee shall not have given such a declaration to the Company, or (iii) any direction referred to in Section 5.12, if the Trustee shall not have taken the action specified in such direction, then, with respect to clauses (ii) and (iii), a record date shall automatically and without any action by the Company or the Trustee be set for determining the Holders entitled to join in such declaration or direction, which record date shall be the close of business on the tenth day (or, if such day is not a Business Day, the first Business Day thereafter) following the day on which the Trustee receives such declaration or direction, and, with respect to clause (i), the Trustee may set any day as a record date for the purpose of determining the Holders entitled to join in such notice of default. Promptly after such receipt by the Trustee of any such declaration or direction referred to in clause (ii) or (iii), and promptly after setting any record date with respect to clause (i), and as soon as practicable thereafter, the Trustee shall notify the Company and the Holders of any such record date so fixed. The Holders on such record date (or their duly appointed agents or proxies), and only such Persons, shall be entitled to join in such notice, declaration or direction, whether or not such Holders remain Holders after such record date; provided that, unless such notice, declaration or direction shall have become effective by virtue of Holders of the requisite principal amount of Notes on such record date (or their duly appointed agents or proxies) having joined therein on or prior to the 90th day after such record date, such notice, declaration or direction shall automatically and without any action by any Person be cancelled and of no further effect. Nothing in this paragraph shall be construed to prevent a Holder (or a duly appointed agent or proxy thereof) from giving, before or after the expiration of such 90-day period, a notice, declaration or direction contrary to or different from, or, after the expiration of such period, identical to, the notice, declaration or direction to which such record date relates, in which event a new record date in respect thereof shall be set pursuant to this paragraph. In addition, nothing in this paragraph shall be construed to render ineffective any notice, declaration or direction of the type referred to in this paragraph given at any time to the Trustee and the Company by Holders (or their duly appointed agents or proxies) of the requisite principal amount of Notes on the date such notice, declaration or direction is so given.

(6) Except as provided in Sections 5.12 and 5.13, any request, demand, authorization, direction, notice, consent, election, waiver or other Act of the Holder of any Note shall bind every future Holder of the same Note and the Holder of every Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Note.

(7) The provisions of this Section 1.4 are subject to the provisions of Section 9.5.

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SECTION 1.5 Notices, Etc. to Trustee and Company.

Any request, demand, authorization, direction, notice, consent, election, waiver or other Act of Holders of Notes or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with,

(1) the Trustee by any Holder of Notes or by the Company shall be sufficient for every purpose hereunder if made, given, furnished or filed in writing to or with a Responsible Officer of the Trustee and received at its Corporate Trust Office, or at any other address previously furnished in writing to the Holders of Notes and the Company by the Trustee; or

(2) the Company by the Trustee or by any Holder of Notes shall be sufficient for every purpose hereunder (unless otherwise herein expressly provided) if in writing, mailed, first-class postage prepaid, or telecopied and confirmed by mail, first-class postage prepaid, or delivered by hand or overnight courier, addressed to the Company at One American Road, Cleveland, Ohio 44144-2398, Attention: General Counsel, or at any other address previously furnished in writing to the Trustee by the Company.

All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, registered or certified with postage prepaid, if mailed; when answered back if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by nationally recognized overnight air courier guaranteeing next day delivery.

SECTION 1.6 Notice to Holders of Notes; Waiver.

Except as otherwise expressly provided herein, where this Indenture provides for notice to Holders of Notes of any event, such notice shall be sufficiently given to Holders if in writing and mailed, first-class postage prepaid, to each Holder of a Note affected by such event, at the address of such Holder as it appears in the Note Register, not earlier than the earliest date and not later than the latest date prescribed for the giving of such notice.

Neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of a Note shall affect the sufficiency of such notice with respect to other Holders of Notes. In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification to Holders of Notes as shall be made with the approval of the Trustee, which approval shall not be unreasonably withheld, shall constitute a sufficient notification to such Holders for every purpose hereunder.

Such notice shall be deemed to have been given when such notice is mailed.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders of Notes shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

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All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, registered or certified with postage prepaid, if mailed; when answered back if telexed; when receipt acknowledged, if telecopied; and the next Business Day after timely delivery to the courier, if sent by nationally recognized overnight air courier guaranteeing next day delivery.

SECTION 1.7 Effect of Headings and Table of Contents.

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 1.8 Successors and Assigns.

All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether so expressed or not.

SECTION 1.9 Separability Clause.

In case any provision in this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 1.10 Benefits of Indenture.

Except as provided in the next sentence, nothing in this Indenture or in the Notes, express or implied, shall give to any Person, other than the parties hereto and their successors and assigns hereunder and the Holders of Notes, any benefit or legal or equitable right, remedy or claim under this Indenture. The provisions of Article XII are intended to be for the benefit of, and shall be enforceable directly by, the holders of Senior Indebtedness.

SECTION 1.11 Governing Law.

THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE UNITED STATES OF AMERICA.

SECTION 1.12 Legal Holidays.

In any case where any Interest Payment Date, Repurchase Date or Stated Maturity of any Note or the last day on which a Holder of a Note has a right to convert his Note shall not be a Business Day at a Place of Payment or Place of Conversion, as the case may be, then (notwithstanding any other provision of this Indenture or of the Notes) payment of principal of, premium, if any, or interest on, or the payment of the Repurchase Price (whether the same is

15

payable in cash or in shares of Common Stock in the case of the Repurchase Price) with respect to, or delivery for conversion of, such Note need not be made at such Place of Payment or Place of Conversion, as the case may be, on or by such day, but may be made on or by the next succeeding Business Day at such Place of Payment or Place of Conversion, as the case may be, with the same force and effect as if made on the Interest Payment Date, Repurchase Date, or at the Stated Maturity or by such last day for conversion; provided, however, that in the case that payment is made on such succeeding Business Day, no interest shall accrue on the amount so payable for the period from and after such Interest Payment Date, Repurchase Date, Stated Maturity or last day for conversion, as the case may be.

SECTION 1.13 Conflict with Trust Indenture Act.

If any provision hereof limits, qualifies or conflicts with a provision of the Trust Indenture Act that is required under such Act to be a part of and govern this Indenture, the latter provision shall control. If any provision of this Indenture modifies or excludes any provision of the Trust Indenture Act that may be so modified or excluded, the latter provision shall be deemed to apply to this Indenture as so modified or to be excluded, as the case may be. Until such time as this Indenture shall be qualified under the Trust Indenture Act, this Indenture, the Company and the Trustee shall be deemed for all purposes hereof to be subject to and governed by the Trust Indenture Act to the same extent as would be the case if this Indenture were so qualified on the date hereof.

ARTICLE II

SECURITY FORMS

SECTION 2.1 Form Generally.

The Notes shall be in substantially the form set forth in this Article, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange, the Internal Revenue Code of 1986, as amended, and regulations thereunder (the “Code”), or as may, consistent herewith, be determined by the officers executing such Notes, as evidenced by their execution thereof. All Notes shall be in fully registered form.

The Trustee’s certificates of authentication shall be in substantially the form set forth in Section 2.3.

Conversion notices shall be in substantially the form set forth in Section 2.4.

Repurchase notices shall be substantially in the form set forth in Section 2.2.

The Notes shall be printed, lithographed, typewritten or engraved or produced by any combination of these methods or may be produced in any other manner permitted by the rules of any automated quotation system or securities exchange (including on steel engraved

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borders if so required by any securities exchange upon which the Notes may be listed) on which the Notes may be quoted or listed, as the case may be, all as determined by the officers executing such Notes, as evidenced by their execution thereof.

Notes issued in the form of one or more Global Notes shall be so issued in definitive, fully registered form without interest coupons. Such Global Note shall be registered in the name of Cede & Co. (“Cede”), as nominee of The Depository Trust Company (“DTC”) and deposited with the Trustee, as custodian for DTC, for credit by DTC to the respective accounts of beneficial owners of the Notes represented thereby (or such other accounts as they may direct).

SECTION 2.2 Form of Note.

THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL NOTE:

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS NOTE FOR ALL PURPOSES.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN THE INDENTURE, THIS GLOBAL NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY.

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AMERICAN GREETINGS CORPORATION

7.00% CONVERTIBLE SUBORDINATED NOTE

DUE JULY 15, 2006

No.                 U.S.$            

CUSIP NO.                     

AMERICAN GREETINGS CORPORATION, a corporation duly organized and existing under the laws of the State of Ohio (herein called the “Company”, which term includes any successor Person under the Indenture referred to on the reverse hereof), for value received, hereby promises to pay to Cede & Co., or registered assigns, the principal sum of [            ] million United States Dollars (U.S. $[            ] ) (which principal amount may from time to time be increased or decreased to such other principal amounts (which, taken together with the principal amounts of all other Outstanding Notes, shall not exceed $[            ] in the aggregate at any time by adjustments made on the records of the Trustee hereinafter referred to in accordance with the Indenture) on July 15, 2006 and to pay interest thereon, from January 15, 2006, in arrears on July 15, 2006 (the “Interest Payment Date”), at the rate of 7.00% per annum, and at the rate of 7.00% per annum on any overdue principal and premium, if any, and, to the extent permitted by law, on any overdue interest. The interest so payable, and punctually paid or duly provided for, on the Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest, which shall be July 1, 2006 (whether or not a Business Day). Except as otherwise provided in the Indenture, any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Note (or one or more Predecessor Notes) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Company, notice whereof shall be given to Holders of Notes not less than 10 days prior to the Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any automated quotation system or securities exchange on which the Notes may be quoted or listed, and upon such notice as may be required by such exchange, all as more fully provided in the Indenture. Payments of principal shall be made upon the surrender of this Note at the option of the Holder at the Corporate Trust Office of the Trustee, or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts, or at such other offices or agencies as the Company may designate, by United States Dollar check drawn on, or transfer to, a United States Dollar account (such a transfer to be made only to a Holder of an aggregate principal amount of Notes in excess of U.S.$2,000,000, and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date). Payment of interest on this Note may be made by United States Dollar check mailed to the address of the Person entitled thereto as such address shall appear in the Note Register, or, upon written application by the Holder to the Note Registrar setting forth wire instructions not later

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than the relevant Record Date, by transfer to a United States Dollar account (such a transfer to be made only to a Holder of an aggregate principal amount of Notes in excess of U.S. $2,000,000 and only if such Holder shall have furnished wire instructions in writing to the Trustee no later than 15 days prior to the relevant payment date).

Except as specifically provided herein and in the Indenture, the Company shall not be required to make any payment with respect to any tax, assessment or other governmental charge imposed by any government or any political subdivision or taxing authority thereof or therein.

Reference is hereby made to the further provisions of this Note set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof or an Authenticating Agent by the manual signature of one of their respective authorized signatories, this Note shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed under its corporate seal.

AMERICAN GREETINGS CORPORATION
By:
	Name:
	Title:

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This Note is one of a duly authorized issue of securities of the Company designated as its “7.00% Convertible Subordinated Notes due July 15, 2006” (herein called the “Notes”), limited in aggregate principal amount to U.S. $[            ], issued and to be issued under an Indenture, dated as of [            ], 2006 (herein called the “Indenture”), between the Company and U.S. Bank National Association, as Trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Trustee, the holders of Senior Indebtedness and the Holders of the Notes and of the terms upon which the Notes are, and are to be, authenticated and delivered. As provided in the Indenture and subject to certain limitations therein set forth, Notes are exchangeable for a like aggregate principal amount of Notes of any authorized denominations as requested by the Holder surrendering the same upon surrender of the Note or Notes to be exchanged, at the Corporate Trust Office of the Trustee. The Trustee upon such surrender by the Holder will issue the new Notes in the requested denominations.

No sinking fund is provided for the Notes. The Company may not optionally redeem the Notes at any time.

In any case where the due date for the payment of the principal of, premium, if any, or interest on any Note or the last day on which a Holder of a Note has a right to convert his Note shall be, at any Place of Payment or Place of Conversion as the case may be, a day on which banking institutions at such Place of Payment or Place of Conversion are authorized or obligated by law or executive order to close, then payment of principal, premium, if any, interest, or delivery for conversion of such Note need not be made on or by such date at such place but may be made on or by the next succeeding day at such place which is not a day on which banking institutions are authorized or obligated by law or executive order to close, with the same force and effect as if made on the date for such payment or the date fixed for repurchase, or by such last day for conversion, and no interest shall accrue on the amount so payable for the period after such date.

Subject to and upon compliance with the provisions of the Indenture, the Holder of this Note is entitled, at his option, at any time on or before the close of business on July 15, 2006, unless the Notes have been previously repurchased, to convert this Note (or any portion of the principal amount hereof that is an integral multiple of U.S. $1,000, provided that the unconverted portion of such principal amount is U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof) into the right to receive (x) the Principal Return, (y) the Net Shares, if any, and (z) Additional Cash, if any, based on an initial Conversion Rate of 71.9466 shares of Common Stock for each U.S. $1,000 principal amount of Notes (or at the current adjusted Conversion Rate if an adjustment has been made as provided in the Indenture) by surrender of this Note, duly endorsed or assigned to the Company or in blank and, in case such surrender shall be made during the period from the close of business on the Regular Record Date to the opening of business on the Interest Payment Date (except if this Note is repurchasable on a Repurchase Date occurring during such period and is surrendered for such conversion during such period (including any Notes or portions thereof submitted for repurchase on a Repurchase Date that is the Regular Record Date or the Interest Payment Date, as the case may be)), also accompanied

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by payment in New York Clearing House or other funds acceptable to the Company of an amount equal to the interest payable on such Interest Payment Date on the principal amount of this Note then being converted, and also the conversion notice hereon duly executed, to the Company at the Corporate Trust Office of the Trustee, or at such other office or agency of the Company, subject to any laws or regulations applicable thereto and subject to the right of the Company to terminate the appointment of any Conversion Agent (as defined below) as may be designated by it for such purpose in the Borough of Manhattan, The City of New York, or at such other offices or agencies as the Company may designate (each a “Conversion Agent”), provided, further, that if this Note or portion hereof is repurchasable on a Repurchase Date occurring, in either case, during the period from the close of business on the Regular Record Date to the opening of business on the Interest Payment Date (including any Notes or portions thereof submitted for repurchase on a Repurchase Date that is the Regular Record Date or the Interest Payment Date, as the case may be) and is surrendered for conversion during such period (or on the last Business Day prior to the Regular Record Date or Interest Payment Date in case of any Note (or portion thereof) submitted for repurchase on a Repurchase Date on the Regular Record Date or Interest Payment Date, as the case may be), then the Holder of this Note on such Regular Record Date will be entitled to receive the interest accruing hereon from January 15, 2006 to the Interest Payment Date and the Holder of this Note who converts this Note or a portion hereof during such period shall not be required to pay such interest upon surrender of this Note for conversion. Subject to the provisions of the preceding sentence and, in the case of a conversion after the close of business on the Regular Record Date and on or before the close of business on the Interest Payment Date, to the right of the Holder of this Note (or any Predecessor Note of record as of such Regular Record Date) to receive the related installment of interest to the extent and under the circumstances provided in the Indenture, no cash payment or adjustment is to be made on conversion for interest accrued hereon from January 15, 2006, or for dividends on the Common Stock issued on conversion hereof. The Company shall thereafter deliver to the Holder the Principal Return, the Net Shares, if any, and Additional Cash, if any, (together with any cash adjustment, as provided in the Indenture) into which this Note is convertible and such delivery will be deemed to satisfy the Company’s obligation to pay the principal amount of this Note. No fractions of shares or scrip representing fractions of shares will be issued on conversion, but instead of any fractional interest (calculated to the nearest l/100th of a share) the Company shall pay the Additional Cash as provided in the Indenture. The Conversion Rate is subject to adjustment as provided in the Indenture. In addition, the Indenture provides that in case of certain consolidations or mergers to which the Company is a party (other than a consolidation or merger that does not result in any reclassification, conversion, exchange or cancellation of the Common Stock) or the conveyance, transfer, sale or lease of all or substantially all of the property and assets of the Company, the Indenture shall be amended, without the consent of any Holders of Notes, so that this Note, if then Outstanding, will be convertible thereafter, during the period this Note shall be convertible as specified above, only into the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, transfer, sale or lease by a holder of the number of shares of Common Stock of the Company into which this Note could have been converted immediately prior to such consolidation, merger, conveyance, transfer, sale or lease (assuming such holder of Common Stock is not a Constituent Person or an Affiliate of a Constituent Person, failed to exercise any rights of election and received per share the kind and amount received per share by

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a plurality of Non-electing Shares). No adjustment in the Conversion Rate will be made until such adjustment would require an increase or decrease of at least one percent of such rate, provided that any adjustment that would otherwise be made will be carried forward and taken into account in the computation of any subsequent adjustment.

If a Change in Control occurs, the Holder of this Note, at the Holder’s option, shall have the right, in accordance with the provisions of the Indenture, to require the Company to repurchase this Note (or any portion of the principal amount hereof that is at least $1,000 or an integral multiple of $1,000 in excess thereof, provided that the portion of the principal amount of this Note to be Outstanding after such repurchase is at least equal to U.S. $1,000) for cash at a Repurchase Price equal to 100% of the principal amount thereof plus interest accrued to the Repurchase Date. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the conditions provided in the Indenture, by delivery of shares of Common Stock having a fair market value equal to the Repurchase Price. For purposes of this paragraph, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the Closing Prices Per Share for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date. Whenever in this Note there is a reference, in any context, to the principal of any Note as of any time, such reference shall be deemed to include reference to the Repurchase Price payable in respect of such Note to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Note shall not be construed as excluding the Repurchase Price so payable in those provisions of this Note when such express mention is not made; provided, however, that, for the purposes of the second succeeding paragraph, such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash.

[The following paragraph shall appear in each Global Note:

In the event of a deposit or withdrawal of an interest in this Note, including an exchange, transfer, repurchase or conversion of this Note in part only, the Trustee, as custodian of the Depositary, shall make an adjustment on its records to reflect such deposit or withdrawal in accordance with the Applicable Procedures.]

[The following paragraph shall appear in each Note that is not a Global Note:

In the event of repurchase or conversion of this Note in part only, a new Note or Notes for the unrepurchased or unconverted portion hereof will be issued in the name of the Holder hereof.]

The indebtedness evidenced by this Note is, to the extent and in the manner provided in the Indenture, subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness of the Company, and this Note is issued subject to such provisions of the Indenture with respect thereto. Each Holder of this Note, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to effectuate the subordination so provided and (c) appoints the Trustee his attorney-in-fact for any and all such purposes.

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If an Event of Default shall occur and be continuing, the principal of all the Notes, together with accrued interest to the date of declaration, may be declared due and payable in the manner and with the effect provided in the Indenture. Upon payment (i) of the amount of principal so declared due and payable, together with accrued interest to the date of declaration, and (ii) of interest on any overdue principal and, to the extent permitted by applicable law, overdue interest, all of the Company’s obligations in respect of the payment of the principal of and interest on the Notes shall terminate.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the rights of the Holders of the Notes under the Indenture at any time by the Company and the Trustee with either (a) the written consent of the Holders of not less than a majority in principal amount of the Notes at the time Outstanding, or (b) by the adoption of a resolution, at a meeting of Holders of the Outstanding Notes at which a quorum is present, by the Holders of at least 66 ²/3% in aggregate principal amount of the Outstanding Notes represented and entitled to vote at such meeting. The Indenture also contains provisions permitting the Holders of specified percentages in principal amount of the Notes at the time Outstanding, on behalf of the Holders of all the Notes, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Note shall be conclusive and binding upon such Holder and upon all future Holders of this Note and of any Note issued in exchange herefor or in lieu hereof whether or not notation of such consent or waiver is made upon this Note or such other Note.

As provided in and subject to the provisions of the Indenture, the Holder of this Note shall not have the right to institute any proceeding with respect to the Indenture or for the appointment of a receiver or trustee or for any other remedy thereunder, unless such Holder shall have previously given the Trustee written notice of a continuing Event of Default, the Holders of not less than 25% in principal amount of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default as Trustee and offered the Trustee reasonable indemnity and the Trustee shall not have received from the Holders of a majority in principal amount of the Notes Outstanding a direction inconsistent with such request, and shall have failed to institute any such proceeding, for 60 days after receipt of such notice, request and offer of indemnity. The foregoing shall not apply to any suit instituted by the Holder of this Note for the enforcement of any payment of principal hereof, premiums if any, or interest hereon on or after the respective due dates expressed herein or for the enforcement of the right to convert this Note as provided in the Indenture.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, premium, if any, and interest on this Note at the times, places and rate, and in the coin or currency, herein prescribed or to convert this Note as provided in the Indenture.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Note is registrable on the Note Register upon surrender of this Note for

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registration of transfer at the Corporate Trust Office of the Trustee or at such other office or agency of the Company as may be designated by it for such purpose in the Borough of Manhattan, The City of New York (which shall initially be an office or agency of the Trustee), or at such other offices or agencies as the Company may designate, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company and the Note Registrar duly executed by, the Holder thereof or his attorney duly authorized in writing, and thereupon one or more new Notes, of authorized denominations and for the same aggregate principal amount, will be issued to the designated transferee or transferees by the Registrar. No service charge shall be made for any such registration of transfer or exchange, but the Company may require payment of a sum sufficient to recover any tax or other governmental charge payable in connection therewith.

Prior to due presentation of this Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the Person in whose name this Note is registered, as the owner thereof for all purposes, whether or not such Note be overdue, and neither the Company, the Trustee nor any such agent shall be affected by notice to the contrary.

No recourse for the payment of the principal (and premium, if any) or interest on this Note and no recourse under or upon any obligation, covenant or agreement of the Company in the Indenture or any indenture supplemental thereto or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer or director or subsidiary, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of consideration for the issue hereof, expressly waived and released.

The Indenture and this Note shall be governed by and construed in accordance with the laws of the State of New York, United States of America.

All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

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ABBREVIATIONS

The following abbreviations, when used in the inscription of the face of this Note, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM	as tenants in common
TEN ENT	as tenants by the entireties
JT TEN	as joint tenants with right of survivorship and not as tenants in common
CUST	as Custodian
U/G/M/A	Uniform Gifts to Minors Act

Additional abbreviations may also be used though not in the above list.

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ELECTION OF HOLDER TO REQUIRE REPURCHASE

(1) Pursuant to Article 13.1 of the Indenture, the undersigned hereby elects to have this Note repurchased by the Company.

(2) The undersigned hereby directs the Trustee or the Company to pay it an amount in cash or, at the Company’s election, Common Stock valued as set forth in the Indenture, equal to 100% of the principal amount to be repurchased (as set forth below), plus interest accrued to the Repurchase Date, as provided in the Indenture.

Dated:

Signature(s)

Signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934.

Signature Guaranteed

Principal amount to be repurchased

(at least U.S. $1,000 or an integral multiple $1,000 in excess thereof):             

Remaining principal amount following such repurchase

(not less than U.S. $1,000):                                                                                               

NOTICE: The signature to the foregoing Election must correspond to the Name as written upon the face of this Note in every particular, without alteration or any change whatsoever.

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SECTION 2.3 Form of Certificate of Authentication.

The Trustee’s certificate of authentication shall be in substantially the following form:

This is one of the Notes referred to in the within-mentioned Indenture.

U.S. Bank National Association,
as Trustee
By:
	Authorized Signatory

Dated:                     

SECTION 2.4 Form of Conversion Notice

CONVERSION NOTICE

The undersigned Holder of this Note hereby irrevocably exercises the option to convert this Note, or any portion of the principal amount hereof (which is U.S. $1,000 or an integral multiple of U.S. $1,000 in excess thereof, provided that the unconverted portion of such principal amount is U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof) below designated, into the right to receive (x) the Principal Return and (y) the Net Shares, if any, together with any Additional Cash in accordance with the terms of the Indenture referred to in this Note, and directs that such cash, together with any shares and any Notes representing any unconverted principal amount hereof, be delivered to and be registered in the name of the undersigned unless a different name has been indicated below. If shares of Common Stock or Notes are to be registered in the name of a Person other than the undersigned, (a) the undersigned will pay all transfer taxes payable with respect thereto and (b) signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad-15 under the Securities Exchange Act of 1934. Any amount required to be paid by the undersigned on account of interest accompanies this Note.

Dated:
	Signature(s)

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If shares or Notes are to be registered in the name of a Person other than the Holder, please print such Person’s name and address:	If only a portion of the Notes is to be converted, please indicate: 1.      Principal amount to be converted:
	U.S. $
Name Address	2.      Principal amount and denomination of Notes representing unconverted principal amount to be issued: Amount U.S. $
Social Security or other Identification Number, if any	(U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof, provided that the unconverted portion of such principal amount is U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof)
[Signature Guaranteed]

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SECTION 2.5 Form of Assignment.

For value received                      hereby sell(s), assign(s) and transfer(s) unto                      (Please insert social security or other identifying number of assignee) the within Note, and hereby irrevocably constitutes and appoints                      as attorney to transfer the said Note on the books of the Company, with full power of substitution in the premises.

Dated:
	Signature(s)
	Signature(s) must be guaranteed by an Eligible Guarantor Institution with membership in an approved signature guarantee program pursuant to Rule 17Ad - 15 under the Securities Exchange Act of 1934.

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ARTICLE III

THE SECURITIES

SECTION 3.1 Title and Terms.

The aggregate principal amount of Notes which may be authenticated and delivered under this Indenture is limited to U.S. $[            ], except for Notes authenticated and delivered pursuant to Section 3.4, 3.5, 3.6, 8.5, 11.2 or 13.3(5) in exchange for, or in lieu of, other Notes previously authenticated and delivered under this Indenture

The Notes shall be known and designated as the “7.00% Convertible Subordinated Notes due July 15, 2006” of the Company. Their Stated Maturity shall be July 15, 2006 and they shall bear interest on their principal amount from January 15, 2006, payable in arrears on July 15, 2006 at the rate of 7.00% per annum and at the rate of 7.00% per annum on any overdue principal and, to the extent permitted by law, on any overdue interest; provided, however, that payments shall only be made on a Business Day as provided in Section 1.12.

The principal of, premium, if any, and interest on the Notes shall be payable as provided in the form of Notes set forth in Section 2.2, and the Repurchase Price, whether payable in cash or in shares of Common Stock, shall be payable at such places as are identified in the Company Notice given pursuant to Section 13.3 (any city in which any Paying Agent is located being herein called a “Place of Payment”).

The Company shall not optionally redeem the Notes at any time.

The Notes shall be convertible as provided in Article XI (any city in which any Conversion Agent is located being herein called a “Place of Conversion”).

The Notes shall be subordinated in right of payment to Senior Indebtedness of the Company as provided in Article XII.

The Notes shall be subject to repurchase by the Company at the option of the Holders as provided in Article XIII.

SECTION 3.2 Denominations.

The Notes shall be issuable only in fully registered form, without coupons, in denominations of U.S. $1,000 and integral multiples of U.S. $1,000 in excess thereof.

SECTION 3.3 Execution, Authentication, Delivery and Dating.

The Notes shall be executed on behalf of the Company by its Chairman of the Board, its Vice Chairman of the Board, its Chief Executive Officer, its President, one of its Executive Vice Presidents or one of its Vice Presidents. Any such signature may be manual or facsimile.

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Notes bearing the manual or facsimile signature of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes.

At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Notes executed by the Company to the Trustee or to its order for authentication, together with a Company Order for the authentication and delivery of such Notes, and the Trustee in accordance with such Company Order shall either at one time or from time to time pursuant to such instructions as may be described therein authenticate and deliver such Notes as provided in this Indenture and not otherwise. Such Company Order shall specify the amount of Notes to be authenticated and the date on which the original issue of Notes is to be authenticated, and shall certify the conditions precedent to the issuance of such Notes contained in this Indenture have been complied with.

Each Note shall be dated the date of its authentication.

No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature of an authorized signatory, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder and is entitled to the benefits of the Indenture. The Trustee may appoint an Authenticating Agent pursuant to the terms of Section 6.12.

SECTION 3.4 Global Notes; Non-Global Notes; Book-Entry Provisions.

(1) Global Notes

(i) Each Global Note authenticated under this Indenture shall be registered in the name of the Depositary designated by the Company for such Global Note or a nominee thereof and delivered to such Depositary or a nominee thereof or custodian therefor, and each such Global Note shall constitute a single Note for all purposes of this Indenture.

(ii) Except for exchanges of Global Notes for definitive, non-Global Notes at the sole discretion of the Company, no Global Note may be exchanged in whole or in part for Notes registered, and no transfer of a Global Note in whole or in part may be registered, in the name of any Person other than the Depositary for such Global Note or a nominee thereof unless (A) such Depositary (i) has notified the Company that it is unwilling, unable or no longer qualified to continue as Depositary for such Global Note or (ii) has ceased to be a clearing agency registered as such under the Exchange Act or announces an intention permanently to cease business or does in fact do so or (B) there shall have occurred and be continuing an Event of Default with respect to such Global Note. In such event, if a successor Depositary for such Global Note is not appointed by the Company within 90 days after the Company receives such notice or becomes aware of such ineligibility, the Company will execute, and the Trustee, upon receipt of an Officers’ Certificate directing the authentication and delivery of Notes, will authenticate and deliver, Notes, in any authorized denominations in an aggregate principal amount equal to the principal amount of such Global Note in exchange for such Global Note.

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(iii) If any Global Note is to be exchanged for other Notes or cancelled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Note Registrar, for exchange or cancellation, as provided in this Article III. If any Global Note is to be exchanged for other Notes or cancelled in part, or if another Note is to be exchanged in whole or in part for a beneficial interest in any Global Note, in each case, as provided in Section 3.5, then either (A) such Global Note shall be so surrendered for exchange or cancellation, as provided in this Article III, or (B) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or cancelled, or equal to the principal amount of such other Note to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Trustee, as Note Registrar, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Note, the Trustee shall, subject to Section 3.5(3) and as otherwise provided in this Article III, authenticate and deliver any Notes issuable in exchange for such Global Note (or any portion thereof) to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative. Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Company shall promptly make available to the Trustee a reasonable supply of Notes that are not in the form of Global Notes. The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its authorized representative which is given or made pursuant to this Article III if such order, direction or request is given or made in accordance with the Applicable Procedures.

(iv) Every Note authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Note or any portion thereof, whether pursuant to this Article III or otherwise, shall be authenticated and delivered in the form of, and shall be, a registered Global Note, unless such Note is registered in the name of a Person other than the Depositary for such Global Note or a nominee thereof, in which case such Note shall be authenticated and delivered in definitive, fully registered form, without interest coupons.

(v) The Depositary or its nominee, as registered owner of a Global Note, shall be the Holder of such Global Note for all purposes under the Indenture and the Notes, and owners of beneficial interests in a Global Note shall hold such interests pursuant to the Applicable Procedures. Accordingly, any such owner’s beneficial interest in a Global Note will be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Agent Members and such owners of beneficial interests in a Global Note will not be considered the owners or holders thereof.

(2) Non-Global Notes. Notes issued upon the events described in Section 3.4(l)(ii) shall be in definitive, fully registered form, without interest coupons.

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SECTION 3.5 Registration; Registration of Transfer and Exchange; Restrictions on Transfer.

(1) The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office referred to as the “Note Register”) in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration of Notes and of transfers of Notes. The Trustee is hereby appointed “Note Registrar” for the purpose of registering Notes and transfers and exchanges of Notes as herein provided.

Upon surrender for registration of transfer of any Note at an office or agency of the Company designated pursuant to Section 10.2 for such purpose, the Company shall execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Notes of any authorized denominations and of a like aggregate principal amount and bearing such restrictive legends as may be required by this Indenture.

At the option of the Holder, and subject to the other provisions of this Section 3.5, Notes may be exchanged for other Notes of any authorized denomination and of a like aggregate principal amount, upon surrender of the Notes to be exchanged at any such office or agency. Whenever any Notes are so surrendered for exchange, and subject to the other provisions of this Section 3.5, the Company shall execute, and the Trustee shall authenticate and deliver, the Notes which the Holder making the exchange is entitled to receive. Every Note presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Note Registrar) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company, the Trustee and the Note Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.

All Notes issued upon any registration of transfer or exchange of Notes shall be the valid obligations of the Company, evidencing the same debt and entitled to the same benefits under this Indenture as the Notes surrendered upon such registration of transfer or exchange.

No service charge shall be made to a Holder for any registration of transfer or exchange of Notes except as provided in Section 3.6, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Notes, other than exchanges pursuant to Section 3.4, 8.5, 11.2 or 13.3 (other than where any shares of Common Stock are to be issued or delivered in a name other than that of the Holder of the Note) not involving any transfer and other than any stamp and other duties, if any, which may be imposed in connection with any such transfer or exchange by the United States or any political subdivision thereof or therein, which shall be paid by the Company.

(2) Certain Transfers and Exchanges. Notwithstanding any other provision of this Indenture or the Notes, transfers and exchanges of Notes and beneficial interests in a Global Note of the kinds specified in this Section 3.5(2) shall be made only in accordance with this Section 3.5(2).

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(i) Global Note to Non-Global Note. In the event that non-Global Notes are to be issued pursuant to Section 3.4(1)(ii) in connection with any transfer of Notes, such transfer may be effected only in accordance with the provisions of this Clause (2)(i) and subject to the Applicable Procedures. Upon receipt by the Trustee, as Note Registrar, of a Company Order from the Company directing the Trustee, as Note Registrar, to (x) authenticate and deliver one or more Notes of the same aggregate principal amount as the beneficial interest in the Global Note to be transferred, such instructions to contain the name or names of the designated transferee or transferees, the authorized denomination or denominations of the Notes to be so issued and appropriate delivery instructions and (y) decrease the beneficial interest of a specified Agent Member’s account in a Global Note by a specified principal amount not greater than the principal amount of such Global Note, then the Trustee, as Note Registrar, shall decrease the principal amount of the Global Note by the specified amount and authenticate and deliver Notes in accordance with such instructions from the Company as provided in Section 3.4(1)(iii).

(ii) Non-Global Note to Global Note. If the Holder of a Note (other than a Global Note) wishes at any time to transfer all or any portion of such Note to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Global Note, such transfer may be effected only in accordance with the provisions of this Clause (2)(ii) and subject to the Applicable Procedures. Upon receipt by the Trustee, as Note Registrar, of such Note as provided in Section 3.5(1) and instructions from the Company directing that a beneficial interest in the Global Note in a specified principal amount not greater than the principal amount of such Note be credited to a specified Agent Member’s account, then the Trustee, as Note Registrar, shall cancel such Note (and issue a new Note in respect of any untransferred portion thereof) as provided in Section 3.5(1) and increase the principal amount of the Global Note by the specified principal amount as provided in Section 3.4(1)(iii).

(iii) Exchanges between Global Note and Non-Global Note. A beneficial interest in a Global Note may be exchanged for a Note that is not a Global Note only as provided in Section 3.4 or only if such exchange occurs in connection with a transfer effected in accordance with Clause 2(i) above. A Note that is not a Global Note may be exchanged for a beneficial interest in a Global Note only if such exchange occurs in connection with a transfer effected in accordance with Clause (2)(ii) above.

(3) Neither the Trustee, the Paying Agent nor any of their agents shall (i) have any duty to monitor compliance with or with respect to any federal or state or other securities or tax laws or (ii) have any duty to obtain documentation on any transfers or exchanges other than as specifically required hereunder.

SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Notes.

If any mutilated Note is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate and deliver in exchange therefor a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding.

If there be delivered to the Company and to the Trustee:

(1) evidence to their satisfaction of the destruction, loss or theft of any Note, and

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(2) such security or indemnity as may be satisfactory to the Company and the Trustee to save each of them and any agent of either of them harmless, then, in the absence of actual notice to the Company or the Trustee that such Note has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a new Note of like tenor and principal amount and bearing a number not contemporaneously outstanding.

In case any such mutilated, destroyed, lost or stolen Note has become or is about to become due and payable, the Company in its discretion, but subject to any conversion rights, may, instead of issuing a new Note, pay such Note, upon satisfaction of the conditions set forth in the preceding paragraph.

Upon the issuance of any new Note under this Section 3.6, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto (other than any stamp and other duties, if any, which may be imposed in connection therewith by the United States or any political subdivision thereof or therein, which shall be paid by the Company) and any other expenses (including the fees and expenses of the Trustee) connected therewith.

Every new Note issued pursuant to this Section 3.6 in lieu of any mutilated, destroyed, lost or stolen Note shall constitute an original additional contractual obligation of the Company, whether or not the mutilated, destroyed, lost or stolen Note shall be at any time enforceable by anyone, and such new Note shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Notes duly issued hereunder.

The provisions of this Section 3.6 are exclusive and shall preclude (to the extent lawful) all other rights and remedies of any Holder with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes.

SECTION 3.7 Payment of Interest; Interest Rights Preserved.

Interest on any Note which is payable, and is punctually paid or duly provided for, on the Interest Payment Date shall be paid to the Person in whose name that Note (or one or more Predecessor Notes) is registered at the close of business on the Regular Record Date for such interest.

Any interest on any Note which is payable, but is not punctually paid or duly provided for, on the Interest Payment Date (herein called “Defaulted Interest”) shall forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below:

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(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner. The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Note, the date of the proposed payment and the Special Record Date, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. The Special Record Date for the payment of such Defaulted Interest shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment. The Trustee, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor to be mailed, first-class postage prepaid, to each Holder at such Holder’s address as it appears in the Note Register, not less than 10 days prior to such Special Record Date. Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefor having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Notes (or their respective Predecessor Notes) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).

(2) The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.

Subject to the foregoing provisions of this Section and Section 3.5, each Note delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Note shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Note.

Interest on any Note which is converted in accordance with Section 11.2 during a Record Date Period shall be payable in accordance with the provisions of Section 11.2.

SECTION 3.8 Persons Deemed Owners.

Prior to due presentment of a Note for registration of transfer, the Company, the Trustee, any Paying Agent and any agent of the Company, the Trustee or any Paying Agent may treat the Person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of principal of, premium, if any, and (subject to Section 3.7) interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Company, the Trustee, any Paying Agent nor any agent of the Company, the Trustee or any Paying Agent shall be affected by notice to the contrary.

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SECTION 3.9 Cancellation.

All Notes surrendered for payment, repurchase, registration of transfer or exchange or conversion shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee. All Notes so delivered to the Trustee shall be cancelled promptly by the Trustee (or its agent). No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section 3.9. All cancelled Notes held by the Trustee shall be disposed of as directed by a Company Order.

SECTION 3.10 Computation of Interest.

Interest on the Notes shall be computed on the basis of a 360-day year of twelve 30-day months.

SECTION 3.11 CUSIP Numbers.

The Company in issuing Notes may use “CUSIP” numbers (if then generally in use) in addition to serial numbers; if so, the Trustee shall use such CUSIP numbers in addition to serial numbers in notices to repurchase as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such CUSIP numbers either as printed on the Notes or as contained in any notice to repurchase and that reliance may be placed only on the serial or other identification numbers printed on the Notes, and any such repurchase shall not be affected by any defect in or omission of such CUSIP numbers.

ARTICLE IV

SATISFACTION AND DISCHARGE

SECTION 4.1 Satisfaction and Discharge of Indenture.

This Indenture shall upon Company Request cease to be of further effect (except as to any surviving rights of conversion, or registration of transfer or exchange, or replacement of Notes herein expressly provided for and the Company’s obligations to the Trustee pursuant to Section 6.7), and the Trustee, at the expense of the Company, shall execute proper instruments in form and substance satisfactory to the Trustee acknowledging satisfaction and discharge of this Indenture, when

(1) either

(i) all Notes theretofore authenticated and delivered (other than (A) Notes which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 3.6 and (B) Notes for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 10.3) have been delivered to the Trustee for cancellation; or

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(ii) all such Notes not theretofore delivered to the Trustee or its agent for cancellation (other than Notes referred to in clauses (A) and (B) of clause (l)(i) above)

(a) have become due and payable, or

(b) will have become due and payable at their Stated Maturity within one year

and the Company, in the case of clause (a) or (b) above, has deposited or caused to be deposited with the Trustee as trust funds (immediately available to the Holders in the case of clause (a)) in trust for the purpose an amount in cash sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee for cancellation, for principal, premium, if any, and interest to the date of such deposit (in the case of Notes which have become due and payable) or to the Stated Maturity;

(2) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

(3) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.

Notwithstanding the satisfaction and discharge of this Indenture, the obligations of the Company to the Trustee under Section 6.7, the obligations of the Company to any Authenticating Agent under Section 6.12, if money shall have been deposited with the Trustee pursuant to clause (l)(ii) of this Section 4.1, the obligations of the Trustee under Section 4.2 and the last paragraph of Section 10.3 and the obligations of the Company and the Trustee under Section 3.5 and Article XI shall survive. Funds held in trust pursuant to this Section are not subject to the provisions of Article XII.

SECTION 4.2 Application of Trust Money.

Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 and in accordance with the provisions of Article XII shall be held in trust for the sole benefit of the Holders and not be subject to the subordination provisions of Article XII, and such monies shall be applied by the Trustee, in accordance with the provisions of the Notes and this Indenture, to the payment, either directly or through any Paying Agent, to the Persons entitled thereto, of the principal, premium, if any, and interest for whose payment such money has been deposited with the Trustee.

All moneys deposited with the Trustee pursuant to Section 4.1 (and held by it or any Paying Agent) for the payment of Notes subsequently converted shall be returned to the Company upon Company Request.

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed or assessed against all money deposited with the Trustee pursuant to Section 4.1

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(other than income taxes and franchise taxes incurred or payable by the Trustee and such other taxes, fees or charges incurred or payable by the Trustee that are not directly the result of the deposit of such money with the Trustee).

ARTICLE V

REMEDIES

SECTION 5.1 Events of Default.

“Event of Default”, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be occasioned by the provisions of Article XII or be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(1) default in the payment of the principal of or premium, if any, on any Note at its Maturity, whether or not such payment is prohibited by the subordination provisions of this Indenture; or

(2) default in the payment of any interest upon any Note when it becomes due and payable, and continuance of such default for a period of 30 days, whether or not such payment is prohibited by the subordination provisions of this Indenture; or

(3) failure by the Company to give a Company Notice in accordance with Section 13.3, whether or not such payment is prohibited by the subordination provisions of this Indenture; or

(4) default in the performance, or breach, of any covenant or warranty of the Company in this Indenture (other than a covenant or warranty a default in the performance or breach of which is specifically dealt with elsewhere in this Section), and continuance of such default or breach for a period of 60 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Notes a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a “Notice of Default;” or

(5) any indebtedness under any bonds, debentures, notes or other evidences of indebtedness for money borrowed by the Company or under any mortgage, indenture or instrument under where there may be issued or by which there may be secured or evidenced any indebtedness for money borrowed by the Company (an “Instrument”), or any guarantee by the Company for indebtedness for money borrowed by any Subsidiary of the Company, with a principal amount then outstanding in excess of U.S. $20,000,000, whether such indebtedness now exists or shall hereafter be created, is not fully paid at final maturity of any Instrument either at its stated maturity or upon acceleration thereof, and such indebtedness is not discharged, or such acceleration is not rescinded or annulled, within a period of 60 days after there shall have been given, by registered or certified mail, to the Company by the Trustee or to the Company

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and the Trustee by the Holders of at least 25% in principal amount of the Outstanding Notes a written notice specifying such default and requiring the Company to cause such indebtedness to be discharged or cause such default to be cured or waived or such acceleration to be rescinded or annulled and stating that such notice is a “Notice of Default” hereunder; or

(6) the entry by a court having jurisdiction in the premises of (A) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or (B) a decree or order adjudging the Company a bankrupt or insolvent, or approving as properly filed a petition seeking reorganization, arrangement, adjustment or composition of or in respect of the company under any applicable Federal or State law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree or order for relief or any such other decree or order unstayed and in effect for a period of 60 consecutive days; or

(7) the commencement by the Company of a voluntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Federal or State bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or similar relief under any applicable Federal or State law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the admission by it in writing of its inability to pay its debts generally as they become due, or the taking of corporate action by the Company in furtherance of any such action.

SECTION 5.2 Acceleration of Maturity; Rescission and Annulment.

If an Event of Default (other than an Event of Default specified in Section 5.1(6) or 5.1 (7)) occurs and is continuing, then in every such case the Trustee or the Holders of not less than 25% in principal amount of the Outstanding Notes may, subject to the provisions of Article XII, declare the principal of all the Notes to be due and payable immediately, by a notice in writing to the Company (and to the Trustee if given by the Holders), and upon any such declaration such principal and all accrued interest thereon shall become immediately due and payable. If an Event of Default specified in Section 5.1(6) or 5.1(7) occurs, the principal of, and accrued interest on, all the Notes shall, subject to the provisions of Article XII, ipso facto become immediately due and payable without any declaration or other Act of the Holders or any act on the part of the Trustee.

At any time after such declaration of acceleration has been made and before a judgment or decree for payment of the money due has been obtained by the Trustee as

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hereinafter in this Article V provided, the Holders of a majority in principal amount of the Outstanding Notes, by written notice to the Company and the Trustee, may, on behalf of all Holders, rescind and annul such declaration and its consequences if

(1) the Company has paid or deposited with the Trustee a sum sufficient to pay:

(i) all overdue interest on all Notes,

(ii) the principal of and premium, if any, on any Notes which have become due otherwise than by such declaration of acceleration and any interest thereon at the rate borne by the Notes,

(iii) to the extent permitted by applicable law, interest upon overdue interest at a rate of 7.00% per annum, and

(iv) all sums paid or advanced by the Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel;

(2) all Events of Default, other than the nonpayment of the principal of and any premium and interest on, Notes which have become due solely by such declaration of acceleration, have been cured or waived as provided in Section 5.13; and

(3) such rescission and annulment would not conflict with any judgment or decree issued in appropriate judicial proceedings regarding the payment by the Trustee to the Holders of the amounts referred to in 5.2(1).

No rescission or annulment referred to above shall affect any subsequent default or impair any right consequent thereon.

SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by Trustee.

The Company covenants that if:

(1) default is made in the payment of any interest on any Note when it becomes due and payable and such default continues for a period of 30 days, or

(2) default is made in the payment of the principal of or premium, if any, on any Note at the Maturity thereof, the Company will, upon demand of the Trustee but subject to the provisions of Article XII pay to it, for the benefit of the Holders of such Notes the whole amount then due and payable on such Notes for principal and interest and interest on any overdue principal and premium, if any, and, to the extent permitted by applicable law, on any overdue interest, at a rate of 7.00% per annum, and in addition thereto, such further amount as shall be sufficient to cover the reasonable costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

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If the Company fails to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company or any other obligor upon the Notes and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company or any other obligor upon the Notes, wherever situated.

If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights of the Holders of Notes by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.

SECTION 5.4 Trustee May File Proofs of Claim.

In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Notes or the property of the Company or of such other obligor or the creditors of either, the Trustee (irrespective of whether the principal of, and any interest on, the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise, to take any and all actions authorized under the Trust Indenture Act in order to have the claims of the Holders and the Trustee allowed in any proceeding,

(1) to file and prove a claim for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Notes and take such other actions, including participating as a member, voting or otherwise, of any official committee of creditors appointed in such matter, and to file such other papers or documents, in each of the foregoing cases, as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and of the Holders of Notes allowed in such judicial proceeding, and

(2) to collect and receive any moneys or other property payable or deliverable on any such claim and to distribute the same;

and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Holder of Notes to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Notes to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amounts due the Trustee under Section 6.7.

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Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder of a Note any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof or to authorize the Trustee to vote in respect of the claim of any Holder of a Note in any such proceeding; provided, however, that the Trustee may, on behalf of such Holders, vote for the election of a trustee in bankruptcy or similar official and be a member of the Creditor’s Committee.

SECTION 5.5 Trustee May Enforce Claims Without Possession of Notes.

All rights of action and claims under this Indenture or the Notes may be prosecuted and enforced by the Trustee without the possession of any of the Notes or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which judgment has been recovered.

SECTION 5.6 Application of Money Collected.

Subject to Article XII, any money collected by the Trustee pursuant to this Article V shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal, premium, if any, or interest, upon presentation of the Notes and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

FIRST: To the payment of all amounts due the Trustee under Section 6.7;

SECOND: To the payment of the amounts then due and unpaid for principal of, premium, if any, or interest on, the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for principal, premium, if any, and interest, respectively;

THIRD: To such other Person or Persons, if any, to the extent entitled thereto; and

FOURTH: Any remaining amounts shall be repaid to the Company.

SECTION 5.7 Limitation on Suits.

No Holder of any Note shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(1) such Holder has previously given written notice to the Trustee of a continuing Event of Default;

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(2) the Holders of not less than 25% in principal amount of the Outstanding Notes shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;

(3) such Holder or Holders have offered to the Trustee, and if requested, shall have provide, reasonable indemnity against the costs, expenses and liabilities to be incurred in compliance with such request;

(4) the Trustee for 60 days after its receipt of such notice, request and offer of indemnity (or if requested, receipt of indemnity) has failed to institute any such proceeding; and

(5) no direction inconsistent with such written request has been given to the Trustee during such 60 day period by the Holders of a majority in principal amount of the Outstanding Notes, it being understood and intended that no one or more of such Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other of such Holders, or to obtain or seek to obtain priority or preference over any other of such Holders or to enforce any right under this Indenture, except in the manner herein provided and for the equal and ratable benefit of all such Holders.

SECTION 5.8 Unconditional Right of Holders to Receive Principal, Premium and Interest and to Convert.

Notwithstanding any other provision in this Indenture, but subject to the provisions of Article XII, the Holder of any Note shall have the right, which is absolute and unconditional, to receive payment of the principal of, premium, if any, and (subject to Section 3.7) interest on such Note on the respective Stated Maturities expressed in such Note (or, in the case of repurchase, on the Repurchase Date), and to convert such Note in accordance with Article XI, and to institute suit for the enforcement of any such payment and right to convert, and such rights shall not be impaired without the consent of such Holder.

SECTION 5.9 Restoration of Rights and Remedies.

If the Trustee or any Holder of a Note has instituted any proceeding to enforce any right or remedy under this Indenture and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Trustee and the Holders of Notes shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and such Holders shall continue as though no such proceeding had been instituted.

SECTION 5.10 Rights and Remedies Cumulative.

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph of Section 3.6, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders of Notes is intended to be

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exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 5.11 Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or any acquiescence therein. Every right and remedy given by this Article V or by law to the Trustee or to the Holders of Notes may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or (subject to the limitations contained in this Indenture) by the Holders of Notes as the case may be.

SECTION 5.12 Control by Holders of Notes.

The Holders of a majority in principal amount of the Outstanding Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that

(1) such direction shall not be in conflict with any rule of law or with this Indenture, and

(2) the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction, and

(3) subject to Section 6.1, the Trustee shall have the right to decline to follow any such direction if the Trustee in good faith shall determine that the action so directed would involve the Trustee in personal liability or would be unduly prejudicial to Holders not joining in such direction.

SECTION 5.13 Waiver of Past Defaults.

The Holders, either (i) through the written consent of not less than a majority in principal amount of the Outstanding Notes or (ii) by the adoption of a resolution, at a meeting of Holders of the Outstanding Notes at which a quorum is present, by the Holders of at least 66-2/3% in principal amount of the Outstanding Notes represented at such meeting, may on behalf of the Holders of all the Notes waive any past default hereunder and its consequences, except a default (A) in the payment of the principal of, premium, if any, or interest on any Note, or (B) in respect of a covenant or provision hereof which under Article VIII cannot be modified or amended without the consent of the Holder of each Outstanding Note affected. The provisions of this section modify the provisions of Section 316(a)(1) of the Trust Indenture Act.

Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

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SECTION 5.14 Undertaking for Costs.

All parties to this Indenture agree, and each Holder of any Note by his acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or any suit against the Trustee for any action taken, suffered or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but neither the provisions of this Section 5.14 nor the Trust Indenture Act shall apply to any suit instituted by the Company, to any suit instituted by the Trustee, to any suit instituted by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the Outstanding Notes, or to any suit instituted by any Holder of any Note for the enforcement of the payment of the principal of, premium, if any, or interest on any Note on or after the respective Stated Maturity or Maturities expressed in such Note (or, in the case of repurchase, on or after the Repurchase Date) or for the enforcement of the right to convert any Note in accordance with Article XI.

SECTION 5.15 Waiver of Stay, Usury or Extension Laws.

The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, usury or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law and covenants that it will not hinder, delay or impede by reason of such law the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VI

THE TRUSTEE

SECTION 6.1 Certain Duties and Responsibilities.

The duties and responsibilities of the Trustee shall be provided by this Indenture and the Trust Indenture Act for securities issued pursuant to indentures qualified thereunder.

(1) Except during the continuance of an Event of Default,

(i) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

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(ii) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture, but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture, but not to verify the contents thereof.

(2) In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.

(3) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i) this paragraph (3) shall not be construed to limit the effect of paragraph (l) of this Section;

(ii) the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;

(iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of (i) the Holders of a majority in principal amount of the Outstanding Notes or (ii) by the adoption of a resolution, at a meeting of Holders of the Outstanding Notes at which a quorum is present, by the Holders of at least 66 ²/3% in principal amount of Outstanding Notes represented at such meeting, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture; and

(iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(4) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

SECTION 6.2 Notice of Defaults.

Within 90 days after the occurrence of any default hereunder as to which the Trustee has received written notice, the Trustee shall give to all Holders of Notes, in the manner

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provided in Section 1.6, notice of such default, unless such default shall have been cured or waived; provided, however, that, except in the case of a default in the payment of the principal of, premium, if any, or interest on any Note the Trustee shall be protected in withholding such notice if and so long as the board of directors, the executive committee or a trust committee of directors or Responsible Officers of the Trustee in good faith determines that the withholding of such notice is in the interest of the Holders; and provided, further, that in the case of any default of the character specified in Section 5.1(4), no such notice to Holders of Notes shall be given until at least 60 days after the occurrence thereof or, if applicable, the cure period specified therein. For the purpose of this Section, the term “default” means any event which is, or after notice or lapse of time or both would become, an Event of Default.

SECTION 6.3 Certain Rights of Trustee.

Subject to the provisions of Section 6.1:

(1) the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, Officers’ Certificate, other certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness or other paper or document (collectively, the “Documents”) believed by it to be genuine and to have been signed or presented by the proper party or parties, and the Trustee need not investigate any fact or matter stated in such Documents;

(2) any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or Company Order and any resolution of the Board of Directors shall be sufficiently evidenced by a Board Resolution;

(3) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be the one specifically prescribed) may, in the absence of bad faith on its part, request and rely upon an Officers’ Certificate or Opinion of Counsel;

(4) the Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

(5) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders of Notes pursuant to this Indenture, unless such Holders shall have offered, and, if requested by the Trustee, delivered, to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction;

(6) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, coupon, other evidence of indebtedness

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or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;

(7) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder; and

(8) the Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

SECTION 6.4 Not Responsible for Recitals or Issuance of Notes.

The recitals contained herein and in the Notes (except the Trustee’s certificates of authentication) shall be taken as the statements of the Company, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Indenture, of the Notes or of the Common Stock issuable upon the conversion of the Notes. The Trustee shall not be accountable for the use or application by the Company of Notes or the proceeds thereof.

SECTION 6.5 May Hold Notes, Act as Trustee Under Other Indentures.

The Trustee, any Authenticating Agent, any Paying Agent, any Conversion Agent or any other agent of the Company or the Trustee, in its individual or any other capacity, may become the owner or pledgee of Notes and may otherwise deal with the Company with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, Conversion Agent or such other agent.

The Trustee may become and act as trustee under other indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding in the same manner as if it were not Trustee hereunder.

SECTION 6.6 Money Held in Trust.

Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company.

SECTION 6.7 Compensation and Reimbursement.

The Company agrees

(1) to pay to the Trustee from time to time such reasonable compensation as the Company and the Trustee shall from time to time agree in writing for its acceptance of this Indenture and for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

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(2) except as otherwise expressly provided herein, to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee (including costs and expenses of enforcing this Indenture and defending itself against any claim (whether asserted by the Company, any Holder of Notes or any other Person) or liability in connection with the exercise of any of its powers or duties hereunder) in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its negligence or bad faith; and

(3) to indemnify the Trustee (and its directors, officers, employees and agents) for, and to hold it harmless against, any loss, liability or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of this Indenture or the trusts, hereunder including the reasonable costs, expenses and reasonable attorneys’ fees of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The Company shall defend any claim or threatened claim asserted against an indemnitee for which it may seek indemnity, and the indemnitee shall cooperate in the defense unless, in the reasonable opinion of the indemnitee’s counsel, the indemnitee has an interest adverse to the Company or a potential conflict of interest exists between the indemnitee and the Company, in which case the indemnitee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided that the Company shall only be responsible for the reasonable fees and expenses of one law firm (in addition to local counsel) in any one action or separate substantially similar actions in the same jurisdiction arising out of the same general allegations or circumstances, such law firm to be designated by the indemnitee.

As security for the performance of the Company under this Section 6.7, the Trustee shall have a lien prior to the Notes upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the Holders, and the Notes are hereby subordinated to such prior lien. The obligations of the Company under this Section 6.7 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for expenses, disbursements and advances, and any other amounts due the Trustee shall constitute an additional obligation hereunder and shall survive the satisfaction and discharge of this indenture.

When the Trustee incurs expenses or renders services in connection with the performance of its obligations hereunder (including its services as Note Registrar or Paying Agent, if so appointed by the Company) after an Event of Default specified in Section 5.1(6) or Section 5.1(7), the expenses (including the reasonable charges of its counsel) and the compensation for the services are intended to constitute expenses of the administration under any applicable Federal or state bankruptcy, insolvency or other similar law.

The provisions of this Section shall survive the termination of this Indenture or the earlier resignation or removal of the Trustee.

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SECTION 6.8 Corporate Trustee Required; Eligibility.

There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such, having (or being part of a holding company with) a combined capital and surplus of at least U.S. $50,000,000, subject to supervision or examination by federal or state authority, and in good standing. The Trustee or an Affiliate of the Trustee shall maintain an established place of business in the Borough of Manhattan, The City of New York. Currently, such place of business is located at U.S. Bank National Association, Mail Code: EX-NY-WALL, 100 Wall Street, Suite 1600, New York, NY 10005. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article and a successor shall be appointed pursuant to Section 6.9.

SECTION 6.9 Resignation and Removal; Appointment of Successor.

(1) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee in accordance with the applicable requirements of Section 6.10.

(2) The Trustee may resign at any time by giving written notice thereof to the Company. If the instrument of acceptance by a successor Trustee required by Section 6.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(3) The Trustee may be removed at any time by an Act of the Holders of a majority in principal amount of the Outstanding Notes, delivered to the Trustee and the Company. If the instrument of acceptance by a successor Trustee required by Section 6.10 shall not have been delivered to the Trustee within 30 days after the giving of such notice of removal, the removed Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

(4) If at any time:

(i) the Trustee shall cease to be eligible under Section 6.8 and shall fail to resign after written request therefor by the Company or by any Holder of a Note who has been a bona fide Holder of a Note for at least six months, or

(ii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the

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purpose of rehabilitation, conservation or liquidation, then, in any such case (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.14, any Holder of a Note who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

(5) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee and shall comply with the applicable requirements of this Section and Section 6.10. If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Notes delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment in accordance with the applicable requirements of Section 6.10, become the successor Trustee and supersede the successor Trustee appointed by the Company. If no successor Trustee shall have been so appointed by the Company or the Holders of Notes and accepted appointment in the manner required by this Section and Section 6.10, any Holder of a Note who has been a bona fide Holder of a Note for at least six months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.

(6) The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders of Notes in the manner provided in Section 1.6. Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

SECTION 6.10 Acceptance of Appointment by Successor.

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on the request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder. Upon request of any such successor Trustee, the Company shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts.

No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be eligible under this Article.

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SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business.

Any corporation into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation succeeding to all or substantially all of the corporate trust business of the Trustee (including the trust created by this Indenture), shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto. In case any Notes shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Notes so authenticated with the same effect as if such successor Trustee had itself authenticated such Notes.

SECTION 6.12 Authenticating Agents.

The Trustee may, with the consent of the Company, appoint an Authenticating Agent or Agents acceptable to the Company with respect to the Notes which shall be authorized to act on behalf of the Trustee to authenticate Notes issued upon exchange or substitution pursuant to this Indenture.

Notes authenticated by an Authenticating Agent shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder, and every reference in this Indenture to the authentication and delivery of Notes by the Trustee or the Trustee’s certificate of authentication shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent shall be subject to acceptance by the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent and subject to supervision or examination by government or other fiscal authority. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.12, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section 6.12.

Any corporation into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation shall be otherwise eligible under this Section 6.12, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company. The Trustee may at any time terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the

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Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section 6.12, the Trustee may appoint a successor Authenticating Agent which shall be subject to acceptance by the Company. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with like effect as if originally named as an Authenticating Agent. No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section 6.12.

The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section 6.12.

If an Authenticating Agent is appointed with respect to the Notes pursuant to this Section 6.12, the Notes may have endorsed thereon, in addition to or in lieu of the Trustee’s certification of authentication, an alternative certificate of authentication in the following form:

This is one of the Notes referred to in the within-mentioned Indenture.

[__________________________________________],
as Trustee
By:
	As Authenticating Agent
By:
	Authorized Signatory

SECTION 6.13 Disqualification; Conflicting Interests.

If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.

SECTION 6.14 Preferential Collection of Claims Against Company.

If and when the Trustee shall be or become a creditor of the Company (or any other obligor upon the Notes), the Trustee shall be subject to the provisions of the Trust Indenture Act regarding the collection of claims against the Company (or any such other obligor).

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ARTICLE VII

CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE

SECTION 7.1 Company May Consolidate, Etc., Only on Certain Terms.

The Company shall not consolidate with or merge into any other Person or convey, transfer, sell or lease all its properties and assets substantially as an entirety to any Person unless:

(1) in case the Company shall consolidate with or merge into another Person or convey, transfer or lease its properties and assets substantially as an entirety to any Person, the Person formed by such consolidation or into which the Company is merged, or the Person which acquires by conveyance or transfer, or which leases the properties and assets of the Company substantially as an entirety, shall be a corporation, limited liability company, partnership or trust, shall be organized and validly existing under the laws of the United States of America, any State thereof or the District of Columbia and shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, the due and punctual payment of the principal of, premium, if any, and interest on all of the Notes as applicable, and the performance or observance of every covenant of this Indenture on the part of the Company to be performed or observed and shall have provided for conversion rights in accordance with Article XI;

(2) immediately after giving effect to such transaction, no Event of Default, and no event that after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing.

(3) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture comply with this Article and that all conditions precedent herein provided for relating to such transaction have been complied with, together with any documents required under Section 8.3.

SECTION 7.2 Successor Substituted.

Upon any consolidation of the Company with, or merger of the Company into any other Person or any conveyance, transfer or lease of all or substantially all the properties and assets of the Company in accordance with Section 7.1, the successor Person formed by such consolidation or into or with which the Company is merged or to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such successor Person had been named as the Company herein, and thereafter, except in the case of a lease, the predecessor Person shall be relieved of all obligations and covenants under this Indenture and the Notes.

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ARTICLE VIII

SUPPLEMENTAL INDENTURES

SECTION 8.1 Supplemental Indentures Without Consent of Holders of Notes.

Without the consent of any Holders of Notes the Company, when authorized by a Board Resolution, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto for any of the following purposes:

(1) to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants and obligations of the Company herein and in the Notes as permitted by this Indenture; or

(2) to add to the covenants of the Company for the benefit of the Holders of Notes or to surrender any right or power herein conferred upon the Company; or

(3) to secure the Notes; or

(4) to make provision with respect to the conversion rights of Holders of Notes pursuant to Section 11.11 or to make provision with respect to the repurchase rights of Holders of Notes pursuant to Section 13.5; or

(5) to add restrictive securities laws legends to the extent the Company and their counsel reasonably believe that they are required by applicable law; or

(6) to comply with the requirements of the Trust Indenture Act or the rules and regulations of the Commission thereunder in order to effect or maintain the qualification of this Indenture under the Trust Indenture Act, as contemplated by this Indenture or otherwise; or

(7) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee; or

(8) subject to Section 12.12, to make any change in Article XII that would limit or terminate the benefits available to any holder of Senior Indebtedness under such Article; or

(9) to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein or which is otherwise defective, or to make any other provisions with respect to matters or questions arising under this Indenture as the Company and the Trustee may deem necessary or desirable, provided such action pursuant to this clause (9) shall not adversely affect the interests of the Holders of Notes in any material respect.

Upon Company Request, accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and subject to and upon receipt by the Trustee of

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the documents described in Section 8.3 hereof, the Trustee shall join with the Company in the execution of any supplemental indenture authorized or permitted by the terms of this Indenture and to make any further appropriate agreements and stipulations which may be therein contained.

SECTION 8.2 Supplemental Indentures with Consent of Holders of Notes.

With either (i) the written consent of the Holders of not less than a majority in principal amount of the Outstanding Notes, by the Act of said Holders delivered to the Company and the Trustee, or (ii) by the adoption of a resolution, at a meeting of Holders of the Outstanding Notes at which a quorum is present, by the Holders of at least 66 ²/3% in principal amount of the Outstanding Notes represented at such meeting, the Company, when authorized by a Board Resolution, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of Notes under this Indenture; provided, however, that no such supplemental indenture shall, without the consent or affirmative vote of the Holder of each Outstanding Note affected thereby,

(1) change the Stated Maturity of the principal of, or interest on, any Note;

(2) reduce the principal amount of, or premium, if any, or the rate of interest payable thereon, on any Note;

(3) reduce the amount payable upon a mandatory repurchase;

(4) modify the provisions of Article XIII with respect to the repurchase rights of Holders of Notes in a manner adverse to the Holders;

(5) change the place or currency of payment of the principal of, premium, if any, or interest on any Note (including any payment of the Repurchase Price in respect of such Note);

(6) impair the right to institute suit for the enforcement of any payment in respect of any Note on or after the Stated Maturity thereof (or, in the case of any repurchase, on or after the Repurchase Date) or, except as permitted by Section 11.11, adversely affect the right of Holders to convert any Note as provided in Article XI;

(7) reduce the requirements of Section 9.4 for quorum or voting, or reduce the percentage in principal amount of the Outstanding Notes the consent of whose Holders is required for any such supplemental indenture or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture;

(8) modify the obligation of the Company to maintain an office or agency in the Borough of Manhattan, The City of New York, pursuant to Section 10.2; or,

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(9) modify any of the provisions of this Section or Section 5.13 or 10.12, except to increase any percentage contained herein or therein or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby.

It shall not be necessary for any Act of Holders of Notes under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

SECTION 8.3 Execution of Supplemental Indentures.

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture, and that such supplemental indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company enforceable against the Company in accordance with its terms. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

SECTION 8.4 Effect of Supplemental Indentures.

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder appertaining thereto shall be bound thereby.

SECTION 8.5 Reference in Notes to Supplemental Indentures.

Notes authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes so modified as to conform, in the opinion of the Company and the Trustee, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Notes.

SECTION 8.6 Notice of Supplemental Indentures.

Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of Section 8.2, the Company shall give notice to all Holders of Notes of such fact, setting forth in general terms the substance of such supplemental indenture, in the manner provided in Section 1.6. Any failure of the Company to give such notice, or any defect therein, shall not in any way impair or affect the validity of any such supplemental indenture.

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ARTICLE IX

MEETINGS OF HOLDERS OF SECURITIES

SECTION 9.1 Purposes for Which Meetings May Be Called.

A meeting of Holders of Notes may be called at any time and from time to time pursuant to this Article to make, give or take any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be made, given or taken by Holders of Notes.

SECTION 9.2 Call, Notice and Place of Meetings.

(1) The Trustee may at any time call a meeting of Holders of Notes for any purpose specified in Section 9.1, to be held at such time and at such place in the Borough of Manhattan, The City of New York, as the Trustee shall determine. Notice of every meeting of Holders of Notes, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 1.6, not less than 21 nor more than 180 days prior to the date fixed for the meeting.

(2) In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Notes shall have requested the Trustee to call a meeting of the Holders of Notes for any purpose specified in Section 9.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Notes in the amount specified, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in paragraph (1) of this Section.

SECTION 9.3 Persons Entitled to Vote at Meetings.

To be entitled to vote at any meeting of Holders of Notes, a Person shall be (i) a Holder of one or more Outstanding Notes, or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Notes by such Holder or Holders. The only Persons who shall be entitled to be present or to speak at any meeting of Holders shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

SECTION 9.4 Quorum; Action.

The Persons entitled to vote a majority in principal amount of the Outstanding Notes shall constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Holders of Notes, be dissolved. In any other case, the meeting may be adjourned for a period of not less than

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10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such adjourned meeting (subject to repeated applications of this sentence). Notice of the reconvening of any adjourned meeting shall be given as provided in Section 9.2(1), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage of the principal amount of the Outstanding Notes which shall constitute a quorum.

Subject to the foregoing, at the reconvening of any meeting adjourned for a lack of a quorum, the Persons entitled to vote 25% in principal amount of the Outstanding Notes at the time shall constitute a quorum for the taking of any action set forth in the notice of the original meeting.

At a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid, any resolution and all matters (except as limited by the proviso to Section 8.2 and except to the extent Section 10.12 requires a different vote) shall be effectively passed and decided if passed or decided by the lesser of (i) the Holders of not less than a majority in principal amount of Outstanding Notes and (ii) the Persons entitled to vote not less than 66 ²/3% in principal amount of Outstanding Notes represented and entitled to vote at such meeting.

Any resolution passed or decisions taken at any meeting of Holders of Notes duly held in accordance with this Section shall be binding on all the Holders of Notes whether or not present or represented at the meeting. The Trustee shall, in the name and at the expense of the Company, notify all the Holders of Notes of any such resolutions or decisions pursuant to Section 1.6.

SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment of Meetings.

(1) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Notes in regard to proof of the holding of Notes and of the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted or required by any such regulations, the holding of Notes shall be proved in the manner specified in Section 1.4 and the appointment of any proxy shall be proved in the manner specified in Section 1.4 or by having the signature of the Person executing the proxy guaranteed by any bank, broker or other eligible institution participating in a recognized medallion signature guarantee program.

(2) The Trustee shall, by an instrument in writing, appoint a temporary chairman (which may be the Trustee) of the meeting, unless the meeting shall have been called by the Company or by Holders of Notes as provided in Section 9.2(2), in which case the Company or the Holders of Notes calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Notes represented at the meeting.

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(3) At any meeting, each Holder of a Note or proxy shall be entitled to one vote for each U.S. $1,000 principal amount of Notes held or represented by him; provided, however, that no vote shall be cast or counted at any meeting in respect of any Note challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Note or proxy.

(4) Any meeting of Holders of Notes duly called pursuant to Section 9.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Notes represented at the meeting, and the meeting may be held as so adjourned without further notice.

SECTION 9.6 Counting Votes and Recording Action of Meetings.

The vote upon any resolution submitted to any meeting of Holders of Notes shall be by written ballots on which shall be subscribed the signatures of the Holders of Notes or of their representatives by proxy and the principal amounts at Stated Maturity and serial numbers of the Outstanding Notes held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting. A record, at least in duplicate, of the proceedings of each meeting of Holders of Notes shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 9.2 and, if applicable, Section 9.4. Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.

ARTICLE X

COVENANTS

SECTION 10.1 Payment of Principal, Premium and Interest.

The Company covenants and agrees that it will duly and punctually pay the principal of and premium, if any, and interest on the Notes in accordance with the terms of the Notes and this Indenture. The Company will deposit or cause to be deposited with the Trustee, no later than the opening of business on the date of the Stated Maturity of any Note or no later than the opening of business on the due date for any installment of interest, all payments so due, which payments shall be in immediately available funds on the date of such Stated Maturity or due date, as the case may be.

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SECTION 10.2 Maintenance of Offices or Agencies.

The Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where the Notes may be surrendered for registration of transfer or exchange or for presentation for payment or for conversion or repurchase and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency not designated or appointed by the Trustee. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office or the office or agency of the Trustee in the Borough of Manhattan, The City of New York.

The Company may at any time and from time to time vary or terminate the appointment of any such agent or appoint any additional agents for any or all of such purposes; provided, however, that until all of the Notes have been delivered to the Trustee for cancellation, or moneys sufficient to pay the principal of, premium, if any, and interest on the Notes have been made available for payment and either paid or returned to the Company pursuant to the provisions of Section 10.3, the Company will maintain in the Borough of Manhattan, The City of New York, an office or agency where Notes may be presented or surrendered for payment and conversion, where Notes may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give prompt written notice to the Trustee, and notice to the Holders in accordance with Section 1.6, of the appointment or termination of any such agents and of the location and any change in the location of any such office or agency.

The Company hereby initially designates the Trustee as Paying Agent and Conversion Agent, and each of the Corporate Trust Office of the Trustee and the office or agency of the Trustee in the Borough of Manhattan, The City of New York, located at U.S. Bank National Association, Mail Code: EX-NY-WALL, 100 Wall Street, Suite 1600, New York, NY 10005, one such office or agency of the Company for each of the aforesaid purposes.

SECTION 10.3 Money for Note Payments To Be Held in Trust.

If the Company shall act as its own Paying Agent, it will, on or before each due date of the principal of, premium, if any, or interest on any of the Notes, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal, premium, if any, or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and the Company will promptly notify the Trustee of its action or failure so to act.

Whenever the Company shall have one or more Paying Agents, it will, no later than the opening of business on each due date of the principal of, premium, if any, or interest on any Notes, deposit with the Trustee a sum in funds immediately payable on the payment date sufficient to pay the principal, premium, if any, or interest so becoming due, such sum to be held for the benefit of the Persons entitled to such principal, premium, if any, or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee of any failure so to act.

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The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:

(1) hold all sums held by it for the payment of the principal of, premium, if any, or interest on Notes for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided;

(2) give the Trustee notice of any default by the Company (or any other obligor upon the Notes) in the making of any payment of principal, premium, if any, or interest; and

(3) at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held by such Paying Agent.

The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Note and remaining unclaimed for two years after such principal, premium, if any, or interest has become due and payable shall be paid to the Company on Company Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Note shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease.

SECTION 10.4 Existence.

Subject to Article VII, the Company will do or cause to be done all things necessary to preserve and keep in full force and effect its existence, rights (charter and statutory) and franchises; provided, however, that the Company shall not be required to preserve any such right or franchise if the Company shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Company and that the loss thereof is not disadvantageous in any material respect to the Holders.

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SECTION 10.5 Maintenance of Properties.

The Company will cause all properties used or useful in the conduct of its business or the business of any Significant Subsidiary to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section shall prevent the Company from discontinuing the operation or maintenance of any of such properties if such discontinuance is, in the judgment of the Company, desirable in the conduct of its business or the business of any Significant Subsidiary and not disadvantageous in any material respect to the Holders.

SECTION 10.6 Payment of Taxes and Other Claims.

The Company will pay or discharge, or cause to be paid or discharged, before the same may become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon the Company or any Significant Subsidiary or upon the income, profits or property of the Company or any Significant Subsidiary, (ii) all claims for labor, materials and supplies which, if unpaid, might by law become a lien or charge upon the property of the Company or any Significant Subsidiary, and (iii) all stamps and other duties, if any, which may be imposed by the United States or any political subdivision thereof or therein in connection with the issuance, transfer, exchange or conversion of any Notes or with respect to this Indenture; provided, however, that, in the case of clauses (i) and (ii), the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim (A) if the failure to do so will not, in the aggregate, have a material adverse impact on the Company, or (B) if the amount, applicability or validity is being contested in good faith by appropriate proceedings.

SECTION 10.7 Registration and Listing.

The Company (i) will effect all registrations with, and obtain all approvals by, all governmental authorities that may be necessary under any United States Federal or state law (including the Securities Act, the Exchange Act and state securities and Blue Sky laws) before any shares of Common Stock issuable upon conversion of Notes are issued and delivered, and qualified or listed as contemplated by clause (ii) (it being understood that the Company shall not be required to register the Notes under the Securities Act), and (ii) will qualify any shares of Common Stock required to be issued and delivered upon conversion of Notes, prior to such issuance or delivery, for listing on the New York Stock Exchange or, if the Common Stock is not then listed on the New York Stock Exchange, list the Common Stock on each national securities exchange or quotation system on which outstanding Common Stock is listed or quoted at the time of such delivery.

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SECTION 10.8 Statement by Officers as to Default.

The Company shall deliver to the Trustee, within 90 days after the end of each fiscal year of the Company ending after the date hereof, an Officers’ Certificate, stating whether or not to the best knowledge of the signers thereof the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture (without regard to any period of grace or requirement of notice provided hereunder) and, if the Company shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.

The Company will deliver to the Trustee, forthwith upon becoming aware of any default in the performance or observance of any covenant, agreement or condition contained in this Indenture, or any Event of Default, an Officers’ Certificate specifying with particularity such default or Event of Default and further stating what action the Company has taken, is taking or proposes to take with respect thereto.

Any notice required to be given under this Section 10.8 shall be delivered to the Trustee at its Corporate Trust Office.

SECTION 10.9 [Intentionally Omitted]

SECTION 10.10 [Intentionally Omitted]

SECTION 10.11 [Intentionally Omitted]

SECTION 10.12 Waiver of Certain Covenants.

The Company may omit in any particular instance to comply with any covenant or condition set forth in Sections 10.4 to 10.6, inclusive (other than a covenant or condition which under Article VIII cannot be modified or amended without the consent of the Holder of each Outstanding Note affected), if before the time for such compliance the Holders shall, through the written consent of, or the adoption of a resolution at a meeting of Holders of the Outstanding Notes at which a quorum is present by, not less than a majority in principal amount of the Outstanding Notes, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company and the duties of the Trustee or any Paying or Conversion Agent in respect of any such covenant or condition shall remain in full force and effect.

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ARTICLE XI

CONVERSION OF SECURITIES

SECTION 11.1 Conversion Privilege and Conversion Rate.

(1) Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, any portion of the principal amount of any Note that is an integral multiple of $1,000 may be converted based on the Conversion Rate, determined as hereinafter provided, in effect at the time of conversion, into the right to receive a combination of cash and fully paid and non-assessable shares of Common Stock. Such conversion right shall commence on the initial issuance date of the Notes and expire at the close of business on July 15, 2006, subject, in the case of conversion of any Global Note, to any Applicable Procedures. In case a Holder exercises his right to require the Company to repurchase the Note, such conversion right in respect of the Note, or portion thereof so called, shall expire at the close of business on the Repurchase Date, unless the Company defaults in making the payment due upon repurchase (in such case subject as aforesaid to any Applicable Procedures with respect to any Global Note).

(2) The rate at which shares of Common Stock shall be delivered upon conversion (herein called the “Conversion Rate”) shall be initially 71.9466 shares of Common Stock for each U.S.$1,000 principal amount of Notes. The Conversion Rate shall be adjusted in certain instances as provided in this Article XI.

(3) Upon conversion, the Holder will receive an aggregate amount (the “Conversion Value”) equal to the product of x, y and z, rounded to the nearest whole cent, where

(i) x is equal to the aggregate principal amount of the Notes being converted divided by 1,000;

(ii) y is equal to the then applicable Conversion Rate on the last day of the Determination Period; and,

(iii) z is equal to the arithmetic average, rounded to the nearest whole cent, (the “Ten Day Weighted Average Price”) of the Daily Volume Weighted Average Price (adjusted, if appropriate, to take into account the occurrence during the Determination Period of any stock dividends, stock splits, stock combinations or other similar events) of the Common Stock for the ten consecutive Trading Days beginning on the second Trading Day immediately following the Conversion Date (including any date that a Conversion Date is deemed to have occurred under Section 1.12) (such Ten consecutive Trading Days, the “Determination Period”).

The Conversion Value shall be paid as follows:

(a) the Company shall pay an amount in cash (the “Principal Return”) equal to the lesser of (I) the Conversion Value and (II) the aggregate principal amount of the Notes being converted; and,

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(b) if the Conversion Value exceeds the Principal Return (such excess, the “Net Share Amount”), the Company shall (A) deliver the number of shares of Common Stock determined as set forth in the following paragraph (the “Net Shares”) and (B) pay Additional Cash determined as set forth in the following paragraph.

The number of Net Shares to be delivered will be the integer part of the number obtained by dividing the Net Share Amount by the Ten Day Weighted Average Price. “Additional Cash” will be a U.S. dollar amount, rounded to the nearest whole cent, equal to the difference between (I) the Net Share Amount and (II) the number of Net Shares to be delivered pursuant to the preceding sentence multiplied by the Ten Day Weighted Average Price. Holders of Notes will not receive fractional shares upon conversion of Notes. In lieu of fractional shares, Holders will receive the Additional Cash described in the second preceding sentence.

SECTION 11.2 Exercise of Conversion Privilege.

In order to exercise the conversion privilege, the Holder of any Note to be converted shall deliver such Note, duly endorsed in blank, at any office or agency of the Company maintained for that purpose pursuant to Section 10.2, accompanied by a duly signed and completed notice of conversion substantially in the form set forth in Section 2.4 stating that the Holder elects to convert such Note or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted. The conversion date will be the date on which the Note and the duly signed and completed notice of conversion are so delivered (the “Conversion Date”). Each Note surrendered for conversion (in whole or in part) during the Record Date Period shall (except in the case of any Note or portion thereof which is repurchasable on a Repurchase Date, occurring within such Record Date Period (including any Notes or portions thereof submitted for repurchase on a Repurchase Date that is a Regular Record Date or an Interest Payment Date, as the case may be)) be accompanied by payment in New York Clearing House funds or other funds acceptable to the Company of an amount equal to the interest payable on the Interest Payment Date on the principal amount of such Note (or part thereof, as the case may be) being surrendered for conversion. The interest so payable on the Interest Payment Date with respect to any Note (or portion thereof, if applicable) which is repurchasable on a Repurchase Date, occurring, during the Record Date Period (including any Notes or portions thereof submitted for repurchase on a Repurchase Date that is a Regular Record Date or Interest Payment Date, as the case may be), which Note (or portion thereof, if applicable) is surrendered for conversion during the Record Date Period (or on the last Business Day prior to the Regular Record Date or Interest Payment Date in the case of any Note (or portion thereof, as the case may be) submitted for repurchase on a Repurchase Date on such Regular Record Date or Interest Payment Date, as the case may be) shall be paid to the Holder of such Note as of such Regular Record Date in an amount equal to the interest that would have been payable on such Note if such Note had been converted as of the close of business on the Interest Payment Date. The interest so payable on the Interest Payment Date in respect of any Note (or portion thereof, as the case may be) which is not eligible for repurchase on a Repurchase Date, occurring during the Record Date Period, which Note (or portion thereof, as the case may be) is surrendered for conversion during the Record Date Period, shall be paid to the Holder of such Note as of such Regular Record Date in an amount equal to the interest that would have been payable on such

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Note if such Note had been converted as of the close of business on the Interest Payment Date. Interest payable in respect of any Note surrendered for conversion on or after an Interest Payment Date shall be paid to the Holder of such Note as of the next preceding Regular Record Date, notwithstanding the exercise of the right of conversion. Except as provided in this paragraph and subject to the last paragraph of Section 3.7, no cash payment or adjustment shall be made upon any conversion on account of any interest accrued from the Interest Payment Date next preceding the Conversion Date, in respect of any Note (or part thereof, as the case may be) surrendered for conversion, or on account of any dividends on the Common Stock issued upon conversion. The Company’s delivery to the Holder of the Principal Return, the Net Shares (if any) and the Additional Cash (if any) into which a Note is convertible will be deemed to satisfy the Company’s obligation to pay the principal amount of the Note.

Notes shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Notes for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Notes as Holders shall cease, and the Person or Persons entitled to receive the Net Shares, if any, issuable upon conversion shall be treated for all purposes as the record holder or holders of such Net Shares at such time. As soon as practicable, the Company shall deliver to the Holder, through the Conversion Agent, (x) cash in an amount equal to the Principal Return, (y) a certificate (or credit the book-entry transfer of such shares of Common Stock) for the number of Net Shares, if any, issuable upon the conversion and (z) any Additional Cash payable to the Holder.

In the case of any Note which is converted in part only, upon such conversion the Company shall execute and the Trustee shall authenticate and deliver to the Holder thereof, at the expense of the Company, a new Note or Notes of authorized denominations in an aggregate principal amount equal to the unconverted portion of the principal amount of such Note. A Note may be converted in part, but only if the principal amount of such Note to be converted is any integral multiple of U.S. $1,000 and the principal amount of such note to remain Outstanding after such conversion is equal to U.S. $1,000 or any integral multiple of $1,000 in excess thereof.

SECTION 11.3 Fractions of Shares.

No fractional shares of Common Stock shall be issued upon conversion of any Note or Notes. If more than one Note shall be surrendered for conversion at one time by the same Holder, the Principal Return and number of Net Shares, if any, which shall be delivered upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any Note or Notes (or specified portions thereof), the Company shall pay Additional Cash.

SECTION 11.4 Adjustment of Conversion Rate.

The Conversion Rate shall be subject to adjustments from time to time as follows:

(1) In case the Company shall pay or make a dividend or other distribution on shares of any class of capital stock payable in shares of Common Stock, the Conversion Rate in

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effect at the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such dividend or other distribution shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination and the denominator shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. If, after any such date fixed for determination, any dividend or distribution is not in fact paid, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to pay such dividend or distribution, to the Conversion Rate that would have been in effect if such determination date had not been fixed. For the purposes of this paragraph (1), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of the Company.

(2) In case the Company shall issue rights, options or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock at a price per share less than the current market price per share (determined as provided in paragraph (8) of this Section 11.4) of the Common Stock on the date fixed for the determination of stockholders entitled to receive such rights, options or warrants (other than any rights, options or warrants that by their terms will also be issued to any Holder upon conversion of a Note into shares of Common Stock without any action required by the Company or any other Person), the Conversion Rate in effect at the opening of business on the day following the date fixed for such determination shall be increased by dividing such Conversion Rate by a fraction of which the numerator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock which the aggregate of the offering price of the total number of shares of Common Stock so offered for subscription or purchase would purchase at such current market price and the denominator shall be the number of shares of Common Stock outstanding at the close of business on the date fixed for such determination plus the number of shares of Common Stock so offered for subscription or purchase, such increase to become effective immediately after the opening of business on the day following the date fixed for such determination. If, after any such date fixed for determination, any such rights, options or warrants are not in fact issued, or are not exercised prior to the expiration thereof, the Conversion Rate shall be immediately readjusted, effective as of the date such rights, options or warrants expire, or the date the Board of Directors determines not to issue such rights, options or warrants, to the Conversion Rate that would have been in effect if the unexercised rights, options or warrants had never been granted or such determination date had not been fixed, as the case may be. For the purposes of this paragraph (2), the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of the Company but shall include shares issuable in respect of scrip certificates issued in lieu of fractions of shares of Common Stock. The Company will not issue any rights, options or warrants in respect of shares of Common Stock held in the treasury of the Company.

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(3) In case outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately increased, and, conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Rate in effect at the opening of business on the day following the day upon which such subdivision or combination becomes effective shall be proportionately reduced, such increase or reduction, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

(4) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock evidences of its indebtedness, capital stock, cash or other assets (including securities, but excluding (i) any rights, options or warrants referred to in paragraph (2) of this Section, (ii) any dividend or distribution paid exclusively in cash, (iii) any dividend or distribution referred to in paragraph (1) of this Section and (iv) distributions upon mergers or consolidations to which Section 11.11 applies), the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for the determination of stockholders entitled to receive such distribution by a fraction of which the numerator shall be the current market price per share (determined as provided in paragraph (8) of this Section 11.4) of the Common Stock on the date fixed for such determination less the then fair market value (as determined by the Board of directors, whose determination shall be conclusive and described in a Board Resolution filed with the Trustee) of the portion of the assets, shares or evidences of indebtedness so distributed applicable to one share of Common Stock and the denominator shall be such current market price per share of the Common Stock, such adjustment to become effective immediately prior to the opening of business on the day following the date fixed for the determination of shareholders entitled to receive such distribution. If after any such date fixed for determination, any such distribution is not in fact made, the Conversion Rate shall be immediately readjusted, effective as of the date the Board of Directors determines not to make such distribution, to the Conversion Rate that would have been in effect if such determination date had not been fixed.

(5) In case the Company shall, by dividend or otherwise, distribute to all holders of its Common Stock cash (excluding any cash that is distributed as part of a distribution referred to in paragraph (4) of this Section or cash distributed upon a merger or consolidation to which Section 11.11 applies) in an aggregate amount that, combined together with (I) the aggregate amount of any other cash distributions to all holders of its Common Stock made exclusively in cash within the 12 months preceding the date of payment of such distribution and in respect of which no adjustment pursuant to this paragraph (5) has been made and (II) the aggregate of any cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) of consideration payable in respect of any tender offer by the Company or any of its Subsidiaries for all or any portion of the Common Stock concluded within the 12 months preceding the date of payment of such distribution and in respect of which no adjustment pursuant to paragraph (6) of this Section 11.4 has been made (the “combined cash and tender amount”) exceeds 10% of the product of the current market price per share (determined as provided in paragraph (8) of this Section 11.4) of

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the Common Stock on the date for the determination of holders of shares of Common Stock entitled to receive such distribution times the number of shares of Common Stock outstanding on such date (the “aggregate current market price”), then, and in each such case, immediately after the close of business on such date for determination, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate in effect immediately prior to the close of business on the date fixed for determination of the stockholders entitled to receive such distribution by a fraction (i) the numerator of which shall be equal to the current market price per share (determined as provided in paragraph (8) of this Section) of the Common Stock on the date fixed for such determination less an amount equal to the quotient of (x) the excess of such combined cash and tender amount over such aggregate current market price divided by (y) the number of shares of Common Stock outstanding on such date for determination and (ii) the denominator of which shall be equal to the current market price per share (determined as provided in paragraph (8) of this Section 11.4) of the Common Stock on such date fixed for determination.

(6) In case a tender offer made by the Company or any Subsidiary for all or any portion of the Common Stock shall expire and such tender offer (as amended upon the expiration thereof) shall require the payment to stockholders (based on the acceptance (up to any maximum specified in the terms of the tender offer) of Purchased Shares (as defined below)) of an aggregate consideration having a fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution) that combined together with (I) the aggregate of the cash plus the fair market value (as determined by the Board of Directors, whose determination shall be conclusive and described in a Board Resolution), as of the expiration of such tender offer, of consideration payable in respect of any other tender offer by the Company or any Subsidiary for all or any portion of the Common Stock expiring within the 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to this paragraph (6) has been made and (II) the aggregate amount of any cash distributions to all holders of the Common Stock within 12 months preceding the expiration of such tender offer and in respect of which no adjustment pursuant to paragraph (5) of this Section has been made (the “combined tender and cash amount”) exceeds 10% of the product of the current market price per share of the Common Stock (determined as provided in paragraph (8) of this Section 11.4) as of the last time (the “Expiration Time”) tenders could have been made pursuant to such tender offer (as it may be amended) times the number of shares of Common Stock outstanding (including any tendered shares) as of the Expiration Time, then, and in each such case immediately prior to the opening of business on the day after the date of the Expiration Time, the Conversion Rate shall be adjusted so that the same shall equal the rate determined by dividing the Conversion Rate immediately prior to close of business on the date of the Expiration Time by a fraction (i) the numerator of which shall be equal to (A) the product of (I) the current market price per share of the Common Stock (determined as provided in paragraph (8) of this Section 11.4) on the date of the Expiration Time multiplied by (II) the number of shares of Common Stock outstanding (including any tendered shares) on the Expiration Time less (B) the combined tender and cash amount, and (ii) the denominator of which shall be equal to the product of (A) the current market price per share of the Common Stock (determined as provided in paragraph (8) of this Section 11.4) as of the Expiration Time multiplied by (B) the number of shares of Common Stock outstanding (including any tendered shares) as of the Expiration Time

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less the number of all shares validly tendered and not withdrawn as of the Expiration Time (the shares deemed so accepted up to any such maximum, being referred to as the “Purchased Shares”).

(7) The reclassification of Common Stock into securities other than Common Stock (other than any reclassification upon a consolidation or merger to which Section 11.11 applies) shall be deemed to involve (a) a distribution of such securities other than Common Stock to all holders of Common Stock (and the effective date of such reclassification shall be deemed to be “the date fixed for the determination of shareholders entitled to receive such distribution” and “the date fixed for such determination” within the meaning of paragraph (4) of this Section), and (b) a subdivision or combination, as the case may be, of the number of shares of Common Stock outstanding immediately prior to such reclassification into the number of shares of Common Stock outstanding immediately thereafter (and the effective date of such reclassification shall be deemed to be “the day upon which such subdivision becomes effective” or “the day upon which such combination becomes effective”, as the case may be, and “the day upon which such subdivision or combination becomes effective” within the meaning of paragraph (3) of this Section 11.4).

(8) For the purpose of any computation under paragraphs (2), (4), (5) or (6) of this Section 11.4, the current market price per share of Common Stock on any date shall be calculated by the Company and be the average of the daily Closing Prices Per Share for the five consecutive Trading Days selected by the Company commencing not more than 10 Trading Days before, and ending not later than the earlier of the day in question and the day before the “ex” date with respect to the issuance or distribution requiring such computation. For purposes of this paragraph, the term “‘ex’ date”, when used with respect to any issuance or distribution, means the first date on which the Common Stock trades regular way in the applicable securities market or on the applicable securities exchange without the right to receive such issuance or distribution.

(9) No adjustment in the Conversion Rate shall be required unless such adjustment (plus any adjustments not previously made by reason of the paragraph (9)) would require an increase or decrease of at least one percent in such rate; provided, however, that any adjustments which by reason of this paragraph (9) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. All calculations under this Article shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be.

(10) The Company may make such increases in the Conversion Rate, for the remaining term of the Notes or any shorter term, in addition to those required by paragraphs (1), (2), (3), (4), (5) and (6) of this Section 11.4, as it considers to be advisable in order to avoid or diminish any income tax to any holders of shares of Common Stock resulting from any dividend or distribution of stock or issuance of rights or warrants to purchase or subscribe for stock. or from any event treated as such for income tax purposes. The Company shall have the power to resolve any ambiguity or correct any error in this paragraph (10) and its actions in so doing shall, absent manifest error, be final and conclusive.

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(11) Notwithstanding the foregoing provisions of this Section, no adjustment of the Conversion Rate shall be required to be made (a) upon the issuance of shares of Common Stock pursuant to any present or future plan for the reinvestment of dividends or (b) because of a tender or exchange offer of the character described in Rule 13e-4(h)(5) under the Exchange Act or any successor rule thereto.

(12) To the extent permitted by applicable law, the Company from time to time may increase the Conversion Rate by any amount for any period of time if the period is at least twenty (20) days, the increase is irrevocable during such period, and the Board of Directors shall have made a determination that such increase would be in the best interests of the Company, which determination shall be conclusive; provided, however, that no such increase shall be taken into account for purposes of determining whether the Closing Price Per Share of the Common Stock equals or exceeds 105% of the Conversion Price in connection with an event which would otherwise be a Change of Control pursuant to Section 13.4. Whenever the Conversion Rate is increased pursuant to the preceding sentence, the Company shall give notice of the increase to the Holders in the manner provided in Section 1.6 at least fifteen (15) days prior to the date the increased Conversion Rate takes effect, and such notice shall state the increased Conversion Rate and the period during which it will be in effect.

SECTION 11.5 Notice of Adjustments of Conversion Rate.

Whenever the Conversion Rate is adjusted as herein provided:

(1) the Company shall compute the adjusted Conversion Rate in accordance with Section 11.4 and shall prepare a certificate signed by the Chief Financial Officer of the Company setting forth the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment is based, and such certificate shall promptly be filed with the Trustee and with each Conversion Agent; and

(2) upon each such adjustment, a notice stating that the Conversion Rate has been adjusted and setting forth the adjusted Conversion Rate shall be required, and as soon as practicable after it is required, such notice shall be provided by the Company to all Holders in accordance with Section 1.6.

Neither the Trustee nor any Conversion Agent shall be under any duty or responsibility with respect to any such certificate or the information and calculations contained therein, except to exhibit the same to any Holder of Notes desiring inspection thereof at its office during normal business hours.

SECTION 11.6 Notice of Certain Corporate Action.

In case:

(1) the Company shall declare a dividend (or any other distribution) on its Common Stock payable (i) otherwise than exclusively in cash or (ii) exclusively in cash in an amount that would require any adjustment pursuant to Section 12.4; or

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(2) the Company shall authorize the granting to all or substantially all of the holders of its Common Stock of rights, options or warrants to subscribe for or purchase any shares of capital stock of any class or of any other rights; or

(3) of any reclassification of the Common Stock, or of any consolidation, merger or share exchange to which the Company is a party and for which approval of any stockholders of the Company is required, or of the conveyance, sale, transfer or lease of all or substantially all of the assets of the Company; or

(4) of the voluntary or involuntary dissolution, liquidation or winding up of the Company;

then the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of Notes pursuant to Section 10.2, and shall cause to be provided to all Holders in accordance with Section 1.6, at least 20 days (or 10 days in any case specified in clause (1) or (2) above) prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, rights, options or warrants, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, rights, options or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, conveyance, transfer, sale, lease, dissolution, liquidation or winding up. Neither the failure to give such notice or the notice referred to in the following paragraph nor any defect therein shall affect the legality or validity of the proceedings described in clauses (1) through (4) of this Section 11.6. If at the time the Trustee shall not be the conversion agent, a copy of such notice shall also forthwith be filed by the Company with the Trustee.

The Company shall cause to be filed at the Corporate Trust Office and each office or agency maintained for the purpose of conversion of Notes pursuant to Section 10.2, and shall cause to be provided to all Holders in accordance with Section 1.6, notice of any tender offer by the Company or any Subsidiary for all or any portion of the Common Stock at or about the time that such notice of tender offer is provided to the public generally.

SECTION 11.7 Company to Reserve Common Stock.

The Company shall at all times reserve and keep available, free from preemptive rights, out of its authorized but unissued Common Stock, for the purpose of effecting the conversion of Notes, the full number of shares of Common Stock then issuable upon the conversion of all Outstanding Notes.

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SECTION 11.8 Taxes on Conversions.

Except as provided in the next sentence, the Company will pay any and all taxes (other than taxes on income) and duties that may be payable in respect of the issue or delivery of Principal Return, Net Shares, if any, and Additional Cash, if any, on conversion of Notes pursuant hereto. The Company shall not, however, be required to pay any tax or duty which may be payable in respect of any transfer involved in the issue and delivery of Principal Return, Net Shares, if any, and Additional Cash, if any, in a name other than that of the Holder of the Note or Notes to be converted, and no such issue or delivery shall be made unless and until the Person requesting such issue has paid to the Company the amount of any such tax or duty, or has established to the satisfaction of the Company that such tax or duty has been paid.

SECTION 11.9 Covenant as to Common Stock.

The Company agrees that all shares of Common Stock which may be delivered upon conversion of Notes, upon such delivery, will have been duly authorized and validly issued and will be fully paid and nonassessable and, except as provided in Section 11.8, the Company will pay all taxes, liens and charges with respect to the issue thereof.

SECTION 11.10 Cancellation of Converted Notes.

All Notes delivered for conversion shall be delivered to the Trustee or its agent to be cancelled by or at the direction of the Trustee, which shall dispose of the same as provided in Section 3.9.

SECTION 11.11 Provision in Case of Consolidation, Merger or Sale of Assets.

In case of any consolidation or merger of the Company with or into any other Person, any merger of another Person with or into the Company (other than a merger which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of Common Stock of the Company) or in case of any sale or transfer of all or substantially all of the assets of the Company, the Person formed by such consolidation or resulting from such merger or which acquires such assets, as the case may be, shall execute and deliver to the Trustee a supplemental indenture providing that the Holder of each Note then Outstanding shall have the right thereafter, during the period such Note shall be convertible as specified in Section 11.1, to convert such Note only into the value of the kind and amount of securities, cash and other property (the “Reference Property”) receivable upon such consolidation, merger, conveyance, sale, transfer or lease by a holder of a number of shares of Common Stock equal to a fraction whose denominator is one thousand (1,000) and whose numerator is the product of the principal amount of such Note and the Conversion Rate in effect immediately prior to such consolidation, merger, conveyance, sale, transfer or lease; provided, however, that after the effective time of such consolidation, merger, conveyance, sale, transfer or lease, the Principal Return (calculated as set forth below for purposes of this Section 11.11) payable hereunder upon conversion of a Note shall continue to be payable in cash. For purposes of this Section 11.11, the Principal Return and any Net Share Amount shall be calculated based on a Conversion Value which has been calculated by substituting the fair value of the Reference Property payable with respect to

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one share of Common Stock in connection with such consolidation, merger, conveyance, sale, transfer or lease as of the date of such event (adjusted, if appropriate, to take into account the occurrence during the period between the date of such consolidation, merger, conveyance, sale, transfer or lease and the applicable Conversion Date of any stock dividends, stock splits, stock combinations or other similar events, the “Reference Property Value”) for the Ten Day Weighted Average Price and otherwise in accordance with Section 11.1. The Company’s obligation to deliver the Net Shares, if any, in respect of the Net Share Amount in connection with such conversion, shall be satisfied by payment in the form of the Reference Property and based on the Reference Property Value.

The right of the Holder of a Note to receive the foregoing consideration upon conversion of a Note following such consolidation, merger, conveyance, sale, transfer or lease, assumes such holder of Common Stock of the Company (i) is not (A) a Person with which the Company consolidated or merged with or into or which merged into or with the Company or to which such conveyance, sale, transfer or lease was made, as the case may be (a “Constituent Person”), or (B) an Affiliate of a Constituent Person, and (ii) failed to exercise his rights of election, if any, as to the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease (provided that if the kind or amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer, or lease is not the same for each share of Common Stock of the Company held immediately prior to such consolidation, merger, conveyance, sale, transfer or lease by others than a Constituent Person or an Affiliate thereof and in respect of which such rights of election shall not have been exercised (“Non-electing Share”), then for the purpose of this Section 11.11 the kind and amount of securities, cash and other property receivable upon such consolidation, merger, conveyance, sale, transfer or lease by the holders of each Non-electing Share shall be deemed to be the kind and amount so receivable per share by a plurality of the Non-electing Shares).

Such supplemental indenture shall provide for adjustments which, for events subsequent to the effective date of such supplemental indenture, shall be as nearly equivalent as may be practicable to the adjustments provided for in this Article. The above provisions of this Section 11.11 shall similarly apply to successive consolidations, mergers, conveyances, sales, transfers or leases. Notice of the execution of such a supplemental indenture shall be given by the Company to the Holder of each Note as provided in Section 1.6 promptly upon such execution.

Neither the Trustee nor any Conversion Agent shall be under any responsibility to determine the correctness of any provisions contained in any such supplemental indenture relating either to the kind or amount of shares of stock or other securities or property or cash receivable by Holders of Notes upon the conversion of their Notes after any such consolidation, merger, conveyance, transfer, sale or lease or to any such adjustment, but may accept as conclusive evidence of the correctness of any such provisions, and shall be protected in relying upon, an Opinion of Counsel with respect thereto, which the Company shall cause to be furnished to the Trustee upon request.

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SECTION 11.12 Responsibility of Trustee for Conversion Provisions.

The Trustee, subject to the provisions of Section 6.1, and any Conversion Agent shall not at any time be under any duty or responsibility to any Holder of Notes to determine whether any facts exist which may require any adjustment of the Conversion Rate, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed, or herein or in any supplemental indenture provided to be employed, in making the same, or whether a supplemental indenture need be entered into. Neither the Trustee, subject to the provisions of Section 6.1, nor any Conversion Agent shall be accountable with respect to the validity or value (or the kind or amount) of any Common Stock, or of any other securities or property or cash, which may at any time be issued or delivered upon the conversion of any Note; and it or they do not make any representation with respect thereto. Neither the Trustee, subject to the provisions of Section 6.1, nor any Conversion Agent shall be responsible for any failure of the Company to make or calculate any cash payment or to issue, transfer or deliver any shares of Common Stock or share certificates or other securities or property or cash upon the surrender of any Note for the purpose of conversion; and the Trustee, subject to the provisions of Section 6.1, and any Conversion Agent shall not be responsible for any failure of the Company to comply with any of the covenants of the Company contained in this Article.

ARTICLE XII

SUBORDINATION OF SECURITIES

SECTION 12.1 Notes Subordinate to Senior Indebtedness.

The Company covenants and agrees, and each Holder of a Note, by its acceptance thereof, likewise covenants and agrees, that, to the extent and in the manner hereinafter set forth in this Article (subject to the provisions of Article IV), the indebtedness represented by the Notes and the payment of the principal of, or premium, if any, or interest on, each and all of the Notes (including the Repurchase Price with respect to Notes submitted for repurchase in accordance with Article XIII), are hereby expressly made subordinate and subject in right of payment to the prior payment in full of all Senior Indebtedness.

SECTION 12.2 No Payment in Certain Circumstances, Payment Over of Proceeds Upon Dissolution, Etc.

No payment shall be made with respect to the principal of, or premium, if any, or interest on the Notes or any shares of Common Stock issued on conversion (including, but not limited to, the Repurchase Price with respect to Notes submitted for repurchase in accordance with Article XIII), except payments and distributions made by the Trustee as permitted by Section 12.9, if:

(i) a default in the payment of principal, premium, if any, or interest (including a default under any repurchase obligation) or other amounts with respect to any Senior Indebtedness occurs and is continuing (or, in the case of Senior Indebtedness for which there is a period of grace, in the event of such a default that continues beyond the period of grace, if any, specified in the instrument or lease evidencing such Senior Indebtedness) unless and until such default shall have been cured or waived or shall have ceased to exist; or

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(ii) a default, other than a payment default, on any Designated Senior Indebtedness occurs and is continuing that then permits holders of such Designated Senior Indebtedness to accelerate its maturity and the Trustee receives a notice of the default (a “Payment Blockage Notice”) from a Representative of Designated Senior Indebtedness or the Company.

If the Trustee receives any Payment Blockage Notice pursuant to clause (ii) above, no subsequent Payment Blockage Notice shall be effective for purposes of this Section unless and until (A) at least 365 days shall have elapsed since the initial effectiveness of the immediately prior Payment Blockage Notice, and (B) all scheduled payments of principal, premium, if any, and interest on the Notes that have come due have been paid in full in cash. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice.

The Company may and shall resume payments on and distributions in respect of the Notes upon the earlier of:

(1) the date upon which the default is cured or waived or ceases to exist, or

(2) in the case of a default referred to in clause (ii) above, 179 days pass after notice is received if the maturity of such Designated Senior Indebtedness has not been accelerated, unless this Article XII otherwise prohibits the payment or distribution at the time of such payment or distribution.

In the event of (a) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to the Company or to its creditors, as such, or to its assets, or (b) any liquidation, dissolution or other winding up of the Company, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or any other marshaling of assets and liabilities of the Company, then and in any such event the holders of Senior Indebtedness shall be entitled to receive payment in full of all amounts due or to become due on or in respect of all Senior Indebtedness in cash before the Holders of the Notes are entitled to receive any payment on account of principal of (or premium, if any) or interest on the Notes or on account of the purchase or other acquisition of Notes, and to that end the holders of Senior Indebtedness shall be entitled to receive, for application to the payment thereof, any payment or distribution of any kind or character, whether in cash, property or securities, which may be payable or deliverable in respect of the Notes in any such case, proceeding, dissolution, liquidation or other winding up or event.

In the event that, notwithstanding the foregoing provisions of this Section, the Trustee or the Holder of any Note shall have received any payment or distribution of assets of the Company of any kind or character, whether in cash, securities or other property, before all

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Senior Indebtedness is paid in full, and if such fact shall, at or prior to the time of such payment or distribution, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment or distribution shall be paid over or delivered forthwith to the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Company for application to the payment of all Senior Indebtedness remaining unpaid, to the extent necessary to pay all Senior Indebtedness in full, after giving effect to any concurrent payment or distribution to or for the holders of Senior Indebtedness.

For purposes of this Article only, the words “cash, securities or other property” shall not be deemed to include shares of capital stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, which shares of stock or securities are subordinated in right of payment to all then outstanding Senior Indebtedness to substantially the same extent as, or to a greater extent than, the Notes are so subordinated as provided in this Article. The consolidation of the Company with, or the merger of the Company into, another Person or the liquidation or dissolution of the Company following the conveyance or transfer of its properties and assets substantially as an entirety to another Person upon the terms and conditions set forth in Article VII shall not be deemed a dissolution, winding up, liquidation, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of the Company for the purposes of this Section if the Person formed by such consolidation or into which the Company is merged or which acquires by conveyance or transfer such properties and assets substantially as an entirety, as the case may be, shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions set forth in Article VII.

In the event that, notwithstanding the foregoing, the Company shall make any payment to the Trustee or the Holder of any Note prohibited by the foregoing provisions of this Section, and if such fact shall, at or prior to the time of such payment, have been made known to the Trustee or, as the case may be, such Holder, then and in such event such payment shall be paid over and delivered forthwith to the Company, in the case of the Trustee, or the Trustee, in the case of such Holder.

SECTION 12.3 Prior Payment to Senior Indebtedness Upon Acceleration of Notes.

In the event of the acceleration of the Notes because of an Event of Default, no payment or distribution shall be made to the Trustee or any holder of Notes in respect of the principal of, premium, if any, or interest on the Notes (including, but not limited to, the Repurchase Price with respect to the Notes submitted for repurchase in accordance with Article XIII), except payments and distributions made by the Trustee as permitted by Section 12.9, until all Senior Indebtedness has been paid in full in cash or other payment satisfactory to the holders of Senior Indebtedness or such acceleration is rescinded in accordance with the terms of this Indenture.

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SECTION 12.4 Payment Permitted If No Default.

Nothing contained in this Article or elsewhere in this Indenture or in any of the Notes shall prevent (a) the Company, at any time except during the pendency of any case, proceeding, dissolution, liquidation or other winding up, assignment for the benefit of creditors or other marshaling of assets and liabilities of the Company referred to in Section 12.2, or during the circumstances referred to in the first paragraph of Section 12.2, or under the conditions described in Section 12.3, from making payments at any time of principal of (and premium, if any) or interest on the Notes, or (b) the application by the Trustee of any money deposited with it hereunder to the payment of or on account of the principal of (and premium, if any) or interest on the Notes or the retention of such payment by the Holders, if, at the time of such application by the Trustee, it did not have knowledge that such payment would have been prohibited by the provisions of this Article.

SECTION 12.5 Subrogation to Rights of Holders of Senior Indebtedness.

Subject to the payment in full of all Senior Indebtedness, the Holders of the Notes shall be subrogated to the extent of the payments or distributions made to the holders of such Senior Indebtedness pursuant to the provisions of this Article to the rights of the holders of such Senior Indebtedness to receive payments and distributions of cash, property and securities applicable to the Senior Indebtedness until the principal of (and premium, if any) and interest on the Notes shall be paid in full. For purposes of such subrogation, no payments or distributions to the holders of the Senior Indebtedness of any cash, property or securities to which the Holders of the Notes or the Trustee would be entitled except for the provisions of this Article, and no payments over pursuant to the provisions of this Article to the holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Notes, be deemed to be a payment or distribution by the Company to or on account of the Senior Indebtedness.

SECTION 12.6 Provisions Solely to Define Relative Rights.

The provisions of this Article are intended solely for the purpose of defining the relative rights of the Holders of the Notes on the one hand and the holders of Senior Indebtedness on the other hand. Nothing contained in this Article or elsewhere in this Indenture or in the Notes is intended to or shall (i) impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Notes, the obligation of the Company, which is absolute and unconditional, to pay to the Holders of the Notes the principal of (and premium, if any) and interest on the Notes as and when the same shall become due and payable in accordance with their terms; or (ii) affect the relative rights against the Company of the Holders of the Notes and creditors of the Company other than the holders of Senior Indebtedness; or (iii) prevent the Trustee or the Holder of any Note from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article of the holders of Senior Indebtedness to receive cash, property and securities otherwise payable or deliverable to the Trustee or such Holder.

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SECTION 12.7 Trustee to Effectuate Subordination.

Each Holder of a Note by its acceptance thereof authorizes and directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article and appoints the Trustee its attorney-in-fact for any and all such purposes.

SECTION 12.8 No Waiver of Subordination Provisions.

No right of any present or future holder of any Senior Indebtedness to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder of any Senior Indebtedness, or by any non-compliance by the Company with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof any such holder may have or be otherwise charged with.

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness may, at any time and from time to time, without the consent of or notice to the Trustee or the Holders of the Notes, without incurring responsibility to the Holders of the Notes and without impairing or releasing the subordination provided in this Article or the obligations hereunder of the Holders of the Notes to the holders of Senior Indebtedness, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Indebtedness, or otherwise amend or supplement in any manner Senior Indebtedness or any instrument evidencing the same or any agreement under which Senior Indebtedness is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Indebtedness; (iii) release any Person liable in any manner for the collection of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights against the Company and any other Person.

SECTION 12.9 Notice to Trustee.

The Company shall give prompt written notice to the Trustee of any fact known to the Company which would prohibit the making of any payment to or by the Trustee in respect of the Notes. Notwithstanding the provisions of this Article or any other provision of this Indenture, the Trustee shall not be charged with knowledge of the existence of any facts which would prohibit the making of any payment to or by the Trustee in respect of the Notes, unless and until the Trustee shall have received written notice thereof from the Company or a Representative or a holder of Senior Indebtedness (including, without limitation, a holder of Designated Senior Indebtedness) and, prior to the receipt of any such written notice, the Trustee, subject to the provisions of Section 6.1, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 12.9 prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (and premium, if any) or interest on any Note), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purpose for which such money was received and shall not be affected by any notice to the contrary which may be received by it within one Business Day prior to such date.

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Notwithstanding anything in this Article XII to the contrary, nothing shall prevent any payment by the Trustee to the Holders of monies deposited with it pursuant to Section 4.1, and any such payment shall not be subject to the provisions of Section 12.2 or 12.3.

Subject to the provisions of Section 6.1, the Trustee shall be entitled to rely on the delivery to it of a written notice by a Person representing himself to be a Representative or a holder of Senior Indebtedness (including, without limitation, a holder of Designated Senior Indebtedness) to establish that such notice has been given by a Representative or a holder of Senior Indebtedness (including, without limitation, a holder of Designated Senior Indebtedness). In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of Senior Indebtedness to participate in any payment or distribution pursuant to this Article, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article, and if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

SECTION 12.10 Reliance on Judicial Order or Certificate of Liquidating Agent.

Upon any payment or distribution of assets of the Company referred to in this Article, the Trustee, subject to the provisions of Section 6.1, and the Holders of the Notes shall be entitled to rely upon any order or decree entered by any court of competent jurisdiction in which such insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution, winding up or similar case or proceeding is pending, or a certificate of the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit of creditors, agent or other Person making such payment or distribution, delivered to the Trustee or to the Holders of Notes, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article.

SECTION 12.11 Trustee Not Fiduciary for Holders of Senior Indebtedness.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Indebtedness and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to Holders of Notes or to the Company or to any other Person cash, property or securities to which any holders of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.

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SECTION 12.12 Reliance by Holders of Senior Indebtedness on Subordination Provisions.

Each Holder by accepting a Note acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness, and no amendment or modification of the provisions contained herein shall diminish the rights of such holders of Senior Indebtedness unless such holders shall have agreed in writing thereto.

SECTION 12.13 Rights of Trustee as Holder of Senior Indebtedness; Preservation of Trustee’s Rights.

The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article with respect to any Senior Indebtedness which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture shall deprive the Trustee of any of its rights as such holder.

Nothing in this Article shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.7.

SECTION 12.14 Article Applicable to Paying Agents.

In case at any time any Paying Agent other than the Trustee shall have been appointed by the Company and be then acting hereunder, the term “Trustee” as used in this Article shall in such case (unless the context otherwise requires) be construed as extending to and including such Paying Agent within its meaning as fully for all intents and purposes as if such Paying Agent were named in this Article in addition to or in place of the Trustee; provided, however, that Section 12.13 shall not apply to the Company or any Affiliate of the Company if it or such Affiliate acts as Paying Agent.

SECTION 12.15 Certain Conversions and Repurchases Deemed Payment.

For the purposes of this Article only, (i) the issuance and delivery of junior notes upon conversion of Notes in accordance with Article XI or upon the repurchase of Notes in accordance with Article XIII shall not be deemed to constitute a payment or distribution on account of the principal of or premium or interest on Notes or on account of the purchase or other acquisition of Notes, and (ii) the payment, issuance or delivery of cash (except in satisfaction of fractional shares pursuant to Section 11.3), property or securities (other than junior securities) upon conversion of a Note shall be deemed to constitute payment on account of the principal of such Note. For the purposes of this Section, the term “junior securities” means (a) shares of any stock of any class of the Company and securities into which the Notes are convertible pursuant to Article XI and (b) securities of the Company which are subordinated in right of payment to all Senior Indebtedness which may be outstanding at the time of issuance or

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delivery of such securities to substantially the same extent as, or to a greater extent than, the Notes are so subordinated as provided in this Article. Nothing contained in this Article or elsewhere in this Indenture or in the Notes is intended to or shall impair, as among the Company, its creditors other than holders of Senior Indebtedness and the Holders of the Notes, the right, which is absolute and unconditional, of the Holder of any Note to convert such Note in accordance with Article XI (subject to the limitations under this Article XII of the ability of the Company to pay the Principal Return) or to exchange such Note for Common Stock in accordance with Article XIII if the Company elects to satisfy the obligations under Article XIII by the delivery of Common Stock.

ARTICLE XIII

REPURCHASE OF NOTES AT THE OPTION OF THE

HOLDER UPON A CHANGE IN CONTROL

SECTION 13.1 Right to Require Repurchase.

In the event that a Change in Control (as hereinafter defined) shall occur, then each Holder shall have the right, at the Holder’s option, but subject to the provisions of Section 13.2, to require the Company to repurchase, and upon the exercise of such right the Company shall repurchase, all of such Holder’s Notes, or any portion of the principal amount thereof that is equal to U.S. $1,000 or any integral multiple of U.S. $1,000 in excess thereof (provided that no single Note may be repurchased in part unless the portion of the principal amount of such Note to be Outstanding after such repurchase is equal to U.S. $1,000 or integral multiples of U.S. $1,000 in excess thereof), on the date (the “Repurchase Date”) that is 45 days after the date of the Company Notice (as defined in Section 13.3) at a purchase price equal to 100% of the principal amount of the Notes to be repurchased plus interest accrued to the Repurchase Date (the “Repurchase Price”); provided, however, that installments of interest on Notes whose Stated Maturity is on or prior to the Repurchase Date shall be payable to the Holders of such Notes, or one or more Predecessor Notes, registered as such on the relevant Record Date according to their terms and the provisions of Section 3.7. Such right to require the repurchase of the Notes shall not continue after a discharge of the Company from its obligations with respect to the Notes in accordance with Article IV, unless a Change in Control shall have occurred prior to such discharge. At the option of the Company, the Repurchase Price may be paid in cash or, subject to the fulfillment by the Company of the conditions set forth Section 13.2, by delivery of shares of Common Stock having a fair market value equal to the Repurchase Price. Whenever in this Indenture (including Sections 2.2, 3.1, 5.1(1) and 5.8) there is a reference, in any context, to the principal of any Note as of any time, such reference shall be deemed to include reference to the Repurchase Price payable in respect of such Note to the extent that such Repurchase Price is, was or would be so payable at such time, and express mention of the Repurchase Price in any provision of this Indenture shall not be construed as excluding the Repurchase Price in those provisions of this Indenture when such express mention is not made; provided, however, that for the purposes of Article XII such reference shall be deemed to include reference to the Repurchase Price only to the extent the Repurchase Price is payable in cash.

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SECTION 13.2 Conditions to the Company’s Election to Pay the Repurchase Price in Common Stock.

The Company may elect to pay the Repurchase Price by delivery of shares of Common Stock pursuant to Section 13.1 if and only if the following conditions shall have been satisfied:

(1) The shares of Common Stock deliverable in payment of the Repurchase Price shall have a fair market value as of the Repurchase Date of not less than the Repurchase Price. For purposes of Section 13.1 and this Section 13.2, the fair market value of shares of Common Stock shall be determined by the Company and shall be equal to 95% of the average of the Closing Prices Per Share of the Common Stock for the five consecutive Trading Days immediately preceding and including the third Trading Day prior to the Repurchase Date;

(2) The Repurchase Price shall be paid only in cash in the event any shares of Common Stock to be issued upon repurchase of Notes hereunder (i) require registration under any federal securities law before such shares may be freely transferrable without being subject to any transfer restrictions under the Securities Act upon repurchase and if such registration is not completed or does not become effective prior to the Repurchase Date, and/or (ii) require registration with or approval of any governmental authority under any state law or any other federal law before such shares may be validly issued or delivered upon repurchase and if such registration is not completed or does not become effective or such approval is not obtained prior to the Repurchase Date;

(3) Payment of the Repurchase Price may not be made in Common Stock unless such stock is, or shall have been, approved for listing on the New York Stock Exchange or listed on a national securities exchange or quoted on the Nasdaq National Market, in each case, prior to the Repurchase Date; and

(4) All shares of Common Stock which may be issued upon repurchase of Notes will be issued out of the Company’s authorized but unissued Common Stock and, will upon issue, be duly and validly issued and fully paid and non-assessable and free of any preemptive or similar rights.

If all of the conditions set forth in this Section 13.2 are not satisfied in accordance with the terms thereof, the Repurchase Price shall be paid by the Company only in cash.

SECTION 13.3 Notices; Method of Exercising Repurchase Right, Etc.

(1) On or before the 30th day after the occurrence of a Change in Control, the Company or, at the request and expense of the Company on or before the 30th day after such occurrence, the Trustee, shall give to all Holders of Notes, in the manner provided in Section 1.6, notice (the “Company Notice”) of the occurrence of the Change of Control and of the repurchase right set forth herein arising as a result thereof. The Company shall also deliver (i) a copy of such notice of a repurchase right to the Trustee and (ii) make a public announcement thereof by release made to Reuters Economic Services and Bloomberg Business News.

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Each notice of a repurchase right shall state:

(i) the Repurchase Date,

(ii) the date by which the repurchase right must be exercised,

(iii) the Repurchase Price, and whether the Repurchase Price shall be paid by the Company in cash or by delivery of shares of Common Stock,

(iv) a description of the procedure which a Holder must follow to exercise a repurchase right, and the place or places where such Notes, are to be surrendered for payment of the Repurchase Price and accrued interest, if any,

(v) that on the Repurchase Date the Repurchase Price, and accrued interest, if any, will become due and payable upon each such Note designated by the Holder to be repurchased, and that interest thereon shall cease to accrue on and after said date,

(vi) the Conversion Rate then in effect, the date on which the right to convert the principal amount of the Notes to be repurchased will terminate and the place or places where such Notes may be surrendered for conversion, and

(vii) the place or places that the Note certificate with the Election of Holder to Require Repurchase as specified in Section 2.2 shall be delivered.

No failure of the Company to give the foregoing notices or defect therein shall limit any Holder’s right to exercise a repurchase right or affect the validity of the proceedings for the repurchase of Notes.

If any of the foregoing provisions or other provisions of this Article XIII are inconsistent with applicable law, such law shall govern.

(2) To exercise a repurchase right, a Holder shall deliver to the Trustee on or before the 30th day after the date of the Company Notice (i) written notice of the Holder’s exercise of such right, which notice shall set forth the name of the Holder, the principal amount of the Notes to be repurchased (and, if any Note is to repurchased in part, the serial number thereof, the portion of the principal amount thereof to be repurchased and the name of the Person in which the portion thereof to remain Outstanding after such repurchase is to be registered) and a statement that an election to exercise the repurchase right is being made thereby, and, in the event that the Repurchase Price shall be paid in shares of Common Stock, the name or names (with addresses) in which the certificate or certificates for shares of Common Stock shall be issued, and (ii) the Notes with respect to which the repurchase right is being exercised. Such written notice shall be irrevocable, except that the right of the Holder to convert the Notes with respect to which the repurchase right is being exercised shall continue until the close of business on the Repurchase Date.

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(3) In the event a repurchase right shall be exercised in accordance with the terms hereof, the Company shall pay or cause to be paid to the Trustee the Repurchase Price in cash or shares of Common Stock, as provided above, for payment to the Holder on the Repurchase Date or, if shares of Common Stock are to be paid, as promptly after the Repurchase Date as practicable, together with accrued and unpaid interest to the Repurchase Date payable with respect to the Notes as to which the repurchase right has been exercised; provided, however, that installments of interest that mature on or prior to the Repurchase Date shall be payable in cash to the Holders of such Notes, or one or more Predecessor Notes, registered as such at the close of business on the relevant Regular Record Date.

(4) If any Note (or portion thereof) surrendered for repurchase shall not be so paid on the Repurchase Date, the principal amount of such Note (or portion thereof, as the case may be) shall, until paid, bear interest to the extent permitted by applicable law from the Repurchase Date at the rate of 7.00% per annum, and each Note shall remain convertible into the Principal Return, Net Shares, if any, and Additional Cash, if any, until the principal of such Note (or portion thereof, as the case may be) shall have been paid or duly provided for.

(5) Any Note which is to be repurchased only in part shall be surrendered to the Trustee (with, if the Company or the Trustee so requires, due endorsement by, or a written instrument of transfer in form satisfactory to the Company and the Trustee duly executed by, the Holder thereof or his attorney duly authorized in writing), and the Company shall execute, and the Trustee shall authenticate and make available for delivery to the Holder of such Note without service charge, a new Note or Notes, containing identical terms and conditions, each in an authorized denomination in aggregate principal amount equal to and in exchange for the unrepurchased portion of the principal of the Note so surrendered.

(6) Any issuance of shares of Common Stock in respect of the Repurchase Price shall be deemed to have been effected immediately prior to the close of business on the Repurchase Date and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock shall be issuable upon such repurchase shall be deemed to have become on the Repurchase Date the holder or holders of record of the shares represented thereby; provided, however, that any surrender for repurchase on a date when the stock transfer books of the Company shall be closed shall constitute the Person or Persons in whose name or names the certificate or certificates for such shares are to be issued as the record holder or holders thereof for all purposes at the opening of business on the next succeeding day on which such stock transfer books are open. No payment or adjustment shall be made for dividends or distributions on any Common Stock issued upon repurchase of any Note declared prior to the Repurchase Date.

(7) No fractions of shares shall be issued upon repurchase of Notes. If more than one Note shall be repurchased from the same Holder and the Repurchase Price shall be payable in shares of Common Stock, the number of full shares which shall be issuable upon such repurchase shall be computed on the basis of the aggregate principal amount of the Notes so repurchased. Instead of any fractional share of Common Stock which would otherwise be issuable on the repurchase of any Note or Notes, the Company will deliver to the applicable

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Holder its check for the current market value of such fractional share. The current market value of a fraction of a share is determined by multiplying the current market price of a full share by the fraction, and rounding the result to the nearest cent. For purposes of this Section, the current market price of a share of Common Stock is the Closing Price Per Share of the Common Stock on the Trading Day immediately preceding the Repurchase Date.

(8) Any issuance and delivery of certificates for shares of Common Stock on repurchase of Notes shall be made without charge to the Holder of Notes being repurchased for such certificates or for any tax or duty in respect of the issuance or delivery of such certificates or the notes represented thereby; provided, however, that the Company shall not be required to pay any tax or duty which may be payable in respect of (i) income of the Holder or (ii) any transfer involved in the issuance or delivery of certificates for shares of Common Stock in a name other than that of the Holder of the Notes being repurchased, and no such issuance or delivery shall be made unless and until the Person requesting such issuance or delivery has paid to the Company the amount of any such tax or duty or has established, to the satisfaction of the Company, that such tax or duty has been paid.

(9) All Notes delivered for repurchase shall be delivered to the Trustee to be cancelled at the direction of the Trustee, which shall dispose of the same as provided in Section 3.9.

SECTION 13.4 Certain Definitions.

For purposes of this Article XIII,

(1) the term “beneficial owner” shall be determined in accordance with Rule 13d-3, as in effect on the date of the original execution of this Indenture, promulgated by the Commission pursuant to the Exchange Act;

(2) a “Change in Control” shall be deemed to have occurred at the time, after the original issuance of the Notes, of:

(i) the acquisition by any Person (including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act) of beneficial ownership, directly or indirectly, through a purchase, merger or other acquisition transaction or series of transactions, of shares of capital stock of the Company entitling such person to exercise 50% or more of the total voting power of all shares of capital stock of the Company entitled to vote generally in the elections of directors, other (A) than any such acquisition by the Company, any subsidiary of the Company or any employee benefit plan of the Company or (b) any such acquisition by Morry Weiss, Judith A. Weiss, Harry H. Stone, Gary Weiss, Jeffrey Weiss, Zev Weiss, Elie Weiss and the Irving I. Stone Limited Liability Co. (collectively, the “Principals”) or any Person controlled by any of the Principals, so long as any such acquisition does not result, directly or indirectly, in a “going private transaction” within the meaning of the Exchange Act; or

(ii) any consolidation of the Company with, or merger of the Company into, any other Person, any merger of another Person into the Company, or any conveyance, sale,

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transfer or lease of all or substantially all of the assets of the Company to another Person (other than (a) any such transaction (x) which does not result in any reclassification, conversion, exchange or cancellation of outstanding shares of capital stock of the Company and (y) pursuant to which the holders of the Common Stock immediately prior to such transaction have the entitlement to exercise, directly or indirectly, 50% or more of the total voting power of all shares of capital stock entitled to vote generally in the election of directors of the continuing or surviving corporation immediately after such transaction or (b) any merger which is effected solely to change the jurisdiction of Incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of common stock of the surviving entity; provided, however, that a Change in Control shall not be deemed to have occurred if (I) the Closing Sales Price Per Share of the Class A Common Stock for any five Trading Days within the period of 10 consecutive Trading Days ending immediately after the later of the Change in Control or the public announcement of the Change in Control (in the case of a Change in Control under clause (i) above) or the period of 10 consecutive Trading Days ending immediately before the Change in Control (in the case of a Change in Control under clause (ii) above) shall equal or exceed 105% of the Conversion Price of the Notes in effect on each such Trading Day or (II) all of the consideration (excluding cash payments for fractional shares and cash payments made pursuant to dissenters’ appraisal rights) in a merger or consolidation otherwise constituting a Change of Control under clause (i) and/or clause (ii) above consists of shares of common stock traded on a national securities exchange or quoted on the Nasdaq National Market (or will be so traded or quoted immediately following such merger or consolidation) and as a result of such merger or consolidation the Notes become convertible into the Principal Return and shares of such common stock, if any, in each case calculated in accordance with Section 11.11 assuming such common stock is the Reference Property. For purposes of this Section 13.4, “Beneficial Owner” shall be determined in accordance with Rule 13(d)(3) promulgated by the Commission under the Exchange Act, as in effect on the date of this Indenture.

(3) the term “Conversion Price” shall equal U.S. $1,000 divided by the Conversion Rate (rounded to the nearest cent); and

(4) for purposes of Section 13.4(2)(i), the term “person” shall include any syndicate or group which would be deemed to be a “person” under Section 13(d)(3) of the Exchange Act, as in effect on the date of the original execution of this Indenture.

SECTION 13.5 Consolidation, Merger, Etc.

In the case of any consolidation, conveyance, sale, transfer or lease of all or substantially all of the assets of the Company to which Section 11.11 applies, in which the Common Stock of the Company is changed or exchanged as a result into the right to receive shares of stock and other securities or property or assets (including cash) which includes shares of Common Stock of the Company or common stock of another Person that are, or upon issuance will be, traded on a United States national securities exchange or approved for trading on an established automated over-the-counter trading market in the United States and such shares constitute at the time such change or exchange becomes effective in excess of 50% of the

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aggregate fair market value of such shares of stock and other securities, property and assets (including cash) (as determined by the Company, which determination shall be conclusive and binding), then the Person formed by such consolidation or resulting from such merger or combination or which acquires the properties or assets (including cash) of the Company, as the case may be, shall execute and deliver to the Trustee a supplemental indenture (which shall comply with the Trust Indenture Act as in force at the date of execution of such supplemental indenture) modifying the provisions of this Indenture relating to the right of Holders to cause the Company to repurchase the Notes following a Change in Control, including without limitation the applicable provisions of this Article XIII and the definitions of the Common Stock and Change in Control, as appropriate, and such other related definitions set forth herein as determined in good faith by the Company (which determination shall be conclusive and binding), to make such provisions apply in the event of a subsequent Change of Control to the common stock and the issuer thereof if different from the Company and Common Stock of the Company (in lieu of the Company and the Common Stock of the Company).

ARTICLE XIV

HOLDERS LISTS AND REPORTS BY TRUSTEE

AND COMPANY; NON-RECOURSE

SECTION 14.1 Company to Furnish Trustee Names and Addresses of Holders.

The Company will furnish or cause to be furnished to the Trustee:

(1) semi-annually, not more than 15 days after the Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders of Notes as of such Regular Record Date, and

(2) at such other times as the Trustee may reasonably request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished; provided, however, that no such list need be furnished so long as the Trustee is acting as Note Registrar.

SECTION 14.2 Preservation of Information.

(1) The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 14.1 and the names and addresses of Holders received by the Trustee in its capacity as Note Registrar. The Trustee may destroy any list, if any, furnished to it as provided in Section 14.1 upon receipt of a new list so furnished.

(2) After this Indenture has been qualified under the Trust Indenture Act, the rights of Holders to communicate with other Holders with respect to their rights under this Indenture or under the Notes, and the corresponding rights, and duties of the Trustee, shall be as provided by the Trust Indenture Act.

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(3) Every Holder of Notes, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of any disclosure of information as to names and addresses of Holders made pursuant to the Trust Indenture Act.

SECTION 14.3 No Recourse Against Others.

An incorporator or any past, present or future director, officer, employee or stockholder, as such, of the Company or any subsidiary shall not have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder shall waive and release all such liability. Such waiver and release shall be part of the consideration for the issue of the Notes.

SECTION 14.4 Reports by Trustee.

(1) After this Indenture has been qualified under the Trust Indenture Act, the Trustee shall transmit to Holders such reports concerning the Trustee and its actions under this Indenture as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant thereto.

(2) After this Indenture has been qualified under the Trust Indenture Act a copy of each such report shall, at the time of such transmission to Holders, be filed by the Trustee with each stock exchange upon which the Notes are listed, with the Commission and with the Company. The Company will notify the Trustee when the Notes are listed on any stock exchange.

SECTION 14.5 Reports by Company.

After this Indenture has been qualified under the Trust Indenture Act, the Company shall file with the Trustee and the Commission, and transmit to Holders, such information, documents and other reports, and such summaries thereof, as may be required pursuant to the Trust Indenture Act at the times and in the manner provided pursuant to such Act; provided that any such information, documents or reports required to be filed with the Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 shall be filed with the Trustee within 15 days after the same is so required to be filed with the Commission.

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ARTICLE XV

IMMUNITY OF INCORPORATORS, STOCKHOLDERS,

OFFICERS AND DIRECTORS

SECTION 15.1 Indenture and Notes Solely Corporate Obligations.

No recourse for the payment of the principal of or premium, if any, or interest on any Note and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture or in any Note, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, employee, agent, officer, or director or subsidiary, as such, past, present or future, of the Company or of any successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly understood that all such liability is hereby waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Notes.

This instrument may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument.

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed, and their respective corporate seals to be hereunto affixed and attested, all as of the day and year first above written.

AMERICAN GREETINGS CORPORATION
By:
	Name:
	Title:
U.S. BANK NATIONAL ASSOCIATION,
as Trustee
By:
	Name:
	Title:

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