10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended May 30, 2008

OR

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

For the transition period from              to             

Commission file number 1-13859

AMERICAN GREETINGS CORPORATION

(Exact name of registrant as specified in its charter)

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

(216) 252-7300

(Registrant’s telephone number, including area code)

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

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

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

As of July 7, 2008, the number of shares outstanding of each of the issuer’s classes of common stock was:

Class A Common                    45,346,060

Class B Common                       3,493,732

AMERICAN GREETINGS CORPORATION

INDEX

			Page Number
PART I - FINANCIAL INFORMATION
	Item 1.	Financial Statements	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
	Item 4.	Controls and Procedures	20
PART II - OTHER INFORMATION
	Item 1.	Legal Proceedings	21
	Item 1A.	Risk Factors	21
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
	Item 6.	Exhibits	22
SIGNATURES			22
EXHIBITS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AMERICAN GREETINGS CORPORATION

CONSOLIDATED STATEMENT OF INCOME

(Thousands of dollars except share and per share amounts)

	(Unaudited) Three Months Ended
	May 30, 2008			May 25, 2007
Net sales	$	425,463		$	418,016
Other revenue		2,837			1,951
Total revenue		428,300			419,967
Material, labor and other production costs		193,342			161,128
Selling, distribution and marketing expenses		150,875			140,694
Administrative and general expenses		62,561			62,235
Other operating income – net		(727	)		(360	)
Operating income		22,249			56,270
Interest expense		4,905			4,757
Interest income		(990	)		(1,499	)
Other non-operating income – net		(901	)		(1,543	)
Income from continuing operations before income tax expense		19,235			54,555
Income tax expense		5,902			24,292
Income from continuing operations		13,333			30,263
Loss from discontinued operations, net of tax		—			(213	)
Net income	$	13,333		$	30,050
Earnings per share – basic:
Income from continuing operations	$	0.27		$	0.54
Loss from discontinued operations		—			—
Net income	$	0.27		$	0.54
Earnings per share – assuming dilution:
Income from continuing operations	$	0.27		$	0.54
Loss from discontinued operations		—			—
Net income	$	0.27		$	0.54
Average number of shares outstanding		48,800,941			55,262,716
Average number of shares outstanding – assuming dilution		48,833,108			55,650,033
Dividends declared per share	$	0.12		$	0.10

See notes to consolidated financial statements (unaudited).

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AMERICAN GREETINGS CORPORATION

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Thousands of dollars)

	(Unaudited) May 30, 2008			(Note 1) February 29, 2008			(Unaudited) May 25, 2007
ASSETS
Current assets
Cash and cash equivalents	$	108,192		$	123,500		$	132,582
Short-term investments		—			—			28,325
Trade accounts receivable, net		59,897			61,902			119,147
Inventories		212,032			216,671			192,399
Deferred and refundable income taxes		67,604			72,280			76,892
Prepaid expenses and other		186,977			195,017			215,983
Total current assets		634,702			669,370			765,328
Goodwill		300,323			285,072			225,318
Other assets		405,116			420,219			399,880
Deferred and refundable income taxes		133,118			133,762			102,060
Property, plant and equipment – at cost		983,988			974,073			947,268
Less accumulated depreciation		685,336			678,068			666,687
Property, plant and equipment – net		298,652			296,005			280,581
	$	1,771,911		$	1,804,428		$	1,773,167
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Debt due within one year	$	70,835		$	42,790		$	—
Accounts payable		110,394			123,713			100,955
Accrued liabilities		73,281			79,345			77,837
Accrued compensation and benefits		39,582			68,669			43,656
Income taxes payable		23,348			29,037			29,878
Other current liabilities		117,160			108,867			84,621
Total current liabilities		434,600			452,421			336,947
Long-term debt		200,541			200,518			223,800
Other liabilities		157,610			181,720			147,597
Deferred income taxes and noncurrent income taxes payable		26,986			26,358			27,184
Shareholders’ equity
Common shares – Class A		45,345			45,324			51,148
Common shares – Class B		3,495			3,434			4,340
Capital in excess of par value		446,075			445,696			424,201
Treasury stock		(871,379	)		(872,949	)		(712,147	)
Accumulated other comprehensive income		20,746			21,244			6,030
Retained earnings		1,307,892			1,300,662			1,264,067
Total shareholders’ equity		952,174			943,411			1,037,639
	$	1,771,911		$	1,804,428		$	1,773,167

See notes to consolidated financial statements (unaudited).

4

AMERICAN GREETINGS CORPORATION

CONSOLIDATED STATEMENT OF CASH FLOWS

(Thousands of dollars)

	(Unaudited) Three Months Ended
	May 30, 2008			May 25, 2007
OPERATING ACTIVITIES:
Net income	$	13,333		$	30,050
Loss from discontinued operations		—			213
Income from continuing operations		13,333			30,263
Adjustments to reconcile to net cash (used) provided by operating activities:
Net loss (gain) on disposal of fixed assets		168			(116	)
Depreciation and amortization		12,785			11,995
Deferred income taxes		5,459			4,466
Other non-cash charges		1,718			1,979
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Decrease (increase) in trade accounts receivable		5,310			(14,745	)
Decrease (increase) in inventories		6,463			(7,389	)
Decrease in other current assets		2,001			646
Decrease in deferred costs – net		1,253			11,691
Decrease in accounts payable and other liabilities		(57,606	)		(21,759	)
Other – net		(2,771	)		4,107
Cash (Used) Provided by Operating Activities		(11,887	)		21,138
INVESTING ACTIVITIES:
Proceeds from sale of short-term investments		—			134,900
Purchases of short-term investments		—			(163,225	)
Property, plant and equipment additions		(10,088	)		(5,875	)
Cash payments for business acquisitions, net of cash acquired		(15,625	)		(6,056	)
Cash receipts related to discontinued operations		—			2,344
Proceeds from sale of fixed assets		265			890
Cash Used by Investing Activities		(25,448	)		(37,022	)
FINANCING ACTIVITIES:
Net increase in short-term debt		28,045			—
Sale of stock under benefit plans		363			9,358
Purchase of treasury shares		(38	)		(3,568	)
Dividends to shareholders		(5,852	)		(5,536	)
Cash Provided by Financing Activities		22,518			254
DISCONTINUED OPERATIONS:
Cash used by operating activities from discontinued operations		—			(59	)
Cash Used by Discontinued Operations		—			(59	)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(491	)		3,558
DECREASE IN CASH AND CASH EQUIVALENTS		(15,308	)		(12,131	)
Cash and Cash Equivalents at Beginning of Year		123,500			144,713
Cash and Cash Equivalents at End of Period	$	108,192		$	132,582

See notes to consolidated financial statements (unaudited).

5

AMERICAN GREETINGS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Three Months Ended May 30, 2008 and May 25, 2007

Note 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements of American Greetings Corporation and its subsidiaries (the “Corporation”) have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary to fairly present financial position, results of operations and cash flows for the periods have been included.

The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2008 refers to the year ended February 29, 2008.

These interim financial statements should be read in conjunction with the Corporation’s financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended February 29, 2008, from which the Consolidated Statement of Financial Position at February 29, 2008, presented herein, has been derived. During the fourth quarter of 2008, it was determined that the Corporation’s entertainment development and production joint venture no longer met all of the criteria necessary to be classified as held for sale in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets.” As a result, this business unit has been reclassified into continuing operations for all periods presented. In addition, certain other amounts in the prior year financial statements have also been reclassified to conform to the 2009 presentation. These reclassifications had no material impact on earnings or cash flows.

Note 2 – Seasonal Nature of Business

A significant portion of the Corporation’s business is seasonal in nature. Therefore, the results of operations for interim periods are not necessarily indicative of the results for the fiscal year taken as a whole.

Note 3 – Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (the “FASB”) issued SFAS No. 157 (“SFAS 157”), “Fair Value Measurements,” which provides a definition of fair value, establishes a framework for measuring fair value and requires expanded disclosures about fair value measurements. In November 2007, the FASB deferred the effective date of SFAS 157 for non-financial assets and liabilities until fiscal years and interim periods beginning after November 15, 2008. SFAS 157 is still effective for the Corporation in fiscal 2009 for financial assets and liabilities. The provisions of SFAS 157 will be applied prospectively. The Corporation adopted SFAS 157 for financial assets and liabilities on March 1, 2008. See Note 12.

In February 2007, the FASB issued SFAS No. 159 (“SFAS 159”), “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS 159 allows companies to choose to measure financial instruments and certain other financial assets and financial liabilities at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Corporation adopted SFAS 159 on March 1, 2008 and elected not to measure any additional financial instruments or other items at fair value.

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Note 4 – Other Income and Expense

	Three Months Ended
(In thousands)	May 30, 2008			May 25, 2007
Other operating income – net	$	(727	)	$	(360	)
Foreign exchange gain	$	(537	)	$	(1,120	)
Rental income		(537	)		(397	)
Miscellaneous		173			(26	)
Other non-operating income – net	$	(901	)	$	(1,543	)

“Miscellaneous” includes, among other things, gains and losses on asset disposals.

Note 5 – Earnings Per Share

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

	Three Months Ended
	May 30, 2008		May 25, 2007
Numerator (in thousands):
Income from continuing operations	$	13,333	$	30,263
Denominator (in thousands):
Weighted average shares outstanding		48,801		55,263
Effect of dilutive securities:
Stock options and other		32		387
Weighted average shares outstanding – assuming dilution		48,833		55,650
Income from continuing operations per share	$	0.27	$	0.54
Income from continuing operations per share – assuming dilution	$	0.27	$	0.54

Approximately 5.6 million and 2.8 million stock options outstanding in the three month periods ended May 30, 2008 and May 25, 2007, respectively, were excluded from the computation of earnings per share–assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the respective periods.

Note 6 – Comprehensive Income

The Corporation’s total comprehensive income is as follows:

	Three Months Ended
(In thousands)	May 30, 2008			May 25, 2007
Net income	$	13,333		$	30,050
Other comprehensive (loss) income:
Foreign currency translation adjustment and other		(273	)		7,043
Pension and other postretirement benefit plans		(225	)		—
Total comprehensive income	$	12,835		$	37,093

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Note 7 – Trade Accounts Receivable, Net

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

(In thousands)	May 30, 2008		February 29, 2008		May 25, 2007
Allowance for seasonal sales returns	$	59,451	$	59,626	$	67,039
Allowance for outdated products		23,199		21,435		26,769
Allowance for doubtful accounts		4,111		3,778		5,009
Allowance for cooperative advertising and marketing funds		35,247		33,662		30,528
Allowance for rebates		57,900		41,435		47,965
	$	179,908	$	159,936	$	177,310

Note 8 – Inventories

(In thousands)	May 30, 2008		February 29, 2008		May 25, 2007
Raw materials	$	20,437	$	17,701	$	19,568
Work in process		12,414		10,516		14,957
Finished products		234,910		244,379		209,688
		267,761		272,596		244,213
Less LIFO reserve		83,194		82,085		80,567
		184,567		190,511		163,646
Display materials and factory supplies		27,465		26,160		28,753
	$	212,032	$	216,671	$	192,399

The valuation of inventory under the Last-In, First-Out (LIFO) method is made at the end of each fiscal year based on inventory levels and costs at that time. Accordingly, interim LIFO calculations, by necessity, are based on estimates of expected fiscal year-end inventory levels and costs and are subject to final fiscal year-end LIFO inventory calculations.

Inventory held on location for retailers with scan-based trading arrangements totaled approximately $37 million, $32 million and $32 million as of May 30, 2008, February 29, 2008 and May 25, 2007, respectively.

Note 9 – Deferred Costs

Deferred costs and future payment commitments are included in the following financial statement captions:

(In thousands)	May 30, 2008			February 29, 2008			May 25, 2007
Prepaid expenses and other	$	110,633		$	119,069		$	119,741
Other assets		326,777			338,003			337,358
Deferred cost assets		437,410			457,072			457,099
Other current liabilities		(71,348	)		(68,457	)		(47,609	)
Other liabilities		(29,182	)		(50,491	)		(30,681	)
Deferred cost liabilities		(100,530	)		(118,948	)		(78,290	)
Net deferred costs	$	336,880		$	338,124		$	378,809

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Note 10 – Debt

The Corporation is party to an amended and restated $450 million secured credit agreement and to an amended and restated receivables purchase agreement that had available financing of up to $150 million. The credit agreement includes a $350 million revolving credit facility and a $100 million delay draw term loan. The agreements were each amended on March 28, 2008. The amendment to the credit agreement extends the period during which the Corporation may borrow on the term loan until April 3, 2009 and changes the start of the amortization period from April 4, 2008 until April 3, 2009. The amendment to the accounts receivable facility decreases the amount of available financing from $150 million to $90 million.

Debt due within one year is as follows:

(In thousands)	May 30, 2008		February 29, 2008
Revolving credit facility	$	35,000	$	20,100
Accounts receivable securitization facility		13,145		—
6.10% senior notes, due 2028		22,690		22,690
	$	70,835	$	42,790

There was no debt due within one year as of May 25, 2007.

At May 30, 2008, the balances outstanding on the revolving credit facility and accounts receivable securitization facility bear interest at a rate of approximately 3.2% and 3.4%, respectively. In addition to the balances outstanding under the aforementioned agreements, the Corporation has, in the aggregate, $25.7 million outstanding under letters of credit, which reduces the total credit availability thereunder. The balance of the 6.10% senior notes was reclassified to current during the second quarter of 2008 as these notes may be put back to the Corporation on August 1, 2008, at the option of the holders, at 100% of the principal amount provided the holders exercise this option between July 1, 2008 and August 1, 2008.

Long-term debt and their related calendar year due dates are as follows:

(In thousands)	May 30, 2008		February 29, 2008		May 25, 2007
7.375% senior notes, due 2016	$	200,000	$	200,000	$	200,000
6.10% senior notes, due 2028		—		—		22,690
Other (due 2010)		541		518		1,110
	$	200,541	$	200,518	$	223,800

At May 30, 2008, the Corporation was in compliance with the financial covenants under its borrowing agreements.

Note 11 – Retirement Benefits

The components of periodic benefit cost for the Corporation’s defined benefit pension and postretirement benefit plans are as follows:

	Defined Benefit Pension						Postretirement Benefit
	Three Months Ended						Three Months Ended
(In thousands)	May 30, 2008			May 25, 2007			May 30, 2008			May 25, 2007
Service cost	$	241		$	244		$	950		$	1,050
Interest cost		2,304			2,265			2,200			2,150
Expected return on plan assets		(2,043	)		(2,154	)		(1,250	)		(1,250	)
Amortization of prior service cost (credit)		77			64			(1,850	)		(1,850	)
Amortization of actuarial loss		320			410			1,075			1,650
	$	899		$	829		$	1,125		$	1,750

The Corporation has a non-contributory profit-sharing plan with a contributory 401(k) provision covering most of its United States employees. The profit-sharing plan expense for the three months ended May 30, 2008 was $1.1 million, compared to $3.1 million in the prior year period. The profit-sharing plan expense for the three month

9

periods are estimates as actual contributions to the profit-sharing plan are made after fiscal year-end. The Corporation also matches a portion of 401(k) employee contributions. The expense recognized for the 401(k) match for the three months ended May 30, 2008 and May 25, 2007 was $1.8 million and $1.2 million, respectively.

At May 30, 2008, February 29, 2008 and May 25, 2007, the liability for postretirement benefits other than pensions was $64.9 million, $63.0 million and $68.5 million, respectively, and is included in “Other liabilities” on the Consolidated Statement of Financial Position.

Note 12 – Fair Value Measurements

SFAS 157 outlines a valuation framework, which requires use of the market approach, income approach and/or cost approach when measuring fair value and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. SFAS 157 also expands disclosure requirements to include the methods and assumptions used to measure fair value.

The hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The classification of fair value measurements within the hierarchy is based upon the lowest level of input that is significant to the measurement. The three levels are defined as follows:

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

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

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

As of May 30, 2008, the Corporation had $6.3 million of mutual fund assets held in a rabbi trust and $6.3 million of a non-qualified deferred compensation plan liability. The fair value of the mutual fund assets was based on each fund’s quoted market value per share in an active market and was considered a Level 1 valuation. Although the Corporation is under no obligation to fund employees’ nonqualified accounts, the fair value of the related non-qualified deferred compensation liability is based on the fair value of the mutual fund assets. The fair value measurement of the deferred compensation liability was also considered a Level 1 valuation because the liability was measured by quoted prices in an active market.

Note 13 – Income Taxes

Effective March 1, 2007, the Corporation adopted FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109,” including the provisions of FASB Staff Position No. FIN-48-1, “Definition of Settlement in FASB Interpretation No. 48.” In connection with the adoption of FIN 48, the Corporation recorded a decrease to retained earnings of $14.0 million to recognize an increase in its liability (or decrease to its refundable) for unrecognized tax benefits, interest and penalties under the recognition and measurement criteria of FIN 48.

Included in the balance of unrecognized tax benefits at February 29, 2008, was $21.0 million in unrecognized tax benefits, the recognition of which would have a favorable effect on the effective tax rate. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 29, 2008 could decrease approximately $2 million during 2009 due to anticipated settlements and resulting cash payments related to open years after 1999, which are currently under examination. As of February 29, 2008, the total amount of gross accrued interest and penalties included in the Consolidated Statement of Financial Position was $6.5 million.

The Corporation is subject to examination by the U.S. Internal Revenue Service and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various foreign tax jurisdictions, including Canada, the United Kingdom, Australia, France, Italy, Mexico and New Zealand for tax years 2003 to the present.

There were no significant changes to any of these amounts during the first quarter of 2009.

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Note 14 – Business Segment Information

	Total Revenue						Segment Earnings (Loss)
	Three Months Ended						Three Months Ended
(In thousands)	May 30, 2008			May 25, 2007			May 30, 2008			May 25, 2007
North American Social Expression Products	$	302,418		$	299,944		$	53,695		$	88,862
Intersegment items		(14,644	)		(8,503	)		(11,243	)		(6,522	)
Exchange rate adjustment		513			(2,509	)		59			(1,650	)
Net		288,287			288,932			42,511			80,690
International Social Expression Products		69,873			64,417			2,862			176
Exchange rate adjustment		1,087			(668	)		(57	)		11
Net		70,960			63,749			2,805			187
Retail Operations		41,493			40,539			(3,407	)		(2,769	)
Exchange rate adjustment		490			(1,611	)		(6	)		(12	)
Net		41,983			38,928			(3,413	)		(2,781	)
AG Interactive		20,527			19,899			(1,096	)		3,279
Exchange rate adjustment		34			(3	)		35			8
Net		20,561			19,896			(1,061	)		3,287
Non-reportable segments		6,509			8,385			(1,966	)		563
Unallocated		—			77			(19,633	)		(27,352	)
Exchange rate adjustment		—			—			(8	)		(39	)
Net		—			77			(19,641	)		(27,391	)
Consolidated total	$	428,300		$	419,967		$	19,235		$	54,555

Termination Benefits

Termination benefits are primarily considered part of an ongoing benefit arrangement, accounted for in accordance with SFAS No. 112, “Employers’ Accounting for Postemployment Benefits,” and are recorded when payment of the benefits is probable and can be reasonably estimated.

The balance of the severance accrual was $7.0 million, $9.6 million and $6.8 million at May 30, 2008, February 29, 2008 and May 25, 2007, respectively, and is included in “Accrued liabilities” on the Consolidated Statement of Financial Position.

Deferred Revenue

Deferred revenue, included in “Other current liabilities” on the Consolidated Statement of Financial Position, totaled $37.8 million, $37.9 million and $34.9 million at May 30, 2008, February 29, 2008 and May 25, 2007, respectively. The amounts relate primarily to the Corporation’s AG Interactive segment and the licensing business included in non-reportable segments.

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Acquisitions

In March 2008, the Corporation acquired a card publisher and franchised distributor of greeting cards in the United Kingdom (“U.K.”), for approximately $16 million. Cash paid, net of cash acquired was $15.6 million and is reflected in investing activities in the Consolidated Statement of Cash Flows. Although the allocation of the purchase price has not yet been finalized, goodwill of approximately $12 million has been recorded as of May 30, 2008. The purchase agreement provides for a contingent payment of up to 2 million U.K. Pounds Sterling to be paid based on the company’s operating results over a three-year period from the date of acquisition. The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. Pro forma results of operations have not been presented because the effect of this acquisition was not deemed material.

During the first quarter of 2009, a preliminary valuation of the intangible assets of PhotoWorks, Inc., which was acquired in the second half of 2008, was completed. Although the allocation of the purchase price has not yet been finalized, the value of the intangible assets acquired was reduced approximately $4 million with a corresponding increase in goodwill recorded as a result of the preliminary valuation.

Note 15 – Discontinued Operations

Discontinued operations include Learning Horizons, the Corporation’s educational products business. This subsidiary meets the definition of a “component of an entity” and has been accounted for as a discontinued operation under SFAS 144. Accordingly, the Corporation’s consolidated financial statements and related notes have been presented to reflect Learning Horizons as a discontinued operation for all periods presented. Learning Horizons was previously included within the Corporation’s “non-reportable segments.”

In February 2007, the Corporation entered into an agreement to sell Learning Horizons. The sale reflects the Corporation’s strategy to focus its resources on business units closely related to its core social expression business. The sale closed in March 2007 and the Corporation received cash proceeds of $2.3 million, which is included in “Cash receipts related to discontinued operations” in the Consolidated Statement of Cash Flows.

The following summarizes the results of discontinued operations:

(In thousands)	Three Months Ended May 25, 2007
Total revenue	$	299
Pre-tax loss from operations	$	(47	)
Gain on sale		195
		148
Income tax expense		361
Loss from discontinued operations, net of tax	$	(213	)

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited consolidated financial statements. This discussion and analysis, and other statements made in this Report, contain forward-looking statements, see “Factors That May Affect Future Results” at the end of this discussion and analysis for a description of the uncertainties, risks and assumptions associated with these statements. Unless otherwise indicated or the context otherwise requires, the “Corporation,” “we,” “our,” “us” and “American Greetings” are used in this Report to refer to the businesses of American Greetings Corporation and its consolidated subsidiaries.

Overview

During the first quarter, we continued to transition fresh new products to retail, which continues to drive sales growth in the card business. The level of activity, including production, distribution and merchandising, needed to drive these sales provided increased costs that put downward pressure on earnings. The growth in the value card line continued in the quarter, driving down the average selling price of both everyday and seasonal cards, while overall card unit sales increased compared to the prior year period. The content costs of cards also continued to increase with growth in the sale of technology cards and changes in product design that add creative embellishments to the card line.

We experienced higher consolidated total revenues and lower earnings during the first quarter of 2009, compared to the prior year quarter. The higher revenues were primarily the result of favorable foreign currency translation. Revenue improvement in the International Social Expression Products segment, primarily in the United Kingdom (“U.K.”), was substantially offset by decreased revenue in the North American Social Expression Products segment. In the card businesses, growth in card unit sales was partially offset by lower average selling prices caused by a higher mix of value line cards.

Our lower earnings were driven by several factors within our North American Social Expression Products segment, which experienced increased costs in the current quarter compared to the prior year period. These items include the rollout of the new single priced card line in Canada, increases in product content costs and increased supply chain, scrap and distribution costs.

As noted in our fiscal year 2008 Annual Report on Form 10-K, the recent parity of the currency exchange rate between the U.S. dollar and the Canadian dollar have created some challenges in the marketplace. To address these challenges, we have created a new Canadian line of products resulting in a temporary reduction in revenues and a temporary increase in costs to create, manufacture and distribute the new product. These impacts continued during the first quarter and reduced pre-tax earnings by approximately $10 million. We anticipate that the rollout of the new Canadian line will be completed during the second quarter of 2009.

As also noted in the prior year, we have experienced increases in card product costs associated with more technology cards (paper cards that include light and/or sound) and other creative content costs. These costs continue to be higher compared to the prior year first quarter, particularly in seasonal cards, as we add technology and other creative embellishments that increase consumers’ perceived value of the card product.

Increases in card shipments outpaced increases of card net sales, particularly seasonal cards, driving up supply chain, scrap and distribution costs during the first quarter compared to the prior year period. In total, these costs along with the increased card product content costs impacted pre-tax earnings by approximately $24 million compared to the prior year period.

The AG Interactive segment also contributed to the decrease in first quarter earnings, primarily related to the two acquisitions in the online photo sharing space that we made during the second half of last year. We are still developing these product lines, which historically are seasonally stronger during the second half of the year. Our overall photo strategy is designed to bring together the strength of both operations, and then leverage the user across all of our existing websites.

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In March 2008, we acquired a card publisher and franchised distributor of greeting cards in the U.K. This acquisition provides us with additional distribution in an increasingly fragmented U.K. market and we anticipate leveraging supply chain synergies as we integrate this new business.

Results of Operations

Three months ended May 30, 2008 and May 25, 2007

Net income was $13.3 million, or $0.27 per share, in the first quarter compared to $30.1 million, or $0.54 per share, in the prior year first quarter (all per-share amounts assume dilution).

Our results for the three months ended May 30, 2008 and May 25, 2007 are summarized below:

(Dollars in thousands)	2008			% Total Revenue		2007			% Total Revenue
Net sales	$	425,463		99.3	%	$	418,016		99.5	%
Other revenue		2,837		0.7	%		1,951		0.5	%
Total revenue		428,300		100.0	%		419,967		100.0	%
Material, labor and other production costs		193,342		45.1	%		161,128		38.4	%
Selling, distribution and marketing expenses		150,875		35.2	%		140,694		33.5	%
Administrative and general expenses		62,561		14.6	%		62,235		14.8	%
Other operating income – net		(727	)	(0.1	)%		(360	)	(0.1	)%
Operating income		22,249		5.2	%		56,270		13.4	%
Interest expense		4,905		1.1	%		4,757		1.1	%
Interest income		(990	)	(0.2	)%		(1,499	)	(0.3	)%
Other non-operating income – net		(901	)	(0.2	)%		(1,543	)	(0.4	)%
Income from continuing operations before income tax expense		19,235		4.5	%		54,555		13.0	%
Income tax expense		5,902		1.4	%		24,292		5.8	%
Income from continuing operations		13,333		3.1	%		30,263		7.2	%
Loss from discontinued operations, net of tax		—		(0.0	)%		(213	)	(0.0	)%
Net income	$	13,333		3.1	%	$	30,050		7.2	%

For the three months ended May 30, 2008, consolidated net sales were $425.5 million, up from $418.0 million in the prior year first quarter. This 1.8%, or $7.4 million, increase was primarily the result of higher net sales in our International Social Expression Products segment of approximately $5 million and a favorable foreign currency translation impact of approximately $7 million. These increases were partially offset by lower net sales in our North American Social Expression Products segment of approximately $4 million.

The increase in our International Social Expression Products segment’s net sales was driven by our U.K. operations where approximately half of the increase was due to the acquisition completed in the current quarter. The remaining increase was primarily the result of a comparison to a soft prior period and additional distribution in the current year at existing customers in the U.K. The prior period was unfavorably impacted by costs associated with incentive allowances for removal of product at retail, as credits issued to customers exceeded new product shipments.

Net sales of our North American Social Expression Products segment decreased approximately $4 million. The majority of the decrease is attributable to the new Canadian line of single-priced cards. The effect of implementing the new product line was a reduction of approximately $5 million in net sales. Lower sales of our gift packaging products and party goods also contributed to the decrease. These decreases were partially offset by higher sales of both everyday and seasonal cards.

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Other revenue, primarily royalty revenue, increased $0.8 million from $2.0 million during the three months ended May 25, 2007 to $2.8 million for the three months ended May 30, 2008.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for the three months ended May 30, 2008 and May 25, 2007 are summarized below:

	Increase (Decrease) From the Prior Year
	Everyday Cards				Seasonal Cards				Total Greeting Cards
	2008		2007		2008		2007		2008		2007
Unit volume	11.2	%	8.0	%	7.1	%	(1.5	)%	9.7	%	4.3	%
Selling prices	(4.6	)%	(4.7	)%	(5.8	)%	1.5	%	(5.2	)%	(2.5	)%
Overall increase / (decrease)	6.0	%	2.9	%	0.9	%	0.0	%	4.0	%	1.7	%

During the first quarter, combined everyday and seasonal greeting card sales less returns improved 4.0%, compared to the prior year quarter, with most of the increase coming from everyday cards.

Everyday card sales less returns for the first quarter were up 6.0%, compared to the prior year quarter with improvement in both the North American Social Expression Products segment and International Social Expression Products segment. Overall, unit volume was up 11.2% and selling prices were down 4.6%. The lower selling prices were the result of a higher mix of value line cards compared to the prior year.

Seasonal card unit volume increased 7.1%, driven primarily by the Mother’s Day program. Lower selling prices of 5.8% related to a higher mix of value priced cards across most programs in the North American Social Expression Products segment compared to the prior year period.

Expense Overview

During the current quarter, we experienced increased costs. These higher costs were due to the rollout of the new single priced card line in Canada, added content to our cards, including music and lights, and increased shipments outpacing increased net sales. These activities were undertaken to drive profitable sales growth.

Material, labor and other production costs for the three months ended May 30, 2008 were $193.3 million, an increase from $161.1 million for the comparable period in the prior year. As a percentage of total revenue, these costs were 45.1% in the current period compared to 38.4% for the three months ended May 25, 2007. The increase of $32.2 million is due to unfavorable spending and product mix of approximately $20 million and $10 million, respectively, and foreign currency translation impacts of approximately $2 million. The increased spending is primarily attributable to higher scrap and creative content costs as well as costs associated with the conversion to our new Canadian line of cards. The unfavorable product mix is attributable to a shift toward cards with more content, including music, lights and other embellishments.

Selling, distribution and marketing expenses for the three months ended May 30, 2008 were $150.9 million, increasing from $140.7 million for the comparable period in the prior year. The increase of $10.2 million is due to unfavorable foreign currency translation of approximately $3 million and higher spending of approximately $7 million. The additional spending is attributable to increases in supply chain costs, specifically freight and distribution costs, due to an increase in products shipped. Merchandiser expense and freight and distribution costs each increased approximately $4 million.

Administrative and general expenses were $62.6 million for the three months ended May 30, 2008, an increase from $62.2 million for the three months ended May 25, 2007. The increase of $0.4 million is primarily related to unfavorable foreign currency translation.

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Interest expense for the three months ended May 30, 2008 was $4.9 million, up from $4.8 million for the prior year quarter. The increase of $0.1 million is attributable to increased short-term borrowings on the revolving credit facility and the accounts receivable securitization facility in the current period.

Other non-operating income – net was $0.9 million in the current year first quarter compared to $1.5 million for the three months ended May 25, 2007. The $0.6 million reduction in income is due primarily to decreased foreign exchange gains in the current period.

The effective tax rate on income from continuing operations was 30.7% and 44.5% for the three months ended May 30, 2008 and May 25, 2007, respectively. The higher effective tax rate in the prior quarter related to several discrete events during that period, primarily agreements reached with the Internal Revenue Service as it closed its audit cycle.

Segment Information

Our operations are organized and managed according to a number of factors, including product categories, geographic locations and channels of distribution. Our North American Social Expression Products and our International Social Expression Products segments primarily design, manufacture and sell greeting cards and other related products through various channels of distribution, with mass retailers as the primary channel. As permitted under Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information,” certain operating divisions have been aggregated into both the North American Social Expression Products and International Social Expression Products segments. The aggregated operating divisions have similar economic characteristics, products, production processes, types of customers and distribution methods. At May 30, 2008, we owned and operated 417 card and gift retail stores in the United States and Canada through our Retail Operations segment. The stores are primarily located in malls and strip shopping centers. The stores sell products purchased from the North American Social Expression Products segment as well as products purchased from other vendors. AG Interactive distributes social expression products, including electronic greetings, personalized printable greeting cards and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices. AG Interactive also offers online photo sharing space and a platform to provide consumers the ability to use their own photos to create unique, high quality physical products, including greeting cards, calendars, photo albums and photo books.

We review segment results using consistent exchange rates between periods to eliminate the impact of foreign currency fluctuations.

North American Social Expression Products Segment

	Three Months Ended
(Dollars in thousands)	May 30, 2008		May 25, 2007		% Change
Total revenue	$	287,774	$	291,441	(1.3	)%
Segment earnings		42,452		82,340	(48.4	)%

Total revenue of our North American Social Expression Products segment for the quarter ended May 30, 2008, excluding the impact of foreign exchange and intersegment items, decreased $3.7 million, or 1.3%, from the prior year period. The majority of the decrease was driven by the rollout of the new Canadian card line. The effect of implementing the new product line was a reduction of approximately $5 million in revenue. Lower sales of our gift packaging products and party goods also contributed to the decrease. These decreases were partially offset by higher sales of both everyday and seasonal cards.

Segment earnings, excluding the impact of foreign exchange and intersegment items, decreased $39.9 million in the current period compared to the three months ended May 25, 2007. The conversion to the new Canadian card line reduced earnings by approximately $10 million in the current three months. Also contributing to the decrease are lower margins and increased supply chain costs. The lower margins are a result of a shift in product mix toward cards with more content, including music, lights and other embellishments. The additional supply chain spending,

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specifically freight and distribution costs, is due to an increase in products shipped. In total, these costs along with the increased card product content costs impacted segment earnings by approximately $24 million compared to the prior year period.

International Social Expression Products Segment

	Three Months Ended
(Dollars in thousands)	May 30, 2008		May 25, 2007		% Change
Total revenue	$	69,873	$	64,417	8.5	%
Segment earnings		2,862		176	1,526.1	%

Total revenue of our International Social Expression Products segment, excluding the impact of foreign exchange, increased $5.5 million, or 8.5%, compared to the prior year quarter. Approximately half of the revenue improvement in the three-month period is attributable to the acquisition completed in the current period. The remaining increase was primarily the result of a comparison to a soft prior period and additional distribution in the current year at existing customers in the U.K. The prior period was unfavorably impacted by costs associated with incentive allowances for removal of product at retail, as credits issued to customers exceeded new product shipments.

Segment earnings, excluding the impact of foreign exchange, increased $2.7 million compared to the prior year three months. The increase is attributable to the higher sales volume in the current period and lower distribution and marketing expenses. The distribution and marketing expenses were higher in the prior year quarter due to the activities related to the removal of product at retail during that period.

Retail Operations Segment

	Three Months Ended
(Dollars in thousands)	May 30, 2008			May 25, 2007			% Change
Total revenue	$	41,493		$	40,539		2.4	%
Segment loss		(3,407	)		(2,769	)	(23.0	)%

Total revenue, excluding the impact of foreign exchange, in our Retail Operations segment increased $1.0 million, or 2.4%, for the three months ended May 30, 2008, compared to the prior year period due to favorable same-store sales. The current year period benefited from the performance of children’s gifting products, which was the driver of the same-store sales increase.

Segment earnings, excluding the impact of foreign exchange, was a loss of $3.4 million in the three months ended May 30, 2008, compared to a loss of $2.8 million during the three months ended May 25, 2007. Segment earnings were unfavorably impacted by a weakening of gross margins as a result of more promotional pricing. Gross margins decreased by approximately 1.9 percentage points.

AG Interactive Segment

	Three Months Ended
(Dollars in thousands)	May 30, 2008			May 25, 2007		% Change
Total revenue	$	20,527		$	19,899	3.2	%
Segment (loss) earnings		(1,096	)		3,279	(133.4	)%

Total revenue of AG Interactive for the three months ended May 30, 2008, excluding the impact of foreign exchange, was $20.5 million compared to $19.9 million in the prior year first quarter. The current year period includes approximately $3 million of revenue from the digital photography acquisitions completed during the second half of 2008. These revenues were partially offset by lower advertising revenues in our online product group. At the end of the first quarter of 2009, AG Interactive had approximately 3.9 million online paid subscriptions versus 3.6 million at the prior year quarter end.

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Segment earnings, excluding the impact of foreign exchange, was a loss of $1.1 million for the quarter ended May 30, 2008, compared to earnings of $3.3 million in the prior year period. The decrease is primarily attributable to expenses incurred in the current period associated with the digital photo product line, including marketing and technology costs. Included in these expenses is approximately $1 million of amortization expense of intangible assets.

Liquidity and Capital Resources

The seasonal nature of our business precludes a useful comparison of the current period and the fiscal year-end financial statements; therefore, a Consolidated Statement of Financial Position as of May 25, 2007, has been included.

Operating Activities

Operating activities used $11.9 million of cash during the three months ended May 30, 2008, compared to providing $21.1 million of cash in the prior year period.

Accounts receivable was a source of cash of $5.3 million during the three months ended May 30, 2008, compared to a use of cash of $14.7 million in the prior year first quarter. The change is attributable to an increase in allowances and discounts as well as increased collections in the U.K.

Deferred costs - net generally represents payments under agreements with retailers net of the related amortization of those payments. During the three months ended May 30, 2008, amortization exceeded payments by $1.3 million; in the three months ended May 25, 2007, amortization exceeded payments by $11.7 million. See Note 9 to the consolidated financial statements for further detail of deferred costs related to customer agreements.

Accounts payable and other liabilities used $57.6 million of cash during the three months ended May 30, 2008, compared to $21.8 million in the prior year period. The change from the prior year is due primarily to income taxes as well as the change in accrued compensation and benefits. The change in income taxes is primarily the result of the lower income level in the current year three months compared to the prior year three months.

Investing Activities

Investing activities used $25.4 million of cash during the three months ended May 30, 2008, compared to $37.0 million in the prior year period. The use of cash in the current quarter is related to cash payments for business acquisitions as well as capital expenditures of $10.1 million. During the first quarter of fiscal 2009, we purchased a card publisher and franchised distributor of greeting cards in the U.K. for $15.6 million. The use of cash in the prior quarter is related to purchases exceeding sales of short-term investments as well as cash payments for business acquisitions. The final payment of $6.1 million for the online greeting card business purchased in the second quarter of fiscal 2007 was made during the first quarter of fiscal 2008.

Financing Activities

Financing activities provided $22.5 million of cash during the three months ended May 30, 2008, compared to $0.3 million during the three months ended May 25, 2007. The current year source of cash relates primarily to short-term debt borrowings of $28.0 million and our receipt of the exercise price on stock options, which provided $0.4 million in the current period. Our receipt of the exercise price on stock options provided $9.4 million in the prior year quarter, but was almost completely offset by dividend payments and share repurchases. Our Class A common share repurchase programs were made through 10b5-1 programs. During the three months ended May 25, 2007, $3.4 million was paid to repurchase approximately 0.1 million shares under the repurchase program.

During the three months ended May 30, 2008 and May 25, 2007, we paid quarterly dividends of $0.12 and $0.10 per common share, respectively, which totaled $5.9 million and $5.5 million, respectively.

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Credit Sources

Substantial credit sources are available to us. In total, we had available sources of approximately $540 million at May 30, 2008. This included our $450 million senior secured credit facility and our $90 million accounts receivable securitization facility. Borrowings under the accounts receivable securitization facility are limited based on our eligible receivables outstanding. We had $35.0 million outstanding under the revolving credit facility and $13.1 million outstanding under the accounts receivable securitization agreement at May 30, 2008. In addition to these borrowings, we have, in the aggregate, $25.7 million outstanding under letters of credit, which reduces the total credit availability thereunder.

Please refer to the discussion of our borrowing arrangements as disclosed in the “Credit Sources” section of our Annual Report on Form 10-K for the year ended February 29, 2008 for further information.

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

Critical Accounting Policies

Please refer to the discussion of our Critical Accounting Policies as disclosed in our Annual Report on Form 10-K for the year ended February 29, 2008.

Factors That May Affect Future Results

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

• a weak retail environment;

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

• competitive terms of sale offered to customers;

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

• consumer acceptance of products as priced and marketed;

• the impact of technology on core product sales;

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

• the escalation in the cost of providing employee health care;

• the ability to successfully integrate acquisitions;

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

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

• the ability to comply with our debt covenants;

• our ability to successfully complete, or achieve the desired benefits associated with, dispositions;

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

• the outcome of any legal claims known or unknown.

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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 to gain a leadership position in the digital photo sharing space.

The risks and uncertainties identified above are not the only risks we face. Additional risks and uncertainties not presently known to us or that we believe to be immaterial also may adversely affect us. Should any known or unknown risks or uncertainties develop into actual events, or underlying assumptions prove inaccurate, these developments could have material adverse effects on our business, financial condition and results of operations. For further information concerning the risks we face and issues that could materially affect our financial performance related to forward-looking statements, refer to our periodic filings with the Securities and Exchange Commission, including the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended February 29, 2008.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

For further information, refer to our Annual Report on Form 10-K for the year ended February 29, 2008. There were no material changes in market risk, specifically interest rate and foreign currency exposure, for us from February 29, 2008, the end of our preceding fiscal year, to May 30, 2008, the end of our most recent fiscal quarter.

Item 4. Controls and Procedures

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

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

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

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes in the risk factors that were discussed in our Annual Report on Form 10-K for the year ended February 29, 2008.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable.

(c) The following table provides information with respect to our purchases of our common shares during the three months ended May 30, 2008.

Period	Total Number of Shares Repurchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans		Maximum Number of Shares (or Approximate Dollar Value) that May Yet Be Purchased Under the Plans
March 2008	Class A –	—			—	—	(2)	$	50,935,815
	Class B –	890	(1)	$	18.65	—
April 2008	Class A –	—			—	—	(2)	$	50,935,815
	Class B –	500	(1)	$	17.75	—
May 2008	Class A –	—			—	—	(2)	$	50,935,815
	Class B –	670	(1)	$	18.31	—
Total	Class A –	—				—	(2)
	Class B –	2,060	(1)			—

(1) There is no public market for the Class B common shares of the Corporation. Pursuant to our Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. If the Corporation does not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer. All of the shares were repurchased by American Greetings for cash pursuant to this right of first refusal.

(2) On January 8, 2008, American Greetings announced that its Board of Directors authorized a program to repurchase up to $100 million of its Class A common shares. There is no set expiration date for this repurchase program. No shares were repurchased under this program during the first quarter of fiscal 2009.

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Item 6. Exhibits

Exhibits required by Item 601 of Regulation S-K

Exhibit Number	Description
10.1	Key Management Annual Incentive Plan (fiscal year 2009 Description)
10.2	Employment Agreement, dated as of June 12, 2008, between John W. Beeder and the Corporation
(31) a	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(31) b	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(32)	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICAN GREETINGS CORPORATION
	By:	/s/ Joseph B. Cipollone
		Joseph B. Cipollone
		Vice President, Corporate Controller, and Chief Accounting Officer *

July 9, 2008

* (Signing on behalf of Registrant as a duly authorized officer of the Registrant and signing as the chief accounting officer of the Registrant.)

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EX-10.1

Exhibit 10.1

TABLE OF CONTENTS
Eligibility	1
How the Plan Works	2
Your Individual Target Incentive	2
Weighting the Measures	3
Measuring Performance	4
Performance Multipliers	4
Performance Measures	5
Corporate Performance	5
Business Unit Performance	7
Individual Performance	8
Summary - Total Award Calculation	9
Appendix	10
Business Unit Components	10
Administrative Details	11
Definition of Common Terms	12

AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	1

AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN   This brochure provides an overview of the Key Management Annual Incentive Plan — a valuable component of your total compensation package. It contains details about how the Plan rewards for Corporate, Business Unit and Individual performance results. In addition, your Incentive Compensation Statement — provided separately — includes information specific to your participation in the plan: your assigned business unit and sub-business unit if any, your target incentive percentage and detailed examples of the incentive calculation under different performance scenarios. Together, these documents provide the information you need to understand the Plan so you can maximize your annual incentive award.   ¢ ELIGIBILITY   You are eligible to participate in the Key Management Annual Incentive Plan if you are a Key Manager or Officer in one of the following primary business units and you do not participate in another Company-sponsored annual incentive plan:

PRIMARY BUSINESS UNIT	PARTICIPANTS
Corporate Consolidated	Chairman, Chief Executive Officer, President and Chief Operating Officer, Corporate-level Senior Vice Presidents and other Section 16 Executive Officers
Total Social Expressions Group (SEG)	Associates who are part of:
	AGI In-Store
	Business Intelligence
	Canada
	Carlton Mexico
	Carlton Cards Retail
	Corporate Staff (Delta, Finance, HR, ISD, Legal)
	Creative
	DesignWare & Specialty SBU
	Everyday & Seasonal Cards
	Field Sales
	Field Sales Operations (FSO)
	Gift Packaging & Holiday SBU
	Global Sourcing
	Inbound Licensing
	Plants
	Product Development
	All other North American Greeting Card Division units
AG Intellectual Properties Group	AGIP Corporate Staff
AG Interactive	AG Interactive associates
AG Properties	AG Properties associates
UK Greetings	UK Greetings associates
John Sands Group	John Sands Group associates
Key Managers include individuals in Key Manager 1 and Key Manager 2 job levels. Officers include Corporate-level Executive Directors, Vice Presidents, Senior Vice Presidents, President and Chief Operating Officer, Chief Executive Officer, Chairman of the Board and any other job level(s) that may be designated.

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¢ HOW THE PLAN WORKS The Key Management Annual Incentive Plan rewards participants for their contributions to American Greetings success over a 12-month fiscal year. The Plan rewards for successful results in three key performance areas: ¡ Corporate Performance. At the beginning of each fiscal year, the American Greetings Board of Directors approves the corporate earnings per share (EPS) and corporate total revenue performance goals for the year. Actual corporate results are compared to these goals at the end of the fiscal year. ¡ Business Unit Performance. Every year, each business unit develops an earnings goal — which is approved by the Board of Directors — based on its strategic direction, business opportunities and growth projections. Business unit performance is based on actual fiscal year earnings results for your assigned business unit compared to goal.	The total award — which is paid in cash — can range from 0% to 200% of your individual target incentive. This provides significant incentive earnings opportunity when performance in one or more of these performance areas exceeds expectations. Let’s take a look at the components of the Plan and how they work. YOUR INDIVIDUAL TARGET INCENTIVE At the beginning of each fiscal year, an individual target incentive is established for you based on your job level. This target incentive is typically communicated as a percentage of your base earnings but may also be expressed as a dollar amount, determined by multiplying your base earnings by your target incentive percentage as follows:
¡ Individual Performance. Your manager will determine your individual performance compared to your objectives for the year. Your actual fiscal year-end performance rating determines the percentage of the target individual incentive amount you earn. At the end of each fiscal year, incentive amounts are determined based on performance in these three key performance areas and are added together to determine your total Key Management Annual Incentive Plan award.	The target incentive represents what you would earn if each performance measure in this incentive plan (Corporate, Business Unit and Individual) were achieved at 100% of goal (i.e., all components achieve their target performance).
	EXAMPLE For example, assume Joe is a Key Manager 1 with base earnings of $60,000. His target incentive under the Plan is 10%, or $6,000 ($60,000 x 10% = $6,000). We’ll refer to Joe throughout this brochure as we describe how the Plan works.

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WEIGHTING THE MEASURES

Performance measures are weighted by job level to reflect the degree to which positions within a job level can affect performance in each of the three key performance areas. Accordingly, associates at higher job levels — who have more impact on the achievement of corporate objectives — have more weight assigned to the corporate performance measure. Lower job levels, in contrast, have more weight assigned to the individual performance area.

The following chart shows the specific weightings for each job level for fiscal year 2009.

	FISCAL YEAR 2009 WEIGHTINGS
JOB LEVEL	Corporate	Business Unit	Individual
Chairman of the Board, CEO, President and COO, Corporate-level Senior Vice Presidents and other Section 16 Executive Officers	30%	50%	20%
Corporate-level Vice Presidents and Executive Directors; Key Managers 2; Key Managers 1	20%	50%	30%

EXAMPLE

Joe, a Key Manager 1 with base earnings of $60,000 and a 10% incentive target, would have the following set of performance measure weightings and target incentive awards:

	Corporate	Business Unit	Individual	Total
Key Manager 1 Weightings	20%	50%	30%	100%
Joe’s Target Incentive	2%	5%	3%	10%
(Percent of Base Earnings)	(10% x 20%)	(10% x 50%)	(10% x 30%)
Joe’s Target Incentive ($)	$1,200 ($60,000 x 2%)	$3,000 ($60,000 x 5%)	$1,800 ($60,000 x 3%)	$6,000

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MEASURING PERFORMANCE   Corporate and business unit actual performance is determined at the end of the fiscal year and expressed as a percentage of the goal. In contrast, individual results are evaluated by your manager at fiscal year-end and communicated as an individual performance rating. If the corporation’s or your business unit’s results exceed or fall below goal, Plan payouts are adjusted.   ¡Below Target Performance. If actual results do not meet a minimum level of performance — the performance threshold — no incentive award is earned for that performance measure. Results that fall between threshold and goal result in a reduced incentive award.   ¡Target Performance. When actual results meet goal, you receive 100% of the target incentive award for that performance measure.   ¡Above Target Performance. When actual results exceed goal, you receive an increased incentive award. You can receive up to 200% of the targeted incentive award for a performance measure.   As described above, there is a precise relationship between actual results and the corresponding incentive award. As performance rises or falls, so does your award. But how much your award changes is determined by a performance multiplier, which is discussed in the following section.   PERFORMANCE MULTIPLIERS   The performance multiplier is used to calculate the corporate and business unit incentive awards when performance is above or below goal, provided the performance thresholds have been achieved.   Corporate and business unit performance incrementally increase your incentive award for performance above goal. They also incrementally decrease your incentive award for performance below goal.   For example, a multiplier of 4 means that for every 1% increase or decrease in the percentage of the goal achieved, there is a corresponding 4% increase or decrease in the percentage of target incentive earned.   The example below illustrates the role of the performance multiplier in determining the adjustment that is made to your incentive target based on actual performance achieved.     Important Note: Business unit performance multipliers vary by business unit. The multiplier assigned to your business unit is provided in your fiscal year 2009 Incentive Plan Statement. A list of all business unit multipliers is provided in the Appendix.

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¢ PERFORMANCE MEASURES   CORPORATE PERFORMANCE   Creating value for our shareholders and increasing our focus on delivering profitable revenue growth are key drivers to American Greetings success. To help achieve these objectives, corporate performance and your corporate incentive award will be determined using two performance measures:   ¡ Corporate earnings per share (EPS), and   ¡ Corporate total revenue   Your corporate incentive award is determined using a two-step process: Step 1: Calculate Preliminary Award   Corporate EPS performance is based on fiscal year-end corporate earnings per share compared to goal. Minimum performance of 90% of goal must be attained before any incentive is earned. Above 90%, your incentive award is determined using a performance multiplier of 4 as illustrated on page 6. This incentive amount is a preliminary award based solely on EPS performance.   Step 2: Calculate Adjustment   The preliminary award based on EPS performance (Step 1) may be adjusted up or down depending on corporate total revenue performance. For high levels of performance (greater than 103% of goal) or lower levels of performance (less than 97% of goal), the adjustment is determined by applying a performance multiplier of 5 to the difference between actual corporate total revenue performance and 103% or 97% as illustrated below. Any adjustment is added to the preliminary award from Step 1. There is no adjustment in this step for corporate total revenue performance at or between 97% and 103% of goal.

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EXAMPLE

Joe is a KM1 with $60,000 in base earnings. Let’s assume:

n Corporate EPS performance is 103% of goal

nCorporate total revenue performance is 104.3% of goal

Joe’s corporate incentive award is calculated as follows:

1. Determine the preliminary award based on corporate EPS performance

2. Determine the corporate total revenue adjustment based on corporate total revenue performance

3. Add the results of Steps 1 and 2

4. Multiply the result in Step 3 by Joe’s corporate target incentive percentage

5. Multiply the result in Step 4 by Joe’s base earnings

Preliminary Award	100%	+	(             3%	x	4            )	=	112%
(Based on corporate EPS Performance)	Target Performance		Results Above Goal		Corporate EPS Performance Multiplier
Corporate Total Revenue Adjustment	(        104.3%	–	103%        )	x	5	=	+ 6.5%
	Corporate Total Revenue Results		Top of Target Revenue Performance Range		Corporate Total Revenue Performance Multiplier
			Corporate Performance Adjustment				118.5%

	CORPORATE INCENTIVE
Joe’s Target Incentive			2%
Corporate Performance Adjustment	x		118.5%
Joe’s Base Earnings	x	$	60,000
Joe’s Incentive Earned	=	$	1,422

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BUSINESS UNIT PERFORMANCE   Business unit performance is based on fiscal year-end earnings results compared to goal. All associates are assigned to a primary business unit. However, some will also be assigned to a sub-business unit based on business conditions and American Greetings strategic priorities.   Business unit and sub-business unit performance measures will vary, but your primary business unit measure will be one of the following:   ¡ Business Unit Pro Forma Earnings Before Interest and Taxes (Business Unit Pro Forma EBIT), or   ¡ Corporate Earnings Before Interest and Taxes (Corporate EBIT).   Earnings are charged/credited for any variation from plan in Net Capital Employed at the weighted average cost of capital. Performance is based on fiscal year-end earnings compared to goal.   The incentive is earned when the performance threshold for the primary business unit (or sub-business unit, where applicable) is achieved.   ¡ The performance threshold for all primary and sub-business units, except for Carlton Cards Retail, is 90% of goal.   ¡ The performance threshold for Carlton Cards Retail is 60% of goal.   A listing of each business unit’s and sub-business unit’s assigned earnings measure(s) and performance multipliers is provided in the Appendix. An example of the calculation of this incentive follows.

EXAMPLE

Joe is a KM1 with $60,000 in base earnings. Let’s assume his business unit has a performance multiplier of 4 and that its performance at year-end is 96% of goal. Joe’s business unit incentive award is calculated in three steps:

1.     Determine the business unit performance adjustment

2.     Apply the business unit performance adjustment to Joe’s target incentive percentage for the business unit component

3.     Multiply the result by Joe’s base earnings

100%	+	(	-4%	x	4	)	=	84%
Target Performance			Results Below Goal		Business Unit Performance Multiplier			Business Unit Performance Adjustment

	BUSINESS UNIT INCENTIVE
Joe’s Target Incentive		5%
Performance Adjustment	x	84%
Joe’s Base Earnings	x	$60,000
Joe’s Incentive Earned	=	$2,520

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  INDIVIDUAL PERFORMANCE   At the end of the fiscal year, managers assess each participant’s performance compared to other participants within the business unit. Managers determine the degree to which the participants achieve the goals and job expectations defined at the beginning of the year.   Managers rank participants based on their relative performance and determine the actual performance rating based on these rankings and the targeted percentage of participants for each rating.   ¡ Participants who receive an “Exceeds Expectations” performance rating receive the target incentive for the individual performance measure multiplied by 150%. In certain circumstances, this target can be increased to 200%¹.   ¡  Participants who receive a “Meets Expectations” rating will receive 100% of their target individual incentive.   ¡ Participants who receive an “Improvement Expected/Performance Below Peer Level” rating will not receive an individual performance incentive and will only receive 50% of any incentive otherwise earned under the corporate and business unit components.   If corporate earnings performance is below the performance threshold, only those associates with a performance rating of “Exceeds Expectations” may receive awards for the individual performance measure.   ¡ Participants who receive an “Exceeds Expectations” performance rating will receive 50% of the target incentive payable for the individual performance component.   ¡ Participants who receive a “Meets Expectations” or “Improvement Expected/Below Peer Level” performance rating will not receive any portion of the individual performance incentive.   If you are a senior executive officer, please refer to the fiscal year 2009 Addendum to the Individual Performance Component, included with your personalized Incentive Compensation Statement, for a complete description of how individual performance under the Key Management Annual Incentive Plan applies to you.  

The following schedule shows how individual amounts will be adjusted based on individual performance.

Performance Rating	Target Percentage of Participants	Will Receive	Percentage of Incentive
Exceeds Expectations 1	30%		150%
Meets Expectations	60%		100%
Improvement Expected/ Performance Below Peer Level	10%		0%

¹Managers can, at their discretion, increase the Individual Payout Percentage to 200% for associates rated as “Exceeds Expectations” who demonstrate an extraordinary level of performance. Accomplishments must be the result of extraordinary effort and initiative that go well beyond the contributions of other associates rated as “Exceeds Expectations.” The number of persons eligible to receive an Individual Payout Percentage of 200% may not exceed one-third of the total number of associates rated as “Exceeds Expectations.”

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¢ SUMMARY—TOTAL AWARD CALCULATION

At the end of American Greetings fiscal year, corporate, business unit and individual results are evaluated and your total incentive award is calculated.

EXAMPLE

The following example shows how Joe’s actual incentive award is calculated based on the assumptions that were used throughout this brochure:

JOE’S ASSUMPTIONS		PERFORMANCE ASSUMPTIONS
Base Earnings:	$60,000	Corporate:	103% of Corporate EPS Goal
			104.3% of Corporate Total Revenue Goal
Individual Target Percentage:	10%
		Business Unit:	96% of Goal
Individual Target Incentive:	$6,000
		Individual:	Exceeds Expectations

INCENTIVE CALCULATION	INCENTIVE %			BASE EARNINGS		INCENTIVE $
[100% + (3% above goal x 4)]		112	%
[(104.3% - 103% top of range) x 5]	+	6.5	%
		118.5	%
Target Corporate Incentive (20% Weight)	x	2	%
		2.37	%	x	$60,000	=	$1,422
+
[100% + (-4 % below goal x 4)]		84	%
Target Business Unit Incentive (50% Weight)	x	5	%
		4.20	%	x	$60,000	=	$2,520
+
Individual Payout Percentage (“ Exceeds”)		150	%
Target Individual Incentive (30% Weight)	x	3	%
		4.50	%	x	$60,000	=	$2,700
=
		11.23	%	x	$60,000	=	$6,642

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¢ APPENDIX

The following section provides additional details about the plan, including details about the business units, their performance measures and performance multipliers.

Please note that some plan participants will have their business unit incentive determined based on performance in two areas. Details about the weightings and performance multipliers for these measures are shown below and on your personalized Incentive Compensation Statement, as appropriate.

	BUSINESS UNIT COMPONENTS
BUSINESS UNIT/ PARTICIPANTS	PERFORMANCE MEASURE		WEIGHT		PERFORMANCE MULTIPLIER
	Primary Unit	Sub Unit	Primary Unit	Sub Unit	Primary Unit	Sub Unit
Corporate Consolidated Chairman, CEO, President, COO, Corporate-level Senior Vice Presidents and other Section 16 Executive Officers	Corporate EBIT		100%		4
Business Intelligence, Canada, Carlton Mexico, Corporate Staff (Delta, Finance, HR, ISD, Legal), Creative, DesignWare & Specialty SBU, Everyday & Seasonal Cards, Field Sales, FSO, Gift Packaging & Holiday SBU, Global Sourcing, Plants, Product Development, all other North American Greeting Card Division units	Total SEG(1)		100%		4
Inbound Licensing	Total SEG(1)	AG Interactive pro forma EBIT	50%	50%	4	2
AGI In-Store	Total SEG(1)	AGI In-Store pro forma EBIT	50%	50%	4	2
Carlton Cards Retail	Total SEG(1)	Carlton Cards Retail pro forma EBIT	25%	75%	4	1
AG Intellectual Properties Group – Corporate Staff	AG Interactive pro forma EBIT + AG Properties pro forma EBIT		100%		2
AG Interactive	AG Interactive pro forma EBIT		100%		2
AG Properties	AG Properties pro forma EBIT		100%		2
UK Greetings	UK Greetings pro forma EBIT		100%		4
John Sands Group	John Sands Group pro forma EBIT		100%		2

⁽¹⁾ Total SEG = NAGCD pro forma EBIT (includes Carlton Mexico pro forma EBIT, Retail Eliminations and Corporate Expense) + Carlton Cards Retail pro forma EBIT + AGI In-Store pro forma EBIT

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ADMINISTRATIVE DETAILS   If your employment status changes, your Plan participation and any payouts may be affected as described below.   ¡ New Hires. If you are hired during the Plan year — defined as the American Greetings fiscal year ending February 28, 2009 — and are eligible to participate in the Key Management Annual Incentive Plan, you will receive a prorated incentive payout based on the period of time you participated in the Plan and your base earnings during that time.   ¡ Promotions and Transfers. If you are promoted or you move from one business unit to another during the Plan year, your individual target incentive, base earnings, business unit goal and corresponding performance multiplier may change. If any of these do change, your incentive will be calculated based on the targets, base earnings, plan provisions and actual performance for each business unit you participated in on a prorated basis and rounded to the nearest full month.   ¡ Termination. If you voluntarily or involuntarily leave American Greetings before the completion of the Plan year, you will forfeit your Key Management Annual Incentive Plan award for that fiscal year.   ¡ Retirement, Leave of Absence, Disability, Death. If your employment ends during the Plan year because you elect to retire after age 60, or if you take a leave of absence, suffer a permanent disability or die, your incentive payout will be prorated to the nearest full month based on the actual period you participated in the Plan during the year.   An associate will be deemed to suffer a permanent disability only in the following circumstances: (A) where an associate is absent from employment with American Greetings due to his or her inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment, which either can be expected to result in death, or can be expected to last for a continuous period of not less than 12 months; or (B) where an associate is scheduled to receive income replacement benefits for a period of not less than 3 months under an accident and health plan covering American Greetings associate on account of a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than 12 months.   ¡ Incentive Payout. Incentive payouts earned in fiscal year 2009 will be paid to participants within two and one-half months following the end of fiscal 2009, typically within 60 days after the end of the fiscal year. Incentive payouts are subject to normal tax withholding at a standardized rate and will be deposited to a bank account of your choice.   It is the intent that incentive payouts fall under the short-term deferral rules of Section 409A of the Internal Revenue Code to exempt the payment of such Key Management Annual Incentive Plan benefits from the requirements of Section 409A.   ¡ Calculating Payouts. For computation purposes, financial goals and actual performance results are rounded to the nearest $1,000. The percent of the financial goal achieved and the percent of target bonus earned is rounded to the nearest one-tenth of one percent. The actual incentive payout is rounded to the nearest dollar.   ¡ Omnibus Incentive Plan. The Key Management Annual Incentive Plan is governed by the American Greetings Corporation 2007 Omnibus Incentive Compensation Plan, as such plan may be amended from time to time. In the event of a conflict between the Key Management Annual Incentive Plan and the Omnibus Incentive Plan, the terms of the Omnibus Incentive Plan will govern.   ¡ Questions. If you have questions about the Key Management Annual Incentive Plan and how it works, please contact your manager. Your manager will work with you to ensure you understand the Plan so you can maximize your annual incentive.

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DEFINITION OF COMMON TERMS   The following provides definitions of some common terms used throughout this brochure. Capitalized terms used herein that are not defined will have the meaning set forth in the Omnibus Incentive Plan.   ¡ Base Earnings. Your base earnings are defined as your base salary earned during the fiscal year. Base earnings exclude health and welfare benefits, bonus, commission, and incentive payments, overtime and other indirect compensation. Base earnings for Plan participants outside of the U.S. may be defined differently and may vary by country.   ¡ Business Unit EBIT. A business unit’s earnings before interest and taxes.   ¡ Business Unit Pro Forma EBIT. A business unit’s earnings before interest and taxes, charged/credited for any variation from plan in Net Capital Employed at the weighted average cost of capital.   ¡ Corporate Earnings Per Share (EPS). Corporate earnings per share is measured at the end of the fiscal year and is calculated as corporate pre-tax income minus taxes divided by the total number of planned shares outstanding as calculated on a fully diluted basis. ¡ Corporate Earnings Before Interest and Taxes (Corporate EBIT). Consolidated corporate earnings before interest and taxes, charged/credited for any variation from plan in Net Capital Employed at the weighted average cost of capital.   ¡ Corporate Total Revenue. Consolidated corporate net sales and other revenues, including but not limited to royalties, advertising, subscriptions and other revenue streams directly related to the conduct of our principal business.   ¡ Fiscal Year. March 1 through February 28 or 29 of the following calendar year.   ¡ Net Capital Employed (NCE). Assets (minus cash and LIFO reserve) minus liabilities (not including interest-bearing debt, inter-company payables and income taxes).

Nothing in this brochure or in any individual Incentive Compensation Statement should be construed to create or imply any contract of employment between an associate and American Greetings and its subsidiaries or to create any binding contractual right to payment of any specific amount under the American Greetings Key Management Annual Incentive Plan. The provisions of this brochure describe the general guidelines used by American Greetings in determining the benefits payable to Plan participants; however, in every case, American Greetings reserves the right to reduce or eliminate the amount that would otherwise be payable to a participant or participants under such guidelines where it determines, in its discretion, that such a reduction is necessary or appropriate, in light of the participant’s performance or other relevant business circumstances.

American Greetings reserves the right to terminate or make changes to the Plan, including retroactively, at any time without prior notice to any of the Plan’s participants (provided, that no amendment to the Plan adopted more than 90 days after the beginning of the applicable fiscal year may have the effect of increasing the amount that is or could be payable under the guidelines set forth herein for such fiscal year to any participant who is a “covered employee” of American Greetings as defined in section 162(m)(3) of the Internal Revenue Code). In the case of our executive officers, the Board of Directors (or committee thereof), and in the case of all other participants, the Board of Directors (or committee thereof), the Chief Executive Officer and the Chairman are the only persons who have the authority to alter or amend this Plan. Any such alteration or amendment must be done in writing. No participant should rely on an alteration or amendment to this Plan unless it is made in writing and signed by the Chief Executive Officer or the Chairman.

SENIOR EXECUTIVE OFFICER

ADDENDUM TO INDIVIDUAL PERFORMANCE COMPONENT OF

FY2009 AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN

INDIVIDUAL PERFORMANCE   Notwithstanding the description of the Individual Performance component included in the brochure (the “Plan Brochure”) outlining the Fiscal 2009 Key Management Annual Incentive Plan, the Individual Performance component of American Greetings Key Management Annual Incentive Plan for all Senior Executive Officers of American Greetings, consisting of the Corporation’s Chairman, Chief Executive Officer, President and Chief Operating Officer, Senior Vice Presidents and other Section 16 officers (collectively the “Senior Executive Officers”) is modified by this Addendum as follows:   ¡A range has been added to the target percentage of participants who receive an “Exceeds Expectations” performance rating. The range is 20% to 30% of the total number of Senior Executive Officers.   ¡Managers will now have even more discretion to adjust the percentage of the individual incentive based on an individual’s performance. Senior Executive Officers who receive an “Exceeds Expectations” performance rating will earn between 100% and 150% of their target incentive under the Individual Performance component. Those who receive a “Meets Expectations” performance rating will earn between 50% and 100% of their target incentive under the Individual Performance component.   As with all participants of the Key Management Annual Incentive Plan, at the end of the fiscal year, managers assess each Senior Executive Officer’s performance compared to other participants. Managers determine the degree to which the participants have achieved the goals and job expectations defined at the beginning of the year.   Managers rank participants based on their relative performance and determine actual performance ratings based on these rankings and the targeted percentage of participants for each rating.   ¡For Senior Executive Officers, the targeted percentage of participants for the “Exceeds Expectations” performance rating is 20% to 30%; the targeted percentage for the “Meets Expectations” performance rating is 60%; and the targeted percentage for the “Improvement Expected / Performance Below Peer Level” is 10%. (See chart on the following page.)   ¡Senior Executive Officers who receive an “Exceeds Expectations” performance rating will receive between 100% and 150% of their target individual incentive, as determined by his or her manager. In certain circumstances, this payout can be increased up to a maximum of 200% of target¹.   ¡Senior Executive Officers who receive a “Meets Expectations” rating will receive between 50% and 100% of their target individual incentive, as determined by his or her manager.   ¡As with other participants, Senior Executive Officers who receive an

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FY2009 KEY MANAGEMENT ANNUAL INCENTIVE PLAN SENIOR EXECUTIVE OFFICER ADDENDUM

“Improvement Expected / Performance Below Peer Level” rating will not receive an individual performance incentive and will only receive 50% of any incentive otherwise earned.   As with other participants, if corporate earnings performance is below the performance threshold, only those Senior Executive Officers with a performance rating of “Exceeds Expectations” may receive awards for the individual performance measure.   ¡Participants, including Senior Executive Officers, who receive an “Exceeds Expectations” performance rating, will receive 50% of the target incentive payable for the individual performance component. ¡Senior Executives who receive a “Meets Expectations” or “Improvement Expected / Below Peer Level” performance rating will not receive any portion of the individual performance incentive.   The schedule below shows how individual amounts will be adjusted based on individual performance.   Except as set forth in this Addendum, the description of the Key Management Annual Incentive Plan included in the Plan Brochure remains unchanged. In the event of a conflict between the terms described in the Plan Brochure and this Addendum, the terms set forth in this Addendum will govern.

Performance Rating	Target Percentage of Participants	Will Receive	Percentage of Incentive
Exceeds Expectations1	20% - 30%		100% - 150%
Meets Expectations	60%		50% - 100%
Improvement Expected / Performance Below Peer Level	10%		0%

¹ Managers can, at their discretion, increase the Individual Payout percentage up to a maximum of 200% of target, for Senior Executive Officers rated as “Exceeds Expectations” who demonstrate an extraordinary level of performance. Accomplishments must be the result of extraordinary effort and initiative that go well beyond the contribution of other Senior Executive Officers rated as “Exceeds Expectations.” The number of persons eligible to receive an Individual Payout Percentage between 150% and 200% may not exceed 10% of the total number of Senior Executive Officers rated as “Exceeds Expectations.”

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EX-10.2

_{Exhibit 10.2}

_{EXECUTIVE EMPLOYMENT AGREEMENT}

_{THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made atCleveland, Ohio, this 12th day of June 2008, by and betweenAMERICAN GREETINGS CORPORATION, anOhio corporation (the “Company”), and JOHN BEEDER (the“Executive”).}

_{In consideration of the covenants set forth in this Agreement, the parties mutually agreeas follows:}

_{1.        Job Title. Subject to the provisions of this Agreement, the Company shall employExecutive as the Company’s Senior Vice President, Sales and Marketing/Executive Salesand Marketing Officer, with such duties and responsibilities as may be assigned from time-to-time bythe Board of Directors or the President of the Company. Executive shall devote Executive’s fullbusiness time and attention and give Executive’s best efforts to the business affairs of theCompany and/or of its subsidiaries as the Board of Directors or the President of the Companymay from time-to-time determine. Executive recognizes that in serving as an officer of theCompany or as an officer of a subsidiary, Executive serves in such capacity solely at the pleasureof the Board of Directors or the President of the Company and that employment in such capacityor in any other capacity may be terminated at any time by the Board of Directors or the Presidentof the Company, subject to the provisions of Section 4 of below.}

_{2.        Fiduciary Obligations. Executive shall carry out his duties in a mannerconsistentwith and in compliance with all present and future requirements andlimitations of all applicablefederal and state laws, all applicable regulations, Company policies(to the extent the policies do notconflict with the terms of this Agreement), and subject to the direction and approval of the Board of}

_{Directors or the President of the Company. Executive acknowledges and fullyunderstands that by entering into this Agreement, he undertakes a fiduciaryrelationship with the Company and is under a fiduciary obligation to use due care and actin the best interest of the Company at all times.Failure of Executive to fulfill all fiduciary obligations ordinarily imposedby law on similar Executives in a fiduciary relationship will be deemeda material breach of this Agreement by Executive.}

_{3.        Compensation & Benefits.}

_{3.1      Base Salary. The Company or a subsidiary shall, during the term of thisEmployment Agreement, pay to Executive as minimum compensation forservices a base salary at a rate to be fixed by the Board of Directors, the CompensationCommittee appointed by the Board of Directors, or the President of the Company,which rate shall not be less than $36,667.00 per month ($440,000 on an annualizedbasis) (“base salary”), less appropriatewithholdings and deductions.}

_{3.2      Annual Incentive Plan. Executive shall be eligible to participate inthe Company’s Key Management Annual Incentive Plan, in accordance with the termsand conditions of the Plan, as it may be amended from time-to-time.}

_{3.3      Stock Options. Executive shall be eligible to participate in theCompany’s Stock Option Plan in accordance with the terms and conditions of the Plan, asit may be amended from time-to-time, which Plan currently provides for employeesat Executive’s level to receive a grant of 35,000 stock options each year, subject toadjustment as provided in the Plan. As additional consideration for acceptingemployment with the Company and signing this Agreement, Executive shall receive anadditional grant of 35,000 stock options on American Greetings Class A Common Stockat the next regularly scheduled stock option grant date. All}

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_{options granted to Executive are subject to the terms, conditions, vesting and exercise schedules set forth in the Plan, as it may be amended from time-to-time.}

_{3.4      Flexible Benefits Program. Executive shall be eligible to participate in theCompany’s flexible benefits program, which includes such benefits as health care, disabilityinsurance, life insurance and a flexible spending account to the same extent other Executives atthe Senior Vice President level participate, in accordance with the terms of the Program, as itmay be amended from time-to-time.}

_{3.5      Retirement Profit Sharing. Executive shall be eligible to participate in theCompany’s Retirement Profit Sharing Plan to the same extent other executives at the Senior VicePresident level participate, in accordance with the terms of the Plan, as it may be amended fromtime-to-time.}

_{3.6      Other Benefits. Executive shall be eligible to receive other Companybenefits to the same extent normally provided to other Senior Vice Presidents. Executive shallbe entitled to reimbursement of the reasonable attorneys’ fees for the review and negotiation ofthis Agreement.}

_{3.7      Relocation. Executive shall be eligible to receive certain relocationbenefits as set forth in the Company’s Associate-on-the-Move Policy, as it may be amended fromtime-to-time. Additionally, recognizing Executive’s unique family circumstances, the Companywill reimburse Executive for: (a) the reasonable cost of commuting between their current homeand Cleveland for Executive and his spouse; and (b) the reasonable cost of temporaryhousing (including rent and utilities) in the Cleveland area, in each case for up to 24 monthsas Executive and his spouse transition from their current home to Cleveland.}

_{4.        Termination.}

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_{4.1      Death. This Agreement shall immediately terminate upon thedeath of Executive. Following the Executive’s death, the Company agreesto pay only the following amounts to Executive’s estate, as required by law:(i) the base salary at the last rate paid to Executive through the end of the monthin which the Executive’s death occurs; (ii) any amounts earned, accrued orowing but not yet paid under this Agreement; and (iii) other benefits inaccordance with applicable plans and programs of the Company.}

_{4.2      Disability. If Executive is disabled, which means that he isunable to perform the essential functions of his position, with reasonableaccommodations, for a period of 16 weeks or more, Executive’s employmentshall terminate. Determination of disability shall be made initially by aphysician appointed by Executive, but the Company reserves the right toappoint a physician to determine disability, andExecutive agrees to cooperate with the Company’s physicianif the Company has a good faith doubt about the determination ofdisability or need for accommodation made by the physician selected byExecutive. If the determinations by the physician for Executive and theCompany cannot be reconciled, the two physicians shall select a thirdphysician, whose determination of disability will be final. In the eventExecutive’s employment terminates because of his disability, he shall beentitled to payment by the Company only of: (i) the base salary at the last ratepaid to Executive through the end of themonth in which the termination occurs; (ii) any amountsearned, accrued or owing but not yet paid under this Agreement; and(iii) other benefits in accordance with applicable plans and programs of the Company.}

_{4.3      Termination “For Cause”. The Company shall have theright to immediately terminate Executive for “cause”.}

_{a.      Cause shall mean:}

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_{(i)    A material breach by Executive of any term of thisAgreement, the Company’s policies, Executive’s fiduciary duties to theCompany, or of any law, statute, or regulation;}

_{(ii)    The material failure to achieve the Company’s reasonable profit,revenue or other written objectives or written goals as determined by theCompany because of Executive’s performance;}

_{(iii)    Misconduct which is injurious to the Company or any of itsaffiliates, either monetarily or otherwise, or which impairs Executive’s ability toeffectively perform his duties or responsibilities;}

_{(iv)    Personal conduct which reflects poorly on the Company orExecutive or which impairs Executive’s ability to perform his duties or managesubordinate employees, including but not limited to the abuse of alcohol orcontrolled substances;}

_{(v)    Habitual or repeated neglect of his duties or responsibilities byExecutive;}

_{(vi)    The appropriation of (or attempted appropriation of) a businessopportunity of the Company or its affiliates, including attempting to secureor securing any personal profit inconnection with any transaction by the Company or its affiliates;}

_{(vii)    The commission of or conviction for (or the proceduralequivalent or conviction for), or the entering of a guilty plea or plea of nocontest with respect to a crime, which in the Company’s reasonable judgment,involves moral turpitude;}

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_{(viii)    Intentional injury of another employee or any person in the course ofperforming services for the Company;}

_{(ix)    Any conflict of interest, including, but not limited to solicitationof business on behalf of a competitor or potential competitor;}

_{(x)    Violation of the Company’s policies prohibiting discrimination orharassment of employees, clients, guests, or vendors of the Company;}

_{(xi)    Failure to comply with the Company’s written Human Resourcespolicies; or}

_{(xii)    Failure to follow any material and lawful instruction given toExecutive by a superior at the Company.}

_{b.      In the event the Company terminates Executive’s employment forcause, he shall be entitled to payment by the Company only the following: (i) the base salary at the last rate paid to Executive through the date of the termination of hisemployment for cause, payable to the Executive immediately upon Executive’stermination; (ii) any amounts earned, accrued or owing but not yet paid underthis Agreement; and (iii) other benefits in accordance with applicable plans or programs of the Company.}

_{4.4      Termination “Without Cause”. The Company shall have the right toterminate this Agreement and Executive’s employment without cause upon writtennotice of 30 days to Executive. At the Company’s option, the Company may payExecutive for 30 days in lieu of notice and require no services of Executive. In the eventthe Company terminates the Executive’s employment without cause, Executive shallbe entitled to payment by the Company}

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_{the following: (i) Executive’s base salary at the rate in effect immediately prior to the dateof his termination of employment, payable to Executive for 3 months, provided that such base salary payment shall be reduced by the amount of salary Executive may receive fromsubsequent employment during the same period; (ii) any amounts earned, accrued orowing but not yet paid under this Agreement; and (iii) other benefits in accordance withapplicable plans and programs of the Company. Alternatively, in the event theCompany terminates the Executive’s employment without cause and Executivesigns a waiver and release of claims in a form acceptable to the Company – and Executivedoes not revoke his signature – Executive shall be entitled to payment by the Companythe following: (i) Executive’s base salary at the rate in effect immediately prior to the dateof his termination of employment, payable to Executive for 12 months, provided that suchbase salary payment shall be reduced by the amount of salary Executive may receive fromsubsequent employment during the same period; (ii) any amounts earned, accrued orowing but not yet paid under this Agreement; (iii) continued health care coverage,concurrently with COBRA, for a period of 12 months immediately following Executive’stermination date at the Senior Vice President active Executive payroll deduction rate, as itmay be changed from time-to-time by the Corporation in its sole discretion;(iv) executive career outplacement services for a period of up to 6 months; and (v) otherbenefits in accordance with applicable plans and programs of the Company. The paymentsand rights to Executive described in this Section 4.4 shall be in lieu of any severanceExecutive might otherwise be eligible to receive under a Company severance plan, andExecutive agrees that he shall not be entitled to receive severance under any Companyseverance plan in the event of a termination without cause. The requirement thatExecutive sign a waiver and release of claims under this}

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_{Section 4.4. shall not result in the lengthening of the 12-month restrictive covenants set forth in Section 5 of this Agreement.}

_{4.5      Termination Upon “Change in Control”. The Company may, at its option,terminate this Agreement as a result of a Change of control of the Company. If theCompany exercises this option, it reserves the right to offer Executive another position inthe Company or one of its affiliates or subsidiaries, which if offered, Executiveagrees to consider in good faith and respond accordingly. If the Company materiallyreduces Executive’s title, authority, duties and responsibilities at any time because of achange of control, Executive may terminate his employment within not more than 30 daysof first notice of the decrease in his authority, duties or responsibilities. If either party electsto terminate this Agreement as a result of change of control of the Company, it willprovide the other party with 30 day’s prior written notice. The Company may, at itsoption, relieve Executive of his duties and responsibilities under this Agreement duringthis 30-day notice period.}

_{a.      A “change of control” means only:}

_{(i)    The acquisition by any entity or person (which theretofore beneficiallyowned less than 50% of the Company’s common stock then outstanding) ofshares of the Company’s common stock in a transaction or series of transactionswhich result in such entity or person beneficially owning more than 50% ofthe Company’s outstanding common stock, where beneficial ownership andthe percentages of shares outstanding are determined pursuant to Sections 13(d)and (g) of the Securities Exchange Act of 1934 and the rules and regulationspromulgated there under; or}

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_{(ii)    The merger or consolidation of the Company with one or morecompanies in a transaction or series of transactions where the common stock ofthe Company is exchanged for less than 50% of the voting stock of the resultingor surviving company, including, without limitation, an exchange of thecommon stock of the for cash; or}

_{(iii)    The sale, assignment, transfer, pledge, hypothecation or otherdisposition of assets (except a pledge, hypothecation or other similardisposition made at the time the Company enters into a bona fidefinancing transaction with a party which at the time of such transaction is not anaffiliate of the Company) of the Company having a value, as determinedby the Board of Directors in good faith, in excess of 33 –1/3% of theconsolidated total assets of the Company.}

_{b.      In the event of a termination by the Company because of a change ofcontrol, the Company shall make only the following payments to Executive:(i) Executive’s base salary at the rate in effect immediately prior to the date of histermination of employment, payable to Executive for 12 months, provided thatsuch base salary payment shall be reduced by the amount of salary Executive mayreceive from subsequent employment during the same period; (ii) any amountsearned, accrued or owing but not yet paid under this Agreement; and (iii) other benefits in accordance with applicable plans and programs of the Company. Thepayments and rights to Executive described in this Section 4.5 shall be in lieu of anyseverance Executive might otherwise be eligible to receive under a Companyseverance plan, and Executive agrees that he shall not be entitled to receive}

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_{severance under any Company severance plan in the event of a termination becauseof change in control.}

_{c.      In the event of a termination by Executive after a material decrease in hisauthority, duties, or responsibilities because of a change of control, theCompany shall pay Executive only the following: (i) Executive’s base salary at therate in effect immediately prior to the date of his termination of employment, payableto Executive for 12 months, provided that such base salary payment shall be reducedby the amount of salary Executive may receive from subsequent employmentduring the same period; (ii) any amounts earned, accrued or owing but not yet paidunder this Agreement; and (iii) other benefits in accordance with applicableplans and programs of the Company. The payments and rights to Executive describedin this Section 4.5 shall be in lieu of any severance Executive might otherwise beeligible to receive under a Company severance plan, and Executive agrees thathe shall not be entitled to receive severance under any Company severance plan in theevent of a termination because of change in control.}

_{4.6      Executive’s Voluntary Termination. Upon 30 days’ prior notice tothe Company, Executive may voluntarily terminate his employment with the Company.In the event that Executive gives less than 30 days’ prior notice to the Company,Executive’s voluntary termination shall be a material breach of this Agreement. In theevent Executive voluntarily terminates his employment upon 30 days’ prior notice to theCompany, he shall be entitled to payment by the Company only of: (i) Executive’s basesalary at the last rate paid to Executive through the date of the termination of hisemployment, which shall be payable to Executive in}

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_{accordance with applicable state law; (ii) any amounts earned, accrued or owing but not yetpaid under this Agreement; and (iii) other benefits in accordance with applicable plansor programs of the Company. If Executive voluntarily terminates his employmentbecause of the Company’s material reduction of Executive’s title, authority, duties andresponsibilities, other than as a result of a change in control as set forth in Section 4.5 ofthis Agreement, Executive shall be entitled to the compensation and benefits set forth inSection 4.4 of this Agreement (Termination “Without Cause”).}

_{4.7      In the event of any termination of employment under this Section 4, theCompany shall be entitled to an offset against amounts due Executive under this Agreementon account of any remuneration attributable to any subsequent employment that he mayobtain.}

_{4.8      The provisions of this Section 4 shall survive the termination of thisAgreement, as applicable.}

_{5.        Restrictive Covenants. Executive covenants and agrees that in consideration of employment as an officer of the Company or as an officer of a subsidiary, Executive shallnot for a period of 12 months after leaving the employ of the Company or a subsidiary,regardless of the reason for such leaving, enter into the employment, directly orindirectly or in a consulting or free lance capacity, of any person, firm or corporation inthe United States or Canada, which at such date of leaving the employ of the Company ora subsidiary shall be manufacturing or selling products that are substantially similar innature to the products being then manufactured or sold by the Company or thesubsidiary. In addition, Executive shall not for a period of 12 months after leaving theemploy of the Company or a subsidiary, regardless of the reason for such leaving,shall not, directly or indirectly, for himself or for any other person, firm, corporation,partnership, association or other entity: (i) employ or attempt to employ or enter intoany}

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_{contractual arrangement with any employee or former employee of the Company, unlesssuch employee or former employee has not been employed by the Company for a periodin excess of six months prior to the solicitation by Executive, and/or (ii) call on orsolicit any of or sell goods or services to the actual or targeted prospective customers orclients of the Company on behalf of any person or entity in connection with anybusiness that competes with the Company. While the covenants of this Section 5 are ineffect, Executive will give notice to the Company, within ten days after accepting anyother employment, of the identity of Executive’s new employer. The Companymay notify such new employer that Executive is bound by this Agreement, and at theCompany’s election, furnish such employer with a copy of this Agreement or relevantportions thereof.}

_{6.        In consideration of Executive’s employment by the Company and thecompensation received therefor, Executive agrees that all copyrights, patents, tradesecrets, or other intellectual property rights associated with any ideas, concepts,techniques, inventions, processes, or works of authorship that are developed or created byExecutive, either alone or with others, during the course of performing work for theCompany or its clients (collectively, the “Work Product”) shall belong exclusively tothe Company and shall, to the extent possible, be considered a work made by the Executivefor hire for the Company within the meaning of Title 17 of the United States Code. To theextent the Work Product may not be considered work made by the Executive forhire for the Company, the Executive agrees to assign, and automatically assign at the time ofcreation of the Work Product, without any requirement of further consideration, anyright, title, or interest the Executive may have in such Work Product. The transfer ofExecutive’s rights under this paragraph shall apply to Executive’s worldwide right, titleand interest in and to all of the Work Product and shall mean the entire right, title and}

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_{interest in and to all intellectual property rights, all proprietary rights and all industrialproperty rights throughout the world, including, without limitation, all copyrightsunder the laws of the United States and all other countries and governmental divisionsthroughout the world. Upon the request of the Company, Executive and his successors,assigns and legal representatives shall (at the Company’s sole cost and expense) take suchfurther reasonable actions, including execution and delivery of instruments ofconveyance, as may be appropriate to give full and proper effect to such assignment,provided that such actions do not adversely affect or interfere with Executive’sperformance of his duties under this Agreement.}

_{7.        Executive agrees that during the period of his employment and thereafter, hewill keep confidential and will not disclose any information, records, documents or tradesecrets of the Corporation acquired by him during his employment, and except asrequired by his employment, will not remove from the Corporation’s premises any recordor other document relating to the business of the Corporation; or make copies thereof; itbeing recognized by him that such information is the property of theCorporation.}

_{8.        Executive acknowledges and confirms that: (i) the restrictive covenantscontained in this Agreement are reasonably necessary to prevent the inevitable disclosureof confidential and proprietary information and trade secrets and to protect the legitimatebusiness interests of the Company and its affiliates, and (ii) the restrictions contained inthis Agreement (including without limitation the length of the term of the provisions ofSection 5) are not overbroad, overlong, or unfair and are not the result of overreaching,duress or coercion of any kind. Executive further acknowledges and confirms that hisfull, uninhibited and faithful observance of each of the covenants contained in thisAgreement will not cause him any undue hardship, financial or otherwise, and thatenforcement of each of the covenants contained herein will not}

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_{impair his ability to obtain employment commensurate with his abilities and on termsfully acceptable to him or otherwise to obtain income required for the comfortable supportof him and his family and the satisfaction of the needs of his creditors. Executiveacknowledges and confirms that it is likely that the special knowledge of the business ofthe Company he will acquire by virtue of his position with the Company is such as wouldcause the Company serious injury or loss if he were to use such knowledge to the benefit ofa competitor or were to compete with the Company in violation of the terms of thisAgreement. Executive further acknowledges that the restrictions contained in thisAgreement are intended to be, and shall be, for the benefit of and shall be enforceable by,the Company’s successors and assigns.}

_{9.        In the event that a court of competent jurisdiction shall determine that any of therestrictive covenants of this Agreement are invalid or more restrictive than permittedunder the governing law of such jurisdiction, then such provision shall be interpreted andenforced as if it provided for the maximum restriction permitted under such governinglaw.}

_{10.      The restrictive covenants of this Agreement shall survive the termination ofthis Agreement and the termination of Executive’s employment.}

_{11.      It is recognized and hereby acknowledged by the parties hereto that abreach by Executive of any of the restrictive covenants contained in this Agreement islikely to cause irreparable harm and damage to the Company, the monetary amount ofwhich may be virtually impossible to ascertain. As a result, Executive recognizesand hereby acknowledges that the Company shall be entitled to an injunction from anycourt of competent jurisdiction, without any requirement to post a bond, enjoining andrestraining any violation of any or all of the restrictive covenants contained in thisAgreement by Executive or any of his affiliates, associates, partners}

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_{or agents, either directly or indirectly, and that such right to injunction shall becumulative and in addition to any other remedies the Company may possess.}

_{12.      Indemnification. In the event of any claim against Executive relating toExecutive’s services as an employee of the Company, the Company agrees to indemnifyExecutive to the extent permitted by applicable law consistent with the Company’sCertificate of Incorporation and Code of Regulations in effect as of the applicable date with respect to any acts or omissions he may have committed during the period which hewas an officer, director and/or employee of the Company or any Subsidiary thereof, or ofany other entity of which he served as an officer, director or employee at the request ofthe Company. Furthermore the Company shall pay the expenses (including, withoutlimitation, attorneys’ fees) incurred by the Executive in defending any proceeding as towhich Executive asserts a right to be indemnified by the Company in advance ofits final disposition, provided, however, that the Company’s payment of expenses incurredby Executive in advance of the final disposition of the proceeding shall be madeonly upon receipt of an undertaking by Executive to repay all amounts advanced if itshould be ultimately determined that Executive is not entitled to be indemnified.The provisions of this Section 12 shall survive the termination of Executive’semployment and the termination of this Agreement.}

_{13.      Arbitration. Executive and the Company agree to submit to mandatorybinding arbitration any claim arising out of or relating to Executive’s employment or thisAgreement. The Federal Arbitration Act shall govern this agreement to arbitrate. Byagreeing to arbitration, Executive and the Company each acknowledge that he/itunderstands that he/it is giving up the right to a trial by jury on the claims to be arbitrated.This agreement to arbitrate shall survive the termination of Executive’s employment andthe termination of this Agreement.}

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_{13.1    Arbitration Procedures.}

_{a.        Arbitration shall be the exclusive method to resolve all claimsarising from or related to the employment of Executive or this Agreement, includingall claims based on statute, contract, tort, or equity, except to the extent prohibited bylaw. The existence of the agreement to arbitrate does not prevent the Company orExecutive from applying for provisional remedies, such as temporary restraining orders, preliminary injunctions, writs of attachment, or receivers, to the extentpermitted by law to prevent an arbitration award from being rendered ineffectual, andthe application for provisional relief shall not be a waiver of arbitration.}

_{b.        Arbitration shall be conducted by a neutral arbitrator selected from a listobtained from the American Arbitration Association. The neutral arbitrator shalldisclose all matters that might impact his or her impartiality, including any ground thatmight lead to the disqualification of a judge, the names of the parties to anypending or prior arbitrations involving any of the same parties or counsel, and theresults of the arbitration (date of award, amount of award, and identification ofprevailing party), any prior attorney-client relationship with a party or lawyer, and anysignificant personal relationship with a party or lawyer. The arbitrator shall haveimmunity of a judicial officer from civil liability while acting as an arbitrator, andall communications shall have the same privileges from defamation and privacyliability as apply to judicial proceedings.}

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_{c.        Arbitration shall be conducted in accordance with the AmericanArbitration Association rules applicable to the resolution of employment disputes,provided that the parties shall be accorded the benefit of state laws on pleadings,summary judgment and judgment on the pleadings.}

_{d.        The Arbitration hearing shall proceed in Cleveland, Ohio.}

_{e.        Any dispute shall be based solely upon the law governing the claimsand defenses pleaded and proved, and the arbitrator may not invoke any basis(including, but not limited to notions of “just cause”) other than controlling law.}

_{f.        The arbitrator shall have the power to set hearing times, give notices,resolve discovery disputes, and assist the parties with the issue of subpoenas aspermitted by law. The arbitrator shall schedule the arbitration promptly and issuea written reasoned opinion promptly after the conclusion of the presentation ofevidence.}

_{g.        The arbitrator shall have the power to interpret this Agreement, and todecide the arbitrability of claims and defenses.}

_{h.        Arbitration shall neither extend nor curtail any applicable statute oflimitations.}

_{13.2    Costs of Arbitration. Executive shall bear only those costs of arbitration thathe would have otherwise had to bear had he brought the same claim or claims in a court oflaw.}

_{14.      Assignment. This Agreement shall be binding upon and inure to the benefit ofthe parties and their respective successors, legal and personal representatives, executors,}

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_{administrators, devisees, legatees, heirs and assigns. The Company may assign andtransfer all of its rights under this Agreement. The obligations of the Executive under thisAgreement, being personal, may not be assigned or transferred by the Executive.}

_{15.      Governing Law; Jurisdiction. This Agreement shall be governed by andconstrued and enforced in accordance with the laws of Ohio.}

_{16.      Entire Agreement. This Agreement constitutes the entire agreement between theparties hereto with respect to the subject matters hereof and thereof and, upon itseffectiveness, supercedes all prior agreements, understandings and arrangements, both oral and written, between Executive and the Company (or any of itsaffiliates) with respect to such subject matters covered. This Agreement may not bemodified in any way unless by a written instrument signed by both the Company andExecutive.}

_{17.      Notices. All notices required or permitted to be given hereunder shall be inwriting and shall be personally delivered by courier, sent by registered or certified mail,return receipt requested or sent by confirmed facsimile transmission addressed as set forthherein. Notices personally delivered, sent by facsimile or sent by overnight courier shall bedeemed given on the date of delivery and notices mailed in accordance with theforegoing shall be deemed given upon the earlier of receipt by the addressee, asevidenced by the return receipt thereof, or three (3) days after deposit in the U.S. mail.Notice shall be sent (i) if to the Company, addressed to American GreetingsCorporation, One American Road, Cleveland, Ohio, 44144, Attention: Catherine Kilbane,General Counsel and Secretary and (ii) if to Executive, to his address as reflected on thepayroll records of the Company, or to such other address which the Executive hasdesignated and as to which Executive has provided notice in accordance with thisprovision.}

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_{18.      Severability. The invalidity of any one or more of the words, phrases, sentences,clauses, provisions, sections or articles contained in this Agreement shall not affectthe enforceability of the remaining portions of this Agreement or any part thereof, all ofwhich are inserted conditionally on their being valid in law, and, in the event that anyone or more of the words, phrases, sentences, clauses, provisions, sections or articlescontained in this Agreement shall be declared invalid, this Agreement shall be construed asif such invalid word or words, phrase or phrases, sentence or sentences, clause orclauses, provisions or provisions, section or sections or article or articles had not beeninserted. If such invalidity is caused by length of time or size of area, or both, the otherwiseinvalid provision will be considered to be reduced to a period or area that would curesuch invalidity.}

_{19.      Survivorship. The respective rights and obligations of the parties hereunder shallsurvive any termination of Executive’s employment to the extent necessary to theintended preservation of such rights and obligations.}

_{20.      Waivers. The waiver by either party hereto of a breach or violation of any term orprovision of this Agreement shall not operate nor be construed as a waiver of anysubsequent breach or violation.}

_{21.      Prevailing Party. In the event that either party hereto brings an action for thecollection of any damages resulting from, or to enjoin any action constituting, a breach ofany of the terms or provisions of this Agreement, then the non-prevailing partyshall pay all reasonable attorneys’ fees, costs, and expert witness fees of the other.}

_{22.      Counterparts. This Agreement may be executed in one or more counterparts, each ofwhich shall be deemed to be an original but all of which together shall constitute one andthe same instrument and agreement.}

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_{23.      Voluntary Agreement. Executive and the Company represent and agree thateach has reviewed all of the provisions of this Agreement, and is voluntarily entering intothis Agreement, and has had an opportunity to review all aspects of this Agreement with his/itslegal, tax, or other advisors.}

_{IN WITNESS WHEREOF, the undersigned have executed this Agreement asof the date first above written.}

By:	AMERICAN GREETINGS CORPORATION
	/s/ Jeffrey Weiss	6/16/08
	President	Date
By:	JOHN BEEDER
	/s/ John Beeder	6/12/08
	John Beeder	Date

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EX-31.A

Exhibit (31) a

Certification of Chief Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Zev Weiss, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Greetings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of American Greetings Corporation as of, and for, the periods presented in this report;

4. American Greetings Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for American Greetings Corporation and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to American Greetings Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of American Greetings Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in American Greetings Corporation’s internal control over financial reporting that occurred during American Greetings Corporation’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, American Greetings Corporation’s internal control over financial reporting; and

5. American Greetings Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to American Greetings Corporation’s auditors and the audit committee of American Greetings Corporation’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect American Greetings Corporation’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in American Greetings Corporation’s internal control over financial reporting.

July 9, 2008	/s/ Zev Weiss
	Zev Weiss
	Chief Executive Officer
	(principal executive officer)

EX-31.B

Exhibit (31) b

Certification of Chief Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Stephen J. Smith, certify that:

1. I have reviewed this quarterly report on Form 10-Q of American Greetings Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of American Greetings Corporation as of, and for, the periods presented in this report;

4. American Greetings Corporation’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for American Greetings Corporation and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to American Greetings Corporation, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of American Greetings Corporation’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in American Greetings Corporation’s internal control over financial reporting that occurred during American Greetings Corporation’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, American Greetings Corporation’s internal control over financial reporting; and

5. American Greetings Corporation’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to American Greetings Corporation’s auditors and the audit committee of American Greetings Corporation’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect American Greetings Corporation’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in American Greetings Corporation’s internal control over financial reporting.

July 9, 2008	/s/ Stephen J. Smith
	Stephen J. Smith
	Senior Vice President and
	Chief Financial Officer
	(principal financial officer)

EX-32

Exhibit (32)

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this quarterly report of American Greetings Corporation on Form 10-Q as filed with the Securities and Exchange Commission on the date therein specified (the “Report”), each of the undersigned certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of American Greetings Corporation.

July 9, 2008

/s/ Zev Weiss

Zev Weiss

Chief Executive Officer

(principal executive officer)

/s/ Stephen J. Smith

Stephen J. Smith

Senior Vice President and

Chief Financial Officer

(principal financial officer)