10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended February 28, 2009

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 No. 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)

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

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

Title of each class	Name of each exchange on which registered
Class A Common Shares, Par Value $1.00	New York Stock Exchange

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

Class B Common Shares, Par Value $1.00

(Title of Class)

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

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

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

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

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

Large accelerated filer  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 Act)     YES  ¨    NO  x

State the aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, August 29, 2008— $692,183,813 (affiliates, for this purpose, have been deemed to be directors, executive officers and certain significant shareholders).

Number of shares outstanding as of April 27, 2009:

CLASS A COMMON—35,919,772

CLASS B COMMON—3,507,512

DOCUMENTS INCORPORATED BY REFERENCE

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

AMERICAN GREETINGS CORPORATION

INDEX

			Page Number
PART I
	Item 1.	Business	1
	Item 1A.	Risk Factors	5
	Item 1B.	Unresolved Staff Comments	13
	Item 2.	Properties	13
	Item 3.	Legal Proceedings	14
	Item 4.	Submission of Matters to a Vote of Security Holders	15
PART II
	Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
	Item 6.	Selected Financial Data	20
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	43
	Item 8.	Financial Statements and Supplementary Data	44
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	87
	Item 9A.	Controls and Procedures	87
	Item 9B.	Other Information	90
PART III
	Item 10.	Directors and Executive Officers of the Registrant	90
	Item 11.	Executive Compensation	90
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	90
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	91
	Item 14.	Principal Accounting Fees and Services	91
PART IV
	Item 15.	Exhibits, Financial Statement Schedules	91
	SIGNATURES		101

PART I

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

Item 1. Business

OVERVIEW

Founded in 1906, American Greetings operates predominantly in a single industry: the design, manufacture and sale of everyday and seasonal greeting cards and other social expression products. Greeting cards, gift wrap, party goods, stationery and giftware are manufactured or sold by us in North America, including the United States, Canada and Mexico, and throughout the world, primarily in the United Kingdom, Australia and New Zealand. In addition, our subsidiary, AG Interactive, Inc., distributes social expression products, including electronic greetings, physical products incorporating consumer photos, and a broad range of graphics and digital services and products, through a variety of electronic channels, including Web sites, Internet portals, instant messaging services and electronic mobile devices. Design licensing is done primarily by our subsidiary AGC, LLC, and character licensing is done primarily by our subsidiaries, Those Characters From Cleveland, Inc. and Cloudco, Inc. Our A.G. Industries, Inc. (doing business as AGI In-Store) subsidiary manufactures custom display fixtures for our products and products of others. As of February 28, 2009, we also owned and operated 341 card and gift retail stores throughout North America. On April 17, 2009, however, we sold our Retail Operations segment, including all of the card and gift store assets.

Our fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2009 refers to the year ended February 28, 2009.

PRODUCTS

American Greetings creates, manufactures and distributes social expression products including greeting cards, gift wrap, party goods, calendars and stationery as well as custom display fixtures. Our major domestic greeting card brands are American Greetings, Carlton Cards, Gibson, Tender Thoughts and Just For You. In addition, on February 24, 2009, we acquired Recycled Paper Greetings (“Recycled Paper” or “RPG”) and now offer Recycled Paper branded greeting card products. On April 17, 2009, we also acquired the Papyrus brand and now offer Papyrus branded products. Our other domestic products include DesignWare party goods, Plus Mark gift wrap and boxed cards, DateWorks calendars and AGI In-Store display fixtures. Electronic greetings and other digital content, services and products are available through our subsidiary, AG Interactive, Inc. Our major Internet brands are AmericanGreetings.com, BlueMountain.com, Egreetings.com, Kiwee.com, PhotoWorks.com and Webshots.com. Through its Webshots and PhotoWorks sites, our AG Interactive business also operates an online photo sharing space and provides consumers the ability to use their own photos to create unique, high quality physical products, including greeting cards, calendars, online photo albums and photo books. We also create and license our intellectual properties, such as the “Care Bears” and “Strawberry Shortcake” characters. Information concerning sales by major product classifications is included in Part II, Item 7.

BUSINESS SEGMENTS

At February 28, 2009, we operated in five business segments: North American Social Expression Products, International Social Expression Products, Retail Operations, AG Interactive and non-reportable operating segments. For information regarding the various business segments comprising our business, see the discussion included in Part II, Item 7 and in Note 16 to the Consolidated Financial Statements included in Part II, Item 8.

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CONCENTRATION OF CREDIT RISKS

Net sales to our five largest customers, which include mass merchandisers and national drug store and supermarket chains, accounted for approximately 36%, 37% and 36% of total revenue in 2009, 2008 and 2007, respectively. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 15%, 16% and 16% of total revenue in 2009, 2008 and 2007, respectively. No other customer accounted for 10% or more of our consolidated total revenue. Approximately 55% of the North American Social Expression Products segment’s revenue in 2009, 2008 and 2007 was attributable to its top five customers. Approximately 40% of the International Social Expression Products segment’s revenue in 2009, 2008 and 2007 was attributable to its top three customers.

CONSUMERS

We believe that women purchase the majority of all greeting cards sold and that the median age of our consumers is approximately 47. We also believe that approximately 86% of American households purchase greeting cards each year, the average number of greeting cards purchased per transaction is approximately 2.7, and consumers make approximately ten card purchasing trips per year.

COMPETITION

The greeting card and gift wrap industries are intensely competitive. Competitive factors include quality, design, customer service and terms, which may include payments and other concessions to retail customers under long-term agreements. These agreements are discussed in greater detail below. There are an estimated 3,000 greeting card publishers in the United States, ranging from small family-run organizations to major corporations. In general, however, the greeting card business is extremely concentrated. We believe that we are one of only two main suppliers offering a full line of social expression products. Our principal competitor is Hallmark Cards, Inc. Based upon our general familiarity with the greeting card and gift wrap industry and limited information as to our competitors, we believe that we are the second-largest company in the industry and the largest publicly owned greeting card company.

The market for consumer photofinishing and digital imaging services is highly competitive and still emerging. Competitive factors include brand awareness, innovative and differentiated products and services, quality and competitive prices. The major competitors in the consumer photofinishing and digital imaging market are Kodak, Snapfish and Shutterfly. In addition to these major competitors, there are numerous other companies that offer online photofinishing services. There are no significant proprietary or other barriers to entry into the digital or consumer photofinishing industry.

PRODUCTION AND DISTRIBUTION

In 2009, our channels of distribution continued to be primarily through mass retail, which is comprised of mass merchandisers, chain drug stores and supermarkets. Other major channels of distribution included card and gift retail stores, department stores, military post exchanges, variety stores and combo stores (stores combining food, general merchandise and drug items). As of February 28, 2009, we owned and operated 341 card and gift retail stores in the United States and Canada through the Retail Operations segment, which are primarily located in malls and strip shopping centers. Prior to the sale of our Retail Operations segment on April 17, 2009, we also sold our products through these company-owned card and gift retail stores. Following the sale, we will continue to sell products to these stores, but the stores are no longer owned by us. From time to time, we also sell our products to independent, third-party distributors. Our AG Interactive segment provides social expressions content through the Internet and wireless platforms.

Many of our products are manufactured at common production facilities and marketed by a common sales force. Our manufacturing operations involve complex processes including printing, die cutting, hot stamping and embossing. We employ modern printing techniques which allow us to perform short runs and multi-color

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printing, have a quick changeover and utilize direct-to-plate technology, which minimizes time to market. Our products are manufactured globally, primarily at facilities located in North America and the United Kingdom. We also source products from domestic and foreign third party suppliers. The photofinishing products provided through our AG Interactive segment are provided primarily by third party vendors. Additionally, information by geographic area is included in Note 16 to the Consolidated Financial Statements included in Part II, Item 8.

Production of our products is generally on a level basis throughout the year. Everyday inventories (such as birthday and anniversary related products) remain relatively constant throughout the year, while seasonal inventories peak in advance of each major holiday season, including Christmas, Valentine’s Day, Easter, Mother’s Day, Father’s Day and Graduation. Payments for seasonal shipments are generally received during the month in which the major holiday occurs, or shortly thereafter. Extended payment terms may also be offered in response to competitive situations with individual customers. Payments for both everyday and seasonal sales from customers that have been converted to a scan-based trading (“SBT”) model are received generally within 10 to 15 days of the product being sold by those customers at their retail locations. As of February 28, 2009, three of our five largest customers in 2009 conduct business with us under an SBT model. The core of this business model rests with American Greetings owning the product delivered to its retail customers until the product is sold by the retailer to the ultimate consumer, at which time we record the sale. American Greetings and many of its competitors sell seasonal greeting cards, other seasonal products and everyday cards at certain foreign locations with the right of return. Sales of other products are generally sold without the right of return. Sales credits for these products are issued at our discretion for damaged, obsolete and outdated products. Information regarding the return of product is included in Note 1 to the Consolidated Financial Statements included in Part II, Item 8.

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

INTELLECTUAL PROPERTY RIGHTS

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

EMPLOYEES

At February 28, 2009, we employed approximately 9,000 full-time employees and approximately 17,600 part-time employees which, when jointly considered, equate to approximately 17,800 full-time equivalent employees. Approximately 1,600 of our hourly plant employees are unionized and covered by collective bargaining agreements. The following table sets forth by location the unions representing our domestic employees, together with the expiration date of the applicable governing collective bargaining agreement.

Union	Location	Contract Expiration Date
International Brotherhood of Teamsters	Bardstown, Kentucky;	March 20, 2011
	Kalamazoo, Michigan;	April 30, 2015
	Cleveland, Ohio	March 31, 2010
UNITE-HERE Union	Greeneville, Tennessee (Plus Mark)	October 19, 2011

Other locations with unions are the United Kingdom, Mexico and Australia. We believe that labor relations at each location where we operate have generally been satisfactory.

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SUPPLY AGREEMENTS

In the normal course of business, we enter into agreements with certain customers for the supply of greeting cards and related products. We view the use of such agreements as advantageous in developing and maintaining business with our retail customers. Under these agreements, the customer typically receives from American Greetings a combination of cash payments, credits, discounts, allowances and other incentive considerations to be earned by the customer as product is purchased from us over the stated term of the agreement or the effective time period of the agreement to meet a minimum purchase volume commitment. The agreements are negotiated individually to meet competitive situations and, therefore, while some aspects of the agreements may be similar, important contractual terms vary. The agreements may or may not specify American Greetings as the sole supplier of social expression products to the customer. In the event an agreement is not completed, in most instances, we have a claim for unearned advances under the agreement.

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

ENVIRONMENTAL REGULATIONS

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

AVAILABLE INFORMATION

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

Our Corporate Governance Guidelines, Code of Business Conduct and Ethics, and the charters of the Board’s Audit Committee, Compensation and Management Development Committee, and Nominating and Governance Committee are available on or through the Investors section of our www.corporate.americangreetings.com Web site, and will be made available, free of charge, in print upon request by any shareholder to the Secretary of American Greetings.

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Item 1A. Risk Factors

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

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

Our success depends on the sustained demand for our products. Many factors affect the level of consumer spending on our products, including, among other things, general economic conditions, interest rates, the availability of consumer credit, taxation, the effects of war, terrorism, fuel prices and consumer confidence in future economic conditions, all of which are beyond our control. Economic conditions have recently deteriorated significantly in the United States, and worldwide, and may remain depressed for the foreseeable future. Because consumer purchases of our products decline during periods of economic downturn, when disposable income is lower, our revenues and earnings have been adversely affected and may continue to be if the global economic downturn continues.

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

One of our key business strategies has been to gain profitable market share by revamping our core greeting card business. Although the majority of the expense associated with these efforts has now been incurred, the need to continuously update and refresh our product offerings is an ongoing, evolving process that will continue to impact net sales, earnings and cash flows over future periods. The actual amount and timing of the expenditures will depend on the success of the strategy and the schedules of our retail partners. Moreover, our long-term success will depend in part on how well we implement our strategy to revamp the greeting card business and we cannot assure you that this strategy will either increase our revenue or profitability. Even if we are able to implement, to a significant degree, this strategy, we may experience systemic, cultural and operational challenges that may prevent any significant increase in profitability or that may otherwise negatively influence our cash flow. In addition, even if our strategy is successful, our profitability may be adversely affected if consumer demand for lower priced, value cards continues to expand, thereby eroding our average selling prices. Our strategy may also have flaws and may not be successful. For example, we may not be able to anticipate or respond in a timely manner to changing customer demands and preferences for greeting cards. If we misjudge the market, we may significantly overstock unpopular products and be forced to grant significant credits or accept significant returns, which would have a negative impact on our results of operations and cash flows. Conversely, shortages of key items could materially and adversely impact our results of operations and financial condition.

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

A few of our customers are material to our business and operations. Net sales to our five largest customers, which include mass merchandisers and chain drug stores, accounted for approximately 36%, 37% and 36% of total revenue for fiscal years 2009, 2008 and 2007, respectively. Approximately 55% of the North American Social Expression Products segment’s revenue in 2009, 2008 and 2007 was attributable to its top five customers, and approximately 40% of the International Social Expression Products segment’s revenue in 2009, 2008 and 2007 was attributable to its top three customers. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 15%, 16% and 16% of total revenue in 2009, 2008 and 2007, respectively. There can be no assurance that our large customers will continue to purchase our products in the same quantities that they have in the past. The loss of sales to one of our large customers could materially and adversely affect our business, results of operations and financial condition.

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

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

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

• take advantage of acquisitions and other opportunities more readily;

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

• adopt more aggressive pricing policies.

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

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

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

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

Many of our largest customers are mass-market retailers. The mass-market retail channel in the U.S. has experienced significant shifts in market share among competitors in recent years. In addition, the retail industry in general has experienced significant declines due to the worldwide downturn in the economy and decreasing consumer demand. As a result, retailers have experienced liquidity problems and some have been forced to file for bankruptcy protection. There is a risk that certain of our key customers will not pay us, or that payment may be delayed because of bankruptcy or other factors beyond our control, which could increase our exposure to losses from bad debts and may require us to write-off deferred cost assets. Additionally, our business, results of operations and financial condition could be materially and adversely affected if certain of these mass-market retailers were to cease doing business as a result of bankruptcy, or significantly reduce the number of stores they operate. For example, in the United Kingdom, the bankruptcy of a major customer and another major customer implementing buying freezes during fiscal 2009 contributed to our recording a goodwill impairment with respect to one reporting unit located in the United Kingdom within the International Social Expression Products segment.

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

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

Our results of operations fluctuate on a seasonal basis.

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

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

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

• political instability, civil unrest and labor shortages;

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

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

• currency and foreign exchange risks; and

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

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

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

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

Our trademarks, trade secrets, copyrights, patents and all of our other intellectual property rights are important assets. We rely on copyright, trademark, patent and trade secret laws in the United States and other jurisdictions and on confidentiality agreements with some employees and others to protect our proprietary rights. If these rights were infringed or invalidated, our business could be materially and adversely affected. In addition, our activities could infringe upon the proprietary rights of others, who could assert infringement claims against us. We could face costly litigation if we are forced to defend these claims. If we are unsuccessful in doing so, our business, results of operations and financial condition may be materially and adversely affected.

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

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

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

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

The terms of our borrowing arrangements contain a number of restrictive covenants, including customary operating restrictions that limit our ability to engage in such activities as borrowing and making investments, capital expenditures and distributions on our capital stock, and engaging in mergers, acquisitions and asset sales. We are also subject to customary financial covenants, including a leverage ratio and an interest coverage ratio. These covenants restrict the amount of our borrowings, reducing our flexibility to fund ongoing operations and

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strategic initiatives. These borrowing arrangements are described in more detail in “Liquidity and Capital Resources” under Item 7 and in Note 11 to the Consolidated Financial Statements under Item 8 of this Annual Report on Form 10-K. Compliance with some of these covenants is based on financial measures derived from our operating results. If economic conditions deteriorate, we may experience material adverse impacts to our business and operating results, such as through reduced customer demand. A decline in our business could make us unable to maintain compliance with these financial covenants, in which case, we may be restricted in how we fund ongoing operations and strategic initiatives and deploy capital, including by limiting our ability to make acquisitions and dispositions, pay dividends and repurchase our stock. In addition, if we our unable to maintain compliance with our financial covenants or otherwise breach the covenants that we are subject to under our borrowing arrangements, our lenders could demand immediate payment of amounts outstanding and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all. In addition, our credit agreement is secured by substantially all of our domestic assets, including the stock of certain of our subsidiaries. If we cannot repay all amounts that we have borrowed under our credit agreement, our lenders could proceed against our assets.

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

We recently acquired two photo sharing and personal publishing businesses, the greeting card company Recycled Paper Greetings, and the Papyrus brand and associated wholesale division of Schurman Fine Papers (“Schurman”), which supplies Papyrus brand greetings cards primarily to leading specialty, mass, grocery and drug store channels. In addition, we continue to regularly evaluate potential acquisition opportunities to support and strengthen our business. We cannot be sure that we will be able to locate suitable acquisition candidates, acquire candidates on acceptable terms or integrate acquired businesses successfully. Future acquisitions could cause us to take on additional compliance obligations as well as incur debt, dilution, contingent liabilities, increased interest expense, restructuring charges and amortization expenses related to intangible assets, which may materially and adversely affect our business, results of operations and financial condition.

Integrating our recent acquisitions, as well as future businesses that we may acquire, involves significant challenges. In particular, the coordination of geographically dispersed organizations with differences in corporate cultures and management philosophies may increase the difficulties of integration. The integration of these acquired businesses will also require the dedication of significant management resources, which may temporarily distract management’s attention from our day-to-day operations. The process of integrating operations may also cause an interruption of, or loss of momentum in, the activities of one or more of our businesses and the loss of key personnel. Employee uncertainty and distraction during the integration process may also disrupt our business. Our strategy is, in part, predicated on our ability to realize cost savings and to increase revenues through the acquisition of businesses that add to the breadth and depth of our products and services. Achieving these cost savings and revenue increases is dependent upon a number of factors, many of which are beyond our control. In particular, we may not be able to realize the benefits of anticipated integration of sales forces, asset rationalization, systems integration, and more comprehensive product and service offerings.

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

On April 17, 2009, we sold our Retail Operations segment, including all 341 of our card and gift retail store assets, to Schurman, which will operate stores under the American Greetings, Carlton Cards and Papyrus brands. The failure of Schurman to operate the retail stores successfully could have a material adverse effect on us, our reputation and our brands, and could materially adversely affect our business, financial condition, and results of operations, because, under the terms of the transaction, we will remain subject to certain of the Retail Operations store leases on a contingent basis through our subleasing of stores to Schurman. We are also the predominant supplier of greeting cards and other social expression products to the retail stores, and we have provided credit support to Schurman, including up to $24.0 million of guarantees in favor of the lenders under Schurman’s senior

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revolving credit facility as described in our Current Report on Form 8-K, dated April 20, 2009. In addition, although we do not control Schurman, because Schurman is licensing the “Papyrus,” “American Greetings” and “Carlton Cards” names for the retail stores, actions taken by Schurman may be seen by the public as actions taken by us, which, in turn, could adversely affect our reputation or brands.

We may be unsuccessful in increasing revenues or generating a profit from the recent acquisitions of PhotoWorks and Webshots in the digital services markets, which could adversely affect our results of operations.

Our recent acquisitions of two photo sharing and personal publishing businesses are designed to provide us with an entry into the online photo sharing space, a significant number of unique visitors 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. However, the market for consumer photofinishing and digital imaging services is highly competitive and still emerging. The major competitors in our market are Kodak, Snapfish and Shutterfly. In addition to these major competitors, there are numerous other companies that offer online photofinishing services. Even if we establish a strong position among consumers for digital products and services, we may not be able to generate significant revenues or a profit from this market. The photography industry is also currently characterized by rapidly evolving technology and consumer demand for services and products. The introduction of digital services and products that use new technologies could render existing services and products obsolete. Our future success in this market will depend on our ability to adapt to new technologies and develop new or modify existing services, products and marketing techniques to satisfy changing consumer needs and attract new customers.

We may be unsuccessful in completing the divestiture of the Strawberry Shortcake and Care Bears properties.

We have entered into agreements to sell our Strawberry Shortcake and Care Bears properties for net proceeds to us of approximately $76.0 million. If this transaction fails to close, it could limit some of our financial flexibility due to the absence of additional liquidity that would have been available from the proceeds of the transaction. For information regarding the proposed divestiture of these properties, see Note 19 to the Consolidated Financial Statements included in Part II, Item 8.

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

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

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

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

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

We are party to collective bargaining contracts with our labor unions, which represent a significant number of our employees. In particular, approximately 1,600 of our employees are unionized and are covered by collective bargaining agreements. Although we believe our relations with our employees are satisfactory, no assurance can be given that we will be able to successfully extend or renegotiate our collective bargaining agreements as they expire from time to time. If we fail to extend or renegotiate our collective bargaining agreements, if disputes with our unions arise, or if our unionized workers engage in a strike or other work related stoppage, we could incur higher ongoing labor costs or experience a significant disruption of operations, which could have a material adverse effect on our business.

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

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

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

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

Information technology infrastructure failures could significantly affect our business.

We depend heavily on our information technology (“IT”) infrastructure in order to achieve our business objectives. If we experience a problem that impairs this infrastructure, such as a computer virus, a problem with the functioning of an important IT application, or an intentional disruption of our IT systems, the resulting disruptions could impede our ability to record or process orders, manufacture and ship in a timely manner, or

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otherwise carry on our business in the ordinary course. Any such event could cause us to lose customers or revenue and could require us to incur significant expense to eliminate these problems and address related security concerns.

We are refreshing our IT systems in stages in an effort to redesign and deploy new processes, organization structures and a common information system over a period of seven to ten years. Such an implementation carries substantial operations risk, including loss of data or information, unanticipated increases in costs, disruption of operations or business interruption. Further, we may not be successful implementing new systems or any new system may not perform as expected. This could have a material adverse effect on our business.

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

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

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

Our authorized capital stock consists of Class A common shares and Class B common shares. The economic rights of each class of common shares are identical, but the voting rights differ. Class A common shares are entitled to one vote per share and Class B common shares are entitled to ten votes per share. There is no public trading market for the Class B common shares, which are held by members of the extended family of American Greetings’ founder, officers and directors of American Greetings and their extended family members, family trusts, institutional investors and certain other persons. As of April 28, 2009, Morry Weiss, the Chairman of the Board of Directors, Zev Weiss, the Chief Executive Officer, Jeffrey Weiss, the President and Chief Operating Officer, and Erwin Weiss, the Senior Vice President, Enterprise Resource Planning, together with other members of the Weiss family and certain trusts and foundations established by the Weiss family beneficially owned approximately 90% in the aggregate of our outstanding Class B common shares (approximately 87%, excluding stock options that are presently exercisable or exercisable within 60 days of April 28, 2009), which, together with Class A common shares beneficially owned by them, represents approximately 50% of the voting power of our outstanding capital stock (approximately 43%, excluding stock options that are presently exercisable or exercisable within 60 days of April 28, 2009). Accordingly, these members of the Weiss family, together with the trusts and foundations established by them, would be able to significantly influence the outcome of shareholder votes, including votes concerning the election of directors, the adoption or amendment of provisions in our Articles of Incorporation or Code of Regulations, and the approval of mergers and other significant corporate transactions, and their interests may not be aligned with your interests. The existence of these levels of ownership concentrated in a few persons makes it less likely that any other shareholder will be able to affect our management or strategic direction. These factors may also have the effect of delaying or preventing a change in our management or voting control or our acquisition by a third party.

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

Certain provisions of Ohio law and our charter documents, together or separately, could have the effect of making it more difficult or discouraging for a third party to acquire or attempt to acquire control of American Greetings and limit the price that certain investors might be willing to pay in the future for our common shares. For example, our charter documents establish a classified board of directors, serving staggered three-year terms,

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allow the removal of directors only for cause, and establish certain advance notice procedures for nomination of candidates for election as directors and for shareholder proposals to be considered at shareholders’ meetings. In addition, while shareholders do have the right to cumulative voting in the election of directors, Class B common shares have ten votes per share.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

As of February 28, 2009, we own or lease approximately 10 million square feet of plant, warehouse and office space throughout the world, of which approximately 365,000 square feet is leased space. We believe our manufacturing and distribution facilities are well maintained and are suitable and adequate, and have sufficient productive capacity to meet our current needs.

The following table summarizes, as of February 28, 2009, our principal plants and materially important physical properties and identifies as of such date the respective segments that use the properties described. In addition to the following, as of February 28, 2009, our Retail Operations segment owned and operated approximately 341 card and gift retail stores throughout North America. Most of these stores operate on premises that we lease from third parties.

* —Indicates calendar year

Location	Approximate Square Feet Occupied		Expiration Date of Material Leases *	Principal Activity
	Owned	Leased
Cleveland,(1)(3)(4)(5) Ohio	1,700,000			World Headquarters: General offices of North American Greeting Card Division; Plus Mark, Inc.; Carlton Cards Retail, Inc.; AG Interactive, Inc.; and AGC, LLC; creation and design of greeting cards, gift wrap, party goods, stationery and giftware; marketing of electronic greetings
Bardstown,(1) Kentucky	413,500			Cutting, folding, finishing and packaging of greeting cards
Danville,(1) Kentucky	1,374,000			Distribution of everyday products including greeting cards
Osceola,(1) Arkansas	2,552,000			Cutting, folding, finishing and packaging of greeting cards and warehousing; distribution of seasonal products
Ripley,(1)	165,000			Greeting card printing (lithography)
Tennessee
Kalamazoo,(1)	602,500			Manufacture and distribution of party goods
Michigan
Forest City,(5) North Carolina	498,000			Manufacture of display fixtures and other custom display fixtures by A.G. Industries, Inc.

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Location	Approximate Square Feet Occupied		Expiration Date of Material Leases *	Principal Activity
	Owned	Leased
Greeneville,(1) Tennessee (Two Locations)	1,410,000			Printing and packaging of seasonal greeting cards and wrapping items and order filling and shipping for Plus Mark, Inc.
Chicago,(1) Illinois		145,000	2018	Recycled Paper Greetings administrative office
University Park,(1) Illinois		182,000	2010	Recycled Paper Greetings warehousing and distribution
Toronto,(1) Ontario, Canada		38,000	2018	General office of Carlton Cards Limited (Canada)
Clayton,(2) Australia	208,000			General offices of John Sands companies
Dewsbury,(2) England (Two Locations)	441,500			General offices of UK Greetings Ltd. and manufacture and distribution of greeting cards and related products
Corby, England(2)	85,000			Distribution of greeting cards and related products
Telford,(2) England	55,000			General offices and distribution for UK Greetings Ltd.
Mexico City,(1) Mexico	89,000			General offices of Carlton Mexico, S.A. de C.V. and distribution of greeting cards and related products

1 North American Social Expression Products

2 International Social Expression Products

3 Retail Operations

4 AG Interactive

5 Non-reportable

Item 3. Legal Proceedings

On March 20, 2009 a shareholder derivative complaint was filed in the Court of Common Pleas of Cuyahoga County, Ohio, by the Electrical Workers Pension Fund, Local 103, I.B.E.W., against certain of our current and former officers and directors. The suit alleges that the named parties breached their fiduciary duties to the Corporation by, among other things, backdating stock options granted to our officers and directors, accepting backdated options and/or causing the Corporation to file false and misleading financial statements. The suit seeks an unspecified amount of damages from the named parties and modifications to our corporate governance policies. On April 16, 2009, the individual defendants removed the matter to the United States District Court for the Northern District of Ohio, Eastern Division. Management believes the allegations made in the complaint are without merit and the defendants intend to vigorously defend this action. We currently do not believe that the impact of this lawsuit, if any, will have a material adverse effect on our financial position, liquidity or results of operations. We currently believe that any liability will be covered by insurance coverage available with financially viable insurance companies, subject to self-insurance retentions and customary exclusions, conditions, coverage gaps, and policy limits, as well as insurer solvency.

In addition to the foregoing, we are involved in certain legal proceedings arising in the ordinary course of business. We, however, do not believe that any of the 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.

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Item 4. Submission of Matters to Vote of Security Holders

None.

Executive Officers of the Registrant

The following table sets forth our executive officers, their ages as of April 29, 2009, and their positions and offices:

Name	Age	Current Position and Office
Morry Weiss	68	Chairman
Zev Weiss	42	Chief Executive Officer
Jeffrey Weiss	45	President and Chief Operating Officer
John W. Beeder	49	Senior Vice President, Executive Sales and Marketing Officer
John S. N. Charlton	62	Senior Vice President, International and Managing Director, UK Greetings
Michael L. Goulder	49	Senior Vice President, Executive Supply Chain Officer
Thomas H. Johnston	61	Senior Vice President, Creative/Merchandising; President, Carlton Cards Retail
Catherine M. Kilbane	46	Senior Vice President, General Counsel and Secretary
Brian T. McGrath	58	Senior Vice President, Human Resources
Stephen J. Smith	45	Senior Vice President and Chief Financial Officer
Erwin Weiss	60	Senior Vice President, Enterprise Resource Planning
Joseph B. Cipollone	50	Vice President, Corporate Controller
Josef Mandelbaum	42	CEO—AG Intellectual Properties
Douglas W. Rommel	53	Vice President, Information Services

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

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

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

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

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

• John S. N. Charlton was Managing Director of the Consumer Products Division of Pentland Group plc in the United Kingdom from 1988 until 1998, and Managing Director of UK Greetings Ltd. (a wholly-owned subsidiary of American Greetings) from 1998 until becoming Senior Vice President, International in October 2000.

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

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• Thomas H. Johnston was Managing Director of Gruppo, Levey & Co., an investment banking firm focused on the direct marketing and specialty retail industries, from November 2001 until May 2004, when he became Senior Vice President and President of Carlton Cards Retail. Mr. Johnston became Senior Vice President, Creative/Merchandising in December 2004.

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

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

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

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

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

• Josef Mandelbaum has held various positions with the Corporation since joining in 1995, including most recently President and Chief Executive Officer of the Corporation’s subsidiary, AG Interactive, Inc. from May 2000 until becoming CEO – AG Intellectual Properties, which consists of the Corporation’s AG Interactive, outbound licensing and entertainment businesses, in February 2005.

• Douglas W. Rommel has held various positions with the Corporation since joining in 1978, including most recently Executive Director of e-business within the Information Services division from July 2000 until becoming Vice President, Information Services in November 2001.

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PART II

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

(a) Market Information.    Our Class A common shares are listed on the New York Stock Exchange under the symbol AM. The high and low sales prices, as reported in the New York Stock Exchange listing, for the years ended February 28, 2009 and February 29, 2008, were as follows:

	2009				2008
	High		Low		High		Low
1st Quarter	$	19.99	$	16.95	$	26.26	$	22.23
2nd Quarter		19.14		11.69		29.10		22.12
3rd Quarter		18.45		7.85		28.49		22.65
4th Quarter		13.04		3.73		24.35		17.77

There is no public market for our Class B common shares. Pursuant to our Amended and Restated Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to American Greetings for purchase at the most recent closing price for our Class A common shares. If we do not purchase such Class B common shares, the holder must convert such shares, on a share for share basis, into Class A common shares prior to any transfer.

National City Bank, Cleveland, Ohio, is our registrar and transfer agent.

Shareholders.    At February 28, 2009, there were approximately 14,700 holders of Class A common shares and 156 holders of Class B common shares of record and individual participants in security position listings.

Dividends.    The following table sets forth the dividends declared by us in 2009 and 2008.

Dividends per share declared in	2009			2008
1st Quarter	$	0.12		$	0.10
2nd Quarter		0.12			0.10
3rd Quarter		0.12			0.10
4th Quarter		0.24	*		0.10
Total	$	0.60		$	0.40

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

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

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COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN AMONG

AMERICAN GREETINGS CORPORATION, THE S&P 400 INDEX AND PEER GROUP INDEX

Set forth below is a line graph comparing the cumulative total return of a hypothetical investment in the our Class A common shares with the cumulative total return of hypothetical investments in the S&P 400 Index, and the Peer Group based on the respective market price of each investment at February 27, 2004, February 28, 2005, February 28, 2006, February 28, 2007, February 29, 2008 and February 27, 2009.

	2/04		2/05		2/06		2/07		2/08		2/09
American Greetings	$	100	$	109	$	94	$	106	$	87	$	18
S & P 400	$	100	$	112	$	132	$	144	$	137	$	80
Peer Group*	$	100	$	113	$	107	$	123	$	117	$	81

Source: Bloomberg L.P.

*Peer Group

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

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

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

(b) Not applicable.

(c) The following table provides information with respect to our purchases of our common shares made during the three months ended February 28, 2009.

Period	Total Number of Shares Purchased			Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
December 2008	Class A –	—			—		—		$	—
	Class B –	500	(1)	$	9.82		—
January 2009	Class A –	1,375,000		$	5.14	(2)	1,375,000	(3)	$	67,937,453
	Class B –	—			—		—
February 2009	Class A –	3,500,000		$	4.88	(2)	3,500,000	(3)	$	50,842,340
	Class B –	—			—		—
Total	Class A –	4,875,000					4,875,000	(3)
	Class B –	500	(1)				—

(1) There is no public market for our Class B common shares. Pursuant to our Amended and Restated Articles of Incorporation, all of the Class B common shares were repurchased by American Greetings for cash pursuant to its right of first refusal.

(2) Excludes commissions paid, if any, related to the share repurchase transactions.

(3) On January 13, 2009, American Greetings announced that its Board of Directors authorized a program to repurchase up to $75 million of its Class A common shares. There is no set expiration date for this repurchase program and the repurchases reflected above were made through a 10b5-1 program in open market or privately negotiated transactions, which were intended to be in compliance with the SEC’s Rule 10b-18.

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Item 6. Selected Financial Data

Thousands of dollars except share and per share amounts

	2009		2008		2007		2006		2005
Summary of Operations
Net sales	$1,646,399		$1,730,784		$1,744,798		$1,875,472		$1,871,386
Total revenue	1,690,738		1,776,451		1,794,290		1,928,136		1,935,109
Goodwill and other intangible assets impairment	290,166		—		2,196		43,153		—
Interest expense	22,854		20,006		34,986		35,124		79,397
(Loss) income from continuing operations	(227,759	)	83,320		39,938		89,219		67,605
(Loss) income from discontinued operations, net of tax	—		(317	)	2,440		(4,843	)	27,674
Net (loss) income	(227,759	)	83,003		42,378		84,376		95,279
(Loss) earnings per share:
(Loss) income from continuing operations	(4.89	)	1.54		0.69		1.35		0.99
(Loss) income from discontinued operations, net of tax	—		(0.01	)	0.04		(0.07	)	0.40
(Loss) earnings per share	(4.89	)	1.53		0.73		1.28		1.39
(Loss) earnings per share—assuming dilution	(4.89	)	1.52		0.71		1.16		1.25
Cash dividends declared per share	0.60		0.40		0.32		0.32		0.12
Fiscal year end market price per share	3.73		18.82		23.38		20.98		24.63
Average number of shares outstanding	46,543,780		54,236,961		57,951,952		65,965,024		68,545,432
Financial Position
Accounts receivable—net	$     63,281		$     61,902		$   104,000		$   139,385		$   179,833
Inventories	203,873		216,671		182,618		213,109		216,255
Working capital	217,990		237,049		425,228		603,797		828,484
Total assets	1,433,788		1,804,428		1,778,214		2,218,962		2,524,207
Property, plant and equipment additions	55,733		56,623		41,716		46,177		47,179
Long-term debt	389,473		220,618		223,915		300,516		486,087
Shareholders’ equity	529,189		943,411		1,012,574		1,220,025		1,386,780
Shareholders’ equity per share	13.05		19.35		18.37		20.22		20.09
Net return on average shareholders’ equity from continuing operations	(30.9	%)	8.5	%	3.6	%	6.8	%	5.1	%

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

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

OVERVIEW

Founded in 1906, we are the world’s largest publicly owned creator, manufacturer and distributor of social expression products. Headquartered in Cleveland, Ohio, as of February 28, 2009, we employ approximately 17,800 associates around the world and are home to one of the world’s largest creative studios.

Our major domestic greeting card brands are American Greetings, Carlton Cards, Gibson, Tender Thoughts and Just For You and other domestic products include DesignWare party goods, Plus Mark gift wrap and boxed cards, DateWorks calendars and AGI In-Store display fixtures. We also create and license our intellectual properties such as the Care Bears and Strawberry Shortcake characters. The Internet and wireless business unit, AG Interactive, is a leading provider of electronic greetings and other content for the digital marketplace. Our major Internet brands are AmericanGreetings.com, BlueMountain.com, Egreetings.com, Kiwee.com, PhotoWorks.com and WebShots.com. As of February 28, 2009, the Retail Operations segment owned and operated 341 card and gift retail stores throughout North America.

Our international operations include wholly-owned subsidiaries in the United Kingdom (“U.K.”), Canada, Australia, New Zealand and Mexico, as well as licensees in approximately 60 other countries.

We experienced difficult industry conditions during 2009 as the global economic slowdown increased in severity throughout the course of the year, particularly during the second half of the year, which is critical to the social expressions industry due to the concentration of major holidays during that period. These industry conditions were characterized by lower customer traffic in retail stores, less consumer spending due to economic uncertainties and a number of retailer bankruptcies. These circumstances significantly impacted our results during 2009, leading to lower revenues and earnings throughout the Corporation.

In addition, these conditions led to several significant asset impairments during the second half of 2009. Due to declining results, uncertainties regarding future forecasts and our declining stock price, we recorded goodwill, intangible asset and fixed asset impairments totaling approximately $296 million during 2009.

These difficult times also provided opportunities that we have leveraged to position ourselves for future success. Our pursuit of these opportunities have led to the following business transactions:

• February 24, 2009 acquisition of Recycled Paper Greetings;

• April 17, 2009 acquisition of the Papyrus trademark and wholesale business division of Schurman Fine Papers that supplies Papyrus brand greeting cards to specialty, mass, grocery and drug store channels; and

• April 17, 2009 divestiture of our Retail Operations segment.

These actions continue the strategy of focusing on growing our core greeting card business and divesting non-core businesses. The additions of RPG and Papyrus provide us with an opportunity for new innovations and ideas. These acquisitions align with our corporate strategy to grow our business by building on our core competency of greeting cards. RPG has a history of creating humorous and alternative greeting cards with a unique style and tone to meet consumers’ needs. The Papyrus brand provides the opportunity to serve a consumer with distinct tastes, one that appreciates the Papyrus approach to design and quality. These acquisitions allow us to focus our efforts and stay true to our vision of providing relevant and compelling products to consumers.

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In addition to the above transactions, in March 2009, we came to an agreement with a potential buyer for our Strawberry Shortcake and Care Bears properties. We expect to receive approximately $76 million for our rights in the properties. The tight credit markets have created difficulty in completing this transaction. There are still hurdles to finalizing the transaction, but we are moving forward with the goal of closing the transaction during fiscal 2010.

Looking forward to fiscal 2010, we expect the economy to remain challenging at least through the first half of the year. While we hope to see improvement later in the year, our strategy is to remain conservative until that time. We have taken actions to reduce costs, including significant headcount reductions during the recent fourth quarter, and are taking further actions to lower manufacturing costs, improve the efficiency of our supply chain and eliminate non-essential discretionary spending. Over the past several years we have incurred significant costs associated with our investment in cards strategy, which focused on improving the design, production, display and promotion of our cards, creating relevant and on-trend products, brought to market quickly and merchandised in a manner that enhances the shopping experience. That strategy, combined with the acquisitions, divestiture and cost savings programs described above, positions us to both withstand the current economic conditions and to be well positioned when the economy begins to improve.

We expect the divestiture of our retail stores, net of the acquisitions of RPG and the Papyrus wholesale business, to negatively impact fiscal 2010 revenues approximately 2%. We also expect that earnings will be negatively impacted in fiscal 2010 due to the transaction and transition expenses we will incur during the period relating to these transactions. Additionally, other revenue, primarily royalty revenue, may be lower in fiscal 2010 based on the anticipated sale of the Strawberry Shortcake and Care Bears properties.

We recognized a net loss of $227.8 million in 2009 compared to net income of $83.0 million in 2008, on total revenue of $1.69 billion in 2009 compared to $1.78 billion in 2008.

The lower consolidated revenues were significantly impacted by unfavorable foreign currency movements, which accounted for approximately half of the total revenue decline. In addition, revenues were lower in all segments except the AG Interactive segment and our non-reportable segments (which include the fixtures and licensing businesses). The increased revenue in the AG Interactive segment was primarily due to the digital photography acquisitions completed during the second half of 2008 partially offset by lower advertising revenues. Revenues in the North American Social Expression Products segment declined primarily due to lower sales of gift packaging products, party goods and specialty products, partially offset by the favorable impact of fewer SBT implementations compared to the prior year. Revenues were lower within the International Social Expression Products segment due to our U.K. business that was significantly impacted by the general economic downturn, with the bankruptcy of one major customer, a buying freeze by another major customer and a general decline in sales to most customers during the fourth quarter. The Retail Operations segment revenue decreased due to both fewer stores and the decrease in same-store sales, particularly during the fourth quarter.

In addition to the $296 million of impairments discussed above, earnings declined due to decreased revenue, an unfavorable product mix and continued increases in product content costs due to the growth in the sale of technology cards and changes in product design that add creative embellishments to the card lines. These increases in content costs along with the growth in value card sales put downward pressure on our gross margins. Supply chain, scrap and distribution costs were higher than the prior year as increases in card shipments outpaced increases of card unit sales.

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RESULTS OF OPERATIONS

Comparison of the years ended February 28, 2009 and February 29, 2008

In 2009, net loss was $227.8 million, or $4.89 per diluted share, compared to net income of $83.0 million, or $1.52 per diluted share, in 2008.

Our results for 2009 and 2008 are summarized below:

(Dollars in thousands)	2009			% Total Revenue		2008			% Total Revenue
Net sales	$	1,646,399		97.4	%	$	1,730,784		97.4	%
Other revenue		44,339		2.6	%		45,667		2.6	%
Total revenue		1,690,738		100.0	%		1,776,451		100.0	%
Material, labor and other production costs		809,956		47.9	%		780,771		43.9	%
Selling, distribution and marketing expenses		618,899		36.6	%		621,478		35.0	%
Administrative and general expenses		226,317		13.4	%		246,722		13.9	%
Goodwill and other intangible assets impairment		290,166		17.2	%		—		0.0	%
Other operating income—net		(1,396	)	(0.1	%)		(1,325	)	(0.1	%)
Operating (loss) income		(253,204	)	(15.0	%)		128,805		7.3	%
Interest expense		22,854		1.4	%		20,006		1.1	%
Interest income		(3,282	)	(0.2	%)		(7,758	)	(0.4	%)
Other non-operating expense (income)—net		2,157		0.1	%		(7,411	)	(0.4	%)
(Loss) income from continuing operations before income tax (benefit) expense		(274,933	)	(16.3	%)		123,968		7.0	%
Income tax (benefit) expense		(47,174	)	(2.8	%)		40,648		2.3	%
(Loss) income from continuing operations		(227,759	)	(13.5	%)		83,320		4.7	%
Loss from discontinued operations, net of tax		—		0.0	%		(317	)	(0.0	%)
Net (loss) income	$	(227,759	)	(13.5	%)	$	83,003		4.7	%

Revenue Overview

Consolidated net sales in 2009 were $1.65 billion, a decrease of $84.4 million from the prior year. Approximately half, or $42 million, of the decrease is attributable to unfavorable foreign currency translation impacts. The remaining decrease was the result of lower sales in our North American Social Expression Products segment, Retail Operations segment and International Social Expression Products segment partially offset by increases in our AG Interactive segment of approximately $6 million and the non-reportable segments of approximately $3 million. The increased revenue in the AG Interactive segment was primarily due to the digital photography acquisitions completed during the second half of 2008 partially offset by lower advertising revenues.

Net sales of our North American Social Expression Products segment decreased approximately $29 million. The majority of the decrease is attributable to decreased sales of our gift packaging and party goods product lines of approximately $37 million and $11 million, respectively. Also contributing to the decrease was a decline in specialty product sales, which include stationery, calendars and stickers, of approximately $7 million. These decreases were partially offset by the favorable impact of fewer SBT implementations in the current year and the favorable impact of an SBT implementation completed during the year that had previously been estimated, which together increased net sales by approximately $28 million in the current year compared to 2008.

The Retail Operations segment’s net sales decreased approximately $15 million due to the both the decrease in same-store sales of 4% and the reduction in stores.

Net sales of our International Social Expression Products segment decreased approximately $7 million. The decrease in the current year is primarily attributable to reduced sales in the U.K. due to the recent bankruptcy of a

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major customer; a buying freeze implemented by another major customer, including on our everyday products; and a general decline in seasonal and everyday card sales to most customers during the fourth quarter. This decrease was partially offset by an increase in sales of approximately $11 million from the U.K. acquisition completed during the first quarter of this year.

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

	2009		2008
Everyday greeting cards	43	%	41	%
Seasonal greeting cards	22	%	22	%
Gift packaging	14	%	15	%
All other products*	21	%	22	%

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

Other revenue, primarily royalty revenue from our Strawberry Shortcake and Care Bears properties, decreased $1.4 million from $45.7 million in 2008 to $44.3 million in 2009. We have entered into an agreement to sell our Strawberry Shortcake and Care Bears properties. We expect to receive approximately $76 million for our rights in the properties. The anticipated sale is expected to close in fiscal 2010. See Note 19 to the Consolidated Financial Statements for further information.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for 2009 and 2008 are summarized below:

	Increase (Decrease) From the Prior Year
	Everyday Cards				Seasonal Cards				Total Greeting Cards
	2009		2008		2009		2008		2009		2008
Unit volume	1.7	%	9.6	%	3.4	%	7.0	%	2.2	%	8.8	%
Selling prices	(1.5	%)	(5.6	%)	(5.3	%)	(4.4	%)	(2.7	%)	(5.2	%)
Overall increase / (decrease)	0.2	%	3.5	%	(2.1	%)	2.3	%	(0.5	%)	3.1	%

During 2009, combined everyday and seasonal greeting card sales less returns decreased 0.5% compared to the prior year, with increases in unit volume more than offset by lower average selling prices.

Everyday card unit volume was up 1.7% compared to the prior year. However, net of prior year SBT implementations that reduced unit volume, everyday card unit volume was essentially flat compared to the prior year. Overall unit volume had been strong through the first three-quarters of the year, up 6.0%, but dropped significantly during the fourth quarter due to the general economic downturn and reduced inventory at retail. Selling prices were down 1.5% compared to the prior year as a result of the continued trend toward a higher mix of value line cards. The increased volume of value priced card sales is driven by expanded distribution and changes in consumer preferences. This growth in the value priced cards more than offsets the impact of the growth in higher priced technology cards.

Seasonal card unit volume increased 3.4% compared to the prior year, driven by improvement in most seasonal programs. Lower selling prices of 5.3% related to a higher mix of value priced cards across most seasonal programs compared to the prior year. The increased volume of value priced card sales is driven by expanded distribution and changes in consumer preferences.

Expense Overview

Material, labor and other production costs (“MLOPC”) for 2009 were $810.0 million, an increase from $780.8 million in 2008. As a percentage of total revenue, these costs were 47.9% in 2009 compared to 43.9% in 2008. The increase of $29.2 million is due to unfavorable mix ($17 million) and spending variances ($44 million) partially offset by favorable volume variances ($12 million) due to the lower sales volume and the impact of foreign currency translation ($20 million). The unfavorable spending variances are primarily attributable to

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higher scrap and shrink ($19 million) and increased expenses ($11 million) associated with our production of film-based entertainment, which is used to support our merchandise licensing strategies by increasing the awareness of our properties within the target audience. Costs ($5 million) associated with the conversion to our new Canadian line of cards and increased severance expenses ($3 million) in the current year also contributed to the unfavorable variances. The unfavorable mix is due to a shift toward cards with more content, including music, lights and other embellishments.

Selling, distribution and marketing expenses were $618.9 million in 2009, decreasing from $621.5 million in the prior year. The decrease of $2.6 million is due primarily to the impact of favorable foreign currency translation ($15 million) partially offset by increased spending ($12 million). The increased spending is the result of higher supply chain costs, specifically merchandiser and distribution costs ($15 million) due to an increase in units shipped. This increase was partially offset by lower advertising expenses ($3 million) as the prior year included additional advertising related to our investment in cards strategy. Increased fixed asset impairment charges ($4 million) in our Retail Operations segment in 2009 compared to 2008 were substantially offset by reduced store expenses ($4 million) due to the reduced store doors in our Retail Operations segment.

Administrative and general expenses were $226.3 million in 2009, compared to $246.7 million in 2008. The $20.4 million decrease in expense in 2009 is due to reduced spending ($16 million) and favorable foreign currency translation impacts ($4 million). The lower spending is primarily the result of decreased variable compensation expenses ($29 million) including management bonuses and profit-sharing contributions. The current year results did not meet the 2009 operating results required to make these variable compensation payments. This decrease was partially offset by an increase in bad debt expense ($6 million) partially due to the recent bankruptcy of a major customer in the U.K., increased amortization of intangible assets ($3 million) due to the acquisitions in both 2009 and 2008 and increased business taxes ($4 million) due primarily to revised assessment values for certain personal property.

Goodwill and other intangible assets impairment charges of $290.2 million were recorded in 2009. In the third quarter of 2009, indicators emerged during the period that led us to conclude that an impairment test was required prior to the annual test. As a result, impairment was recorded for a reporting unit in the International Social Expression Products segment, located in the U.K., and in our AG Interactive segment. The goodwill impairment charge recorded in the U.K. was $82.1 million, which represents all of the goodwill for this reporting unit. The goodwill and intangible assets impairment charge for the AG Interactive segment was $160.8 million, which includes all of the goodwill for AG Interactive. An additional impairment analysis was performed at the end of the fourth quarter of 2009 as a result of the continued significant deterioration of the global economic environment and the decline in the price of our common shares. Based on that analysis, we recorded goodwill charges of $47.9 million, which includes all the goodwill for our North American Greeting Card Division (“NAGCD”) and $0.1 million, which includes all the goodwill for our fixtures business. NAGCD is part of our North American Social Expression Products segment and the fixtures business is included in non-reportable segments. Also, in the fourth quarter, the estimated AG Interactive goodwill impairment charge recorded in the third quarter was finalized which resulted in a credit of $0.7 million being recorded due to final purchase accounting adjustments in the fourth quarter.

Interest expense was $22.9 million in 2009, compared to $20.0 million in 2008. The increase of $2.9 million is primarily attributable to increased borrowings on our revolving credit facility ($4 million) and the accounts receivable securitization facility ($1 million) in the current period. These increases were partially offset by interest savings ($1 million) associated with the reduced balance outstanding of our 6.10% notes as well as reduced fees for our credit and accounts receivable facilities. The reduction in commitment fees is primarily due to increased borrowings under the facilities.

Other non-operating expense (income) – net was expense of $2.2 million in 2009 compared to income of $7.4 million in 2008. The decrease of $9.6 million is due to a swing of approximately $8 million from a foreign exchange gain in 2008 to a loss in 2009 and to the loss of approximately $3 million on our investment in debt securities.

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The effective tax rate for 2009 and 2008 was 17.2% and 32.8%, respectively. These rates reflect the United States statutory rate of 35% combined with the additional net impact of the various foreign, state and local income tax rates. The lower rate in 2009 reflects the nondeductible portion of the goodwill impairment described above, interest expense on settled positions and reduced charitable allowances partially offset by the favorable impact of the closure of our French subsidiary. See Note 17 to the Consolidated Financial Statements for further information.

Segment Results

We review segment results using consistent exchange rates between years to eliminate the impact of foreign currency fluctuations. For additional segment information, see Note 16 to the Consolidated Financial Statements.

North American Social Expression Products Segment

(Dollars in thousands)	2009		2008		% Change
Total revenue	$	1,101,615	$	1,130,310	(2.5	%)
Segment earnings		71,860		177,332	(59.5	%)

In 2009, total revenue of the North American Social Expression Products segment, excluding the impact of foreign exchange and intersegment items, decreased $28.7 million, or 2.5%, from 2008. The decrease is primarily attributable to lower sales of our gift packaging ($37 million) and party goods ($11 million) product lines. Also contributing to the decrease was a decline in specialty product sales ($7 million), which include stationery, calendars and stickers. Sales of our everyday and seasonal cards remained relatively flat compared to prior year sales. These decreases were partially offset by the favorable impact of fewer SBT implementations in the current year and the favorable impact of an SBT implementation completed during the year that had previously been estimated, which together increased net sales by approximately $28 million in the current year compared to 2008.

Segment earnings, excluding the impact of foreign exchange and intersegment items, decreased $105.5 million, or 59.5%, in 2009 compared to the prior year. Approximately half of the decrease is attributable to the goodwill impairment charge ($48 million) recorded in the fourth quarter. Also contributing to the decrease are lower margins and increased supply chain costs of approximately $12 million. 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, specifically freight and distribution costs, is due to an increase in card units shipped. The remaining decrease in earnings is attributable to an increase in SBT scrap costs.

International Social Expression Products Segment

(Dollars in thousands)	2009			2008		% Change
Total revenue	$	299,830		$	307,959	(2.6	%)
Segment (loss) earnings		(81,616	)		24,223	—

Total revenue of the International Social Expression Products segment, excluding the impact of foreign exchange, decreased $8.1 million, or 2.6%, in 2009 compared to 2008. The majority of the decrease in the current year is due to lower sales in the U.K., which is attributable to the significant decreases in the sales of everyday and seasonal cards, particularly during the fourth quarter. Everyday card sales were down across the customer base and were accentuated by the third quarter bankruptcy of a major customer, a buying freeze implemented by a second major customer and lost shelf space with a third major customer. The seasonal card decline was the result of decreased sales in the Christmas and Valentine’s Day seasonal programs and year-over-year timing differences related to the Easter and Mother’s Day programs. These decreases were partially offset by an increase in revenue ($11 million) from the U.K. acquisition completed during the first quarter of this year.

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Segment earnings, excluding the impact of foreign exchange, decreased $105.8 million from income of $24.2 million in 2008 to a loss of $81.6 million in 2009. This decrease is mainly attributable to the goodwill impairment charge of approximately $88 million (approximately $82 million reported above plus approximately $6 million of foreign currency based on the consistent exchange rates utilized for segment reporting purposes). The remaining decrease in earnings was a result of the lower card sales, severance charges ($5 million) associated with headcount reductions and facility reorganizations and charges related to the recent bankruptcy of a major customer in the U.K.

Retail Operations Segment

(Dollars in thousands)	2009			2008			% Change
Total revenue	$	183,913		$	198,271		(7.2	%)
Segment loss		(19,123	)		(3,772	)	—

The Retail Operations segment exhibits considerable seasonality, which is typical for most retail store operations. A significant amount of the total revenue and segment earnings occur during the fourth quarter in conjunction with the major holiday seasons.

Total revenue in our Retail Operations segment, excluding the impact of foreign exchange, decreased $14.4 million, or 7.2%, year over year. Total revenue at stores open one year or more was down 4.0%, or approximately $7 million, from 2008. This sales decline occurred primarily during the final four months of the year as consumer spending decreased due to the severity of the economic downturn. Also contributing to the decrease is the reduction in store doors as the average number of stores was approximately 5% less than in the prior year period. During the fourth quarter of 2009, approximately 70 underperforming stores were closed.

Segment loss, excluding the impact of foreign exchange, was $19.1 million in 2009 compared to $3.8 million in 2008. Earnings during 2009 were unfavorably impacted by the lower sales level and a weakening of gross margins as a result of more promotional pricing. Gross margins decreased by approximately 3.6 percentage points. Also contributing to the decrease in earnings were the fixed asset impairment charges recorded during the year. Due to weak performance in certain of our stores and the anticipated store closures, long-lived assets within the segment were reviewed. As a result, impairment charges of approximately $5 million were recorded compared to fixed asset impairment charges of approximately $1 million in 2008.

AG Interactive Segment

(Dollars in thousands)	2009			2008		% Change
Total revenue	$	84,254		$	78,652	7.1	%
Segment (loss) earnings		(161,503	)		6,755	—

Total revenue, excluding the impact of foreign exchange, increased $5.6 million, or 7.1%, from 2008. This increase is primarily due to the digital photography acquisitions completed during the second half of 2008. Digital photography revenue contributed approximately $13 million to the increase. This increase was offset by reduced sales in the online product group ($7 million) as increases in subscription revenue were more than offset by reduced advertising revenue. At the end of 2009, AG Interactive had approximately 4.1 million paid subscriptions versus 3.8 million in 2008.

Segment earnings, excluding the impact of foreign exchange, decreased $168.3 million from income of $6.8 million in 2008 to a loss of $161.5 million in 2009. This decrease was a direct result of the goodwill and intangible asset impairments of $160.1 million discussed above. The remaining decrease is attributable to severance charges ($2 million) due to the headcount reductions during 2009 and expenses incurred associated with the digital photography product line, including marketing, intangible asset amortization and technology costs.

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Unallocated Items

Centrally incurred and managed costs, excluding the impact of foreign exchange, totaled $76.6 million and $84.2 million in 2009 and 2008, respectively, and are not allocated back to the operating segments. The unallocated items included interest expense for centrally incurred debt of $22.9 million and $20.0 million in 2009 and 2008, respectively, and domestic profit-sharing expense of $5.2 million in 2008. We did not incur profit-sharing expense during 2009 based on the operating results in the year. Unallocated items also included stock-based compensation expense in accordance with SFAS No. 123 (revised 2004) (“SFAS 123R”) of $4.4 million and $6.5 million in 2009 and 2008, respectively. In addition, unallocated items included costs associated with corporate operations including the senior management staff, corporate finance, legal and human resource functions, as well as insurance programs and other strategic costs. These costs totaled $49.3 million and $52.5 million in 2009 and 2008, respectively.

Comparison of the years ended February 29, 2008 and February 28, 2007

In 2008, net income was $83.0 million, or $1.52 per diluted share, compared to net income of $42.4 million, or $0.71 per diluted share, in 2007.

Our results for 2008 and 2007 are summarized below:

(Dollars in thousands)	2008			% Total Revenue		2007			% Total Revenue
Net sales	$	1,730,784		97.4	%	$	1,744,798		97.2	%
Other revenue		45,667		2.6	%		49,492		2.8	%
Total revenue		1,776,451		100.0	%		1,794,290		100.0	%
Material, labor and other production costs		780,771		43.9	%		826,791		46.1	%
Selling, distribution and marketing expenses		621,478		35.0	%		627,940		35.0	%
Administrative and general expenses		246,722		13.9	%		253,035		14.1	%
Goodwill impairment		—		0.0	%		2,196		0.1	%
Other operating income—net		(1,325	)	(0.1	%)		(5,252	)	(0.3	%)
Operating income		128,805		7.3	%		89,580		5.0	%
Interest expense		20,006		1.1	%		34,986		2.0	%
Interest income		(7,758	)	(0.4	%)		(8,135	)	(0.5	%)
Other non-operating income—net		(7,411	)	(0.4	%)		(2,682	)	(0.1	%)
Income from continuing operations before income tax expense		123,968		7.0	%		65,411		3.6	%
Income tax expense		40,648		2.3	%		25,473		1.4	%
Income from continuing operations		83,320		4.7	%		39,938		2.2	%
(Loss) income from discontinued operations, net of tax		(317	)	(0.0	%)		2,440		0.2	%
Net income	$	83,003		4.7	%	$	42,378		2.4	%

Revenue Overview

Consolidated net sales in 2008 were $1.73 billion, a decrease of $14.0 million from the prior year. This decrease was primarily the result of lower sales in our North American Social Expression Products segment, our Retail Operations segment, AG Interactive and our fixtures business partially offset by an increase in our International Social Expression Products segment and the impact of favorable foreign currency translation.

The North American Social Expression Products segment decreased approximately $24 million. Our candle product lines, which were sold in January 2007, contributed approximately $33 million to net sales in the prior year. As a result, sales of products other than candles increased approximately $9 million. Approximately $32 million of the increase was due to lower spending on our investment in cards strategy and improvements in

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everyday and seasonal card sales provided approximately $27 million. These increases were partially offset by approximately $3 million of increased SBT implementations in the current year, a decline in specialty product sales, which include stationery, calendars and stickers, of approximately $12 million, a decline in gift packaging sales of approximately $19 million as well as the impact of the temporary promotional activities related to the Canadian dual-priced products of approximately $13 million.

The Retail Operations segment decreased approximately $17 million as the reduction in stores more than offset the increase in same-store sales. Net sales in our fixtures business were lower by approximately $10 million.

The reduction of approximately $7 million in AG Interactive’s net sales was due to lower sales in the mobile product group partially offset by growth in the online product group and digital photography revenue from the two acquisitions made in the second half of 2008.

These decreases were partially offset by an increase of approximately $6 million in our International Social Expression Products segment as well as favorable foreign currency of approximately $39 million.

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

	2008		2007
Everyday greeting cards	41	%	38	%
Seasonal greeting cards	22	%	21	%
Gift packaging	15	%	16	%
All other products*	22	%	25	%

* The “all other products” classification includes, among other things, giftware, party goods, calendars, custom display fixtures, stickers, online greeting cards and other digital products in both years. Candles and balloons are included in 2007 only.

Other revenue, primarily royalty revenue, decreased $3.8 million from $49.5 million in 2007 to $45.7 million in 2008.

Wholesale Unit and Pricing Analysis for Greeting Cards

Unit and pricing comparatives (on a sales less returns basis) for 2008 and 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	9.6	%	(10.6	%)	7.0	%	(9.6	%)	8.8	%	(10.3	%)
Selling prices	(5.6	%)	4.8	%	(4.4	%)	5.7	%	(5.2	%)	5.1	%
Overall increase / (decrease)	3.5	%	(6.3	%)	2.3	%	(4.5	%)	3.1	%	(5.7	%)

During 2008, combined everyday and seasonal greeting card sales less returns increased 3.1% compared to the prior year, with increases in both everyday and seasonal cards.

Everyday card unit volume was up 9.6% compared to the prior year. Approximately one-third of the increase was related to SBT implementation activities. The remaining improvement was driven by increases in the North American Social Expression Products segment where, through the investment in cards strategy, we have been focused on driving card productivity. The decrease in selling prices, down 5.6%, was the result of significant volume increases in the sales of value line cards.

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Seasonal card unit volume increased 7.0% compared to the prior year. This increase was driven by improvements in the Valentine’s Day, Christmas and Easter seasons, slightly offset by a decline in the Mother’s Day season. The overall unit increase was within the North American Social Expression Products segment, with the International Social Expression Products segment flat compared to the prior year. Seasonal selling prices decreased 4.4% compared to the prior year. This decline in average selling prices was the result of significant volume increases in the sales of value line cards.

Expense Overview

MLOPC for 2008 were $780.8 million, a decrease from $826.8 million in 2007. As a percentage of total revenue, these costs were 43.9% in 2008 compared to 46.1% in 2007. The decrease of $46.0 million is due to favorable mix ($55 million) and volume variances ($16 million) due to lower sales volume in the current year partially offset by unfavorable spending variances ($8 million) and the impact of foreign currency translation ($17 million). The favorable product mix is due to a change to a richer mix of card versus non-card products. The mix impact was accentuated by the increase in card sales and the significant reduction of non-card sales, primarily as a result of the sale of our candle product lines in January 2007 and lower sales of gift packaging products. The increased spending is attributable to higher SBT scrap and shrink costs, which continue to increase as more customers are moved to the SBT business model, as well as higher expenses associated with our production of film-based entertainment, which is used to support our merchandise licensing strategies by increasing the awareness of our properties within the target audience.

Selling, distribution and marketing expenses were $621.5 million in 2008, decreasing from $627.9 million in the prior year. The decrease of $6.4 million is due primarily to reduced spending ($20 million) partially offset by the impact of unfavorable foreign currency translation ($14 million). The lower spending is the direct result of strategic actions taken in the prior and current periods. In the prior year, we closed 60 underperforming retail stores and exited lower margin products within the AG Interactive mobile products group. The store closures resulted in exit costs in the prior year ($7 million) and reduced store expenses ($10 million), including rent, depreciation and personnel costs, in the current year. The reduced offerings in the mobile products group drove lower current year marketing-related expenses in AG Interactive ($7 million). The current year also includes savings from supply chain cost reduction programs ($2 million). These amounts were partially offset by higher advertising and research expenses ($6 million), a portion of which is attributable to our focus on our core greeting card business.

Administrative and general expenses were $246.7 million in 2008, compared to $253.0 million in 2007. The $6.3 million decrease in expense in 2008 is due primarily to reduced spending ($10 million) partially offset by unfavorable foreign currency translation impacts ($4 million). The lower spending is the direct result of cost savings initiatives taken in the prior and current periods. The decreased spending is attributable to lower payroll and benefits-related expenses ($3 million), reduced information technology-related expenses ($2 million), less profit-sharing expense ($2 million), lower business taxes ($2 million), reduced consulting expenses ($2 million) and less stock-based compensation expense ($1 million). These were partially offset by higher amortization expense ($2 million) of intangible assets, primarily due to the acquisitions in 2008 and 2007.

A goodwill impairment charge of $2.2 million was recorded in 2007 representing all the goodwill of our entertainment development and production joint venture. There were no goodwill impairment charges in 2008.

Interest expense was $20.0 million in 2008, compared to $35.0 million in 2007. The decrease of $15.0 million is primarily attributable to interest savings ($11 million) associated with the reduced balances outstanding of our 6.10% notes, 7.00% convertible notes and facility borrowings. The reduced balances for our 6.10% notes and the 7.00% convertible notes are due to the financing activities undertaken in 2007. The remaining decrease in interest expense in 2008 is also attributable to the prior year refinancing activities. As a result of those activities, certain additional expenses were incurred in 2007, such as the write-off of deferred financing fees, which did not recur in 2008. Also, certain expenses were reduced in the current year due to the 2007 activities such as commitment fees, which decreased as a result of the reduced availability under the term loan facility. See Note 11 to the Consolidated Financial Statements for further information on the financing activities in 2007.

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Other operating income – net was $1.3 million in 2008 compared to $5.3 million in 2007. The decrease of $4.0 million is due primarily to a gain ($20 million) related to terminations of long-term supply agreements associated with retailer consolidations partially offset by the loss ($16 million) on the sale of our candle product lines, both of which were recorded in 2007. Other non-operating income – net was $7.4 million in 2008 compared to $2.7 million in 2007. The $4.7 million increase is attributable primarily to higher foreign exchange gains in 2008 compared to 2007.

The effective tax rate for 2008 and 2007 was 32.8% and 38.9%, respectively. These rates reflect the United States statutory rate of 35% combined with the additional net impact of the various foreign, state and local income tax rates. The lower rate in 2008 compared to 2007 is primarily the result of the restructuring and consolidation of several foreign entities that reduced our future tax liabilities and the recognition of additional interest income on our net tax positions during the current year. See Note 17 to the Consolidated Financial Statements for further information.

Loss from discontinued operations was $0.3 million for 2008 compared to income from discontinued operations of $2.4 million in 2007. The loss in 2008 primarily relates to income tax expense on the sale of Learning Horizons in the first quarter of 2008. The 2007 amount included a gain based on the closing balance sheet adjustments for the sale of Magnivision ($3 million after tax) and a tax benefit on the South African business unit sale ($2 million) partially offset by a loss from Learning Horizons ($3 million after tax). The Learning Horizons loss included goodwill and fixed asset impairment charges ($1 million). The impairments for Learning Horizons were primarily recorded as a result of the intention to sell the business, and therefore, present the operation at its estimated fair value.

Segment Results

We review segment results using consistent exchange rates between years to eliminate the impact of foreign currency fluctuations. For additional segment information, see Note 16 to the Consolidated Financial Statements.

North American Social Expression Products Segment

(Dollars in thousands)	2008		2007		% Change
Total revenue	$	1,130,310	$	1,154,240	(2.1	%)
Segment earnings		177,332		164,281	7.9	%

In 2008, total revenue of the North American Social Expression Products segment, excluding the impact of foreign exchange and intersegment items, decreased $23.9 million, or 2.1%, from 2007. Our candle product lines, which were sold in January 2007, contributed approximately $33 million to net sales in the prior year. As a result, sales of products other than candles increased approximately $9 million. Approximately $32 million of the increase was due to lower spending on our investment in cards strategy and improvements in everyday and seasonal card sales provided approximately $27 million. These increases were partially offset by approximately $3 million of increased SBT implementations in the current year, a decline in specialty product sales, which include stationery, calendars and stickers, of approximately $12 million, a decline in gift packaging sales of approximately $19 million as well as the impact of the temporary promotional activities related to the Canadian dual-priced products of approximately $13 million.

Segment earnings, excluding the impact of foreign exchange and intersegment items, increased $13.1 million, or 7.9%, in 2008 compared to the prior year. Approximately $32 million of the increase was due to lower spending on our investment in cards strategy and SBT conversions. Segment earnings were impacted by a favorable product mix due to a change to a richer mix of card versus non-card products, driven by improved everyday and seasonal card sales and decreased sales of non-card products, primarily as a result of the sale of our candle product lines in January 2007 and lower sales of gift packaging products. These improvements were partially offset by increases in card product costs associated with more technology cards (paper cards that include lights

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and/or sound), increased SBT scrap, higher creative content costs and the impact on earnings of the decrease in total revenue. Segment earnings in 2007 benefited from the gain related to terminations of long-term supply agreements associated with retailer consolidations ($20 million), but was unfavorably impacted by the loss incurred on the sale of the candle product lines ($16 million).

International Social Expression Products Segment

(Dollars in thousands)	2008		2007		% Change
Total revenue	$	307,959	$	302,022	2.0	%
Segment earnings		24,223		10,433	132.2	%

Total revenue of the International Social Expression Products segment, excluding the impact of foreign exchange, increased $5.9 million, or 2.0%, in 2008 compared to 2007. This increase was driven by additional distribution obtained during the year, primarily in the U.K.

Segment earnings, excluding the impact of foreign exchange, increased $13.8 million compared to 2007. This increase is attributable to improvements in our U.K. operations, including expanded distribution, changes in product mix and cost savings initiatives in manufacturing and supply chain. Also, the prior year earnings included severance charges ($3 million) primarily as a result of facility closures, including the manufacturing facility in Australia.

Retail Operations Segment

(Dollars in thousands)	2008			2007			% Change
Total revenue	$	198,271		$	215,439		(8.0	%)
Segment loss		(3,772	)		(16,526	)	77.2	%

The Retail Operations segment exhibits considerable seasonality, which is typical for most retail store operations. A significant amount of the total revenue and segment earnings occur during the fourth quarter in conjunction with the major holiday seasons.

Total revenue in our Retail Operations segment, excluding the impact of foreign exchange, decreased $17.2 million, or 8.0%, year over year. Total revenue at stores open one year or more was up approximately 3.6%, or approximately $7 million, from 2007 but was more than offset by the reduction in store doors. The average number of stores decreased approximately 13.0% compared to the prior year, which reduced revenues by approximately $24 million. The current year benefited from the performance of children’s gifting products, which was the driver of the same-store sales increase.

Segment loss, excluding the impact of foreign exchange, was $3.8 million in 2008 compared to $16.5 million in 2007. Approximately half of the $12.8 million improvement in earnings is due to the prior year charges associated with the closure of 60 underperforming stores during the fourth quarter. The remaining improvement is attributable to lower store and administrative expenses due to fewer doors as well as improved product mix. Gross margins increased by approximately 2 percentage points, partially due to less promotional pricing compared to the prior year.

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AG Interactive Segment

(Dollars in thousands)	2008		2007		% Change
Total revenue	$	78,652	$	85,856	(8.4	%)
Segment earnings		6,755		5,616	20.3	%

Total revenue, excluding the impact of foreign exchange, decreased $7.2 million, or 8.4%, from 2007. This decrease is the result of the lower revenue in the mobile product group ($16 million) due to reduced offerings in 2008 partially offset by advertising and subscription revenue growth in the online product group ($4 million) and digital photography revenue ($5 million) in the current year associated with the two acquisitions made in the second half of the year. At the end of 2008, AG Interactive had approximately 3.8 million paid subscriptions versus 3.5 million in 2007.

Segment earnings, excluding the impact of foreign exchange, increased $1.1 million in 2008 compared to 2007. Growth in advertising and subscription revenue as well as lower expenses in the mobile product group due to the reduced offerings in that group were substantially offset by expenses incurred in the current year associated with the two digital photography acquisitions in the second half of the year.

Unallocated Items

Centrally incurred and managed costs, excluding the impact of foreign exchange, totaled $84.2 million and $105.0 million in 2008 and 2007, respectively, and are not allocated back to the operating segments. The unallocated items included interest expense for centrally incurred debt of $20.0 million and $35.0 million in 2008 and 2007, respectively, and domestic profit-sharing expense of $5.2 million and $6.8 million in 2008 and 2007, respectively. Unallocated items also included stock-based compensation expense in accordance with SFAS 123R of $6.5 million and $7.6 million in 2008 and 2007, respectively. In addition, unallocated items included costs associated with corporate operations including the senior management staff, corporate finance, legal and human resource functions, as well as insurance programs and other strategic costs. These costs totaled $52.5 million and $55.6 million in 2008 and 2007, respectively.

Liquidity and Capital Resources

Operating Activities

During the year, cash flow from operating activities provided cash of $73.0 million compared to $243.5 million in 2008, a decrease of $170.5 million. Cash flow from operating activities for 2008 compared to 2007 resulted in a decrease of $21.2 million from $264.7 million in 2007.

Other non-cash charges were $13.7 million during 2009 compared to $9.3 million during 2008. The increase is primarily due to an increase of approximately $4 million in the fixed asset impairment charges recorded in the current year compared to the prior year related to our Retail Operations segment. Other non-cash charges in 2009 included $2.7 million for the loss on our investment in debt securities. This loss was substantially offset by a reduction in stock-based compensation expense.

Accounts receivable, net of the effect of acquisitions and dispositions, was a use of cash of $6.4 million in 2009 compared to a source of cash of $41.8 million in 2008 and $42.2 million in 2007. As a percentage of the prior twelve months’ net sales, net accounts receivable was 3.8% at February 28, 2009, compared to 3.6% at February 29, 2008. The current year use of cash is due to higher accounts receivable balances in the North American Social Expression Products segment as a result of less SBT implementation activity in the fourth quarter of the current year compared to the prior year period. We generally experience lower sales and accounts receivable balances in the period a customer moves to the SBT business model. The prior year source of cash was primarily attributable to additional customers moving to the SBT business model during 2008, particularly in

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the fourth quarter, which as noted above causes a lower accounts receivable balance in the period of implementation as sales are reversed. In addition, customers on the SBT business model generally tend to have shorter payment terms than non-SBT customers.

Inventories, net of the effect of acquisitions and dispositions, provided a source of cash of $1.0 million in 2009 compared to a use of cash of $28.5 million in 2008 and a source of cash of $22.2 million in 2007. The increase in inventory, thus a use of cash, in 2008 from 2007 is attributable to the North American Social Expression Products segment, primarily due to the increase in technology cards and the inventory build related to the new Canadian product line.

Other current assets, net of the effect of acquisitions and dispositions, were a source of cash of $18.0 million in 2009 compared to $28.0 million in 2008 and a use of cash of $36.1 million in 2007. The activity in 2009, 2008 and 2007 is attributable to a $90 million receivable recorded as part of the termination of several long-term supply agreements in fiscal 2007. Approximately $60 million of this receivable was collected in the fourth quarter of 2007 and the balance was received in 2008 and 2009.

Deferred costs – net generally represents payments under agreements with retailers net of the related amortization of those payments. During 2009, 2008 and 2007, amortization exceeded payments by $27.6 million, $38.5 million and $52.4 million, respectively. In 2008, deferred costs – net also includes the impact of a reduction of deferred contract costs of approximately $15 million associated with the termination of a long-term supply agreement and related refund received. In 2007, deferred costs – net also included the reduction of approximately $76 million of deferred contract costs associated with retailer consolidations. See Note 10 to the consolidated financial statements for further detail of deferred costs related to customer agreements.

Accounts payable and other liabilities, net of the effect of acquisitions and dispositions, used $67.5 million of cash in 2009 compared to providing $18.9 million of cash in 2008 and $0.6 million of cash in 2007. The change was attributable primarily to lower 2009 year end accruals related to variable compensation and other normal course of business accounts payable, accrued liabilities, and income and other taxes payable. For example, variable compensation payable and income taxes payable were lower at February 28, 2009 than at February 29, 2008 due to our poor financial results in fiscal 2009 compared to fiscal 2008. The increase in accounts payable and other liabilities in 2008 was attributable to accrued compensation and benefits and income taxes payable. The change in accounts payable and other liabilities in 2007 was primarily due to a reduction in trade payables and the profit-sharing accrual partially offset by an increase in income taxes payable.

Investing Activities

Cash used by investing activities was $137.3 million during 2009 compared to $125.6 million during 2008 and cash provided of $177.5 million during 2007. The use of cash in the current year is primarily related to investments in debt securities, business acquisitions and capital expenditures. During the second quarter of 2009, we paid $44.2 million to acquire, at a substantial discount, first lien debt securities of RPG. During the fourth quarter of 2009, we acquired all of the issued and outstanding capital stock of RPG for a combination of cash, long-term debt and the contribution of the debt securities that we acquired during the second quarter of 2009. The cash paid as a result of this transaction, net of cash acquired, was $22.3 million. We also issued approximately $55 million of long-term debt (with a fair market value of approximately $28 million) and relinquished the RPG first lien debt securities (with a fair market value of approximately $41 million), which we had previously purchased for $44.2 million. See Notes 2 and 11 to the consolidated financial statements for further information.

Also, in 2009, we purchased a card publisher and franchised distributor of greeting cards in the U.K. for $15.6 million.

Capital expenditures totaled $55.7 million, $56.6 million and $41.7 million in 2009, 2008 and 2007, respectively. We currently expect 2010 capital expenditures to total in the range of $35 million to $45 million.

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Cash used for investing activities in 2008 included the acquisition of two businesses for $70.2 million. In October 2007, we acquired the online assets of the Webshots brand, and in January 2008, we acquired PhotoWorks, Inc., an online photo sharing and personal publishing company. Also, the final payment of $6.1 million for the online greeting card business acquired in 2007 was made during the first quarter of 2008. These outflows were partially offset by cash inflows of $3.1 million from the sale of fixed assets and $4.3 million related to discontinued operations.

Cash flows from investing activities in 2007 also included the net proceeds from sales of short-term investments. Short-term investments decreased $208.7 million as sales of short-term investments exceeded purchases. In addition, $12.6 million was received related to discontinued operations, $6.2 million was received from the sale of the candle product lines and $4.8 million was received from the sale of fixed assets. These sources of cash were partially offset by a use of cash of $13.1 million for the acquisition of the online greeting card business and the final payment for the acquisition of Collage Designs Limited, which occurred in 2005.

Financing Activities

Financing activities provided $23.0 million of cash in 2009 compared to using $146.9 million in 2008 and $518.5 million in 2007. The current year amount relates primarily to additional long-term debt borrowings of $141.5 million partially offset by share repurchases and long-term debt repayments. During 2009, $73.8 million was paid to repurchase approximately 7.9 million shares under our Class A common share repurchase programs and $0.2 million was paid to repurchase approximately 10,000 Class B common shares, in accordance with our Amended and Restated Articles of Incorporation. During the second quarter of 2009, $22.5 million was paid upon exercise of the put option on our 6.10% senior notes.

In 2008, cash used for financing activities primarily related to our Class A common share repurchase programs. During 2008, $149.2 million was paid to repurchase 6.7 million shares under the repurchase programs. We paid $23.1 million to repurchase 0.9 million Class B common shares during 2008, in accordance with our Amended and Restated Articles of Incorporation. The majority of the Class B common shares repurchased were held by the American Greetings Retirement Profit Sharing and Savings Plan (the “Plan”) on behalf of participants investing in the Plan’s company stock fund. In connection with the Plan’s determination that the company stock fund should consist solely of Class A common shares to facilitate participant transactions, during November 2007, the Plan sold the remaining Class B common shares back to American Greetings in accordance with our Amended and Restated Articles of Incorporation. The cash outflow for repurchases was partially offset by net borrowings of $20.1 million under our credit facility.

In 2007, cash used for financing activities related primarily to our debt activities in the period. We retired $277.3 million of our 6.10% senior notes and issued $200.0 million of 7.375% senior unsecured notes. We repaid $159.1 million of our 7.00% convertible subordinated notes. We paid $8.5 million of debt issuance costs during the period for our new credit facility, the 7.375% senior unsecured notes and the exchange offer on our 7.00% convertible subordinated notes. These amounts were deferred and are being amortized over the respective periods of the instruments. Our Class A common share repurchase programs also contributed to the cash used for financing activities in 2007. During 2007, $257.5 million was paid to repurchase 11.1 million shares under the repurchase programs. We paid $0.3 million to repurchase Class B common shares during 2007, in accordance with our Amended and Restated Articles of Incorporation.

Our receipt of the exercise price on stock options provided $0.5 million, $27.2 million and $6.8 million in 2009 2008 and 2007, respectively.

We paid dividends totaling $22.6 million, $21.8 million and $18.4 million in 2009, 2008 and 2007, 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 February 28, 2009. This included our $450 million senior secured credit facility and our $90 million accounts receivable securitization facility. We had $61.6 million outstanding under the revolving credit facility and $100.0 million outstanding under the term loan facility at February 28, 2009. In addition to these borrowings, we had, in the aggregate, $26.2 million outstanding under letters of credit, which reduces the total credit availability thereunder as of February 28, 2009. Additional letters of credit have been issued subsequent to year end in connection with the sale of our Retail Operations segment and the purchase of the Papyrus brand. See Note 19 to the Consolidated Financial Statements for further information.

The credit agreement includes a $350 million revolving credit facility and a $100 million delay draw term loan. The obligations under the credit agreement are guaranteed by our material domestic subsidiaries and are secured by substantially all of the personal property of American Greetings and each of our material domestic subsidiaries, including a pledge of all of the capital stock in substantially all of our domestic subsidiaries and 65% of the capital stock of our first tier foreign subsidiaries. The revolving credit facility will mature on April 4, 2011, and any outstanding term loans will mature on April 4, 2013. Each term loan will amortize in equal quarterly installments equal to 0.25% of the amount of such term loan, beginning on April 3, 2009, with the balance payable on April 4, 2013.

Revolving loans denominated in U.S. dollars under the credit agreement will bear interest at a rate per annum based on the then applicable London Inter-Bank Offer Rate (“LIBOR”) or the alternate base rate (“ABR”), as defined in the credit agreement, in each case, plus margins adjusted according to our leverage ratio. Term loans will bear interest at a rate per annum based on either LIBOR plus 150 basis points or based on the ABR, as defined in the credit agreement, plus 25 basis points. We pay an annual commitment fee of 75 basis points on the undrawn portion of the term loan. The commitment fee on the revolving facility fluctuates based on our leverage ratio.

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

We are also party to an amended and restated receivables purchase agreement with available financing of up to $90 million. The agreement expires on October 23, 2009. Under the amended and restated receivables purchase agreement, American Greetings and certain of its subsidiaries sell accounts receivable to AGC Funding Corporation (“AGC Funding”), a wholly-owned, consolidated subsidiary of American Greetings, which in turn sells undivided interests in eligible accounts receivable to third party financial institutions as part of a process that provides funding similar to a revolving credit facility. Funding under the facility may be used for working capital, general corporate purposes and the issuance of letters of credit.

The interest rate under the accounts receivable securitization facility is based on (i) commercial paper interest rates, (ii) LIBOR rates plus an applicable margin or (iii) a rate that is the higher of the prime rate as announced by the applicable purchaser financial institution or the federal funds rate plus 0.50%. AGC Funding pays an annual commitment fee of 28 basis points on the unfunded portion of the accounts receivable securitization facility, together with customary administrative fees on outstanding letters of credit that have been issued and on outstanding amounts funded under the facility.

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

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

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

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

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

The total fair value of our publicly traded debt, based on quoted market prices, was $119.0 million (at a carrying value of $228.6 million) at February 28, 2009. The carrying amount of our publicly traded debt significantly exceeded its fair value at February 28, 2009 due to the tighter U.S. credit markets.

Throughout fiscal 2010, we will continue to consider all options for capital deployment including growth options, capital expenditures, the opportunity to repurchase our own shares, or by reducing debt. To this end, in January 2009, we announced that our Board of Directors authorized the repurchase of up to $75 million of Class A common shares, that may be made through open market purchases or privately negotiated transactions as market conditions warrant, at prices the Company deems appropriate, and subject to applicable legal requirements and other factors. There is no set expiration date for this program. We also may from time to time seek to retire or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise, including strategically repurchasing our 7.375% senior unsecured notes due in 2016 at a discount to par. Such repurchases or exchanges, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.

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.

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Contractual Obligations

The following table presents our contractual obligations and commitments to make future payments as of February 28, 2009:

	Payment Due by Period as of February 28, 2009
(In thousands)	2010		2011		2012		2013		2014		Thereafter		Total
Long-term debt	$	750	$	1,000	$	1,000	$	1,000	$	157,850	$	254,867	$	416,467
Operating leases		24,664		18,988		13,689		9,859		6,989		18,422		92,611
Commitments under customer agreements		55,877		21,358		540		125		—		—		77,900
Commitments under royalty agreements		12,584		7,516		4,367		4,306		3,300		15,300		47,373
Interest payments		25,371		25,175		22,236		21,910		19,080		42,421		156,193
Severance		12,240		1,276		683		10		—		—		14,209
	$	131,486	$	75,313	$	42,515	$	37,210	$	187,219	$	331,010	$	804,753

The interest payments in the above table are determined assuming the same level of debt outstanding in the future years as at February 28, 2009 for the revolving credit facility and the term loan facility at the current average interest rates for those facilities.

In addition to the contracts noted in the table, we issue purchase orders for products, materials and supplies used in the ordinary course of business. These purchase orders typically do not include long-term volume commitments, are based on pricing terms previously negotiated with vendors and are generally cancelable with the appropriate notice prior to receipt of the materials or supplies. Accordingly, the foregoing table excludes open purchase orders for such products, materials and supplies as of February 28, 2009.

Although we do not anticipate that contributions will be required in 2010 to the defined benefit pension plan that we assumed in connection with our acquisition of Gibson Greetings, Inc. in 2001, we may make contributions in excess of the legally required minimum contribution level. Refer to Note 12 to the Consolidated Financial Statements. We do anticipate that contributions will be required beginning in fiscal 2011, but those amounts have not been determined as of February 28, 2009.

Critical Accounting Policies

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

Allowance for Doubtful Accounts

We evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we are aware of a customer’s inability to meet its financial obligations, a specific allowance for bad debts against amounts due is recorded to reduce the receivable to the amount we reasonably expect will be collected. In addition, we recognize allowances for bad debts based on estimates developed by using standard quantitative measures incorporating historical write-offs. The establishment of allowances requires the use of judgment and assumptions regarding the potential for losses on receivable balances. Although we consider these balances adequate and proper, changes in economic conditions in the retail markets in which we operate could have a material effect on the required allowance balances.

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Sales Returns

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

Deferred Costs

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

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

For those contractual arrangements that are based upon a minimum purchase volume commitment, we periodically review the progress toward the volume commitment and estimate future sales expectations for each customer. Factors that can affect our estimate include store door openings and closings, retail industry consolidation, amendments to the agreements, consumer shopping trends, addition or deletion of participating products and product productivity. Based upon our review, we may modify the remaining amortization periods of individual agreements to reflect the changes in the estimates for the attainment of the minimum volume commitment in order to align amortization expense with the periods benefited. We do not make retroactive expense adjustments to prior fiscal years as amounts, if any, have historically not been material. The aggregate average remaining life of our contract base is 5.9 years.

The accuracy of our assessments of the performance-related value of a deferred cost asset related to a particular agreement and of the estimated time period of the completion of a volume commitment is based upon our ability to accurately predict certain key variables such as product demand at retail, product pricing, customer viability and other economic factors. Predicting these key variables involves uncertainty about future events; however, the assumptions used are consistent with our internal planning. If the deferred cost assets are assessed to be recoverable, they are amortized over the periods benefited. If the carrying value of these assets is considered to not be recoverable through performance, such assets are written down as appropriate.

Goodwill and Other Intangible Assets

Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations accounted for by the purchase method. In accordance with SFAS No. 142, “Goodwill and Other Intangible Assets,” goodwill and certain intangible assets are presumed to have indefinite useful lives and are

39

thus not amortized, but subject to an impairment test annually or more frequently if indicators of impairment arise. We complete the annual goodwill impairment test during the fourth quarter. To test for goodwill impairment, we are required to estimate the fair market value of each of our reporting units. While we may use a variety of methods to estimate fair value for impairment testing, our primary methods are discounted cash flows and a market based analysis. We estimate future cash flows and allocations of certain assets using estimates for future growth rates and our judgment regarding the applicable discount rates. Changes to our judgments and estimates could result in a significantly different estimate of the fair market value of the reporting units, which could result in an impairment of goodwill.

Deferred Income Taxes

Deferred income taxes are recognized at currently enacted tax rates for temporary differences between the financial reporting and income tax bases of assets and liabilities and operating loss and tax credit carryforwards. In assessing the realizability of deferred tax assets, we assess whether it is more likely than not that a portion or all of the deferred tax assets will not be realized. We consider the scheduled reversal of deferred tax liabilities, tax planning strategies and projected future taxable income in making this assessment. The assumptions used in this assessment are consistent with our internal planning. A valuation allowance is recorded against those deferred tax assets determined to not be realizable based on our assessment. The amount of net deferred tax assets considered realizable could be increased or decreased in the future if our assessment of future taxable income or tax planning strategies change.

New 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. We adopted SFAS 157 for financial assets and liabilities on March 1, 2008. In October 2008, the FASB issued FASB Staff Position FAS 157-3 (“FSP 157-3”), “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which clarifies the application of SFAS 157 when the market for a financial asset is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 became effective upon issuance, including prior periods for which financial statements have not been issued.

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. We adopted SFAS 159 on March 1, 2008 and elected not to measure any additional financial instruments or other items at fair value.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations.” SFAS 141R provides revised guidance on the recognition and measurement of the consideration transferred, identifiable assets acquired, liabilities assumed, noncontrolling interests and goodwill acquired in a business combination. SFAS 141R also expands required disclosures surrounding the nature and financial effects of business combinations. SFAS 141R is effective, on a prospective basis, for fiscal years beginning after December 15, 2008. We do not expect the adoption of SFAS 141R to have a significant impact on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” SFAS 160 establishes accounting and reporting standards for noncontrolling interests (i.e. minority interests) in a subsidiary and for the deconsolidation of a subsidiary.

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Under the standard, noncontrolling interests are considered equity and should be clearly identified, presented and disclosed in the consolidated statement of financial position within equity, but separate from the parent’s equity. SFAS 160 is effective, on a prospective basis, for fiscal years beginning after December 15, 2008. However, presentation and disclosure requirements must be retrospectively applied to comparative financial statements. We are currently evaluating the impact that SFAS 160 will have on our consolidated financial statements upon adoption.

In April 2008, the FASB issued FASB Staff Position FAS 142-3 (“FSP 142-3”), “Determination of the Useful Life of Intangible Assets.” FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. The intent of FSP 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under other U.S. generally accepted accounting principles (“GAAP”). FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date. Certain disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date.

In May 2008, the FASB issued SFAS No. 162 (“SFAS 162”), “The Hierarchy of Generally Accepted Accounting Principles.” The new standard is intended to improve financial reporting by identifying a consistent framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 became effective on November 15, 2008. The adoption of SFAS 162 did not have a significant impact on our consolidated financial statements.

In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1 (“FSP 132R-1”), “Employers’ Disclosures about Postretirement Benefit Plan Assets.” FSP 132R-1 provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. It requires disclosure of additional information about investment allocation, fair values of major categories of assets, the development of fair value measurements and concentrations of risk. FSP 132R-1 is effective for fiscal years ending after December 15, 2009; however, earlier application is permitted. The adoption of FSP 132R-1 in fiscal 2010 will have no effect on our consolidated financial position or results of operations.

Factors That May Affect Future Results

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

• a weak retail environment and general economic conditions;

• the ability to successfully integrate acquisitions, including the recent acquisitions of RPG and the Papyrus brand;

• our ability to successfully complete the proposed sale of the Strawberry Shortcake and Care Bears properties;

• our successful transition of the Retail Operations segment to its buyer, Schurman Fine Papers, and the ability to achieve the desired benefits associated with this and other dispositions;

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

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

• competitive terms of sale offered to customers;

• the ability to comply with our debt covenants;

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

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

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

• the outcome of any legal claims known or unknown.

Risks pertaining specifically to AG Interactive include the viability of online advertising, subscriptions as revenue generators, 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 the “Risk Factors” section included in Part I, Item 1A of this Annual Report on Form 10-K.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Derivative Financial Instruments—During 2007, we entered into an interest rate derivative designed to offset the interest rate risk related to the forecasted issuance of $200 million of senior indebtedness. The interest rate derivative agreement expired during the year. We did not designate this agreement as a hedging instrument pursuant to the provisions of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Accordingly, the change in fair value of this agreement was recognized and included in “Interest expense” in the Consolidated Statement of Operations for the year ended February 28, 2007. We have no derivative financial instruments as of February 28, 2009.

Interest Rate Exposure—We manage interest rate exposure through a mix of fixed and floating rate debt. Currently, the majority of our debt is carried at fixed interest rates. Therefore, our overall interest rate exposure risk is minimal. Based on our interest rate exposure on our non-fixed rate debt as of and during the year ended February 28, 2009, a hypothetical 10% movement in interest rates would not have had a material impact on interest expense. Under the terms of our current credit agreement, we have the ability to borrow significantly more floating rate debt, which, if incurred could have a material impact on interest expense in a fluctuating interest rate environment.

Foreign Currency Exposure—Our international operations expose us to translation risk when the local currency financial statements are translated into U.S. dollars. As currency exchange rates fluctuate, translation of the statements of operations of international subsidiaries to U.S. dollars could affect comparability of results between years. Approximately 27%, 28% and 26% of our 2009, 2008 and 2007 total revenue from continuing operations, respectively, were generated from operations outside the United States. Operations in Australasia, Canada, Mexico, the European Union and the U.K. are denominated in currencies other than U.S. dollars. No assurance can be given that future results will not be affected by significant changes in foreign currency exchange rates.

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Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Supplementary Financial Data	Page Number
Report of Independent Registered Public Accounting Firm	45
Consolidated Statement of Operations—Years ended February 28, 2009, February  29, 2008 and February 28, 2007	46
Consolidated Statement of Financial Position—February 28, 2009 and February 29, 2008	47
Consolidated Statement of Cash Flows—Years ended February 28, 2009, February  29, 2008 and February 28, 2007	48
Consolidated Statement of Shareholders’ Equity—Years ended February 28, 2009, February  29, 2008 and February 28, 2007	49
Notes to Consolidated Financial Statements—Years ended February 28, 2009, February  29, 2008 and February 28, 2007	50
Supplementary Financial Data:
Quarterly Results of Operations (Unaudited)	86

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

American Greetings Corporation

We have audited the accompanying consolidated statement of financial position of American Greetings Corporation as of February 28, 2009 and February 29, 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended February 28, 2009. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Greetings Corporation at February 28, 2009 and February 29, 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended February 28, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 1 to the consolidated financial statements, the Corporation adopted the provisions of (i) FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109, in fiscal 2008; (ii) SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R), effective February 28, 2007; and (iii) SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, applying the one-time special transition provisions, in fiscal 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), American Greetings Corporation’s internal control over financial reporting as of February 28, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 28, 2009 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Cleveland, Ohio

April 28, 2009

45

CONSOLIDATED STATEMENT OF OPERATIONS

Years ended February 28, 2009, February 29, 2008 and February 28, 2007

Thousands of dollars except share and per share amounts

	2009		2008		2007
Net sales	$1,646,399		$1,730,784		$1,744,798
Other revenue	44,339		45,667		49,492
Total revenue	1,690,738		1,776,451		1,794,290
Material, labor and other production costs	809,956		780,771		826,791
Selling, distribution and marketing expenses	618,899		621,478		627,940
Administrative and general expenses	226,317		246,722		253,035
Goodwill and other intangible assets impairment	290,166		—		2,196
Other operating income—net	(1,396	)	(1,325	)	(5,252	)
Operating (loss) income	(253,204	)	128,805		89,580
Interest expense	22,854		20,006		34,986
Interest income	(3,282	)	(7,758	)	(8,135	)
Other non-operating expense (income)—net	2,157		(7,411	)	(2,682	)
(Loss) income from continuing operations before income tax (benefit) expense	(274,933	)	123,968		65,411
Income tax (benefit) expense	(47,174	)	40,648		25,473
(Loss) income from continuing operations	(227,759	)	83,320		39,938
(Loss) income from discontinued operations, net of tax	—		(317	)	2,440
Net (loss) income	$  (227,759	)	$     83,003		$     42,378
(Loss) earnings per share—basic:
(Loss) income from continuing operations	$        (4.89	)	$         1.54		$         0.69
(Loss) income from discontinued operations	—		(0.01	)	0.04
Net (loss) income	$        (4.89	)	$         1.53		$         0.73
(Loss) earnings per share—assuming dilution:
(Loss) income from continuing operations	$        (4.89	)	$         1.53		$         0.67
(Loss) income from discontinued operations	—		(0.01	)	0.04
Net (loss) income	$        (4.89	)	$         1.52		$         0.71
Average number of shares outstanding	46,543,780		54,236,961		57,951,952
Average number of shares outstanding—assuming dilution	46,543,780		54,506,048		62,362,794
Dividends declared per share	$         0.60		$         0.40		$         0.32

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

February 28, 2009 and February 29, 2008

Thousands of dollars except share and per share amounts

	2009			2008
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	60,216		$	123,500
Trade accounts receivable, net		63,281			61,902
Inventories		203,873			216,671
Deferred and refundable income taxes		71,850			72,280
Prepaid expenses and other		162,175			195,017
Total current assets		561,395			669,370
GOODWILL		26,871			285,072
OTHER ASSETS		368,958			420,219
DEFERRED AND REFUNDABLE INCOME TAXES		178,785			133,762
PROPERTY, PLANT AND EQUIPMENT – NET		297,779			296,005
	$	1,433,788		$	1,804,428
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Debt due within one year	$	750		$	22,690
Accounts payable		117,504			123,713
Accrued liabilities		75,673			79,345
Accrued compensation and benefits		32,198			68,669
Income taxes payable		11,743			29,037
Other current liabilities		105,537			108,867
Total current liabilities		343,405			432,321
LONG-TERM DEBT		389,473			220,618
OTHER LIABILITIES		149,820			181,720
DEFERRED INCOME TAXES AND NONCURRENT INCOME TAXES PAYABLE		21,901			26,358
SHAREHOLDERS’ EQUITY
Common shares – par value $1 per share:
Class A – 80,548,353 shares issued less 43,505,203 treasury shares in 2009 and 80,522,153 shares issued less 35,198,300 treasury shares in 2008		37,043			45,324
Class B – 6,066,092 shares issued less 2,566,875 treasury shares in 2009 and 6,066,092 shares issued less 2,632,087 treasury shares in 2008		3,499			3,434
Capital in excess of par value		449,085			445,696
Treasury stock		(938,086	)		(872,949	)
Accumulated other comprehensive (loss) income		(67,278	)		21,244
Retained earnings		1,044,926			1,300,662
Total shareholders’ equity		529,189			943,411
	$	1,433,788		$	1,804,428

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

Years ended February 28, 2009, February 29, 2008 and February 28, 2007

Thousands of dollars

	2009			2008			2007
OPERATING ACTIVITIES:
Net (loss) income	$	(227,759	)	$	83,003		$	42,378
Loss (income) from discontinued operations		—			317			(2,440	)
(Loss) income from continuing operations		(227,759	)		83,320			39,938
Adjustments to reconcile (loss) income from continuing operations to cash flows from operating activities:
Goodwill and other intangible assets impairment		290,166			—			2,196
Net loss on disposal of fixed assets		1,215			961			1,726
Loss on purchase of debt		—			—			5,055
Loss on disposal of product lines		—			—			15,969
Depreciation and intangible assets amortization		50,016			48,535			49,412
Deferred income taxes		(29,438	)		(7,562	)		(16,277	)
Other non-cash charges		13,735			9,303			13,891
Changes in operating assets and liabilities, net of acquisitions and dispositions:
Trade accounts receivable		(6,413	)		41,758			42,206
Inventories		924			(28,456	)		22,227
Other current assets		17,986			27,970			(36,082	)
Deferred costs—net		27,596			53,438			128,752
Accounts payable and other liabilities		(67,542	)		18,934			553
Other—net		2,554			(4,664	)		(4,836	)
Total Cash Flows From Operating Activities		73,040			243,537			264,730
INVESTING ACTIVITIES:
Proceeds from sale of short-term investments		—			692,985			1,026,280
Purchases of short-term investments		—			(692,985	)		(817,540	)
Property, plant and equipment additions		(55,733	)		(56,623	)		(41,716	)
Cash payments for business acquisitions, net of cash acquired		(37,882	)		(76,338	)		(13,122	)
Cash receipts related to discontinued operations		—			4,283			12,559
Proceeds from sale of fixed assets		433			3,104			4,847
Other—net		(44,153	)		—			6,160
Total Cash Flows From Investing Activities		(137,335	)		(125,574	)		177,468
FINANCING ACTIVITIES:
Increase in long-term debt		141,500			20,100			200,000
Reduction of long-term debt		(22,509	)		—			(440,588	)
Sale of stock under benefit plans		525			27,156			6,834
Purchase of treasury shares		(73,983	)		(172,328	)		(257,817	)
Dividends to shareholders		(22,566	)		(21,803	)		(18,418	)
Debt issuance costs		—			—			(8,533	)
Total Cash Flows From Financing Activities		22,967			(146,875	)		(518,522	)
DISCONTINUED OPERATIONS:
Cash (used) provided by operating activities from discontinued operations		—			(59	)		1,283
Cash provided by investing activities from discontinued operations		—			—			1,634
Total Cash Flows From Discontinued Operations		—			(59	)		2,917
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(21,956	)		7,758			4,507
DECREASE IN CASH AND CASH EQUIVALENTS		(63,284	)		(21,213	)		(68,900	)
Cash and Cash Equivalents at Beginning of Year		123,500			144,713			213,613
Cash and Cash Equivalents at End of Year	$	60,216		$	123,500		$	144,713

See notes to consolidated financial statements.

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CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

Years ended February 28, 2009, February 29, 2008 and February 28, 2007

Thousands of dollars except per share amounts

	Common Shares						Capital in Excess of Par Value			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
	Class A			Class B
BALANCE MARCH 1, 2006	$	56,130		$	4,218		$	398,505		$	(676,436	)	$	9,823		$	1,427,785		$	1,220,025
Cumulative effect adjustment, adoption of SAB 108 (net of tax of $1,808)		—			—			—			—			—			3,348			3,348
Net income		—			—			—			—			—			42,378			42,378
Other comprehensive income (loss):
Foreign currency translation adjustment		—			—			—			—			30,990			—			30,990
Minimum pension liability (net of tax of $55)		—			—			—			—			150			—			150
Unrealized loss on available-for-sale securities (net of tax of $1)		—			—			—			—			(10	)		—			(10	)
Reclassification adjustment for amounts recognized in income (net of tax of $216)		—			—			—			—			359			—			359
Comprehensive income		—			—			—			—			—			—			73,867
Adjustment recognized upon adoption of SFAS 158 (net of tax of $32,909)		—			—			—			—			(42,325	)		—			(42,325	)
Cash dividends—$0.32 per share		—			—			—			—			—			(18,418	)		(18,418	)
Sale of shares under benefit plans, including tax benefits		351			—			6,462			—			—			—			6,813
Purchase of treasury shares		(11,149	)		(12	)		—			(246,656	)		—			—			(257,817	)
Debt conversion and settlement		5,506			—			107			210,726			—			(200,680	)		15,659
Stock compensation expense		—			—			7,559			—			—			—			7,559
Stock grants and other		1			77			2,226			1,952			—			(393	)		3,863
BALANCE FEBRUARY 28, 2007		50,839			4,283			414,859			(710,414	)		(1,013	)		1,254,020			1,012,574
Cumulative effect adjustment, adoption of FIN 48		—			—			—			—			—			(14,017	)		(14,017	)
Net income		—			—			—			—			—			83,003			83,003
Other comprehensive income (loss):
Foreign currency translation adjustment		—			—			—			—			18,691			—			18,691
Pension and postretirement adjustments recognized in accordance with SFAS 158 (net of tax of $7,093)		—			—			—			—			3,567			—			3,567
Unrealized loss on available-for-sale securities (net of tax of $1)		—			—			—			—			(1	)		—			(1	)
Comprehensive income		—			—			—			—			—			—			105,260
Cash dividends—$0.40 per share		—			—			—			—			—			(21,803	)		(21,803	)
Sale of shares under benefit plans, including tax benefits		1,220			2			25,533			79			—			(43	)		26,791
Purchase of treasury shares		(6,736	)		(928	)		—			(164,664	)		—			—			(172,328	)
Stock compensation expense		—			—			6,547			—			—			—			6,547
Stock grants and other		1			77			(1,243	)		2,050			—			(498	)		387
BALANCE FEBRUARY 29, 2008		45,324			3,434			445,696			(872,949	)		21,244			1,300,662			943,411
Net loss		—			—			—			—			—			(227,759	)		(227,759	)
Other comprehensive loss:
Foreign currency translation adjustment		—			—			—			—			(80,845	)		—			(80,845	)
Pension and postretirement adjustments recognized in accordance with SFAS 158 (net of tax of $6,839)		—			—			—			—			(7,674	)		—			(7,674	)
Unrealized loss on available-for-sale securities (net of tax of $0)		—			—			—			—			(3	)		—			(3	)
Comprehensive loss		—			—			—			—			—			—			(316,281	)
Cash dividends—$0.60 per share		—			—			—			—			—			(27,491	)		(27,491	)
Sale of shares under benefit plans, including tax benefits		26			—			384			—			—			—			410
Purchase of treasury shares		(8,311	)		(10	)		—			(67,158	)		—			—			(75,479	)
Stock compensation expense		—			—			4,369			—			—			—			4,369
Stock grants and other		4			75			(1,364	)		2,021			—			(486	)		250
BALANCE FEBRUARY 28, 2009	$	37,043		$	3,499		$	449,085		$	(938,086	)	$	(67,278	)	$	1,044,926		$	529,189

See notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Years ended February 28, 2009, February 29, 2008 and February 28, 2007

Thousands of dollars except per share amounts

NOTE 1—SIGNIFICANT ACCOUNTING POLICIES

Consolidation:    The consolidated financial statements include the accounts of American Greetings Corporation and its subsidiaries (“American Greetings” or the “Corporation”). All significant intercompany accounts and transactions are eliminated. The Corporation’s fiscal year ends on February 28 or 29. References to a particular year refer to the fiscal year ending in February of that year. For example, 2009 refers to the year ended February 28, 2009.

The Corporation’s investments in less than majority-owned companies in which it has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method except when they qualify as variable interest entities and the Corporation is the primary beneficiary, in which case the investments are consolidated in accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 46 (revised December 2003), “Consolidation of Variable Interest Entities.”

Reclassifications:    Certain amounts in the prior year financial statements have been reclassified to conform to the 2009 presentation.

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

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

Short-term Investments:    In prior years, the Corporation invested in auction rate securities, which are variable-rate debt securities associated with bond offerings. While the underlying security has a long-term nominal maturity, the interest rate is reset through Dutch auctions that are typically held every 7, 28 or 35 days, creating short-term liquidity for the Corporation. The securities trade at par and are callable at par on any interest payment date at the option of the issuer. Interest is paid at the end of each auction period. The investments were classified as available-for-sale and were recorded at cost, which approximated market value. There were no short-term investments as of February 28, 2009 or February 29, 2008.

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

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

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Concentration of Credit Risks:    The Corporation sells primarily to customers in the retail trade, including those in the mass merchandise, drug store, supermarket and other channels of distribution. These customers are located throughout the United States, Canada, the United Kingdom, Australia, New Zealand and Mexico. Net sales from continuing operations to the Corporation’s five largest customers accounted for approximately 36%, 37% and 36% of total revenue in 2009, 2008 and 2007, respectively. Net sales to Wal-Mart Stores, Inc. and its subsidiaries accounted for approximately 15%, 16% and 16% of total revenue from continuing operations in 2009, 2008 and 2007, respectively.

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

Inventories:    Finished products, work in process and raw materials inventories are carried at the lower of cost or market. The last-in, first-out (LIFO) cost method is used for certain domestic inventories, which approximate 75% and 70% of the total pre-LIFO consolidated inventories at February 28, 2009 and February 29, 2008, respectively. Foreign inventories and the remaining domestic inventories principally use the first-in, first-out (FIFO) method except for display material and factory supplies which are carried at average cost. The Corporation allocates fixed production overhead to inventory based on the normal capacity of the production facilities. Abnormal amounts of idle facility expense, freight, handling costs and wasted material are treated as a current period expense. See Note 7 for further information.

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

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

Film production costs are accounted for pursuant to American Institute of Certified Public Accountants Statement of Position 00-2 (“SOP 00-2”), “Accounting by Producers or Distributors of Films,” and are stated at the lower of cost or net realizable value based on anticipated total revenue (ultimate revenue). Film production costs are generally capitalized. These costs are then ratably recognized based on the ratio of the current period’s revenue to estimated remaining ultimate revenues. Ultimate revenues are calculated in accordance with SOP 00-2 and require estimates and the exercise of judgment. Accordingly, these estimates are periodically updated to include the actual results achieved or new information as to anticipated revenue performance of each title.

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During 2009, production expense totaled $19,945 and included $8,856 related to changes in ultimate revenue estimates. During 2008, production expense totaled $8,560 and included amounts related to changes in ultimate revenue estimates of approximately $4,035. The balance of deferred film production costs was $10,290 and $12,899 at February 28, 2009 and February 29, 2008, respectively. The Corporation expects to recognize approximately $3,600 of production costs during the next twelve months.

Investment in Life Insurance:    The Corporation’s investment in corporate-owned life insurance policies is recorded in “Other assets” net of policy loans. The net life insurance expense, including interest expense, is included in “Administrative and general expenses” in the Consolidated Statement of Operations. The related interest expense, which approximates amounts paid, was $11,101, $10,779 and $10,938 in 2009, 2008 and 2007, respectively.

Goodwill and Other Intangible Assets:    Goodwill represents the excess of purchase price over the estimated fair value of net assets acquired in business combinations and is not amortized in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 142 (“SFAS 142”), “Goodwill and Other Intangible Assets.” This statement addresses the amortization of intangible assets with defined lives and addresses the impairment testing and recognition for goodwill and indefinite-lived intangible assets. The Corporation is required to evaluate the carrying value of its goodwill for potential impairment on an annual basis or more frequently if indicators arise. While the Corporation may use a variety of methods to estimate fair value for impairment testing, its primary methods are discounted cash flows and a market based analysis. The required annual goodwill impairment test is completed during the fourth quarter. Intangible assets with defined lives are amortized over their estimated lives. See Note 9 for further discussion.

Property and Depreciation:    Property, plant and equipment are carried at cost. Depreciation and amortization of buildings, equipment and fixtures are computed principally by the straight-line method over the useful lives of the various assets. The cost of buildings is depreciated over 25 to 40 years; computer hardware and software over 3 to 7 years; machinery and equipment over 3 to 15 years; and furniture and fixtures over 8 to 20 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated life of the leasehold improvement. Property, plant and equipment are reviewed for impairment in accordance with SFAS No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS 144 also provides a single accounting model for the disposal of long-lived assets. In accordance with SFAS 144, assets held for sale are stated at the lower of their fair values or carrying amounts and depreciation is no longer recognized. See Note 8 for further information.

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

Pension and Other Postretirement Benefits:    In September 2006, the FASB issued SFAS No. 158 (“SFAS 158”), “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R).” SFAS 158 requires an employer to recognize a plan’s funded status in its statement of financial position, measure a plan’s assets and obligations as of the end of the employer’s fiscal year and recognize the changes in a defined benefit postretirement plan’s funded status in comprehensive income in the year in which the changes occur. SFAS 158’s requirement to recognize the funded status of a benefit plan and new disclosure requirements were adopted by the Corporation effective February 28, 2007. See Note 12.

Revenue Recognition:    Sales of seasonal product to unrelated, third party retailers are recognized at the approximate date the product is received by the customer, commonly referred to in the industry as the ship-to-arrive date (“STA”). The Corporation maintains STA data due to the large volume of seasonal product

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shipment activity and the lead time required to achieve customer-requested delivery dates. Seasonal cards, certain other seasonal products and everyday cards at certain foreign locations are generally sold with the right of return on unsold merchandise. In addition, the Corporation provides for estimated returns of these products when those sales to unrelated, third party retailers are recognized. These estimates are based on historical sales returns, the amount of current year sales and other known factors. Accrual rates utilized for establishing estimated returns reserves have approximated actual returns experience.

Except for products sold with a right of return and retailers with a scan-based trading (“SBT”) arrangement, sales are generally recognized by the Corporation upon shipment of products to unrelated, third party retailers and upon the sale of products to the consumer at Corporation-owned retail locations. Sales of these products are generally sold without the right of return and sales credits are issued at the Corporation’s discretion for damaged, obsolete and outdated products.

For retailers with an SBT arrangement, the Corporation owns the product delivered to its retail customers until the product is sold by the retailer to the ultimate consumer, at which time the Corporation recognizes revenue, for both everyday and seasonal products. When a retailer commits to convert to an SBT arrangement, the Corporation reverses previous sales transactions. Legal ownership of the inventory at the retailer’s stores reverts back to the Corporation at the time of conversion. The timing and amount of the sales reversal depends on retailer inventory turn rates and the estimated timing of the store conversions.

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

The Corporation has agreements for licensing the Care Bears and Strawberry Shortcake characters and other intellectual property. These license agreements provide for royalty revenue to the Corporation based on a percentage of net sales and are subject to certain guaranteed minimum royalties. Certain of these agreements are managed by outside agents. All payments flow through the agents prior to being remitted to the Corporation. Typically, the Corporation receives quarterly payments from the agents. Royalty revenue is generally recognized upon receipt and recorded in “Other revenue” and expenses associated with the servicing of these agreements are primarily recorded as “Selling, distribution and marketing expenses.”

Deferred revenue, included in “Other current liabilities” on the Consolidated Statement of Financial Position, totaled $37,751 and $37,895 at February 28, 2009 and February 29, 2008, respectively. The amounts relate primarily to the Corporation’s AG Interactive segment and the licensing activities included in non-reportable segments.

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

Translation of Foreign Currencies:    Asset and liability accounts are translated into United States dollars using exchange rates in effect at the date of the Consolidated Statement of Financial Position; revenue and expense accounts are translated at average exchange rates during the related period. Translation adjustments are reflected as a component of shareholders’ equity. Gains and losses resulting from foreign currency transactions, including intercompany transactions that are not considered permanent investments, are included in net income as incurred.

Shipping and Handling Fees:    The Corporation classifies shipping and handling fees as part of “Selling, distribution and marketing expenses.” Shipping and handling costs were $130,271, $128,177 and $126,880 in 2009, 2008 and 2007, respectively.

Advertising Expense:    Advertising costs are expensed as incurred. Advertising expense was $30,392, $45,099 and $43,314 in 2009, 2008 and 2007, respectively.

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Income Taxes:    Income tax expense includes both current and deferred taxes. Current tax expense represents the amount of income taxes paid or payable (or refundable) for the year, including interest and penalties. Deferred income taxes, net of appropriate valuation allowances, are provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. See Note 17 for further discussion.

In July 2006, the FASB issued FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertain tax positions recognized in a company’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes,” including what criteria must be met prior to recognition of the financial statement benefit of a position taken or expected to be taken in a tax return. FIN 48 requires a company to include additional qualitative and quantitative disclosures within its financial statements. The disclosures include potential tax benefits from positions taken for tax return purposes that have not been recognized for financial reporting purposes and a tabular presentation of significant changes during each annual period. The disclosures also include a discussion of the nature of uncertainties, factors that could cause a change and an estimated range of reasonably possible changes in tax uncertainties. FIN 48 requires a company to recognize a financial statement benefit for a position taken for tax return purposes when it is more likely than not that the position will be sustained. The cumulative effect of adopting FIN 48 is recorded as an adjustment to the opening balance of retained earnings in the period of adoption. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Corporation adopted FIN 48 on March 1, 2007. See Note 17 for further discussion.

Staff Accounting Bulletin No. 108:    In 2007, the Corporation determined that the reported February 28, 2006 “Trade accounts receivable, net” was understated by $5,156 ($3,348 after-tax) as a result of an accounting error in which the allowance for rebates was overstated. The Corporation assessed the error amounts considering Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” as well as SEC SAB No. 108, “Considering the Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial Statements.” The error was not deemed to be material to any prior period reported consolidated financial statements, but was deemed material in the current year. Accordingly, the Corporation recorded the correction of the overstatement of the allowance for rebates (correspondingly, an understatement of net income of prior periods) as an adjustment to beginning retained earnings pursuant to the special transition provision detailed in SAB No. 108.

Recent Accounting Pronouncements:    In September 2006, 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. The Corporation adopted SFAS 157 for financial assets and liabilities on March 1, 2008. In October 2008, the FASB issued FASB Staff Position FAS 157-3 (“FSP 157-3”), “Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active,” which clarifies the application of SFAS 157 when the market for a financial asset is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 became effective upon issuance, including prior periods for which financial statements have not been issued. See Note 14.

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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In December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141R”), “Business Combinations.” SFAS 141R provides revised guidance on the recognition and measurement of the consideration transferred, identifiable assets acquired, liabilities assumed, noncontrolling interests and goodwill acquired in a business combination. SFAS 141R also expands required disclosures surrounding the nature and financial effects of business combinations. SFAS 141R is effective, on a prospective basis, for fiscal years beginning after December 15, 2008.

In December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51.” SFAS 160 establishes accounting and reporting standards for noncontrolling interests (i.e. minority interests) in a subsidiary and for the deconsolidation of a subsidiary. Under the standard, noncontrolling interests are considered equity and should be clearly identified, presented and disclosed in the consolidated statement of financial position within equity, but separate from the parent’s equity. SFAS 160 is effective, on a prospective basis, for fiscal years beginning after December 15, 2008. However, presentation and disclosure requirements must be retrospectively applied to comparative financial statements. The Corporation is currently evaluating the impact that SFAS 160 will have on its consolidated financial statements upon adoption.

In April 2008, the FASB issued FASB Staff Position FAS 142-3 (“FSP 142-3”), “Determination of the Useful Life of Intangible Assets.” FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS 142. The intent of FSP 142-3 is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under other U.S. generally accepted accounting principles (“GAAP”). FSP 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The guidance for determining the useful life of a recognized intangible asset shall be applied prospectively to intangible assets acquired after the effective date. Certain disclosure requirements shall be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date.

In May 2008, the FASB issued SFAS No. 162 (“SFAS 162”), “The Hierarchy of Generally Accepted Accounting Principles.” The new standard is intended to improve financial reporting by identifying a consistent framework for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. GAAP for nongovernmental entities. SFAS 162 became effective on November 15, 2008. The adoption of SFAS 162 did not have a significant impact on the Corporation’s consolidated financial statements.

In December 2008, the FASB issued FASB Staff Position FAS 132(R)-1 (“FSP 132R-1”), “Employers’ Disclosures about Postretirement Benefit Plan Assets.” FSP 132R-1 provides guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. It requires disclosure of additional information about investment allocation, fair values of major categories of assets, the development of fair value measurements and concentrations of risk. FSP 132R-1 is effective for fiscal years ending after December 15, 2009; however, earlier application is permitted. The adoption of FSP 132R-1 in fiscal 2010 will have no effect on the Corporation’s consolidated financial position or results of operations.

NOTE 2—ACQUISITIONS

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

During the fourth quarter of 2009, the Corporation acquired all of the issued and outstanding capital stock of RPG Holdings, Inc. and its subsidiary, Recycled Paper Greetings, Inc. (together “RPG”). RPG is a Chicago-based creator and designer of humorous and alternative greeting cards. RPG’s cards are distributed primarily

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through mass retail partners, drug stores and specialty retail stores. The acquisition was completed pursuant to a petition and pre-packaged plan of reorganization filed on January 2, 2009, by RPG under the U.S. Bankruptcy Code and an agreement dated December 30, 2008, between the Corporation and RPG.

On February 24, 2009, the Corporation acquired all of the issued and outstanding capital stock of RPG in exchange for: (a) approximately $18,000 in cash, which includes up to $3,200 of unpaid professional fees and other amounts owed by RPG that the Corporation anticipates paying upon approval of these amounts by the U.S. Bankruptcy Court; (b) the $67,100 in principal amount of first lien debt securities held by American Greetings; (c) approximately $22,000 in aggregate principal amount of American Greetings’ 7.375% senior notes due June 1, 2016, issued under American Greetings’ existing senior notes indenture; and (d) approximately $32,700 in aggregate principal amount of American Greetings’ 7.375% notes due June 1, 2016, issued under American Greetings’ new indenture. Also in connection with the acquisition, approximately $6,500 of debtor-in-possession financing (the “DIP”) owed by RPG to American Greetings under the debtor-in-possession credit agreement put in place in the fourth quarter of 2009 was extinguished. The Corporation also incurred approximately $3,500 in transaction costs associated with this acquisition.

The total cost of the acquisition has been allocated to the assets acquired and the liabilities assumed based upon their estimated fair values at the date of the acquisition. The estimated purchase price allocation is preliminary and subject to revision as valuation work is still being conducted. The following represents the preliminary purchase price allocation:

Purchase price (in millions):
Cash paid (including transaction costs and the DIP)	$	22.9
Purchase price payable (including transaction costs)		4.8
Fair market value of first lien debt securities		41.4
Fair market value of long-term debt issued		28.4
Cash acquired		(0.6	)
	$	96.9
Allocation (in millions):
Current assets	$	17.1
Property, plant and equipment		3.9
Other assets (including deferred tax assets)		18.8
Intangible assets		41.5
Goodwill		22.5
Liabilities assumed		(6.9	)
	$	96.9

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 completed as the acquisition closed within days of the Corporation’s year-end. Pro forma results will be completed and filed with the SEC on Form 8-K within seventy-five days of the closing of the acquisition.

In addition, the Corporation is currently in the process of reviewing the RPG operations for rationalization opportunities, particularly in the areas of supply chain, manufacturing, distribution and corporate functions. Once this review has been completed and a detailed plan of action is approved, additional liabilities may be required in the allocation of the purchase price. These actions, if any, will be accounted for in accordance with Emerging Issues Task Force (“EITF”) Issue No. 95-3, “Recognition of Liabilities in Connection with a Purchase Business Combination.”

In March 2008, the Corporation acquired a card publisher and franchised distributor of greeting cards in the United Kingdom (“U.K.”). Cash paid, net of cash acquired was approximately $15,600 and is reflected in

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investing activities in the Consolidated Statement of Cash Flows. In connection with this acquisition, intangible assets and goodwill of $5,800 and $6,100, respectively, were recorded. Approximately $8,400 of current assets and fixed assets were recorded and liabilities of approximately $4,700 were assumed. The purchase agreement 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 second half of 2008, the Corporation acquired Webshots and PhotoWorks, Inc. (“PhotoWorks”) for $45,200 and $26,484, respectively. The financial results of these acquisitions are included in the Corporation’s consolidated results from their respective dates of acquisition. Pro forma results of operations have not been presented as the effects of these acquisitions were not deemed material.

Webshots is an online digital photography business. The $45,200 cash payment is reflected in investing activities in the Consolidated Statement of Cash Flows. Intangible assets and goodwill of $9,300 and $41,600, respectively, were recorded. Liabilities of approximately $5,500 were also assumed as part of the acquisition.

PhotoWorks is a leading online photo sharing and personal publishing company that allows consumers to use their digital images to create high quality photo-personalized products like greeting cards, calendars, online photo albums and photo books. In accordance with the terms of its agreement with PhotoWorks, on December 13, 2007, the Corporation commenced a cash tender offer to acquire all outstanding common stock of PhotoWorks at a price of 59.5 cents per share. Cash paid, net of cash acquired, was $25,082 and is reflected in investing activities in the Consolidated Statement of Cash Flows. Intangible assets and goodwill totaling approximately $4,870 and $15,500, respectively, were recorded. A deferred tax asset of approximately $10,000 was recorded in connection with a net operating loss carryforward that was acquired in the transaction and liabilities of approximately $5,000 were also assumed as part of the acquisition.

During the second quarter of 2007, the Corporation acquired an online greeting card business for approximately $21,000. Approximately $15,000 was paid in the second quarter of 2007 and approximately $6,000 was paid in the first quarter of 2008. Cash paid, net of cash acquired, was $11,154 in 2007 and $6,056 in 2008 and is reflected in investing activities in the Consolidated Statement of Cash Flows. In connection with this acquisition, intangible assets and goodwill of $11,200 and $12,500, respectively, were recorded. The financial results of this acquisition are included in the Corporation’s consolidated results from the date of acquisition. The pro forma results of operations have not been presented because the effect of this acquisition was not deemed material.

During the fourth quarter of 2005, the Corporation acquired 100% of the equity interests of Collage Designs Limited (“Collage”). Collage is a European manufacturer of gift wrap products. The Corporation acquired the net assets of Collage valued at approximately $300 and recorded goodwill of approximately $6,000. Approximately $2,700 was paid at the closing and $1,300 was paid in 2006. The remainder, totaling $1,968, was paid in February 2007. 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.

The goodwill and certain intangible assets related to the acquisitions completed in 2008, 2007 and 2005 disclosed above were impaired in 2009. See Note 9 for further information.

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NOTE 3—OTHER INCOME AND EXPENSE

	2009			2008			2007
Gain on contract terminations	$	—		$	—		$	(20,004	)
Loss on disposal of candle product lines		—			—			15,969
Miscellaneous		(1,396	)		(1,325	)		(1,217	)
Other operating income—net	$	(1,396	)	$	(1,325	)	$	(5,252	)

During 2007, the $20,004 gain on contract terminations was a result of retailer consolidations, wherein, multiple long-term supply agreements were terminated and a new agreement was negotiated with a new legal entity with substantially different terms and sales commitments. Also, in 2007, the Corporation sold substantially all of the assets associated with its candle product lines and recorded a loss of $15,969. The proceeds of $6,160 received from the sale of the candle product lines in 2007 are included in “Other—net” investing activities in the Consolidated Statement of Cash Flows.

	2009			2008			2007
Foreign exchange loss (gain)	$	483		$	(7,206	)	$	(2,733	)
Rental income		(1,432	)		(1,225	)		(1,326	)
Miscellaneous		3,106			1,020			1,377
Other non-operating expense (income)—net	$	2,157		$	(7,411	)	$	(2,682	)

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

NOTE 4—(LOSS) EARNINGS PER SHARE

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

	2009			2008		2007
Numerator:
(Loss) income from continuing operations	$	(227,759	)	$	83,320	$	39,938
Add-back—interest on convertible subordinated notes, net of tax		—			—		1,967
(Loss) income from continuing operations—assuming dilution	$	(227,759	)	$	83,320	$	41,905
Denominator (thousands):
Weighted average shares outstanding		46,544			54,237		57,952
Effect of dilutive securities:
Convertible debt		—			—		4,015
Stock options and other		—			269		396
Weighted average shares outstanding—assuming dilution		46,544			54,506		62,363
(Loss) income from continuing operations per share	$	(4.89	)	$	1.54	$	0.69
(Loss) income from continuing operations per share—assuming dilution	$	(4.89	)	$	1.53	$	0.67

For 2009, all options outstanding (totaling approximately 6.7 million) were excluded from the computation of earnings per share-assuming dilution, as the effect would have been antidilutive due to the net loss in the period. Had the Corporation reported income for the year, approximately 6.0 million stock options outstanding during

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the period would have been excluded from the computation of earnings per share-assuming dilution because the options’ exercise prices were greater than the average market price of the common shares during the year. Approximately 1.7 million and 3.2 million stock options, in 2008 and 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 years.

NOTE 5—ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

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

	February 28, 2009			February 29, 2008
Foreign currency translation adjustments	$	(20,238	)	$	60,607
Pension and postretirement benefits adjustments, net of tax (See Note 12)		(47,038	)		(39,364	)
Unrealized investment (loss) gain, net of tax		(2	)		1
	$	(67,278	)	$	21,244

NOTE 6—TRADE ACCOUNTS RECEIVABLE, NET

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

	February 28, 2009		February 29, 2008
Allowance for seasonal sales returns	$	47,121	$	57,126
Allowance for outdated products		11,486		21,435
Allowance for doubtful accounts		5,011		3,778
Allowance for cooperative advertising and marketing funds		25,048		33,662
Allowance for rebates		45,774		43,935
	$	134,440	$	159,936

NOTE 7—INVENTORIES

	February 28, 2009		February 29, 2008
Raw materials	$	21,425	$	17,701
Work in process		7,068		10,516
Finished products		232,893		244,379
		261,386		272,596
Less LIFO reserve		86,025		82,085
		175,361		190,511
Display material and factory supplies		28,512		26,160
	$	203,873	$	216,671

There were no material LIFO liquidations in 2009, 2008 or 2007. Inventory held on location for retailers with SBT arrangements totaled approximately $34,000 and $32,000 as of February 28, 2009 and February 29, 2008, respectively.

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NOTE 8—PROPERTY, PLANT AND EQUIPMENT

	February 28, 2009		February 29, 2008
Land	$	15,048	$	16,568
Buildings		243,395		263,682
Equipment and fixtures		699,637		693,823
		958,080		974,073
Less accumulated depreciation		660,301		678,068
	$	297,779	$	296,005

During 2009, the Corporation disposed of approximately $43,000 of property, plant and equipment that included accumulated depreciation of approximately $41,000 compared to disposals in 2008 of approximately $38,000 with accumulated depreciation of approximately $34,000. Continued operating losses and negative cash flows led to testing for impairment of long-lived assets in the Retail Operations segment in accordance with SFAS 144. As a result, fixed asset impairment charges of $5,465, $1,436 and $1,760 were recorded in “Selling, distribution and marketing expenses” on the Consolidated Statement of Operations for 2009, 2008 and 2007, respectively. The charges represent the difference between the carrying values of the assets and the future net discounted cash flows estimated to be generated by those assets.

Depreciation expense totaled $42,843, $43,903 and $47,006 in 2009, 2008 and 2007, respectively.

NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS

In accordance with SFAS 142, the Corporation is required to evaluate the carrying value of its goodwill for potential impairment on an annual basis or an interim basis if there are indicators of potential impairment. Due to the recent deterioration in the global economic environment and resulting significant decrease in the Corporation’s market capitalization, combined with significant decreases in reported market values of comparable, unrelated companies, indicators emerged within the AG Interactive segment, which is also the reporting unit for SFAS 142 purposes, and one reporting unit located in the United Kingdom within the International Social Expression Products segment (the “UK Reporting Unit”) that led the Corporation to conclude that a SFAS 142 impairment test was required to be performed during the third quarter of 2009 for goodwill in these reporting units.

Within the AG Interactive segment, there were the following three primary indicators: (1) a substantial decline in advertising revenues; (2) the e-commerce businesses not growing as anticipated; and (3) the Corporation’s belief that the segment’s current long-term cash flow forecasts may now be unattainable based on the lengthening and deepening economic deterioration.

The following three primary indicators emerged within the UK Reporting Unit: (1) the recent bankruptcy of a major customer; (2) a major customer implementing buying freezes, including on the Corporation’s everyday products; and (3) the Corporation’s belief that current long-term cash flow forecasts may now be unattainable based on the lengthening and deepening economic deterioration.

Under SFAS 142, the test for, and measurement of, impairment of goodwill consists of two steps. In the first step, the initial test for potential impairment, the Corporation compares the fair value of each reporting unit to its carrying amount. Fair values were determined using a combination of an income approach and a market based approach which were validated by a market capitalization reconciliation. Based on this evaluation, it was determined that the fair values of the AG Interactive segment and UK Reporting Unit were less than their carrying values, thus indicating potential impairment. In the second step, the measurement of the impairment, the Corporation hypothetically applies purchase accounting to the reporting units using the fair values from the first step. As a result, the Corporation recorded goodwill charges of $150,208, which includes all the goodwill for the

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AG Interactive segment, and $82,110, which includes all of the goodwill for the UK Reporting Unit. The amounts recorded in the third quarter were estimates. The AG Interactive segment impairment was adjusted down by $655 in the fourth quarter due to final purchase accounting adjustments for a final impairment total of $149,553.

The required annual impairment test of goodwill was completed early in the fourth quarter of 2009 and based on the results of the testing, no additional impairment charges were recorded.

However, based on the continued significant deterioration of the global economic environment during the fourth quarter of 2009 and the closing share price of the Corporation’s Class A common shares at February 28, 2009, that resulted in the Corporation’s fair value of equity being below the carrying value of equity, an additional interim impairment analysis was performed at the end of the fourth quarter following the same steps as described above. Based on this analysis, it was determined that the fair values of the North American Greeting Card Division (“NAGCD”) and the Corporation’s fixtures business, which are both also the reporting units for SFAS 142 purposes, were less than their carrying values. As a result, the Corporation recorded goodwill impairment charges of $47,850, which includes all the goodwill for NAGCD, and $82, which includes all the goodwill for the Corporation’s fixtures business. NAGCD is included in the North American Social Expression Products segment and the fixtures business is included in non-reportable segments.

In 2008, the Corporation completed the required annual impairment test of goodwill in the fourth quarter and based on the results of the testing, no impairment charges were recorded.

In 2007, the required annual goodwill impairment test resulted in an impairment charge of $2,196 for the Corporation’s entertainment development and production joint venture, which is included in the non-reportable segments. This charge represented all of the goodwill of this entity. A discounted cash flow method was used for testing purposes.

A summary of the changes in the carrying amount of the Corporation’s goodwill during the years ended February 28, 2009 and February 29, 2008 by segment, is as follows:

	North American Social Expression Products			International Social Expression Products			AG Interactive			Non- Reportable Segments			Total
Balance at February 28, 2007	$	47,843		$	86,041		$	90,139		$	82		$	224,105
Acquisition related		—			—			56,349			—			56,349
Currency translation		19			1,009			3,590			—			4,618
Balance at February 29, 2008		47,862			87,050			150,078			82			285,072
Acquisition related		22,465			6,096			794			—			29,355
Impairment		(47,850	)		(82,110	)		(149,553	)		(82	)		(279,595	)
Currency translation		(12	)		(6,630	)		(1,319	)		—			(7,961	)
Balance at February 28, 2009	$	22,465		$	4,406		$	—		$	—		$	26,871

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At February 28, 2009 and February 29, 2008, intangible assets, net of accumulated amortization and impairment charges, were $50,593 and $27,438, respectively. The following table presents information about these intangible assets, which are included in “Other assets” on the Consolidated Statement of Financial Position:

	February 28, 2009							February 29, 2008
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Intangible assets with indefinite lives	$	10,000	$	—		$	10,000	$	—	$	—		$	—
Patents		3,910		(3,303	)		607		3,686		(3,207	)		479
Trademarks		9,547		(7,949	)		1,598		10,236		(5,211	)		5,025
Artist relationships		15,750		—			15,750		—		—			—
Customer relationships		26,105		(9,476	)		16,629		10,342		(1,534	)		8,808
Leasehold interest		—		—			—		4,824		(4,824	)		—
Other		15,526		(9,517	)		6,009		17,334		(4,208	)		13,126
	$	80,838	$	(30,245	)	$	50,593	$	46,422	$	(18,984	)	$	27,438

The majority of the increase in intangible assets relates to assets acquired in connection with the acquisition of RPG, estimated at approximately $41,500. The U.K. acquisition in 2009 also added approximately $5,800 of intangible assets. The intangible asset with an indefinite life is the RPG trade name. Other intangible assets acquired primarily include customer and artist relationships and franchise networks. The weighted average amortization period for the intangible assets acquired in 2009 is approximately 9 years. See Note 2 for further information.

In conjunction with the goodwill impairment analysis performed in the third quarter of 2009 for the AG Interactive segment and the UK Reporting Unit discussed above, intangible assets were also tested for impairment in accordance with SFAS 144. Based on this testing, the Corporation recorded an impairment charge of $10,571 in the AG Interactive segment. The impairment charge was determined using a discounted cash flows analysis and related primarily to customer relationships, developed technology and trademarks.

Amortization expense for intangible assets totaled $7,173, $4,632 and $2,406 in 2009, 2008 and 2007, respectively. Estimated annual amortization expense for the next five years will approximate $6,629 in 2010, $5,080 in 2011, $4,941 in 2012, $4,885 in 2013 and $4,420 in 2014. The weighted average remaining amortization period is approximately 8 years.

NOTE 10—DEFERRED COSTS

In the normal course of its business, the Corporation enters into agreements with certain customers for the supply of greeting cards and related products. Under these agreements, the customer typically receives from the Corporation a combination of cash payments, credits, discounts, allowances and other incentive considerations to be earned by the customer as product is purchased from the Corporation over the stated term of the agreement or the effective time period of the agreement to meet a minimum purchase volume commitment. In the event a contract is not completed because a minimum purchase volume commitment is not met, in most instances, the Corporation has a claim for unearned advances under the agreement. The Corporation periodically reviews the progress toward the commitment and adjusts the estimated amortization period accordingly to match the costs with the revenue associated with the agreement. The agreements may or may not specify the Corporation as the sole supplier of social expression products to the customer.

A portion of the total consideration may be payable by the Corporation at the time the agreement is consummated. All future payment commitments are classified as liabilities at inception until paid. The payments that are expected to be made in the next twelve months are classified as “Other current liabilities” in the Consolidated Statement of Financial Position and the remaining payment commitments beyond the next twelve

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months are classified as “Other liabilities.” The Corporation maintains an allowance for deferred costs related to supply agreements of $30,897 and $29,700 at February 28, 2009 and February 29, 2008, respectively. This allowance is included in “Other assets” in the Consolidated Statement of Financial Position.

Deferred costs and future payment commitments were as follows:

	February 28, 2009			February 29, 2008
Prepaid expenses and other	$	107,596		$	119,069
Other assets		273,311			338,003
Deferred cost assets		380,907			457,072
Other current liabilities		(55,877	)		(68,457	)
Other liabilities		(22,023	)		(50,491	)
Deferred cost liabilities		(77,900	)		(118,948	)
Net deferred costs	$	303,007		$	338,124

A summary of the changes in the carrying amount of the Corporation’s net deferred costs during the years ended February 28, 2009, February 29, 2008 and February 28, 2007 is as follows:

Balance at February 28, 2006	$	515,642
Payments		102,265
Net contract termination		(76,438	)
Amortization		(154,579	)
Currency translation and other		2,857
Balance at February 28, 2007		389,747
Payments		104,705
Net contract termination		(14,920	)
Amortization		(143,223	)
Currency translation and other		1,815
Balance at February 29, 2008		338,124
Payments		105,952
Amortization		(133,548	)
Currency translation and other		(7,521	)
Balance at February 28, 2009	$	303,007

NOTE 11—LONG AND SHORT-TERM DEBT

On June 29, 2001, the Corporation issued $175,000 of 7.00% convertible subordinated notes, due on July 15, 2006. The notes were convertible at the option of the holders into Class A common shares of the Corporation at any time before the close of business on July 15, 2006, at a conversion rate of 71.9466 common shares per $1 principal amount of notes.

On May 26, 2006, $159,122 of the 7.00% convertible subordinated notes were exchanged (modified) for a new series of 7.00% convertible subordinated notes due on July 15, 2006. The Corporation paid an exchange fee of $796 that was deferred at May 26, 2006 and amortized over the remaining term of the new convertible subordinated notes. The terms of the new notes were substantially the same as the old notes except that upon conversion, the new notes were settled in cash and Class A common shares. Upon conversion, the old notes could only be settled in Class A common shares. During 2007, the Corporation issued 1,126,026 Class A common shares upon conversion of $15,651 of the old series of 7.00% convertible subordinated notes. Upon settlement of the new series of 7.00% convertible subordinated notes, the Corporation paid $159,122 in cash and issued

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4,379,339 Class A common shares. The 5,505,365 Class A common shares issued upon conversion of the convertible notes were issued from the Corporation’s treasury shares. This issuance resulted in a treasury stock loss of approximately $200,000, which was recorded against retained earnings.

On May 24, 2006, the Corporation issued $200,000 of 7.375% senior unsecured notes, due on June 1, 2016. The proceeds from this issuance were used for the repurchase of the Corporation’s 6.10% senior notes due on August 1, 2028 that were tendered in the Corporation’s tender offer and consent solicitation that was completed on May 25, 2006.

On May 25, 2006, the Corporation repurchased $277,310 of its 6.10% senior notes due on August 1, 2028 and recorded a charge of $5,055 for the consent payment and other fees associated with the notes repurchased, as well as for the write-off of related deferred financing costs. In conjunction with the tender, the indenture governing the 6.10% senior notes was amended to eliminate certain restrictive covenants and events of default. The balance of the 6.10% senior notes was reclassified to current during the second quarter of 2008 as these notes could 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 exercised this option between July 1, 2008 and August 1, 2008. During the second quarter of 2009, $22,509 of these notes were repaid upon exercise of the put option. The balance of the 6.10% senior notes was reclassified to long-term.

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

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

The New Notes and the Additional Senior Notes generally contain comparable covenants as described below for the Corporation’s credit agreement. The New Notes also provide that if the Corporation incurs more than an additional $10,000 of indebtedness (other than indebtedness under the credit agreement or certain other permitted indebtedness), such indebtedness must be (a) pari passu in right of payment to the New Notes and expressly subordinated in right of payment to the credit agreement at least to the same extent as the New Notes, or (b) expressly subordinated in right of payment to the New Notes. Alternatively, the Corporation can redeem the New Notes in whole, but not in part, at a purchase price equal to 100% of the principal amount thereof plus accrued but unpaid interest, if any, or have the subordination provisions removed from the New Notes.

The total fair value of the Corporation’s publicly traded debt, based on quoted market prices, was $118,966 (at a carrying value of $228,618) and $220,406 (at a carrying value of $222,690) at February 28, 2009 and February 29, 2008, respectively. The carrying amount of the Corporation’s publicly traded debt significantly exceeded its fair value at February 28, 2009 due to the tighter U.S. credit markets.

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On April 4, 2006, the Corporation entered into a new $650,000 secured credit agreement. The new credit agreement included a $350,000 revolving credit facility and a $300,000 delay draw term loan. The Corporation could request one or more term loans until April 4, 2007. In connection with the execution of this new agreement, the Corporation’s amended and restated credit agreement dated May 11, 2004 was terminated and deferred financing fees of $1,013 were written off. The obligations under the new credit agreement are guaranteed by the Corporation’s material domestic subsidiaries and are secured by substantially all of the personal property of American Greetings Corporation and each of its material domestic subsidiaries, including a pledge of all of the capital stock in substantially all of the Corporation’s domestic subsidiaries and 65% of the capital stock of the Corporation’s first tier foreign subsidiaries. The revolving credit facility will mature on April 4, 2011 and any outstanding term loans will mature on April 4, 2013. Each term loan will amortize in equal quarterly installments equal to 0.25% of the amount of such term loan, beginning on April 4, 2007, with the balance payable on April 4, 2013.

Revolving loans denominated in U.S. dollars under the new credit agreement will bear interest at a rate per annum based on the then applicable London Inter-Bank Offer Rate (“LIBOR”) or the alternate base rate (“ABR”), as defined in the credit agreement, in each case, plus margins adjusted according to the Corporation’s leverage ratio. Term loans will bear interest at a rate per annum based on either LIBOR plus 150 basis points or based on the ABR, as defined in the credit agreement, plus 25 basis points. The Corporation pays an annual commitment fee of 25 basis points on the undrawn portion of the revolving credit facility and 62.5 basis points on the undrawn portion of the term loan. Commencing on November 30, 2006, in accordance with the terms of the new credit agreement, the commitment fee on the revolving facility fluctuates based on the Corporation’s leverage ratio.

On February 26, 2007, the credit agreement dated April 4, 2006 was amended. The amendment decreased the size of the term loan facility to $100,000 and extended the period during which the Corporation may borrow on the term loan until April 4, 2008. In connection with the reduction of the term loan facility, deferred financing fees of $1,128 were written off. Further, it extended the commitment fee on the term loan through April 4, 2008 and increased the fee to 75 basis points on the undrawn portion of the loan. The start of the amortization period was also changed from April 4, 2007 to April 4, 2008.

On March 28, 2008, the aforementioned credit agreement was further amended. The amendment extended 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.

On February 23, 2009, the Corporation drew down $100,000 in principal amount under the term loan. The proceeds of the term loan will be used for general corporate purposes. The Corporation’s ability to draw down term loans expires on April 3, 2009. Accordingly, in light of current market conditions, the Corporation drew on the facility to provide it with greater financial flexibility and to enhance liquidity for the long term.

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

On September 23, 2008, the credit agreement was further amended as follows: (1) to permit the Corporation to sell its Strawberry Shortcake, Care Bears and Sushi Pack properties; (2) to increase the permitted level of acquisitions that the Corporation may make from $200,000 to $325,000; (3) to authorize the Corporation to further amend its accounts receivable facility described below to allow its wholly-owned, consolidated accounts receivable subsidiary, AGC Funding Corporation (“AGC Funding”), to enter into insurance and other

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transactions that may mitigate credit risks associated with the collection of accounts receivable; and (4) to permit the Corporation to grant certain liens to third parties engaged in connection with the production, marketing and exploitation of the Corporation’s entertainment properties.

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

The interest rate under the accounts receivable securitization facility is based on (i) commercial paper interest rates, (ii) LIBOR rates plus an applicable margin or (iii) a rate that is the higher of the prime rate as announced by the applicable purchaser financial institution or the federal funds rate plus 0.50%. AGC Funding pays an annual commitment fee of 28 basis points on the unfunded portion of the accounts receivable securitization facility, together with customary administrative fees on outstanding letters of credit that have been issued and on outstanding amounts funded under the facility.

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

On March 28, 2008, the amended and restated receivables purchase agreement was further amended. The amendment decreased the amount of available financing from $150,000 to $90,000. There were no balances outstanding under the amended and restated receivables purchase agreement as of February 28, 2009 or February 29, 2008.

At February 28, 2009, the Corporation was in compliance with its financial covenants under the borrowing agreements described above.

Debt due within one year was as follows:

	February 28, 2009		February 29, 2008
6.10% senior notes, due 2028	$	—	$	22,690
Term loan facility		750		—
	$	750	$	22,690

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

	February 28, 2009		February 29, 2008
7.375% senior notes, due 2016	$	211,440	$	200,000
7.375% notes, due 2016		16,997		—
Term loan facility, due 2013		99,250		—
Revolving credit facility, due 2011		61,600		20,100
6.10% senior notes, due 2028		181		—
Other		5		518
	$	389,473	$	220,618

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At February 28, 2009, the balances outstanding on the revolving credit facility and term loan facility bear interest at a rate of approximately 2.4% and 3.2%, respectively. In addition to the balances outstanding under the aforementioned agreement, the Corporation provides financing for certain transactions with some of its vendors, which includes a combination of various guarantees and letters of credit. At February 28, 2009, the Corporation had credit arrangements to support the letters of credit in the amount of $113,605 with $26,168 of credit outstanding.

Aggregate maturities of long-term debt are as follows:

2010	$	750
2011		1,000
2012		1,000
2013		1,000
2014		157,850
Thereafter		254,867
	$	416,467

Interest paid in cash on short-term and long-term debt was $21,721 in 2009, $18,512 in 2008 and $32,410 in 2007. In 2007, interest expense included $5,055 related to the early retirement of substantially all of our 6.10% senior notes including the consent payment, fees paid and the write-off of deferred financing costs. Deferred financing costs of $1,013 and $1,128 associated with the termination of the credit facility in April 2006 and the amendment of the term loan facility in February 2007, respectively, were also written off during the year. These amounts were partially offset by $2,390 for the net gain recognized on an interest rate derivative entered into and settled during 2007.

NOTE 12—RETIREMENT AND POSTRETIREMENT BENEFIT PLANS

The Corporation has a non-contributory profit-sharing plan with a contributory 401(k) provision covering most of its United States employees. Corporate contributions to the profit-sharing plan were $5,184 and $6,751 for 2008 and 2007, respectively. In addition, the Corporation, at its discretion, matches a portion of 401(k) employee contributions. The Corporation’s matching contributions were $4,521 and $4,545 for 2008 and 2007, respectively. Based on the 2009 operating results, the Corporation elected not to make profit-sharing or 401(k) matching contributions for 2009.

Employees of certain foreign subsidiaries are covered by local pension or retirement plans. Annual expense and accumulated benefits of these foreign plans were not material to the consolidated financial statements.

The Corporation also participates in a multi-employer pension plan covering certain domestic employees who are part of a collective bargaining agreement. Total pension expense for the multi-employer plan, representing contributions to the plan, was $511, $554 and $753 in 2009, 2008 and 2007, respectively.

The Corporation has deferred compensation plans that provide certain officers and directors with the opportunity to defer receipt of compensation and director fees, respectively, including compensation received in the form of the Corporation’s common shares. The Corporation funds these deferred compensation liabilities by making contributions to a rabbi trust. In accordance with EITF Issue No. 97-14, “Accounting for Deferred Compensation Arrangements Where Amounts Earned Are Held in a Rabbi Trust and Invested,” both the trust assets and the related obligation associated with deferrals of the Corporation’s common shares are recorded in equity at cost and offset each other. There were approximately 0.3 million common shares in the trust at February 28, 2009 with a cost of $5,133 compared to approximately 0.2 million common shares with a cost of $3,571 at February 29, 2008.

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In 2001, in connection with its acquisition of Gibson Greetings, Inc. (“Gibson”), the Corporation assumed the obligations and assets of Gibson’s defined benefit pension plan (the “Gibson Retirement Plan”) that covered substantially all Gibson employees who met certain eligibility requirements. Benefits earned under the Gibson Retirement Plan have been frozen and participants no longer accrue benefits after December 31, 2000. The Gibson Retirement Plan has a measurement date of February 28 or 29. No contributions were made to the plan in either 2009 or 2008. The Gibson Retirement Plan was under-funded at February 28, 2009 and fully funded at February 29, 2008.

The Corporation also has an unfunded defined benefit pension plan (the “Supplemental Executive Retirement Plan”) covering certain management employees. The Supplemental Executive Retirement Plan has a measurement date of February 28 or 29. The Supplemental Executive Retirement Plan was amended in 2005 to change the twenty-year cliff-vesting period with no minimum plan service requirements to a ten-year cliff-vesting period with a requirement that at least five years of that service must be as a plan participant. The plan was amended in 2008 to authorize the Corporation to make a one-time offer to each participant who is no longer employed by American Greetings, but is either currently receiving payments under the plan or has a deferred vested benefit under the plan to receive a lump sum cash payment in 2008 in satisfaction of all future benefit payments under the Supplemental Executive Retirement Plan. As a result, a settlement expense of $105 was recorded during 2008.

The Corporation also has several defined benefit pension plans at its Canadian subsidiary. These include a defined benefit pension plan covering most Canadian salaried employees, which was closed to new participants effective January 1, 2006, but eligible members continue to accrue benefits and an hourly plan in which benefits earned have been frozen and participants no longer accrue benefits after March 1, 2000. There are also two unfunded plans, one that covers a supplemental executive retirement pension relating to an employment agreement and one that pays supplemental pensions to certain former hourly employees pursuant to a prior collective bargaining agreement. All plans have a measurement date of February 28 or 29. During 2008, the Corporation settled a portion of its obligation under one of the defined benefit pension plans at its Canadian subsidiary. For the affected participants, the plan was converted to a defined contribution plan. As a result, a settlement expense of $1,067 was recorded.

The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits to full-time United States employees who meet certain age, service and other requirements. The plan is contributory; with retiree contributions adjusted periodically, and contains other cost-sharing features such as deductibles and coinsurance. The plan has a measurement date of February 28 or 29. The Corporation made significant changes to its retiree health care plan in 2002 by imposing dollar maximums on the per capita cost paid by the Corporation for future years. The plan was amended in 2004 and 2005 to further limit the Corporation’s contributions at certain locations. The Corporation maintains a trust for the payment of retiree health care benefits. This trust is funded at the discretion of management.

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

	Pension Plans						Postretirement Benefits
	2009			2008			2009			2008
Change in benefit obligation:
Benefit obligation at beginning of year	$	152,565		$	162,434		$	139,665		$	143,803
Service cost		954			987			3,495			3,885
Interest cost		9,128			8,919			8,682			8,229
Participant contributions		46			54			4,546			4,618
Retiree drug subsidy payments		—			—			2,898			—
Plan amendments		—			90			—			—
Actuarial gain		(6,311	)		(7,147	)		(31,191	)		(12,255	)
Benefit payments		(10,081	)		(10,502	)		(7,982	)		(8,615	)
Settlements		—			(7,280	)		—			—
Currency exchange rate changes		(6,185	)		5,010			—			—
Benefit obligation at end of year		140,116			152,565			120,113			139,665
Change in plan assets:
Fair value of plan assets at beginning of year		126,023			135,526			76,686			77,114
Actual return on plan assets		(26,002	)		500			(11,352	)		3,761
Employer contributions		1,776			3,134			—			(192	)
Participant contributions		46			54			4,546			4,618
Benefit payments		(10,081	)		(10,502	)		(7,982	)		(8,615	)
Settlements		—			(7,280	)		—			—
Currency exchange rate changes		(5,273	)		4,591			—			—
Fair value of plan assets at end of year		86,489			126,023			61,898			76,686
Funded status at end of year	$	(53,627	)	$	(26,542	)	$	(58,215	)	$	(62,979	)

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

	Pension Plans						Postretirement Benefits
	2009			2008			2009			2008
Other assets	$	623		$	7,861		$	—		$	—
Accrued compensation and benefits		(2,076	)		(2,018	)		—			—
Other liabilities		(52,174	)		(32,385	)		(58,215	)		(62,979	)
Net amount recognized	$	(53,627	)	$	(26,542	)	$	(58,215	)	$	(62,979	)
Amounts recognized in accumulated other comprehensive income:
Net actuarial loss	$	50,277		$	24,345		$	47,720		$	66,683
Net prior service cost (credit)		1,036			1,296			(19,184	)		(26,602	)
Net transition obligation		43			63			—			—
Accumulated other comprehensive income	$	51,356		$	25,704		$	28,536		$	40,081

For the defined benefit pension plans, the estimated net loss, prior service cost and transition obligation that will be amortized from accumulated other comprehensive income into periodic benefit cost over the next fiscal year are approximately $1,806, $258, and $5, respectively. For the postretirement benefit plan, the estimated net loss and prior service credit that will be amortized from accumulated other comprehensive income into periodic benefit cost over the next fiscal year are approximately $3,000 and ($7,400), respectively.

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

	Pension Plans		Postretirement Benefits
	2009	2008	2009		2008
Weighted average discount rate used to determine:
Benefit obligations at measurement date
US	6.75%	6.50%	6.75	%	6.50	%
International	7.50%	5.75%	N/A		N/A
Net periodic benefit cost
US	6.50%	5.75%	6.50	%	5.75	%
International	5.75%	5.25%	N/A		N/A
Expected long-term return on plan assets:
US	7.00%	7.00%	7.00	%	7.00	%
International	6.00%	6.00%	N/A		N/A
Rate of compensation increase:
US	Up to 6.50%	Up to 6.50%	N/A		N/A
International	Up to 3.50%	3.50-4.00%	N/A		N/A
Health care cost trend rates:
For year ending February 28 or 29	N/A	N/A	9.00	%	9.50	%
For year following February 28 or 29	N/A	N/A	9.00	%	9.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	N/A	N/A	5.00	%	6.00	%
Year the rate reaches the ultimate trend rate	N/A	N/A	2017		2014

For 2009, the net periodic pension cost for the pension plans was based on long-term asset rates of return as noted above. In developing these expected long-term rate of return assumptions, consideration was given to expected returns based on the current investment policy and historical return for the asset classes.

For 2009, the Corporation assumed a long-term asset rate of return of 7% to calculate the expected return for the postretirement benefit plan. In developing the 7% expected long-term rate of return assumption, consideration was given to various factors, including a review of asset class return expectations based on historical 15-year compounded returns for such asset classes. This rate is also consistent with actual compounded returns earned by the plan over several years.

	2009			2008
Effect of a 1% increase in health care cost trend rate on:
Service cost plus interest cost	$	1,429		$	1,105
Accumulated postretirement benefit obligation		11,298			10,311
Effect of a 1% decrease in health care cost trend rate on:
Service cost plus interest cost		(1,155	)		(935	)
Accumulated postretirement benefit obligation		(9,362	)		(8,883	)

The following table presents selected pension plan information:

	2009		2008
For all pension plans:
Accumulated benefit obligation	$	136,595	$	149,054
For pension plans that are not fully funded:
Projected benefit obligation		126,386		37,798
Accumulated benefit obligation		122,923		34,374
Fair value of plan assets		72,136		3,395

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

	2009			2008			2007
Components of net periodic benefit cost:
Service cost	$	954		$	987		$	924
Interest cost		9,128			8,919			8,668
Expected return on plan assets		(8,049	)		(8,761	)		(8,524	)
Amortization of transition obligation		6			6			6
Amortization of prior service cost		260			260			254
Amortization of actuarial loss		459			1,454			2,218
Settlements		—			1,172			—
Net periodic benefit cost		2,758			4,037			3,546
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Actuarial loss		27,681			1,047			24,991
Prior service cost		—			90			1,465
Transition obligation		—			—			59
Amortization of prior service cost		(260	)		(260	)		—
Amortization of actuarial loss		(459	)		(1,454	)		—
Amortization of transition obligation		(6	)		(6	)		—
Settlements		—			(1,172	)		—
Total recognized in net periodic benefit cost and other comprehensive income	$	29,714		$	2,282		$	30,061

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

	2009			2008			2007
Components of net periodic benefit cost:
Service cost	$	3,495		$	3,885		$	3,681
Interest cost		8,682			8,229			7,733
Expected return on plan assets		(5,100	)		(5,097	)		(5,098	)
Amortization of prior service credit		(7,418	)		(7,418	)		(7,418	)
Amortization of actuarial loss		4,224			6,042			7,022
Net periodic benefit cost		3,883			5,641			5,920
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Actuarial (gain) loss		(14,739	)		(10,919	)		83,644
Prior service credit		—			—			(34,020	)
Amortization of actuarial loss		(4,224	)		(6,042	)		—
Amortization of prior service credit		7,418			7,418			—
Total recognized in net periodic benefit cost and other comprehensive income	$	(7,662	)	$	(3,902	)	$	55,544

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At February 28, 2009 and February 29, 2008, the assets of the plans are held in trust and allocated as follows:

	Pension Plans		Postretirement Benefits
	2009	2008	2009	2008	Target Allocation
Equity securities:
US	39%	53%	24%	35%	15% – 35%
International	24%	23%	N/A	N/A	N/A
Debt securities:
US	60%	46%	68%	60%	55% – 75%
International	59%	64%	N/A	N/A	N/A
Cash and cash equivalents:
US	1%	1%	8%	5%	0% – 20%
International	17%	13%	N/A	N/A	N/A

As of February 28, 2009, the investment policy for the U.S. pension plans target an approximately even distribution between equity securities and debt securities with a minimal level of cash maintained in order to meet obligations as they come due. The investment policy for the international pension plans target an approximately 20/60/10 distribution between equity securities, debt securities and cash and cash equivalents.

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

Although the Corporation does not anticipate that contributions to the Gibson Retirement Plan will be required in 2010, it may make contributions in excess of the legally required minimum contribution level. Any voluntary contributions by the Corporation are not expected to exceed deductible limits in accordance with Internal Revenue Service (“IRS”) regulations.

Based on historic patterns and currently scheduled benefit payments, the Corporation expects to contribute $1,940 to the Supplemental Executive Retirement Plan in 2010. The plan is a non-qualified and unfunded plan, and annual contributions, which are equal to benefit payments, are made from the Corporation’s general funds.

In addition, the Corporation does not anticipate contributing to the postretirement benefit plan in 2010.

The benefits expected to be paid out are as follows:

	Pension Plans		Postretirement Benefits
			Excluding Effect of Medicare Part D Subsidy		Including Effect of Medicare Part D Subsidy
2010	$	10,197	$	6,718	$	5,772
2011		10,224		7,064		6,010
2012		10,219		7,579		6,630
2013		10,351		7,791		6,741
2014		10,461		7,909		6,787
2015 – 2019		54,720		47,408		44,926

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NOTE 13—LONG-TERM LEASES AND COMMITMENTS

The Corporation is committed under noncancelable operating leases for commercial properties (certain of which have been subleased) and equipment, terms of which are generally less than 25 years. Rental expense under operating leases for the years ended February 28, 2009, February 29, 2008 and February 28, 2007 are as follows:

	2009			2008			2007
Gross rentals	$	48,332		$	47,536		$	55,537
Sublease rentals		(460	)		(241	)		(235	)
Net rental expense	$	47,872		$	47,295		$	55,302

At February 28, 2009, future minimum rental payments for noncancelable operating leases, net of aggregate future minimum noncancelable sublease rentals, are as follows:

Gross rentals:
2010	$	24,664
2011		18,988
2012		13,689
2013		9,859
2014		6,989
Later years		18,422
		92,611
Sublease rentals		(503	)
Net rentals	$	92,108

NOTE 14—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.

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The following table summarizes the financial assets measured at fair value on a recurring basis as of the measurement date, February 28, 2009, and the basis for that measurement, by level within the fair value hierarchy:

	Balance as of February 28, 2009		Quoted prices in active markets for identical assets (Level 1)
Financial assets
Active employees’ medical plan trust assets	$	21,491	$	21,491
Deferred compensation plan assets(1)		4,769		4,769
Total	$	26,260	$	26,260

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

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

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

NOTE 15—COMMON SHARES AND STOCK OPTIONS

At February 28, 2009 and February 29, 2008, common shares authorized consisted of 187,600,000 Class A and 15,832,968 Class B common shares.

Class A common shares have one vote per share and Class B common shares have ten votes per share. There is no public market for the Class B common shares of the Corporation. Pursuant to the Corporation’s Amended and Restated Articles of Incorporation, a holder of Class B common shares may not transfer such Class B common shares (except to permitted transferees, a group that generally includes members of the holder’s extended family, family trusts and charities) unless such holder first offers such shares to the Corporation for purchase at the most recent closing price for the Corporation’s Class A common shares. 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.

Total stock-based compensation expense, recognized in “Administrative and general expenses” on the Consolidated Statement of Operations, was $4,369 ($2,738 net of tax), which reduced earnings per share and earnings per share – assuming dilution by $0.06 and $0.06 per share, respectively, during the year ended February 28, 2009. During 2008, total stock-based compensation expense was $6,547 ($4,114 net of tax), which reduced earnings per share and earnings per share – assuming dilution by $0.08 and $0.08 per share, respectively. During 2007, total stock-based compensation expense was $7,559 ($4,604 net of tax), which reduced earnings per share and earnings per share – assuming dilution by $0.08 and $0.07 per share, respectively.

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

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Stock option transactions and prices are summarized as follows:

	Number of Class A Options		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at February 29, 2008	4,930,779		$	22.81		$	2,629
Granted	1,080,500			17.90
Exercised	(26,200	)		18.40
Cancelled	(292,260	)		26.19
Outstanding at February 28, 2009	5,692,819		$	21.72	6.0		—
Exercisable at February 28, 2009	4,161,246		$	22.25	5.3		—
	Number of Class B Options		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at February 29, 2008	824,520		$	23.59			—
Granted	193,000			18.12
Outstanding at February 28, 2009	1,017,520		$	22.55	6.9		—
Exercisable at February 28, 2009	641,687		$	23.29	6.4		—

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

	2009		2008		2007
Risk-free interest rate	2.5	%	4.6	%	5.0	%
Dividend yield	2.7	%	1.25	%	1.41	%
Expected stock volatility	0.31		0.25		0.24
Expected life in years	2.4		2.3		2.2

The weighted average fair value per share of options granted during 2009, 2008 and 2007 was $3.13, $4.44 and $3.81, respectively. The total intrinsic value of options exercised was $116, $8,937 and $2,192 in 2009, 2008 and 2007, respectively.

During 2006, approximately 180,000 performance shares were awarded to certain executive officers under the American Greetings 1997 Equity and Performance Incentive Plan. The performance shares represented the right to receive Class B common shares, at no cost to the officer, upon achievement of management objectives over a five-year performance period. The performance shares were in lieu of a portion of the officer’s annual cash bonus. The number of performance shares actually earned was based on the percentage of the officer’s target incentive award, if any, that the officer achieved during the performance period under the Corporation’s Key Management Annual Incentive Plan. The Corporation recognized compensation expense related to performance shares ratably over the estimated vesting period. All 180,000 performance shares were earned by the executives as of February 29, 2008.

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

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The fair value of the performance shares is the estimated present value at March 1 of each respective fiscal year using the Black-Scholes option-pricing model with the following assumptions:

	2008		2007
Risk-free interest rate	4.95	%	4.74	%
Dividend yield	1.38	%	1.52	%
Expected stock volatility	0.25		0.24
Expected life in years	1.0		1.0

The fair value per share of the performance shares in 2008 and 2007 was $22.79 and $20.73, respectively. Compensation costs recognized for approximately 60,000 performance shares vesting in each of 2008 and 2007 were approximately $1,400 (included in the $6,547 stock compensation expense disclosed above) and $1,200 (included in the $7,559 stock compensation expense disclosed above), respectively. Approximately 60,000 Class B common shares were issued in each of 2009, 2008 and 2007 related to the performance shares earned and vested in 2008, 2007 and 2006, respectively.

As of February 28, 2009, the Corporation had unrecognized compensation expense of approximately $2,000, before taxes, related to stock options. The unrecognized compensation expense is expected to be recognized over an average period of approximately one year.

The number of shares available for future grant at February 28, 2009 is 1,700,736 Class A common shares and 282,363 Class B common shares.

NOTE 16—BUSINESS SEGMENT INFORMATION

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

The North American Social Expression Products and International Social Expression Products segments primarily design, manufacture and sell greeting cards and other related products through various channels of distribution with mass retailers as the primary channel. As permitted under SFAS 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. Approximately 55% of the North American Social Expression Products segment’s revenue in 2009, 2008 and 2007 is attributable to its top five customers. Approximately 40% of the International Social Expression Products segment’s revenue in 2009, 2008 and 2007 is attributable to its top three customers.

At February 28, 2009, the Corporation owned and operated 341 card and gift retail stores in the United States and Canada through its Retail Operations segment. The stores 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. The two acquisitions in 2008, which are included in this segment, provide the Corporation entry into the 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.

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

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

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

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

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

Centrally incurred and managed costs are not allocated back to the operating segments. The unallocated items include interest expense on centrally-incurred debt, domestic profit-sharing expense and stock-based compensation expense. In addition, the costs associated with corporate operations including the senior management, corporate finance, legal and human resource functions, among other costs, are included in the unallocated items.

Operating Segment Information

	Total Revenue									Segment (Loss) Earnings
	2009			2008			2007			2009			2008			2007
North American Social Expression Products	$	1,159,162		$	1,187,520		$	1,216,588		$	114,395		$	220,285		$	208,826
Intersegment items		(57,547	)		(57,210	)		(62,348	)		(42,535	)		(42,953	)		(44,545	)
Exchange rate adjustment		(6,167	)		(668	)		(7,939	)		(1,909	)		(104	)		(3,006	)
Net		1,095,448			1,129,642			1,146,301			69,951			177,228			161,275
International Social Expression Products		299,830			307,959			302,022			(81,616	)		24,223			10,433
Exchange rate adjustment		(29,103	)		3,367			(20,292	)		3,947			513			(740	)
Net		270,727			311,326			281,730			(77,669	)		24,736			9,693
Retail Operations		183,913			198,271			215,439			(19,123	)		(3,772	)		(16,526	)
Exchange rate adjustment		(5,101	)		(922	)		(8,253	)		(108	)		119			89
Net		178,812			197,349			207,186			(19,231	)		(3,653	)		(16,437	)
AG Interactive		84,254			78,652			85,856			(161,503	)		6,755			5,616
Exchange rate adjustment		(841	)		63			(408	)		(188	)		(300	)		158
Net		83,413			78,715			85,448			(161,691	)		6,455			5,774
Non-reportable segments		62,338			59,356			73,441			(7,627	)		3,779			11,852
Unallocated		—			63			184			(76,590	)		(84,183	)		(105,036	)
Exchange rate adjustment		—			—			—			(2,076	)		(394	)		(1,710	)
Net		—			63			184			(78,666	)		(84,577	)		(106,746	)
	$	1,690,738		$	1,776,451		$	1,794,290		$	(274,933	)	$	123,968		$	65,411

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	Depreciation and Amortization									Capital Expenditures
	2009			2008			2007			2009			2008			2007
North American Social Expression Products	$	28,207		$	29,313		$	31,841		$	43,537		$	43,390		$	27,713
Exchange rate adjustment		(11	)		(1	)		(11	)		(25	)		(2	)		(2	)
Net		28,196			29,312			31,830			43,512			43,388			27,711
International Social Expression Products		6,336			4,989			5,666			1,449			914			5,746
Exchange rate adjustment		(638	)		57			(365	)		(116	)		20			(359	)
Net		5,698			5,046			5,301			1,333			934			5,387
Retail Operations		5,077			5,650			6,581			4,691			6,486			3,567
Exchange rate adjustment		(156	)		(25	)		(235	)		(133	)		(38	)		(137	)
Net		4,921			5,625			6,346			4,558			6,448			3,430
AG Interactive		9,328			6,496			4,047			3,918			3,326			3,757
Exchange rate adjustment		(365	)		28			(75	)		—			—			—
Net		8,963			6,524			3,972			3,918			3,326			3,757
Non-reportable segments		1,628			1,425			1,375			2,218			2,492			1,428
Unallocated		610			603			588			194			35			3
	$	50,016		$	48,535		$	49,412		$	55,733		$	56,623		$	41,716

	Assets
	2009			2008
North American Social Expression Products	$	930,028		$	914,835
Exchange rate adjustment		(6,769	)		367
Net		923,259			915,202
International Social Expression Products		170,196			260,848
Exchange rate adjustment		(46,715	)		2,396
Net		123,481			263,244
Retail Operations		38,414			55,867
Exchange rate adjustment		(3,486	)		1,088
Net		34,928			56,955
AG Interactive		24,847			193,226
Exchange rate adjustment		(1,239	)		909
Net		23,608			194,135
Non-reportable segments		39,281			45,615
Unallocated and intersegment items		310,461			324,539
Exchange rate adjustment		(21,230	)		4,738
Net		289,231			329,277
	$	1,433,788		$	1,804,428

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Geographical Information

	Total Revenue						Fixed Assets – Net
	2009		2008		2007		2009		2008
United States	$	1,235,828	$	1,286,213	$	1,336,241	$	260,251	$	244,405
United Kingdom		222,918		260,288		228,779		22,632		30,785
Other foreign		231,992		229,950		229,270		14,896		20,815
	$	1,690,738	$	1,776,451	$	1,794,290	$	297,779	$	296,005

Product Information

	Total Revenue
	2009		2008		2007
Everyday greeting cards	$	704,380	$	709,824	$	656,906
Seasonal greeting cards		356,762		379,603		363,793
Gift packaging		240,452		264,040		278,140
Other revenue		44,339		45,667		49,492
All other products		344,805		377,317		445,959
	$	1,690,738	$	1,776,451	$	1,794,290

Termination Benefits and Facility Closings

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 Corporation recorded severance charges of $15,688, $6,288 and $10,347 in 2009, 2008 and 2007, respectively, related to certain headcount reductions and facility closures including manufacturing facilities in the North American Social Expression Products segment in 2008 and a manufacturing facility in the International Social Expression Products segment in 2007. The expense of $15,688 recorded in 2009 included enhanced benefits provided to certain domestic employees that were severed in connection with the headcount reductions announced in the fourth quarter of 2009. These one-time termination benefits were accounted for in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” The following table summarizes the severance charges by segment:

	2009		2008		2007
North American Social Expression Products	$	6,247	$	4,902	$	5,486
International Social Expression Products		4,119		71		3,199
Retail Operations		1,787		74		362
AG Interactive		1,626		22		1,020
Non-reportable		1,108		27		—
Unallocated		801		1,192		280
Total	$	15,688	$	6,288	$	10,347

The remaining balance of the severance accrual was $14,209 and $9,648 at February 28, 2009 and February 29, 2008, respectively.

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NOTE 17—INCOME TAXES

(Loss) income from continuing operations before income taxes:

	2009			2008		2007
United States	$	(136,523	)	$	89,409	$	49,766
Foreign		(138,410	)		34,559		15,645
	$	(274,933	)	$	123,968	$	65,411

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

	2009			2008			2007
Current:
Federal	$	(21,530	)	$	21,849		$	27,703
Foreign		2,918			18,496			8,313
State and local		876			8,075			1,719
		(17,736	)		48,420			37,735
Deferred		(29,438	)		(7,772	)		(12,262	)
	$	(47,174	)	$	40,648		$	25,473

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

	2009			2008			2007
Income tax expense at statutory rate	$	(96,227	)	$	43,389		$	22,894
State and local income taxes, net of federal tax benefit		(1,128	)		3,744			(1,825	)
Canadian income tax audit assessment		—			—			5,133
Tax-exempt interest		(6	)		(548	)		(1,396	)
Nondeductible goodwill		61,445			—			—
Foreign items, net of foreign tax credits		(7,613	)		(6,770	)		(1,609	)
Worthless stock deduction on foreign subsidiary		(9,460	)		—			—
Charitable contribution carryforward expiration		2,434			—			—
Valuation allowance		(2,000	)		(752	)		2,707
Accruals and settlements		486			3,491			2,585
Other		4,895			(1,906	)		(3,016	)
Income tax at effective tax rate	$	(47,174	)	$	40,648		$	25,473

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

Income taxes paid from continuing operations were $19,555 in 2009, $40,205 in 2008 and $30,375 in 2007.

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

	February 28, 2009			February 29, 2008
Deferred tax assets:
Employee benefit and incentive plans	$	63,423		$	44,775
Net operating loss carryforwards		33,725			39,116
Deferred capital loss		8,291			9,071
Reserves not currently deductible		44,001			65,178
Charitable contributions carryforward		2,580			2,434
Foreign tax credit carryforward		33,682			25,101
Goodwill and other intangible assets		60,263			—
Other		5,540			7,751
		251,505			193,426
Valuation allowance		(24,807	)		(26,296	)
Total deferred tax assets		226,698			167,130
Deferred tax liabilities:
Goodwill and other intangible assets		—			4,153
Property, plant and equipment		22,846			17,892
Other		2,896			2,216
Total deferred tax liabilities		25,742			24,261
Net deferred tax assets	$	200,956		$	142,869

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

	February 28, 2009			February 29, 2008
Deferred and refundable income taxes (current)	$	54,929		$	70,923
Deferred and refundable income taxes (noncurrent)		147,857			78,363
Deferred income taxes and noncurrent income taxes payable		(1,830	)		(6,417	)
Net deferred tax assets	$	200,956		$	142,869

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

The Corporation periodically reviews the need for valuation allowances against deferred tax assets and recognizes these deferred tax assets to the extent that realization is more likely than not. Based upon a review of earnings history and trends, forecasted earnings and the relevant expiration of carryforwards, the Corporation believes that the valuation allowances provided are appropriate. At February 28, 2009, the valuation allowance of $24,807 related principally to certain foreign and domestic net operating loss carryforwards and deferred capital losses.

At February 28, 2009, the Corporation had deferred tax assets of approximately $6,869 for foreign net operating loss carryforwards, of which $3,874 has no expiration dates and $2,995 has expiration dates ranging from 2010 through 2018. In addition, the Corporation had deferred tax assets related to domestic net operating loss, state net operating loss, charitable contribution and foreign tax credit (“FTC”) carryforwards of approximately $17,075, $9,781, $2,580 and $33,682, respectively. The federal net operating loss carryforward has expiration dates ranging from 2019 to 2027. The state net operating loss carryforwards have expiration dates ranging from 2010 to 2029. The charitable contribution carryforward has an expiration date of 2014. The FTC carryforwards have expiration dates ranging from 2013 to 2020.

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Deferred taxes have not been provided on approximately $65,856 of undistributed earnings of foreign subsidiaries since substantially all of these earnings are necessary to meet their business requirements. It is not practicable to calculate the deferred taxes associated with these earnings; however, foreign tax credits would be available to reduce federal income taxes in the event of distribution.

Effective March 1, 2007, the Corporation adopted FIN 48, 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 $14,017 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. A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits is as follows:

	2009			2008
Balance at beginning of year	$	27,523		$	24,722
Additions based on tax positions related to the current year		229			1,401
Reductions based on tax positions related to the current year		(408	)		—
Additions for tax positions of prior years		18,744			9,339
Reductions for tax positions of prior years		(6,581	)		(7,939	)
Settlements		(4,747	)		—
Balance at end of year	$	34,760		$	27,523

At February 28, 2009, the Corporation had unrecognized tax benefits of $34,760 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $23,433, compared to unrecognized tax benefits of $27,523 that, if recognized, would have a favorable effect on the Corporation’s income tax expense of $21,003 at February 29, 2008. It is reasonably possible that the Corporation’s unrecognized tax positions as of February 28, 2009 could decrease approximately $10,000 during 2010 due to anticipated settlements and resulting cash payments related to open years after 1999, which are currently under examination.

The Corporation recognizes interest and penalties accrued on unrecognized tax benefits and refundable income taxes as a component of income tax expense. During the year ended February 28, 2009, the Corporation recognized a net credit of $5,341 for interest and penalties on unrecognized tax benefits and refundable income taxes. As of February 28, 2009, the total amount of gross accrued interest and penalties related to unrecognized tax benefits and refundable income taxes netted to a refundable of $1,538. During the year ended February 29, 2008, the Corporation recognized $1,061 of net interest expense and penalties related to unrecognized tax benefits and refundable income taxes. As of February 29, 2008, the total amount of gross accrued interest and penalties included in the Consolidated Statement of Financial Position related to unrecognized tax benefits and refundable income taxes was a payable of $6,516.

The Corporation is subject to examination by the IRS and various U.S. state and local jurisdictions for tax years 1996 to the present. The Corporation is also subject to tax examination in various foreign tax jurisdictions, including Canada, the United Kingdom, Australia, France, Italy, Mexico and New Zealand for tax years 2004 to the present.

NOTE 18—DISCONTINUED OPERATIONS

Discontinued operations include the Corporation’s educational products business, its South African business unit and its nonprescription reading glasses business. Learning Horizons, Maginivision and the South African business units each meet the definition of a “component of an entity” and have been accounted for as discontinued operations under SFAS 144. Accordingly, the Corporation’s consolidated financial statements and related notes have been presented to reflect all three as discontinued operations for all periods presented. Learning Horizons and Magnivision were previously included within the Corporation’s “non-reportable segments” and the South African business unit was included within the former “Social Expression Products” segment.

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The following summarizes the results of discontinued operations for the periods presented:

	2008			2007
Total revenue	$	299		$	14,457
Pre-tax loss from operations		(47	)		(5,553	)
Gain on sale		34			5,784
		(13	)		231
Income tax expense (benefit)		304			(2,209	)
(Loss) income from discontinued operations, net of tax	$	(317	)	$	2,440

In February 2007, the Corporation entered into an agreement to sell its educational products subsidiary, 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 $2,183, which is included in “Cash receipts related to discontinued operations” in the Consolidated Statement of Cash Flows. The pre-tax loss from operations in 2007 included $108 of fixed asset impairment charges in accordance with SFAS 144 and $640 of goodwill impairment charges in accordance with SFAS 142, representing all the goodwill of the reporting unit. Additional charges of $3,472 were recorded for other inventory and receivable reductions. The charges and impairments were primarily recorded as a result of the intention to sell Learning Horizons, and therefore, present the operation at its estimated fair value.

In February 2006, the Corporation committed to a plan to sell its South African business unit. It had been determined that the business unit was no longer a strategic fit for the Corporation. The sale closed in the second quarter of 2007 during which the Corporation recorded a pre-tax gain of $703. Immediately prior to, but in conjunction with, the sale of the South African business, approximately 50% of the shares owned by the Corporation were sold back to the South African business for approximately $4,000. The remaining outstanding shares owned by the Corporation were sold to a third party for proceeds of approximately $5,500. The total of approximately $9,500 is included in “Cash receipts related to discontinued operations” in the Consolidated Statement of Cash Flows.

On July 30, 2004, the Corporation announced it had signed a letter of agreement to sell its Magnivision nonprescription reading glasses business. The sale reflected the Corporation’s strategy to focus its resources on business units closely related to its core social expression business. The sale of Magnivision closed in the third quarter of 2005. In 2007, the Corporation recorded a pre-tax gain of $5,100 based on the final closing balance sheet adjustments for the sale of Magnivision. Proceeds of $2,100 and $3,000 are included in “Cash receipts related to discontinued operations” in the Consolidated Statement of Cash Flows in 2008 and 2007, respectively.

NOTE 19—SUBSEQUENT EVENTS

Sale of Strawberry Shortcake and Care Bears Properties

On July 20, 2008, the Corporation entered into a binding letter agreement to sell the Strawberry Shortcake and Care Bears properties and the Corporation’s rights in the Sushi Pack property to Cookie Jar Entertainment Inc. (“Cookie Jar”) for $195,000 in cash. The transaction was expected to close by September 30, 2008; however, with the disruptions in the financial markets, the transaction did not close. As a result, under the terms of the agreement, the Corporation had the right to solicit offers from third parties to purchase the properties until March 31, 2009. During the period of time between September 30, 2008 and March 31, 2009, Cookie Jar could match any third party offer up to a pre-established threshold.

On March 24, 2009, the Corporation entered into a binding term sheet with MoonScoop S.A.S. (“MoonScoop”) providing for the sale to MoonScoop of the Strawberry Shortcake and Care Bears properties owned by the Corporation, as well as all rights in those properties owned by Cookie Jar and its affiliates. Under the terms of the

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agreement, MoonScoop agrees to pay approximately $95,000 for the properties and assume all contracts and related obligations related to the properties. The Corporation and Cookie Jar will be entitled to receive approximately $76,000 and $19,000, respectively, as consideration for their rights to the properties.

The term sheet provides that MoonScoop’s acquisition of the Strawberry Shortcake and Care Bears properties is subject to Cookie Jar’s right, pursuant to the binding letter agreement discussed above, to match the terms of the transaction set forth in the term sheet and acquire the properties. On March 30, 2009, Cookie Jar delivered notice to the Corporation that it had elected to acquire the Strawberry Shortcake and Care Bears properties pursuant to its matching right for aggregate consideration payable to the Corporation of approximately $76,000. Cookie Jar must close on the acquisition no later than April 30, 2009, unless the Corporation and Cookie Jar mutually agree on an extension. If Cookie Jar fails to close, the acquisition of the properties by MoonScoop is expected to close in June 2009. If Cookie Jar acquires the properties, MoonScoop will be entitled to a break-up fee of approximately $2,850. Closure of either the Cookie Jar or MoonScoop transaction is subject to the acquiring party obtaining financing as well as certain limited other terms and conditions.

In connection with the acquisition of the Strawberry Shortcake and Care Bears properties, both MoonScoop and Cookie Jar have agreed to grant the Corporation ten-year exclusive licensing agreements for the properties for certain categories of social expression products that are developed, manufactured and sold in connection with the Corporation’s core social expressions business.

Sale of American Greetings Retail Stores and Purchase of Papyrus Brand

On April 17, 2009, the Corporation entered into an agreement with Schurman Fine Papers and one of its subsidiaries (collectively, “Schurman”) to sell all rights, title and interest in the assets of the Corporation’s Retail Operations segment for approximately $6,000 in cash and Schurman’s assumption of certain liabilities related to the Retail Operations segment. The Corporation sold all 341 of its card and gift retail store assets to Schurman, which will operate stores under the American Greetings, Carlton Cards and Papyrus brands. Under the terms of the transaction, the Corporation anticipates remaining subject to certain of its store leases on a contingent basis by subleasing the stores to Schurman.

Pursuant to the terms of the agreement, the Corporation also purchased from Schurman its Papyrus trademark and its wholesale business division, which supplies Papyrus brand greeting cards primarily to leading specialty, mass, grocery and drug store channels, in exchange for approximately $18,000 in cash and the Corporation’s assumption of certain liabilities related to Schurman’s wholesale business. In addition, the Corporation agreed to provide Schurman limited credit support through the provision of a limited guarantee (“Liquidity Guarantee”) and a limited bridge guarantee (“Bridge Guarantee”) in favor of the lenders under Schurman’s senior revolving credit facility (the “Senior Credit Facility”). The Corporation also purchased shares representing approximately 15% of the issued and outstanding equity interests in Schurman for approximately $2,000.

Pursuant to the terms of the Liquidity Guarantee, the Corporation has guaranteed the repayment of up to $12,000 of Schurman’s borrowings under the Senior Credit Facility to help ensure that Schurman has sufficient borrowing availability under this facility. The Liquidity Guarantee is required to be backed by a letter of credit for the term of the Liquidity Guarantee, which is currently anticipated to end in January 2014. Pursuant to the terms of the Bridge Guarantee, the Corporation has guaranteed the repayment of up to $12,000 of Schurman’s borrowings under the Senior Credit Facility until Schurman is able to include the inventory and other assets of the Retail Operations segment in its borrowing base. The Bridge Guarantee is required to be backed by a letter of credit and generally will be reduced as Schurman is able to include such inventory and other assets in its borrowing base. The Corporation’s obligations under the Liquidity Guarantee and the Bridge Guarantee generally will not be triggered unless Schurman’s lenders under its Senior Credit Facility have substantially completed the liquidation of the collateral under Schurman’s Senior Credit Facility, or 91 days after the liquidation is started, whichever is earlier, and will be limited to the deficiency, if any, between the amount owed and the amount collected in connection with the liquidation.

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The Corporation and Schurman also entered into a loan agreement, dated as of the closing date, pursuant to which the Corporation is providing Schurman with up to $10,000 of subordinated financing (“Subordinated Credit Facility”) for an initial term of nineteen months, subject to up to three automatic one-year renewal periods (or partial-year, in the case of the last renewal), unless either party provides the appropriate written notice prior to the expiration of the applicable term. Schurman can only borrow under the facility if it does not have other sources of financing available, and borrowings under the Subordinated Credit Facility may only be used for specified purposes. In addition, availability under the Subordinated Credit Facility will be limited as long as the Bridge Guarantee is in place to the difference between $10,000 and the current maximum amount of the Bridge Guarantee. Borrowings under the Subordinated Credit Facility will be subordinate to borrowings under the Senior Credit Facility. The Subordinated Credit Facility provides affirmative and negative covenants and events of default customary for such financings.

In connection with the agreement, the Corporation and Schurman have also entered into several other ancillary agreements, including an inventory supply agreement, a marketing services agreement, a transition services agreement and a trademark licensing agreement.

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QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

Thousands of dollars except per share amounts

The following is a summary of the unaudited quarterly results of operations for the years ended February 28, 2009 and February 29, 2008:

	Quarter Ended
	May 30		Aug 29		Nov 28			Feb 28
Fiscal 2009
Net sales	$	425,463	$	372,942	$	444,527		$	403,467
Total revenue		428,300		385,835		454,084			422,519
Gross profit		232,121		202,830		221,313			180,179
Net income (loss)		13,333		2,297		(193,311	)		(50,078	)
Earnings (loss) per share	$	0.27	$	0.05	$	(4.25	)	$	(1.13	)
Earnings (loss) per share—assuming dilution		0.27		0.05		(4.25	)		(1.13	)
Dividends declared per share		0.12		0.12		0.12			0.24

The third quarter included pre-tax goodwill impairment charges of $82,110 for the UK Reporting Unit and $150,208 for the AG Interactive segment, a pre-tax other intangible assets impairment charge of $10,571, pre-tax severance expense of $7,160 and a pre-tax fixed asset impairment charge of $3,937 in the Retail Operations segment. Partially offsetting these charges was a reduction in variable compensation expense of $11,050.

The fourth quarter included a pre-tax fixed asset impairment charge of $1,528 in the Retail Operations segment and a pre-tax severance charge of $7,506. The fourth quarter also included goodwill impairment charges of $47,850 for NAGCD and $82 for the Corporation’s fixtures business. The estimated goodwill impairment charge recorded in the third quarter for the AG Interactive segment was reduced $655 in the fourth quarter. The fourth quarter also included a loss of $2,740 on the investment in first lien debt securities of RPG.

Quarterly earnings per share amounts do not add to the full year primarily due to share repurchases during the periods and the anti-dilutive impact of potentially dilutive securities in periods in which the Corporation recorded a net loss.

	Quarter Ended
	May 25			Aug 24		Nov 23			Feb 29
Fiscal 2008
Net sales	$	418,016		$	365,878	$	475,015		$	471,875
Total revenue		419,967			377,485		485,766			493,233
Gross profit		256,888			202,826		251,686			238,613
Income from continuing operations		30,263			8,375		29,120			15,562
Loss from discontinued operations, net of tax		(213	)		—		(104	)		—
Net income		30,050			8,375		29,016			15,562
Earnings per share:
Continuing operations	$	0.54		$	0.15	$	0.53		$	0.31
Net income		0.54			0.15		0.53			0.31
Earnings per share—assuming dilution:
Continuing operations		0.54			0.15		0.52			0.31
Net income		0.54			0.15		0.52			0.31
Dividends declared per share		0.10			0.10		0.10			0.10

The fourth quarter included a pre-tax fixed asset impairment charge of $1,436 in the Retail Operations segment and a pre-tax severance charge of $4,331. The fourth quarter also included a pre-tax charge of $13,500 associated with the Canadian dual-priced products, primarily temporary promotional activities.

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

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

There were no disagreements with our independent registered public accounting firm on accounting or financial disclosure matters within the three year period ended February 28, 2009, or in any period subsequent to such date.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

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

American Greetings carries out a variety of on-going procedures, under the supervision and with the participation of the Corporation’s management, including its Chief Executive Officer and Chief Financial Officer, to evaluate the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures. Based on the foregoing, the Chief Executive Officer and Chief Financial Officer of American Greetings concluded that the Corporation’s disclosure controls and procedures were effective as of February 28, 2009.

Changes in Internal Controls.

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

Report of Management on Internal Control Over Financial Reporting.

The management of American Greetings is responsible for establishing and maintaining adequate internal control over financial reporting for the Corporation. American Greetings’ internal control system was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. American Greetings’ management assessed the effectiveness of the Corporation’s internal control over financial reporting as of February 28, 2009. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

As permitted by the Securities and Exchange Commission, management’s February 28, 2009 assessment on internal control over financial reporting did not include an assessment of and conclusion on the effectiveness of internal control over financial reporting of Recycled Paper Greetings, which we acquired on February 24, 2009 and which is included in the Corporation’s consolidated financial statements as of February 28, 2009. The assets of Recycled Paper Greetings constituted approximately 7% of the Corporation’s total assets as of February 28, 2009. In addition, because we acquired Recycled Paper Greetings on February 24, 2009, its results of operations were not material to our consolidated financial results.

Based on management’s assessment under COSO’s “Internal Control-Integrated Framework,” management believes that as of February 28, 2009, American Greetings’ internal control over financial reporting is effective.

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

87

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Shareholders

American Greetings Corporation

We have audited American Greetings Corporation’s internal control over financial reporting as of February 28, 2009, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). American Greetings Corporation’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s internal control over financial reporting based on our audit.

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

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

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

As indicated in the accompanying Report of Management on Internal Control Over Financial Reporting, the Corporation completed the acquisition of Recycled Paper Greetings, Inc. on February 24, 2009. As permitted by the Securities and Exchange Commission, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Recycled Paper Greetings, Inc., which is included in the 2009 consolidated financial statements of American Greetings Corporation and constituted approximately seven percent of total assets at February 28, 2009. In addition, as Recycled Paper Greetings, Inc. was acquired on February 24, 2009, its results of operations were not material to the consolidated results. Our audit of internal control over financial reporting of American Greetings Corporation also did not include an evaluation of the internal control over financial reporting of Recycled Paper Greetings, Inc.

In our opinion, American Greetings Corporation maintained, in all material respects, effective internal control over financial reporting as of February 28, 2009, based on the COSO criteria.

88

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statement of financial position of American Greetings Corporation as of February 28, 2009 and February 29, 2008, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended February 28, 2009 of American Greetings Corporation and our report dated April 28, 2009 expressed an unqualified audit opinion thereon.

/s/ Ernst & Young LLP

Cleveland, Ohio

April 28, 2009

89

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors and Executive Officers of the Registrant

We hereby incorporate by reference the information called for by this Item 10 from the information contained in (i) our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 26, 2009 under the headings “Proposal One—Election of Directors,” “Security Ownership—Section 16(a) Beneficial Ownership Reporting Compliance” and “Corporate Governance” and (ii) for information regarding executive officers, Part I of this Annual Report on Form 10-K.

Item 11. Executive Compensation

We hereby incorporate by reference the information called for by this Item 11 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 26, 2009 under the headings “Compensation Discussion and Analysis,” “Information Concerning Executive Officers,” “Director Compensation” and “Compensation Committee Report.”

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

We hereby incorporate by reference the information called for by this Item 12 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 26, 2009 under the heading “Security Ownership.”

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information about our common shares that may be issued under our equity compensation plans as of February 28, 2009.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders(1)	7,019,431	$	21.84	1,983,099
Equity compensation plans not approved by security holders	—		N/A	—
Total	7,019,431	$	21.84	1,983,099

(1) Column (a) includes 5,692,819 Class A common shares and 1,017,520 Class B common shares that may be issued in connection with the exercise of outstanding stock options. The amount in column (a) also includes 59,864 Class B common shares that may be issued upon the settlement of outstanding performance shares that have been awarded under the Corporation’s equity compensation plans, assuming the maximum performance or other criteria have been achieved. The amount in column (a) also includes 3,754 Class A

90

common shares and 245,474 Class B common shares representing share equivalents that have been credited to the account of certain officers or directors who have deferred receipt of shares earned and vested under our 1997 Equity and Performance Incentive Plan or our 2007 Omnibus Incentive Compensation Plan or that were to be paid in lieu of cash directors fees under the 1995 Director Stock Plan, which will be issued under these plans upon the expiration of the deferral period.

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

Column (c) includes 1,700,736 Class A common shares and 282,363 Class B common shares, which shares may generally be issued under the Corporation’s equity compensation plans upon the exercise of stock options or stock appreciation rights and/or awards of deferred shares, performance shares or restricted stock.

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

We hereby incorporate by reference the information called for by this Item 13 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 26, 2009 under the headings “Certain Relationships and Related Transactions” and “Corporate Governance.”

Item 14. Principal Accounting Fees and Services

We hereby incorporate by reference the information called for by this Item 14 from the information contained in our Proxy Statement in connection with our Annual Meeting of Shareholders to be held on June 26, 2009 under the heading “Independent Registered Public Accounting Firm.”

PART IV

Item 15. Exhibits, Financial Statement Schedules

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

1. Financial Statements

Report of Independent Registered Public Accounting Firm	45
Consolidated Statement of Operations—Years ended February 28, 2009, February 29, 2008 and February  28, 2007	46
Consolidated Statement of Financial Position—February 28, 2009 and February 29, 2008	47
Consolidated Statement of Cash Flows—Years ended February 28, 2009, February 29, 2008 and  February 28, 2007	48
Consolidated Statement of Shareholders’ Equity—Years ended February 28, 2009, February 29, 2008  and February 28, 2007	49
Notes to Consolidated Financial Statements—Years ended February 28, 2009, February 29, 2008 and  February 28, 2007	50
Quarterly Results of Operations (Unaudited)	86

2. Financial Statement Schedules

Schedule II—Valuation and Qualifying Accounts S-1

3. Exhibits required by Item 601 of Regulation S-K

91

Item	Description
2	Plan of acquisition, reorganization, arrangement, liquidation or succession.
	(i)	Binding Letter Agreement, dated July 20, 2008, between Cookie Jar Entertainment Inc. and the Corporation.
		This Exhibit is filed herewith.
	(ii)	Agreement, dated December 30, 2008, among the Corporation, Lakeshore Trading Company, RPG Holdings, Inc., and Recycled Paper Greetings, Inc.
		This Exhibit is filed herewith.
	(iii)	Recycled Paper Greetings’ Debtors’ Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, dated January 2, 2009.
		This Exhibit has been previously filed as an Exhibit to Amendment No. 1 to Form T-3, with respect to the Corporation’s 7 3/8% Senior Notes due 2016, filed by the Corporation with the Securities and Exchange Commission on January 7, 2009, and is incorporated herein by reference.
3	Articles of Incorporation and By-laws.
	(i)	Amended and Restated Articles of Incorporation of the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated July 1, 2008, and is incorporated herein by reference.
	(ii)	Amended and Restated Code of Regulations of the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated July 1, 2008, and is incorporated herein by reference.
4	Instruments defining the rights of security holders, including indentures.
	(i)	Trust Indenture, dated as of July 27, 1998.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 1999, and is incorporated herein by reference.
	(ii)	First Supplemental Indenture, dated May 25, 2006, to the Indenture dated July 27, 1998, with respect to the Corporation’s 6.10% Senior Notes due April 1, 2028, between the Corporation, as issuer, and JP Morgan Trust Company, National Association, as Trustee.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated May 26, 2006, and is incorporated herein by reference.
	(iii)	Form of Trust Indenture, dated May 24, 2006, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 7 3/8% Senior Notes due June 1, 2016.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated May 22, 2006, and is incorporated herein by reference.
	(iv)	Form of Global Note for the 7 3/8% Senior Notes due June 1, 2016.
		This Exhibit is included in the Form of Trust Indenture between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, which has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated May 22, 2006, and is incorporated herein by reference.

92

Item	Description
	(v)	First Supplemental Indenture, dated February 24, 2009, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 7 3/8% Senior Notes due June 1, 2016.
		This Exhibit is filed herewith.
	(vi)	Trust Indenture, dated February 24, 2009, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 7 3/8% Notes due June 1, 2016.
		This Exhibit is filed herewith.
	(vii)	Form of Global Note for the 7 3/8% Notes due 2016.
		This Exhibit is included in the Trust Indenture, dated February 24, 2009, between the Corporation, as Issuer, and The Bank of Nova Scotia Trust Company of New York, as Trustee, with respect to the Corporation’s 7 3/8% Notes due June 1, 2016, which is filed as Exhibit (vi) herewith.
10	Material Contracts
	(i)	Credit Agreement, dated April 4, 2006, among the Corporation, various lending institutions party thereto, National City Bank, as the global agent, joint lead arranger, joint bookrunner, Swing Line Lender, LC Issuer and collateral agent, UBS Securities LLC, as joint lead arranger, joint bookrunner and syndication agent, and KeyBank National Association, JPMorgan Chase Bank, N.A., and LaSalle Bank National Association, as documentation agents (the “Credit Agreement”).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated April 4, 2006, and is incorporated herein by reference.
	(ii)	Amendment No. 1 to Credit Agreement, dated as of July 3, 2006.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	(iii)	Amendment No. 2 to Credit Agreement, dated as of February 26, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	(iv)	Amendment No. 3 to Credit Agreement, dated as of April 16, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	(v)	Amendment No. 4 to Credit Agreement, dated as of March 28, 2008.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	(vi)	Amendment No. 5 to Credit Agreement, dated as of September 23, 2008.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 29, 2008, and is incorporated herein by reference.

93

Item	Description
	(vii)	Pledge and Security Agreement, dated as of April 4, 2006, by and among, the Corporation, each of the domestic subsidiaries of American Greetings Corporation identified therein and National City Bank, as collateral agent.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated April 4, 2006, and is incorporated herein by reference.
	(viii)	Amended and Restated Receivables Purchase Agreement, dated as of October 24, 2006, among AGC Funding Corporation, the Corporation, as Servicer, members of the various Purchaser Groups from time to time party thereto and PNC Bank, National Association, as Administrator and as issuer of Letters of Credit (the “Receivables Purchase Agreement”).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated October 26, 2006, and is incorporated herein by reference.
	(ix)	First Amendment to Receivables Purchase Agreement, dated January 12, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	(x)	Omnibus Amendment to Receivables Sale Agreement, Sale and Contribution Agreement and Receivables Purchase Agreement, dated as of February 28, 2007, among AGC Funding Corporation, the Corporation, Gibson Greetings, Inc., Plus Mark, Inc., members of the various Purchaser Groups from time to time party thereto, and PNC Bank, National Association, as Administrator and as issuer of Letters of Credit.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	(xi)	Third Amendment to Receivables Purchase Agreement, dated March 28, 2008.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	*(xii)	Form of Employment Contract with Specified Officers.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*(xiii)	Amendment to Form of Employment Contract with Specified Officers.
		This Exhibit is filed herewith.
	*(xiv)	American Greetings Severance Benefits Plan (Officers)—Summary Plan Description.
		This Exhibit is filed herewith.
	*(xv)	Amendment to American Greetings Severance Benefits Plan (Officers).
		This Exhibit is filed herewith.
	*(xvi)	American Greetings Corporation Executive Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.

94

Item	Description
	*(xvii)	Amendment One to American Greetings Corporation Executive Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*(xviii)	Amendment Two to American Greetings Corporation Executive Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*(xix)	Amendment Number Three to American Greetings Corporation Executive Deferred Compensation Plan—American Greetings Corporation Executive Third Party Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*(xx)	Amendment Number Four to American Greetings Corporation Executive Deferred Compensation Plan and Amendment Number One to the American Greetings Corporation Executive Third Party Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated December 14, 2005, and is incorporated herein by reference.
	*(xxi)	Forms of Agreement for Deferred Compensation Benefits (Officer form).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	*(xxii)	Form of Agreement under American Greetings Corporation Executive Deferred Compensation Plan Executive Third Party Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*(xxiii)	American Greetings Corporation Outside Directors’ Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated December 14, 2005, and is incorporated herein by reference.
	*(xxiv)	Form of Deferral Agreement under the American Greetings Corporation Outside Directors’ Deferred Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	*(xxv)	1992 Stock Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 33-58582), dated February 22, 1993, and is incorporated herein by reference.

95

Item	Description
	*(xxvi)	1995 Director Stock Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 33-61037), dated July 14, 1995, and is incorporated herein by reference.
	*(xxvii)	1996 Employee Stock Option Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 333-08123), dated July 15, 1996, and is incorporated herein by reference.
	*(xxviii)	1997 Equity and Performance Incentive Plan (as amended on June 25, 2004).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Registration Statement on Form S-8 (Registration No. 333-121982), dated January 12, 2005, and is incorporated herein by reference.
	*(xxix)	2007 Omnibus Incentive Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated June 22, 2007, and is incorporated herein by reference.
	*(xxx)	Description of Compensation Payable to Non-Employee Directors.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated July 14, 2006, and is incorporated herein by reference.
	*(xxxi)	American Greetings Corporation Second Amended and Restated Supplemental Executive Retirement Plan (Effective October 31, 2007).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended November 23, 2007, and is incorporated herein by reference.
	*(xxxii)	Employment Agreement, dated as of March 1, 2001, between William R. Mason and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated December 14, 2005, and is incorporated herein by reference.
	*(xxxiii)	Severance Agreement, dated as of July 15, 2008, between William R. Mason and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 29, 2008, and is incorporated herein by reference.
	*(xxxiv)	Employment Agreement, dated as of October 17, 2002, between Michael Goulder and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2003, and is incorporated herein by reference.
	*(xxxv)	Amendment to Employment Agreement, effective as of January 1, 2009, between Michael Goulder and the Corporation.
		This Exhibit is filed herewith.

96

Item	Description
	*(xxxvi)	Employment Agreement, dated as of May 6, 2002, between Erwin Weiss and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2003, and is incorporated herein by reference.
	*(xxxvii)	Amendment to Employment Agreement, effective as of January 1, 2009, between Erwin Weiss and the Corporation.
		This Exhibit is filed herewith.
	*(xxxviii)	Employment Agreement, dated as of September 9, 2002, between Steven Willensky and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2003, and is incorporated herein by reference.
	*(xxxix)	Retirement Agreement, dated as of March 31, 2008, between Steven Willensky and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	*(xl)	Employment Agreement, dated as of August 22, 2003, between Catherine M. Kilbane and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2004, and is incorporated herein by reference.
	*(xli)	Employment Agreement, dated as of March 4, 2004, between Thomas H. Johnston and the Corporation, as amended on March 11, 2004.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*(xlii)	Employment Agreement, dated as of June 1, 1991, between Jeffrey M. Weiss and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2004, and is incorporated herein by reference.
	*(xliii)	Employment Agreement, dated as of May 1, 1997, between Zev Weiss and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2004, and is incorporated herein by reference.
	*(xliv)	Executive Service Contract, dated May 8, 1998, between the Corporation and John S.N. Charlton.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2006, and is incorporated herein by reference.

97

Item	Description
	*(xlv)	Employment Agreement, dated April 14, 2003, between Stephen J. Smith and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*(xlvi)	Employment Agreement, dated February 4, 2000, between Josef A. Mandelbaum and AG Interactive, Inc. (fka AmericanGreetings.com, Inc.).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*(xlvii)	Amendment to Employment Agreement, effective as of January 1, 2009, between Josef Mandelbaum and AG Interactive, Inc.
		This Exhibit is filed herewith.
	*(xlviii)	Executive Employment Agreement, dated as of June 12, 2008, between John W. Beeder and the Corporation.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 30, 2008, and is incorporated herein by reference.
	*(xlix)	Amendment to Employment Agreement, effective January 1, 2009, between John W. Beeder and the Corporation.
		This Exhibit is filed herewith.
	*(l)	Key Management Annual Incentive Plan (fiscal year 2009 Description).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 30, 2008, and is incorporated herein by reference.
	*(li)	Form of Employee Stock Option Agreement under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*(lii)	Form of Director Stock Option Agreement under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004).
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*(liii)	Form of Employee Stock Option Agreement (Revised) under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004) for grants on or after May 1, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.
	*(liv)	Form of Director Stock Option Agreement (Revised) under 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004) for grants on or after May 1, 2007.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2007, and is incorporated herein by reference.

98

Item	Description
	*(lv)	Form of Employee Stock Option Agreement under 2007 Omnibus Incentive Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended May 25, 2007, and is incorporated herein by reference.
	*(lvi)	Form of Director Stock Option Agreement under 2007 Omnibus Incentive Compensation Plan.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 24, 2007, and is incorporated herein by reference.
	*(lvii)	Form of Restricted Shares Grant Agreement.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 28, 2005, and is incorporated herein by reference.
	*(lviii)	Performance Share Grant Agreement, dated August 2, 2005, between the Corporation and Zev Weiss.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*(lix)	Performance Share Grant Agreement, dated August 2, 2005, between the Corporation and Jeffrey Weiss.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Quarterly Report on Form 10-Q for the quarter ended August 31, 2005, and is incorporated herein by reference.
	*(lx)	Performance Share Grant Agreement, dated April 22, 2008, between the Corporation and Zev Weiss.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	*(lxi)	Performance Share Grant Agreement, dated April 22, 2008, between the Corporation and Jeffrey Weiss.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Annual Report on Form 10-K for the fiscal year ended February 29, 2008, and is incorporated herein by reference.
	*(lxii)	Independent Contractor Agreement, dated December 14, 2005, between American Greetings and Joseph S. Hardin, Jr.
		This Exhibit has been previously filed as an Exhibit to the Corporation’s Current Report on Form 8-K, dated December 14, 2005, and is incorporated herein by reference.
	*(lxiii)	Split-Dollar Agreement, dated May 7, 2001, between American Greetings and the Morry Weiss and Judith S. Weiss 2001 Irrevocable Insurance Trust, dated March 1, 2001, Gary Weiss, Jeffrey Weiss, Zev Weiss and Elie Weiss, co-trustees.
		This Exhibit is filed herewith.

99

Item	Description
	*(lxiv)	Agreement to Terminate Split-Dollar Agreement, dated February 16, 2009, between American Greetings and the Morry Weiss and Judith S. Weiss 2001 Irrevocable Insurance Trust dated March 1, 2001, Gary Weiss, Jeffrey Weiss, Zev Weiss and Elie Weiss, co-trustees.
		This Exhibit is filed herewith.
	*(lxv)	Agreement, dated February 16, 2009, between American Greetings Corporation and Morry Weiss in connection with Termination of the Split-Dollar Agreement.
		This Exhibit is filed herewith.
	*(lxvi)	Form of Performance Share Award Agreement.
		This Exhibit is filed herewith
21		Subsidiaries of the Corporation.
		This Exhibit is filed herewith.
23		Consent of Independent Registered Public Accounting Firm.
		This Exhibit is filed herewith.
(31)a		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
		This Exhibit is filed herewith.
(31)b		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.
		This Exhibit is filed herewith.
32		Certification Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002.
		This Exhibit is filed herewith.

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

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

(c) Financial Statement Schedules

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

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

Schedule II—Valuation and Qualifying Accounts

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

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SIGNATURES

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

	AMERICAN GREETINGS CORPORATION
		(Registrant)
Date: April 29, 2009	By:	/S/    CATHERINE M. KILBANE
		Catherine M. Kilbane,
		Senior Vice President, General Counsel and Secretary

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

SIGNATURE	TITLE		DATE
/S/    MORRY WEISS         Morry Weiss	Chairman of the Board; Director	) ) )
/S/    ZEV WEISS         Zev Weiss	Chief Executive Officer (principal executive officer); Director	) ) )
/S/    JEFFREY WEISS         Jeffrey Weiss	President and Chief Operating Officer; Director	) ) )
/S/    SCOTT S. COWEN         Scott S. Cowen	Director	) ) )
/S/    JEFFREY D. DUNN         Jeffrey D. Dunn	Director	) ) )
/S/    JOSEPH S. HARDIN, JR.         Joseph S. Hardin, Jr.	Director	) ) )	April 29, 2009
/S/    WILLIAM E. MACDONALD, III         William E. MacDonald, III	Director	) ) )
/S/    MICHAEL J. MERRIMAN, JR.         Michael J. Merriman, Jr.	Director	) ) )
/S/    CHARLES A. RATNER         Charles A. Ratner	Director	) ) )
/S/    JERRY SUE THORNTON         Jerry Sue Thornton	Director	) ) )
/S/    STEPHEN J. SMITH         Stephen J. Smith	Senior Vice President and Chief Financial Officer (principal financial officer)	) )
/S/    JOSEPH B. CIPOLLONE         Joseph B. Cipollone	Vice President and Corporate Controller; Chief Accounting Officer (principal accounting officer)	) ) )

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SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

AMERICAN GREETINGS CORPORATION AND SUBSIDIARIES

(In thousands of dollars)

COLUMN A	COLUMN B			COLUMN C						COLUMN D			COLUMN E
				ADDITIONS
Description	Balance at Beginning of Period			(1) Charged to Costs and Expenses			(2) Charged (Credited) to Other Accounts-Describe			Deductions- Describe			Balance at End of Period
Year ended February 28, 2009:
Deduction from asset account:
Allowance for doubtful accounts	$	3,778		$	4,871		$	(18	)(B)(F)	$	3,620	(C)	$	5,011
Allowance for seasonal sales returns	$	57,126	(A)	$	223,095		$	(3,068	)(B)(F)	$	230,032	(D)	$	47,121
Allowance for other assets	$	29,700		$	4,547		$	—		$	3,350	(E)	$	30,897
Year ended February 29, 2008:
Deduction from asset account:
Allowance for doubtful accounts	$	6,350		$	(205	)	$	271	(B)	$	2,638	(C)	$	3,778
Allowance for seasonal sales returns	$	57,584		$	220,596	(A)	$	1,539	(B)	$	222,593	(D)	$	57,126	(A)
Allowance for other assets	$	28,000		$	5,300		$	—		$	3,600	(E)	$	29,700
Year ended February 28, 2007:
Deduction from asset account:
Allowance for doubtful accounts	$	8,075		$	2,905		$	137	(B)	$	4,767	(C)	$	6,350
Allowance for seasonal sales returns	$	67,159		$	227,496		$	1,064	(B)	$	238,135	(D)	$	57,584
Allowance for other assets	$	30,600		$	—		$	—		$	2,600	(E)	$	28,000

Note A: Amount changed from prior year due to a reclassification entry.

Note B: Translation adjustment on foreign subsidiary balances.

Note C: Accounts charged off, less recoveries.

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

Note E: Deferred contract costs charged to the allowance account and reduction to the account.

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

S -1

EX-2.(I)

Exhibit 2(i)

July 20, 2008

Confidential

Cookie Jar Entertainment Inc.

266 King Street West, 2nd floor

Toronto, Ontario CANADA

M5V 1H8

Attention:	Greg Gilhooly
	General Counsel

Re: Binding Letter Agreement between Cookie Jar Entertainment Inc. (“COOKIE JAR”) and American Greetings Corporation (“AG”)

Dear Michael:

COOKIE JAR and AG are entering into this binding letter agreement setting forth the terms of the acquisition by COOKIE JAR of the Strawberry Shortcake (“SSC”) and Care Bears (“CB”) properties (collectively, the “Properties”) owned by AG and its affiliates.

Purchase Price:	The purchase price for the Properties is US $195,000,000.00 (the “Purchase Price”) and is not subject to further adjustments based on COOKIE JAR’s diligence review or, except as set forth below, other factors. COOKIE JAR shall assume all ordinary course contracts and all related, ordinary course obligations attendant to the Properties arising after the Closing Date, including the CBS agreement.
Settlement:	The transaction is an all-cash deal. The Properties shall be debt free and free of all liens, claims and security interests at the closing, except for the interests owned by Hasbro and held by existing licensees in the normal course.
Form of Purchase:	Asset purchase.
Closing Date:	The closing date (the “Closing Date”) for the transaction is no later than September 30, 2008. All revenues earned and due, but not paid, up to the Closing Date shall be collected by COOKIE JAR on AG’s behalf.
Conditions:	This obligations of COOKIE JAR and AG under this binding letter agreement are conditioned solely upon satisfaction or waiver of the following conditions: (i) regulatory approval relating to all applicable competition filings and expiration or early termination of any applicable waiting periods; (ii) receipt of all material necessary third party consents and approvals, (iii) no material adverse change occurring with respect to the

Properties; for purposes of this condition, a “material adverse change” shall mean an occurrence that will result in a 20% or greater decline in the net income attributable the normal course licensing of the Properties as against AG’s business plan for the second quarter of fiscal year 2009 with respect to the Properties as made available by AG to COOKIE JAR; provided, however, material adverse change shall not include any information specifically disclosed as potentially constituting an “adverse change” to the Properties in the electronic data room relating to the Properties to which COOKIE JAR had access and which was actually accessed; provided, further, within five business days of discovering any occurrence that COOKIE JAR believes constitutes a material adverse change, COOKIE JAR shall inform AG; provided, further, developments that are not specifically related to the Properties, such as developments in the business and financial markets generally and which do not disproportionately impact AG or the Properties shall not constitute a material adverse change; (iv) if, prior to the Closing, a new contract is entered into with Hasbro relating to licensing of the Properties for toys, hobbies, crafts and games, such contract not being on materially worse terms to AG than those set forth in the contract draft dated April 18, 2008; (v) receipt of financing (debt and equity) on terms and conditions that are commercially reasonable in the circumstances and consistent in all material respects with similar transactions, and (vi) evidence in the form of a certificate from a duly authorized AG officer confirming that that the Properties have been operated in the ordinary course and in a manner consistent with all legal and contractual requirements save an except with respect to AG’s recent actions in connection with its dispute with DIC. COOKIE JAR will use its commercially reasonable efforts to obtain the financing and to satisfy all conditions on a timely basis to obtaining the financing. COOKIE JAR is not aware of any reason that it will not be able to obtain financing for the transactions contemplated hereby. AG and COOKIE JAR shall cooperate with each other and AG shall permit access to any and all books, records and personnel of AG and its affiliates (to the extent relating to the Properties) as may be reasonably necessary to permit the purchase and sale of the Properties to proceed, and shall cooperate with COOKIE JAR’s lenders and other financing sources as may be necessary at no cost to AG to permit the transaction to be financed in a manner and under a structure that is reasonably acceptable to the parties.

Exclusivity:

AG shall deal exclusively with COOKIE JAR in respect of the Properties (save and except with respect to licensing in the

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	normal course) from the date hereof up to and including September 30. During this period, neither AG nor any of its affiliates, representatives, advisors, agents, etc. shall, directly or indirectly, shop, market, solicit, pursue, or deal with any third party in any way with respect to any transaction involving a transfer, sale, partnership, hypothecation, merger, or other transaction involving the ownership or control of the Properties or of any entity that owns or controls the Properties, or which would otherwise be inconsistent with, or delay the consummation of, the transactions contemplated by this letter.
AG Reserved Licensing:	AG and COOKIE JAR hereby agree to a ten year exclusive inbound licensing agreements for the Properties from COOKIE JAR to AG on certain categories reserved for AG. These exclusive license agreements shall provide for a 10% royalty to COOKIE JAR, with right of first refusal and “last match” provisions in favor of AG (which right shall run with the Properties in the event of any sale of the properties by COOKIE JAR or its affiliates) upon any license relating to the Products that is similar to the product categories set forth below. The license will convey to AG exclusive rights to use the Properties in the following product categories (the “Products”):
	—     Greeting cards (everyday and seasonal, boxed and unboxed, gift card holders and cellos, with or without music/audio)
	—     Party goods including, but not limited to, paper and electronic invitations and thank you notes, accessories, favors and decorations
	—     Everyday plastic tableware and serving-ware (whether placed in the party goods or housewares aisles of retail locations)
	—     Gift packaging (everyday, seasonal and seasonal promotional) including gift wrap, gift bags, gift boxes, tissue, gift enclosures, package decorations
	—     Calendars
	—     Stickers
	—     Christmas ornaments in plastic or resin, with or without electronic and or musical/audio features
	—     Juvenile boxed Valentine cards
	—     Stationery
	—     Electronic greetings in any form or media
	—     Digital photo IP product use
	—     Retailer-specific non-card products

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	Upon the expiration or termination of any inbound licensing agreement with COOKIE JAR or DIC for other COOKIE JAR and. DIC brands, including any current licensing agreements with Hallmark, COOKIE JAR shall offer AG a five year exclusive inbound licensing agreement for the Products on the same economic terms as the expired or terminated license.
	AG and COOKIE JAR will also consider partnership opportunities for other AG properties, and will discuss other potential arrangements as part of this transaction.
Transition Services:	AG and COOKIE JAR, at COOKIE JAR’s request, will develop a mutually agreed upon transition services agreement as part of the transaction to avoid disruption in the creative and logistical support required to operate the Properties on a “cost plus” basis to COOKIE JAR.
Employees and Severance:	AG will make such AG employees currently associated with the Properties available to COOKIE JAR for employment as mutually agreed by AG and COOKIE JAR. COOKIE JAR will then have the discretion to either hire or absorb the severance costs of those employees, such severance costs not to exceed US $1,000,000.00 less the amount of severance avoided through COOKIE JAR’s employment or retention of any such individual on a dollar for dollar basis.
Non-Solicitation:	AG and COOKIE JAR agree that for a period of one year from the Closing Date, COOKIE JAR will not solicit for employment any AG employee, and AG will not solicit for employment any COOKIE JAR employee, except as noted in the preceding provision above.
Hasbro:	With respect to AG’s ongoing negotiations with Hasbro, AG will provide all historical Hasbro contracts and the most recent proposed draft contract. AG will provide COOKIE JAR with all documents, including projections and marketing plans, which have been provided by Hasbro. COOKIE JAR will not discuss the potential acquisition of the Properties with Hasbro or any retailers as part of its due diligence review, but will liaise closely with AG and its advisors on the precise nature of the Hasbro contract as reasonably necessary.
JLG Buyout:	AG shall be responsible for terminating the contract between Those Characters From Cleveland Inc. and the Joster Loria Group Inc. dated August I, 2001, as amended to date, AG shall be responsible far the costs and liabilities associated with such

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	termination.
“Sushi Pack”:	Included in the purchase and sale of the Properties, COOKIE JAR shall also acquire all of AG’s rights in and to the “Sushi Pack” property. AG shall retain, for a period of ten years from the Closing Date, an ongoing fifty-fifty revenue split on any licensing or entertainment revenue resulting from Sushi Pack on customary terms and conditions.
Shop Period:	If for any reason the purchase and sale of the Properties described above does not occur on or prior to September 30, 2008 (other than due to AG’s material uncured breach of this letter or the parties’ definitive agreements), AG shall have the right to solicit offers from third parties in which AG does not have any ownership interest for a period of six (6) months commencing September 30, 2008 and ending March 31, 2009 (the “Shop Period”) for 100% of the Properties, including all rights held by COOKIE JAR and all of its affiliates (including DIC), with any such potential offer to be conditional only upon not more than those conditions set out above with respect to this transaction, and evidenced by a binding term sheet fully executed and delivered during that period (a “Binding Term Sheet”). AG shall include COOKIE JAR in that process as a potential purchaser, and shall keep COOKIE JAR reasonably informed of the status, terms and conditions of any other offers received during such period. During the Shop Period AG shall be relieved of its confidentiality obligations under the agreement between Those Characters From Cleveland, Inc. and DIC Entertainment Corporation dated as of October 1, 2001, as amended to date, to the extent necessary to provide prospective purchasers with information related to the Properties, provided, that the recipient of any such information executes a non-disclosure agreement customary for transactions of this type.
Tag Along/Drag Along:	If the transactions contemplated hereby do not close by September 30, 2008 (other than due to AG’s material uncured breach of this letter or the parties’ definitive agreements), and if, during the Shop Period, AG receives a Binding Term Sheet from a non-affiliate and subsequently closes such transaction within 75 days following receipt of the Binding Term Sheet, AG shall have the option to cause COOKIE JAR to consummate the transactions set forth the Binding Term Sheet during such 75-day period (a “drag along”), which right shall run with the Properties in the event of any sale of the Properties by COOKIE JAR of its affiliates). COOKIE JAR shall also have the right and option (in its discretion) to tag along to participate in any such transactions; provided, that if

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	COOKIE JAR fails or refuses to “tag along” (regardless of the reason therefor), then such sale transaction shall not be consummated unless AG elects to drag along COOKIE JAR. In the case of any drag along or tag along, COOKIE JAR shall provide reasonable cooperation and shall participate without any representation, warranty or other agreement, covenant or restriction (other than limited, customary representations regarding power, authority and enforceability and a representation as to the rights being transferred), and without any requirement to participate in or be subject to any restrictive covenants, escrows, indemnities or holdbacks. If AG or COOKIE JAR exercises any of such drag along or tag along rights, COOKIE JAR shall receive 20% (excluding unaffiliated third party fees in respect of the transaction) of the gross proceeds or other consideration paid or payable (directly or indirectly) on account of the Properties. All payments to COOKIE JAR and its affiliates must be in cash and paid in full at the closing, with such consideration valued as the parties may mutually agree, and in no event less than the amount at or basis on which any non-cash consideration is valued by buyer in the Binding Term Sheet.
Matching Right:	During the Shop Period, COOKIE JAR shall have a right to match (with COOKIE JAR to give notice to AG within five (5) business days) any third party offer for the Properties only if such offer is for an amount which would yield AG (with the entitlement to 80% of such amount), not more than US $214,500,000.00 (being US $195,000,000.00 plus ten percent). COOKIE JAR shall have the option to exercise such matching right in cash, or in such mix of cash and non-cash consideration as indicated in the third party offer.
Press Release:	The parties shall agree to a mutually acceptable joint press release with respect to this matter. Until such release is issued, no public announcement of this transaction shall be made. Notwithstanding the foregoing, AG shall have the right to make any disclosure or filing that AG is advised by counsel are required by NYSE listing standards or under federal securities laws. COOKIE JAR acknowledges that AG will file this letter agreement with the United States Securities and Exchange Commission following execution hereof, but that in connection with such filing, AG will request confidential treatment of this letter and shall take all steps legally permissible or appropriate to cause this letter and its contents, terms and conditions (and all exhibits hereto) to be accorded confidential treatment under SEC rules and regulations and under the Freedom of

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	Information Act to the maximum extent possible.
Long Form Agreement:	The parties may agree the terms of a long-form agreement and other related documentation customary for transactions of this kind containing (among other things) customary representations, warranties and indemnities. The parties will use commercially reasonable efforts to negotiate and execute such long-form agreement and other documentation by August 29, 2008. However, until such time as this letter agreement is replaced by any such further documentation, this letter agreement remains binding on the parties.
Expenses:	AG shall bear all of its own expenses with respect to the transactions contemplated hereby. COOKIE JAR shall bear all of its expenses, including all applicable governmental filing fees with respect to the transactions contemplated hereby.
Governing Law; Enforcement:	This letter agreement shall be governed by the laws of the State of Ohio. Any dispute or controversy arising under or related in any way to this letter agreement shall be adjudicated by a court of competent jurisdiction located in the State of New York. Each party recognizes that the rights contained herein and the benefits arising therefrom are unique and damages cannot provide an adequate remedy in the event of a breach of this letter agreement. Therefore, if (i) all of the conditions to the obligations of AG and COOKIE JAR set forth above are either satisfied or waived, and either party fails or refuses to consummate the sale and purchase of the Properties contemplated hereby, the other party shall be entitled to specific performance of the sale and purchase of the Properties or (ii) either party fails to perform any of its other material obligations hereunder, the other party shall be entitled to specific performance thereof.
	*  *  *  *  *

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If the terms set forth in this letter are acceptable, please sign below. Please feel free to call me to discuss any aspect of this letter or the proposed transaction.

Sincerely,

/s/Josef Mandelbaum

Josef Mandelbaum, Senior Vice President

American Greetings Corporation

Agreed:

/s/Greg Gilhooly

Greg Gilhooly

General Counsel

COOKIE JAR ENTERTAINMENT, INC.

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EX-2.(II)

Exhibit 2(ii)

AGREEMENT

AGREEMENT, dated as of December 30, 2008 (this “Agreement”), by and among American Greetings Corporation, an Ohio corporation (“Parent”), Lakeshore Trading Company, a Delaware limited liability company and an indirect wholly owned Subsidiary of Parent (“Purchaser”), RPG Holdings, Inc., a Delaware corporation (the “Company”), and Recycled Paper Greetings, Inc., an Illinois corporation and a wholly owned Subsidiary of the Company (“Opco” and, together with the Company and its or Opco’s other Subsidiaries, collectively, the “Debtors”).

W I T N E S S E T H:

WHEREAS, Debtors are engaged in the business of manufacturing, marketing and distributing greeting cards (the “Business”);

WHEREAS, the Company and Opco have determined that this Agreement and the transactions contemplated hereby are in their respective best interests;

WHEREAS, the Debtors propose to file voluntary petitions for relief under Chapter 11 of the United States Code, 11 U.S.C. §§ 101, et seq. (the “Bankruptcy Code”), on the date identified on the signature page to this Agreement as the “Petition Date” (the “Petition Date”) in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court” and such proceedings, collectively, the “Bankruptcy Case”) and, simultaneously therewith, file (i) motions seeking Bankruptcy Court approval of this Agreement, the payment of the Break-Up Fee (as defined below) pursuant to this Agreement and the DIP Loan Agreement (as defined below) and (ii) a plan of reorganization in the form attached hereto as Exhibit A (as it may be amended from time to time consistent with this Agreement, the “Plan”) and a disclosure statement (the “Disclosure Statement”) in substantially the form attached hereto as Exhibit B; and

WHEREAS, in connection with the foregoing, holders of Opco’s First-Lien Debt (as defined below) (the “First-Lien Debtholders”) and Second-Lien Debt (as defined below) (the “Second-Lien Debtholders”) have delivered the Undertaking attached hereto as Exhibit C.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, and intending to be bound hereby, the parties hereby agree as follows:

I.    CERTAIN DEFINITIONS

1.1     Certain Definitions.

In addition to the terms defined elsewhere herein and in the Plan (which terms are used herein as so defined unless otherwise defined herein), for purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1 when used herein with initial capital letters:

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by Contract or otherwise.

“AG Indenture” means the Indenture, dated May 24, 2006, between Parent and The Bank of Nova Scotia Trust Company of New York, as indenture trustee, pursuant to which Parent issued its Existing 7.375% Senior Notes.

“AG Notes” means $22.0 million aggregate principal amount of Parent’s 7.375% Senior Notes due 2016 to be issued by Parent as “Additional Notes” under the AG Indenture.

“Authorized Creditor Representative” means the Creditor Representatives specified in Schedule 1.1(a).

“Break-Up Fee Order” means an order of the Bankruptcy Court approving the Break-Up Fee in substantially the form attached as Exhibit D.

“Business Day” means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.

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

“Company Capital Stock” means, as of any date, the issued and outstanding capital stock of the Company.

“Company Material Adverse Effect” means (i) an event, circumstance or development which has had or is reasonably likely to have or result in a material adverse effect on or a material adverse change in or to the business, assets, properties, results of operations or financial condition of the Debtors (taken as a whole) or (ii) a material adverse effect on or a material adverse change in or to the ability of the Company to consummate the transactions contemplated by this Agreement or the Plan or perform its obligations under this Agreement or the Plan, other than, as applied to clause

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(i) only, an effect or change resulting from any one or more of the following to the extent that, as applied to the events in (A), (B), (C) and (F) below, the effects thereof on Debtors (taken as a whole) are not disproportionate to the effects thereof on other United States greeting card companies: (A) the effect of any change in the United States economy or securities or financial markets in general; (B) the effect of any change that generally affects the greeting card industry; (C) the effect of any change arising in connection with any force majeure (such as hurricanes, floods or earthquakes), hostilities, acts of war, sabotage or terrorism or military actions or any escalation or material worsening of any such hostilities, acts or war, sabotage or terrorism or military actions existing or underway as of the date hereof; (D) the effect of any actions taken by Purchaser or its Affiliates with respect to the transactions contemplated hereby, by the Plan or with respect to the Debtors, including their employees; (E) any matter which is listed on the Disclosure Schedule; (F) the effect of any changes in applicable Laws or accounting rules; (G) any effect resulting from the public announcement of this Agreement, compliance with terms of this Agreement or the consummation of the transactions contemplated by this Agreement; or (H) any loss of customers, artists or account representatives resulting from the filing of the Bankruptcy Case or the entering into this Agreement or otherwise.

“Competing Transaction” means (i) a transaction pursuant to which any Person (or group of Persons), directly or indirectly, acquires or would acquire a majority of the Company Capital Stock, whether from the Company or otherwise and whether of a type contemplated by prior proposals from shareholders or creditors of the Company or otherwise, (ii) a merger, reorganization, share exchange, consolidation or other business combination involving the Company in which the holders of the Company Capital Stock immediately prior to such transaction would cease to own a majority of such Company Capital Stock (or capital stock of the acquiring or resulting stock in such transaction), (iii) a transaction pursuant to which any Person (or group of Persons) acquires or would acquire control of assets (including for this purpose the outstanding equity securities of Subsidiaries and securities of the entity surviving any merger or business combination involving any Subsidiary) of the Company or any Subsidiary representing more than 50% of the fair market value of all the assets, net revenues or net income of the Company and its Subsidiaries, taken as a whole, immediately prior to such transaction, (iv) any other consolidation, business combination, recapitalization, capital restructuring, plan of reorganization or similar transaction involving the Company or any Subsidiary, as a result of which the holders of shares of Company Capital Stock immediately prior to such transaction do not, in the aggregate, continue to hold a majority of the outstanding shares of common stock and the outstanding voting power of the surviving or resulting entity in such transaction immediately after the consummation thereof, (v) any transaction involving an acquisition of the Company, a capital contribution to the Company or a restructuring of the indebtedness of the Company proposed by or on behalf of the Company’s shareholders or debtholders, or (vi) any other transaction that is conditioned or predicated on the transactions contemplated by this Agreement not being

3

completed in accordance with the terms of this Agreement or is intended or could reasonably be expected to result in such not being so completed.

“Competing Transaction Plan” has the meaning given to such term in the Undertaking.

“Confirmation Order” has the meaning given to such term in the Plan.

“Contract” means any written or legally binding oral contract, indenture, note, bond, lease or other agreement or undertaking.

“Contributed First-Lien Debt” means $67.1 million aggregate principal amount of First-Lien Debt owned by Purchaser.

“Copyrights” means any copyrights, whether in published or unpublished works and whether in digital or print media, and any United States or foreign registrations thereof and applications therefor, including all renewals and extensions thereof and rights corresponding thereto throughout the world.

“Creditor Representatives” means Representatives of the Professionals.

“DIP Amount” means the total amount of unpaid Liabilities of the Debtors under and incurred in accordance with the DIP Loan Agreement and this Agreement as of the Closing (as defined below).

“DIP Budget” means the budget attached to the DIP Loan Agreement as Exhibit M thereto.

“DIP Loan Agreement” means the Senior Secured Super-Priority Debtor-in-Possession Credit Agreement, dated as of the date hereof, among the Company, Opco and certain other Persons.

“DIP Loan Order” means an Order of the Bankruptcy Court satisfying the requirements of Section 4.02 of the DIP Loan Agreement.

“Disclosure Schedule” means the disclosure schedule delivered by the Company to Parent and Purchaser simultaneously herewith, organized by the particular Sections of this Agreement to which the disclosure schedule relates.

“Effective Time” means the time on the Effective Date (as defined in the Plan) at which the Closing is effective.

“Employees” means all individuals, as of the date hereof, whether or not actively at work as of the date hereof, who are employed by Debtors in connection with the Business, together with individuals who are hired by Debtors after the date hereof and prior to the Closing.

4

“Environmental Law” means any Law (as defined below) currently in effect relating to the protection of human health and safety or the environment or natural resources, including the Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C. §§ 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. App. §§ 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C. §§ 6901, et seq.), the Clean Water Act (33 U.S.C. §§ 1251, et seq.), the Clean Air Act (42 U.S.C. §§ 7401, et seq.), the Toxic Substances Control Act (15 U.S.C. §§ 2601, et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. §§ 136, et seq.), and the Occupational Safety and Health Act (29 U.S.C. §§ 651, et seq.) and the regulations promulgated pursuant thereto.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“Existing 7.375% Senior Notes” means Parent’s $200.0 million aggregate principal amount of 7.375% Senior Notes due 2016 existing under the AG Indenture.

“Excess Amount” means $1.0 million.

“Excluded Liabilities” means (a) Professional Fees other than Reimbursable Professional Fees and the Debtors’ Professional Fees (to the extent any Debtor has any Liability therefor) and (b) Liabilities to any direct or indirect shareholder of the Company, whether arising by Contract, by Law or otherwise (such Liabilities, “Shareholder Liabilities”).

“Final Order” has the meaning given to such term in the Plan.

“First-Lien Adjustment” means the reduction in the First-Lien Debtholder Cash Amount and First-Lien Debtholder Note Amount (but not below zero in the aggregate) by 25% of the amount, if any, by which the Shareholder Liabilities determined as herein provided exceed $1.5 million, provided, however, that if the Excluded Liabilities are less than $1.5 million, no First-Lien Adjustment shall be made. The First-Lien Adjustment shall first be applied to reduce the First-Lien Debtholder Note Amount (first by reduction of New AG Notes and then by reduction of AG Notes, in each case as otherwise distributable to First-Lien Debtholders pursuant to the Plan) (but in any case not below zero) and then be applied to reduce the First-Lien Debtholder Cash Amount (but not below zero). For purposes of the First-Lien Adjustment, New AG Notes and AG Notes shall be valued at their face amount.

“First-Lien Credit Agreement” means the First Lien Credit Agreement, dated as of December 5, 2005, as amended (the “First-Lien Credit Agreement”), among the Company, Opco, Credit Suisse, Cayman Islands Branch, as administrative and collateral agent (“Credit Suisse”), and certain other Persons.

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“First-Lien Debt” means the Indebtedness (as defined below) outstanding under the First-Lien Credit Agreement, including therein all pre- and post-petition interest and all unpaid fees and expenses and Liabilities under or in respect of the LIBOR Swap (as defined below).

“First-Lien Debtholder Cash Amount” means $12.4 million, provided, however, that the First-Lien Debtholder Cash Amount shall be reduced as herein provided for the First-Lien Adjustment, if any.

“First-Lien Debtholder Note Amount” means $41.55 million aggregate principal amount of Parent Notes (consisting of $22.0 million aggregate principal amount of AG Notes and $19.55 million aggregate principal amount of New AG Notes), provided, however, that the First-Lien Debtholder Note Amount shall be reduced as herein provided for the First-Lien Adjustment, if any.

“GAAP” means generally accepted accounting principles in the United States as of the date hereof.

“Governmental Body” means any government or governmental or regulatory body thereof, or political subdivision thereof, whether foreign, federal, state or local, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private).

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Indebtedness” of any Person means, without duplication, (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for borrowed money and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable and other accrued current liabilities arising in the Ordinary Course of Business); (iii) all obligations of such Person under leases required to be capitalized in accordance with GAAP; (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction; (v) all obligations of the type referred to in clauses (i) through (iv) of any Persons for the payment of which such Person is responsible or liable, directly or indirectly, as obligor, guarantor, surety or otherwise, including guarantees of such obligations; (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person); and (vii) all other liabilities or obligations required by GAAP to be reflected as indebtedness on a consolidated balance sheet of such person as of the relevant date prepared in accordance with GAAP.

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“Intellectual Property” means the following used or held for use by a Debtor in connection with the Business: (i) all Copyrights; (ii) all Patents; (iii) all trade secrets; (iv) all Trademarks; and (v) all rights to sue or otherwise claim for past, present or future infringement or unauthorized use or disclosure or breach of any of the assets, properties or rights described above.

“IRS” means the Internal Revenue Service.

“Key Artist Contracts” means Contracts with artists or other Persons from which the Debtors (taken as a whole) derived more than $500,000 of gross revenues from the sale of Products incorporating their designs or content during the 12-month period ended November 30, 2008.

“Knowledge of the Company” means the actual knowledge of those officers of the Company identified on Schedule 1.1(c).

“Knowledge of Parent” means the actual knowledge of those officers of Parent identified on Schedule 1.1(d).

“Law” means any federal, state, local or foreign law, statute, code, ordinance, rule or regulation or common law requirement.

“Legal Proceeding” means any judicial, administrative or arbitral actions, suits, proceedings (public or private) or claims or any proceedings by or before a Governmental Body.

“Liability” means any debt, liability or obligation (whether direct or indirect, known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), and including all costs and expenses relating thereto.

“LIBOR Swap” means the Master Agreement and related Schedule, each dated February 6, 2006, between Opco and LaSalle Bank National Association.

“Licensed Intellectual Property” means all Intellectual Property licensed (as licensee or licensor) by a Debtor.

“Lien” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement or encumbrance or any other right of a third party.

“Material Pleading” means any pleading or other filing in the Bankruptcy Case by any Debtor relating to the Plan or Disclosure Statement, the DIP Loan Agreement, the Break-Up Fee, confirmation of the Plan, the payment of Professional Fees or any other matter that could reasonably be expected to

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adversely affect Parent or Purchaser or their respective rights or obligations hereunder or any Liability of any Debtor as of the Closing other than the payment of accounts payable in the Ordinary Course of Business.

“Measurement Date” means the close of business on the last Business Day five Business Days before the Closing Date.

“Measurement Period Transaction” means any payment of, or incurrence of any Liability in respect of, Professional Fees or Excluded Liabilities by any of the Debtors during the period from the Measurement Date to the Closing.

“Multiple Employer Plan” means a single employer plan, as defined in Section 4001(a)(15) of ERISA, which (i) is maintained for employees of a Debtor and at least one Person other than a Debtor or (ii) was so maintained and in respect of which a Debtor could have liability under Section 4064 or 4069 of ERISA in the event such plan has been or were to be terminated.

“New Indenture” means the Indenture, in substantially the form attached as Exhibit E, to be entered into as of the Closing Date by Parent and the trustee specified therein.

“New AG Notes” means AG’s 7.375% Notes due 2016 to be issued pursuant to and having the terms set forth in the New Indenture.

“Order” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body.

“Ordinary Course of Business” means the ordinary and usual course of normal day-to-day operations of the Business through the date hereof consistent with past practice.

“Owned Intellectual Property” means all Intellectual Property owned by a Debtor.

“Parent Notes” means (i) $22.0 million aggregate principal amount of AG Notes and (ii) $32.7 aggregate principal amount of New AG Notes, provided, however, that interest on all Parent Notes will accrue from and after the Closing Date.

“Patents” means any United States or foreign patents, together with, any extensions, reexaminations and reissues of such patents, patents of addition, patent applications, divisions, continuations, continuations-in-part and any subsequent filings in any country or jurisdiction claiming priority therefrom.

“Permits” means any approvals, authorizations, consents, licenses, permits or certificates of a Governmental Body.

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“Permitted Exceptions” means (i) all defects, exceptions, restrictions, easements, rights of way and encumbrances disclosed in policies of title insurance which have been made available to Purchaser; (ii) statutory liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings provided an adequate reserve is established therefor; (iii) mechanics’, carriers’, workers’, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business; (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body provided that such regulations have not been violated; (v) title of a lessor under a capital or operating lease; (vi) Liens imposed under the First-Lien Credit Agreement, the Second-Lien Credit Agreement or the DIP Loan Agreement; (vii) liens securing debt as disclosed in the Debtors’ Financial Statements (as defined below), and (viii) Liens on real or personal property that do not significantly adversely affect the value or use of the property to which they relate.

“Person” means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

“Products” means any and all products developed, manufactured, marketed or sold by Debtors.

“Professional Fees” means the reasonable amounts paid or payable to Professionals (as defined below) for services from the Petition Date to and including the Closing Date (as defined below).

“Professionals” mean the firms listed on Schedule 1.1(e) and any other financial advisory, restructuring, law, accounting or other advisory firm or Person retained by any Debtor, the First-Lien Debtholders or the Second-Lien Debtholders (other than AG) in connection with the Bankruptcy Case.

“Purchaser Material Adverse Effect” means a material adverse effect on the ability of Parent or Purchaser to consummate the transactions contemplated by this Agreement or the Plan or perform its respective obligations under this Agreement or the Plan.

“Reimbursable Professional Fees” means Professional Fees paid or payable by the Company to the Professionals up to the amounts specified in Schedule 1.1(f).

“Representative” means a legal, financial or other advisor to or employee or other representative of a Person.

“Required Approval” means that a matter shall have been approved by the Company, Purchaser and the holders of two-thirds of the aggregate principal amount of the First-Lien Debt, as well as the holders of a majority in principal amount of the First-Lien Debt held by First-Lien Debtholders other than

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the Purchaser and its Affiliates, and the holders of two-thirds of the aggregate principal amount of the Second-Lien Debt.

“Second-Lien Adjustment” means the reduction in the Second-Lien Debtholder Note Amount (but not below zero) of 100% of the amount, if any, by which the Shareholder Liabilities determined as herein provided exceed $1.0 million but are less than or equal to $1.5 million, and 75% of the amount, if any, by which the Shareholder Liabilities determined as herein provided exceed $1.5 million, provided, however, that if the Excluded Liabilities are less than $1.0 million, no Second-Lien Adjustment shall be made. For purposes of the Second-Lien Adjustment, the New AG Notes shall be valued at their face amount.

“Second-Lien Credit Agreement” means the Second-Lien Credit Agreement, dated as of December 5, 2005, as amended (the “Second-Lien Credit Agreement”), among the Company, Opco, Wells Fargo Bank, N.A., as a successor administrative and collateral agent, and certain other Persons.

“Second-Lien Debt” means the Indebtedness outstanding under the Second-Lien Credit Agreement, including therein all pre- and post-petition interest and all unpaid fees and expenses.

“Second-Lien Debtholder Note Amount” means $13.15 million aggregate principal amount of Parent Notes (consisting of New AG Notes), provided, however, that the Second-Lien Debtholder Note Amount shall be reduced as herein provided for the Second-Lien Adjustment, if any.

“September Balance Sheet” means the unaudited condensed consolidated balance sheet of the Company and its Subsidiaries as of September 26, 2008 (the “Balance Sheet Date”) included as part of the Financial Statements attached hereto as Schedule 4.4(a).

“Software” is as defined in the definition of “Technology”.

“Subsidiary” of a Person means another Person whose financial position and results of operations are required to be consolidated with the first Person in financial statements prepared in accordance with GAAP.

“Tax Authority” means any government, or agency, instrumentality or employee thereof, charged with the administration of any law or regulation relating to Taxes.

“Taxes” means (i) all federal, state, local or foreign taxes, charges or other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any Tax Authority in connection with any item described in clause (i).

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“Tax Return” means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes (including any attachments thereto or amendments thereof).

“Technology” means the following owned, used or licensed (as licensee or licensor) by a Debtor in connection with the Business: (i) all computer software programs (in source code and object code form) and collections of data, whether embodied in firmware, software or otherwise, as well as pertinent documentation, designs, files, records and data (“Software”); and (ii) all know-how, formulae, specifications, technical information, data, processes, technology, plans, drawings, research and development, proprietary information, and all documentation related to any of the foregoing, in each instance that is maintained as confidential, except in each instance for any such item that is generally available to the public as of the date hereof.

“Trademarks” means any unregistered trademarks and service marks in the United States or foreign jurisdictions or multinational trademark authorities; any trademarks or service marks registered in the United States or foreign jurisdictions or multinational trademark authorities and any applications therefor; any trade names, brand names, product identifiers, certification marks, logos, trade dress, and Internet domain names, and uniform resource locators associated therewith, and any registration thereof or application therefor in the United States or foreign jurisdictions, including any extension, modification or renewal of any such registration or application, and all goodwill associated with all of the foregoing throughout the world.

“Treasury Regulations” means the Income Tax Regulations promulgated under the Code.

“Undertaking” means the Undertaking of First-Lien Debtholders and Second-Lien Debtholders in the form attached as Exhibit B.

1.2     Terms Defined Elsewhere in this Agreement.    For purposes of this Agreement, the following terms have meanings set forth in the sections indicated:

Term	Section
Affected Creditor Approval	2.3(b)
Agreement	Recitals
Antitrust Division	7.3(a)
Antitrust Laws	7.3(b)
Bankruptcy Case	Recitals
Bankruptcy Code	Recitals
Bankruptcy Court	Recitals
Break-Up Fee	6.3
Business	Recitals
Closing	3.1

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Term	Section
Closing Date	3.1
Company	Recitals
Debtor Securities	4.5
Debtors	Recitals
Disputed Amount	2.3(b)
Employee Benefit Plans	4.14(a)
Estimated Closing Liabilities	2.3(a)
Exchange Act	5.6
Final Determination Date Finally Determined	2.3(f) 2.3(b)
Financial Statements	4.4(a)
First-Lien Debtholders	Recitals
FTC Hold-Back Amount HSR Authority	7.3(a) 2.3(c) 7.3(d)
Leased Property	4.7
Material Contract	4.11
Opco Outside Date	Recitals 3.4(a)
Owned Intellectual Property	4.10(a)
Parent	Recitals
Parent Filed SEC Reports	5.6
Petition Date	Recitals
Plan	Recitals
Purchase Price	2.2
Purchaser	Recitals
Qualified Plans	4.14(c)
RPGI	6.3
Registered Intellectual Property	4.10(a)
SEC	5.6
Second-Lien Debtholders	Recitals
Second Request	7.3(b)
Stock Purchase	2.1
Termination Date	3.4(a)
Third Party TIA	6.2 7.3(e)
Title IV Plans	4.14(a)
Trading Value	6.2

1.3    Other Definitional and Interpretive Matters.    (a)    Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

Calculation of Time Period.    When calculating the period of time before which, within which or following which any act is to be done or step taken

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pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day.

Dollars.    Any reference in this Agreement to $ shall mean U.S. dollars.

Exhibits/Schedules.    All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.

Gender and Number.    Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

Headings.    The division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.

Herein.    The words such as “herein,” “hereinafter,” “hereof” and “hereunder” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

Including.    The word “including” or any variation thereof means “including, without limitation” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

(b)        The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

II.    THE TRANSACTIONS

2.1    Stock Purchase.    On the terms and subject to the conditions set forth in this Agreement and the Plan, at the Closing, Purchaser shall, and Parent shall cause Purchaser to, purchase, acquire and accept from the Company, and the Company shall issue, sell, transfer and deliver to Purchaser 1,000 newly issued shares of common stock of the Company, which upon consummation of the Plan pursuant to and in accordance with the Confirmation Order, including the cancellation pursuant to the Plan of all capital stock and rights to purchase or otherwise acquire capital stock of the Company immediately prior to the Effective Time, shall constitute all of the issued and outstanding Company Capital Stock

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(such transaction, the “Stock Purchase”), free and clear of all Liens other than those created by Purchaser.

2.2       Consideration.    (a) On the terms and subject to the conditions herein, the aggregate consideration for the Stock Purchase (the “Purchase Price”) shall be:

(i)        Cash in an amount equal to the sum of:

(A)        the DIP Amount, less the amounts thereof that are due or payable to Purchaser as a lender under the DIP Loan Agreement;

(B)        the amount of unpaid Reimbursable Professional Fees (which amount shall be paid to the Professionals pursuant to the Plan);

(C)        the First-Lien Debtholder Cash Amount to be distributed to First-Lien Debtholders by wire transfer to accounts designated for this purpose by the Persons entitled to such distributions pursuant to the Plan, subject to adjustment for any First-Lien Adjustment;

(D)        an amount equal to the lesser of the Excess Amount and the amount of Excluded Liabilities; and

(E)        subject to Section 2.3, an amount equal to the First-Lien Adjustment and Second-Lien Adjustment, if any, to be paid as hereafter provided to the Persons entitled thereto in respect of any Shareholder Liability.

(ii)      Purchaser’s and its Affiliates’ release of their rights to recovery under the Plan in respect of the Contributed First-Lien Debt pursuant to the delivery of a duly executed instrument of acceptance of the Plan in substantially the form of Exhibit F;

(iii)      Parent Notes in the amount of the First-Lien Debtholder Note Amount to be distributed to the First-Lien Debtholders as provided in the Plan, subject to adjustment for any First-Lien Adjustment; and

(iv)      Parent Notes in the amount of the Second-Lien Debtholder Note Amount, to be distributed to Second-Lien Debtholders as provided in the Plan, subject to adjustment for any Second-Lien Adjustment.

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(b)        As provided in the Plan, from and after the Effective Date, the Debtors shall pay, and following the Closing Parent shall cause the Debtors to pay, all other amounts required to be paid by them pursuant to the Plan.

2.3     Certain Determinations and Adjustments.    (a) Not later than the next Business Day after the Measurement Date, the Company shall furnish to Purchaser and the Authorized Creditor Representatives the Company’s calculation, prepared in good faith, of the amounts as of the Measurement Date of Excluded Liabilities (such amounts, “Estimated Closing Liabilities”).

(b)        If the Company and Purchaser agree that the Estimated Closing Liabilities have been correctly calculated in accordance with this Agreement and such determinations are approved by the Authorized Creditor Representatives of each class of creditors, if any, whose recoveries under the Plan would be affected as a result of the First-Lien Adjustment or the Second-Lien Adjustment (“Affected Creditor Approval”), the amounts thereof shall be (i) fixed for all purposes of this Agreement and the Plan, (ii) rolled forward day to day to the Closing by agreement of the Company and Purchaser to reflect Measurement Period Transactions, and (iii) notwithstanding any other provision hereof, thereafter be deemed to have been Finally Determined for all purposes under this Agreement, and, as applicable, the First-Lien Adjustment and the Second-Lien Adjustment shall be made as provided herein. If such parties are unable so to agree or to obtain such Affected Creditor Approval, the First-Lien Debtholder Note Amount, and, as applicable, the First-Lien Debtholder Cash Amount, and the Second-Lien Debtholder Note Amount shall be adjusted for any First-Lien Adjustment and Second-Lien Adjustment as provided in this Agreement by the total amount in dispute (the “Disputed Amount”), and the matters to which the affected parties cannot so agree or confirm will be submitted by such parties for determination on an expedited basis by the Bankruptcy Court. Until the Disputed Amount is either (i) accepted in writing by Purchaser with Affected Creditor Approval or (ii) determined by the Bankruptcy Court in a Final Order that is not subject to appeal (either (i) or (ii), “Finally Determined”), the Disputed Amount shall be as fixed by Purchaser to reflect its good faith estimate of the maximum amount of Excluded Liabilities that have not been Finally Determined as aforesaid.

(c)        Notwithstanding any other provision hereof, when all or any portion of the Disputed Amount has been Finally Determined, the applicable withheld amount of First-Lien Debtholder Cash Amount and First-Lien Debtholder Note Amount shall be released to the First-Lien Debtholders and the applicable withheld amount of Second-Lien Debtholder Note Amount shall be released to the Second-Lien Debtholders. Pending such release, such amounts (the “Hold-Back Amount”) shall be held by Parent in a segregated account for the benefit of the First-Lien Debtholders and the Second-Lien Debtholders, subject to the terms of this Agreement.

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(d)        The Company will provide to Parent and Purchaser and Authorized Creditor Representatives such reasonable access to financial and other information of the Business as any of them may request to assess the calculations contemplated hereby, all such information to be held subject to the confidentiality agreements or covenants applicable to any such Persons.

(e)        For the avoidance of doubt:

 (i)         If the Excluded Liabilities are Finally Determined to be less than $1.0 million, Purchaser shall pay all amounts set forth in Section 2.2(a) and there shall be no First-Lien Adjustment or Second-Lien Adjustment.

 (ii)        If the Excluded Liabilities are Finally Determined to exceed $1.0 million, but the Shareholder Liabilities are less than $1.0 million, Purchaser shall, or shall cause the Company or Opco to (as set forth in Section 2.2(a)): (A) pay the Shareholder Liabilities and (B) contribute the difference, if any, between the amount of Shareholder Liabilities as Finally Determined and $1.0 million to pay the Professional Fees of the First-Lien Debtholders and the Second-Lien Debtholders in excess of the amounts set forth on Schedule 1.1(f) (which contribution shall be shared equally among professionals for the First-Lien Debtholders on the one hand and the Second-Lien Debtholders, on the other hand, up to the extent of such excess). In such case, as provided in the Undertaking, the First-Lien Debtholders and the Second-Lien Debtholders, respectively, shall be responsible for any fees of their Professionals in excess of the Reimbursable Professional Fees and the amounts set forth in clause (B) of the preceding sentence, and, as provided herein and in the Undertaking, the Debtors shall have no liability in respect of any such excess.

 (iii)        If the Shareholder Liabilities, as Finally Determined, exceed $1.0 million, Purchaser shall pay, or cause the Company or Opco to pay, the Excess Amount as set forth in Section 2.2(a)(i)(D) and the amounts set forth in Section 2.2(a)(i)(E) and the First-Lien Adjustment and Second-Lien Adjustment shall be made as provided herein. In such case, as provided in the Undertaking, the First-Lien Debtholders and Second-Lien Debtholders, respectively, shall be responsible for any fees of their Professionals in excess of the Reimbursable Professional Fees and, as provided in the Undertaking, the First-Lien Adjustment and Second-Lien Adjustment shall be made and the Debtors, Parent and Purchaser shall have no liability in respect of any such excess.

(f)        Parent shall cause Purchaser to satisfy its obligations under Section 2.2 and this Section 2.3.

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III.    CLOSING AND TERMINATION

3.1     Closing Date.     Subject to the satisfaction of the conditions set forth in Article VIII hereof (or the waiver thereof by the party entitled to waive that condition), the closing of the Stock Purchase (the “Closing”) shall take place at the offices of Jones Day located at 222 East 41st Street, New York, New York (or at such other place as the parties may designate in writing) at 10:00 a.m. (New York City time) on the date that is two Business Days following the satisfaction or waiver of the conditions set forth in Article VIII (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless another time or date, or both, are agreed to in writing by the parties hereto. The date on which the Closing shall be held is referred to in this Agreement as the “Closing Date.”

3.2     Deliveries by the Company.     At the Closing, the Company shall deliver to Purchaser:

(a)        the officer’s certificate required to be delivered pursuant to Sections 8.1(a) and 8.1(b);

(b)        a certificate executed by the Company that the Company is not a foreign person within the meaning of Section 1445(f)(3) of the Code;

(c)        a certificate representing the Company Capital Stock being purchased and sold hereunder; and

(d)        such other documents, instruments and certificates as Purchaser may reasonably request, including a certified copy of the Confirmation Order and notice of the effective date of the Plan.

3.3        Deliveries by Purchaser. At the Closing, Purchaser shall, and Parent shall cause Purchaser to, deliver:

(a)        to the Company, the consideration specified in Section 2.2, to be distributed as provided in the Plan, and a written instrument referred to in Section 2.2(a)(ii) in substantially the form of Exhibit D;

(b)        to the Company, on behalf of the Debtors, the officer’s certificate required to be delivered pursuant to Sections 8.2(a) and 8.2(b); and

(c)        to the Company, on behalf of the Debtors, such other documents, instruments and certificates as the Company may reasonably request.

3.4     Termination of Agreement.    This Agreement may be terminated prior to the Closing as follows:

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(a)        by Purchaser or the Company if the Closing shall not have occurred by the close of business on February 28, 2009 or such later date (but not after May 31, 2009) as Purchaser may from time to time designate in its sole discretion (February 28, 2009 or such later date, the “Termination Date”); provided, however, that, (i) if the Closing shall not have occurred due to the failure of the Bankruptcy Court to enter the Confirmation Order or the condition to Closing set forth in Section 8.3(b) remains unsatisfied or not waived and if all other conditions to the respective obligations of the parties to close hereunder that are capable of being fulfilled by the Termination Date shall have been so fulfilled or waived, then neither the Company nor Purchaser may terminate this Agreement pursuant to this Section 3.4(a) prior to May 31, 2009 (the “Outside Date”), (ii) if the Closing shall not have occurred on or before the Termination Date due to a material breach of any representations, warranties, covenants or agreements contained in this Agreement by Purchaser or the Company, then no breaching party may terminate this Agreement pursuant to this Section 3.4(a) prior to the Outside Date unless and until such breach is cured or waived by the non-breaching parties, and (iii) the Outside Date may only be extended by an agreement in writing of the Company and Purchaser and with Required Approval;

(b)        by mutual written consent of the Company and Purchaser;

(c)        by Purchaser, if any condition to the obligations of the Purchaser set forth in Sections 8.1 and 8.3 shall have become incapable of fulfillment other than as a result of a breach by Purchaser of any covenant or agreement contained in this Agreement, and such condition is not waived by Purchaser;

(d)        by the Company, if any condition to the obligations of the Company set forth in Sections 8.2 and 8.3 shall have become incapable of fulfillment other than as a result of a breach by the Company of any covenant or agreement contained in this Agreement, and such condition is not waived by the Company;

(e)        by Purchaser, if there shall be a breach in any material respect by the Company of any representation or warranty, or any covenant or agreement, contained in this Agreement which would result in a failure of a condition set forth in Sections 8.1 or 8.3 and which breach has not been cured by the earlier of (i) 10 Business Days after the giving of written notice by Purchaser to the Company of such breach and (ii) the Termination Date;

(f)         by the Company, if there shall be a breach in any material respect by Purchaser of any representation or warranty, or any covenant or agreement, contained in this Agreement which would result in a failure of a condition set forth in Sections 8.2 or 8.3 and which breach has not been cured by the earlier of (i) 10 Business Days after the giving of written notice by the Company to Purchaser of such breach and (ii) the Termination Date;

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(g)        by the Company or Purchaser if there shall be in effect a final non-appealable Order of a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that, subject to the provisions of Section 7.3, the parties hereto shall promptly appeal any adverse determination which is appealable (and pursue such appeal with reasonable diligence);

(h)        by Purchaser, if the Company or Opco shall enter into a Contract with respect to a Competing Transaction or if the Bankruptcy Court shall enter an order approving a Competing Transaction, subject to Purchaser’s right to payment of the Break-Up Fee in accordance with the provisions of Section 6.3;

(i)        automatically, if the Company or Opco consummates a Competing Transaction, subject to Purchaser’s right to payment of the Break-Up Fee in accordance with the provisions of Section 6.3;

(j)        by Purchaser, if the Break-Up Fee Order or the DIP Loan Order are not entered within 20 calendar days after the Petition Date or such later date as Purchaser may from time to time designate in its sole discretion;

(k)        by Purchaser if (i) the Bankruptcy Case is dismissed or converted into a case under Chapter 7 of the Bankruptcy Code or (ii) a trustee or examiner is appointed in the Bankruptcy Case;

(l)        by Purchaser if any of the Break-Up Fee Order, the DIP Agreement Order, the Plan or the Confirmation Order is amended or modified in a manner (other than in accordance with this Agreement or the Undertaking), or the Bankruptcy Court enters any Order, that in any such case Purchaser determines is adverse to it or Parent; or

(m)        by the Company or Purchaser pursuant to Section 7.3.

The failure of a party to exercise its right to terminate this Agreement under, or the extension of any time period in, any provision of this Section 3.4 at any time will not constitute a waiver of any such right.

3.5     Procedure Upon Termination.    In the event of termination pursuant to Section 3.4 hereof, written notice thereof shall forthwith be given to the other party or parties, and this Agreement shall terminate, and the Stock Purchase hereunder shall be abandoned, without further action by Purchaser or the Company. If this Agreement is terminated as provided herein, each party shall redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same.

3.6     Effect of Termination.    In the event that this Agreement is validly terminated as provided herein, then each of the parties shall be relieved of its

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duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to Parent, Purchaser or the Company; provided, however, that the obligations of the parties set forth in Section 6.3 and the provisions of Article IX hereof shall survive any such termination and shall be enforceable hereunder.

IV.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company hereby represents and warrants to Parent and Purchaser that except as set forth in the Disclosure Schedule:

4.1    Organization and Good Standing.    Except as set forth on Schedule 4.1, the Company and each of its Subsidiaries is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and, subject to the limitations imposed on such Debtors as a result of filing the Bankruptcy Case, has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted.

4.2    Authorization of Agreement.    Subject to entry of the Break-Up Fee Order and the Confirmation Order, the Company has the requisite corporate power and authority to execute and deliver this Agreement and each other agreement, document or instrument contemplated hereby or thereby to which it is a party and to perform its respective obligations hereunder and thereunder. The execution and delivery of this Agreement and each other agreement, document or instrument contemplated hereby or thereby to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of the Company. This Agreement and each other agreement, document or instrument contemplated hereby or thereby to which it is a party has been duly and validly executed and delivered by the Company and (assuming the due authorization, execution and delivery by the other parties hereto, the entry of the Confirmation Order and, with respect to the Company’s obligations under Section 6.3, the entry of the Break-Up Fee Order) this Agreement and each other agreement, document or instrument contemplated hereby or thereby to which it is a party constitutes legal, valid and binding obligations of the Company, enforceable against it in accordance with its respective terms, subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

4.3    Conflicts; Consents.    (a) Except as set forth on Schedule 4.3(a), the execution and delivery by the Company of this Agreement and each other agreement, document or instrument contemplated hereby or thereby to which it is a party, the consummation of the transactions contemplated hereby and thereby, or compliance by the Company with any of the provisions hereof do not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under any

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provision of (i) the certificate of incorporation and by-laws of any Debtor; or (ii) subject to entry of the Confirmation Order and applicable provisions of the Bankruptcy Code, any Contract to which any Debtor is a party which was listed or required to be listed in the Disclosure Schedule pursuant to Sections 4.10 or 4.11, any Order of any Governmental Body or Law applicable to any Debtor or any of their respective properties or assets as of the date hereof.

   (b)        No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Governmental Body is required on the part of a Debtor in connection with the execution and delivery of this Agreement or any other agreement, document or instrument contemplated hereby or thereby to which it is a party, the compliance by the Company with any of the provisions hereof or thereof, the consummation of the transactions contemplated hereby or thereby or the taking by a Debtor of any other action contemplated hereby or thereby, except for (i) compliance with the applicable requirements of the HSR Act, (ii) such other consents, waivers, approvals, Orders, Permits, authorizations, declarations, filings and notifications, the failure of which to obtain or make, would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (iii) the entry of the Confirmation Order, and (iv) the entry of the Break-Up Fee Order.

4.4        Financial Statements; Etc.    (a) Attached as Schedule 4.4(a) are the unaudited consolidated financial statements of the Company as of and for the year ended April 25, 2008 and as of and for the five months ended September 26, 2008 (the “Financial Statements”). The Financial Statements were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments and, in the case of the September 26, 2008 Financial Statements, to the absence of footnotes).

   (b)        There are no Liabilities of any Debtor of a kind required by GAAP to be disclosed on a balance sheet, other than: (i) liabilities provided for in the September Balance Sheet or disclosed in the footnotes to the Financial Statements, (ii) liabilities disclosed on Schedule 4.4(b), and (iii) other undisclosed liabilities that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect.

   (c)        The inventory and accounts receivable reflected in the September Balance Sheet arose out of the conduct of the Business in the Ordinary Course of Business. The reserves related to such inventory and accounts receivable so reflected in the September Balance Sheet were adequate under GAAP.

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4.5        Capitalization.    The authorized and outstanding capital stock of each Debtor is set forth on Schedule 4.5. All outstanding shares of capital stock of each Debtor have been duly authorized and validly issued and are fully paid and non assessable, were issued in compliance with all applicable federal and state securities laws and any preemptive rights or rights of first refusal of any Person, and are not listed on any stock exchange or regulated market. Except as set forth on Schedule 4.5, there are no outstanding (i) shares of capital stock or voting securities of any Debtor, (ii) securities convertible into or exchangeable for shares of capital stock or voting securities of any Debtor, or (iii) options, warrants or other rights (including pre-emptive rights or rights of first offer) or agreements to acquire from a Debtor, or other obligation of a Debtor to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of a Debtor (the items in the preceding clauses (i), (ii) and (iii) being referred to collectively as the “Debtor Securities”). Except as set forth on Schedule 4.5, (x) there are no voting trusts, proxies or any other agreements or understandings with respect to the voting of any Debtor Securities or that affects or relates to the voting or giving of written consents with respect to any Debtor Securities, and (y) there is no agreement or restriction (such as a right of first refusal, right of first offer or proxy) with respect to the sale of any Debtor Securities (whether outstanding or issuable upon conversion or exercise of outstanding securities). There are no outstanding obligations of any Debtor to repurchase, redeem or otherwise acquire any Debtor Securities. Except as set forth in Schedule 4.5 or the October Balance Sheet and except for, the First-Lien Debt and the Second-Lien Debt, the Debtors have no Indebtedness as of the date hereof.

4.6        Events Subsequent to April 25, 2008.    Except as set forth on Schedule 4.6, since April 25, 2008 no Debtor has:

   (a)        conducted the Business or entered into any transaction or Contract (other than this Agreement and the transactions herein contemplated) other than in the Ordinary Course of Business;

   (b)        sold, leased, transferred or assigned any of its assets, tangible or intangible, other than for fair consideration, or abandoned or permitted to lapse any of its material Intellectual Property or granted any license or sublicense of any of its material Intellectual Property;

   (c)        permitted, allowed or suffered any of its assets to be subject to any Lien other than Permitted Exceptions;

   (d)        acquired or made any investment in (by merger, exchange, consolidation, purchase or otherwise) any corporation or partnership or interest in any business organization or entity, or acquired any assets outside of the Ordinary Course of Business or which are material, individually or in the aggregate, to the Business;

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   (e)        canceled or forgiven any Indebtedness or waived any claims or rights of a material nature;

   (f)        adopted or amended any plan or agreement of the sort described in Section 4.14;

   (g)        terminated or modified in any material respect any Material Contract or Permit that is material to the Business, other than scheduled terminations or expirations;

   (h)        committed to make any capital expenditure after the date hereof other than capital expenditures (i) that, to the Knowledge of the Company, are required by Law or any Contract disclosed in the Disclosure Schedule, (ii) that are included in the DIP Budget, or (iii) that, in the good faith judgment of management of the Company, after the date hereof become necessary to respond to any emergency or other unforeseen development and are necessary to continue to conduct the Business in the Ordinary Course of Business;

   (i)        made any loan or advance to, or guarantee for the benefit of, any other Person, other than advances to employees in the Ordinary Course of Business;

   (j)        suffered or experienced any damage, destruction or loss to, or other adverse change in the condition of, its property which, in the aggregate, is material to the Business (whether or not covered by insurance);

   (k)        instituted or permitted any material change in the conduct of its business, or any material change in its method of purchase, sale, lease, management, marketing, promotion or operation;

   (l)        made any change in any method of accounting or accounting policies, other than those required by GAAP, or made any write-up in its accounts receivable or inventory that is other than in the Ordinary Course of Business;

   (m)        entered into or amended any Contract with or made any payment to any director or officer of the Company or Opco or any Affiliate thereof other than the payment of compensation and benefits and the reimbursement of business expenses of directors and officers of the Company or Opco in the Ordinary Course of Business; or

   (n)        agreed, in writing or otherwise, to do any of the foregoing.

4.7        Real Property.    No Debtor owns or leases any real property other than that identified on Schedule 4.7. Schedule 4.7 lists all real property leased pursuant to leases (the “Leased Property”). Except as otherwise described on Schedule 4.7, each Debtor party to a Contract relating to Leased Property is in compliance in all material respects with the applicable Contract.

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4.8        Title.    Except as set forth on Schedule 4.8, Debtors own or have a valid right to use all of the material assets used or held for use by them in the conduct of the Business, free and clear of all Liens, other than Permitted Exceptions, and Liens which do not materially affect the value of the asset to which such Liens relates or the continued use thereof in the Business in the Ordinary Course of Business.

4.9        Taxes.    (a) Except as set forth on Schedule 4.9, and except for matters that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) Debtors have timely filed all Tax Returns required to be filed with the appropriate Tax Authorities in all jurisdictions in which such Tax Returns are required to be filed (taking into account any extension of time to file granted or to be obtained on behalf of the Company), and all such Tax Returns are correct and complete in all material respects, and (ii) other than Taxes and liabilities of Debtors the payment of which is prohibited or stayed by the Bankruptcy Code, (A) each Debtor has paid all Taxes due and payable by it (whether or not such Taxes are shown on any Tax Return), (B) each Debtor has withheld and timely remitted to the appropriate Tax Authority all Taxes required to have been withheld and remitted in connection with amounts paid or owing to any Person, and (C) the Debtors have no liability for any Taxes of any Person other than a Debtor payable by reason of Contract, assumption, transferee or successor liability, operation of Law or Treasury Regulation Section 1.1502-6 (or any predecessor or successor thereof or any analogous or similar provision under Law) or otherwise.

   (b)        Except as set forth in Schedule 4.9, no Debtor has granted, or has had granted on its behalf, any extension or waiver of the statute of limitations period applicable to any income, franchise or other material Tax Return or within which any Tax may be assessed or collected by any Tax Authority, which period (after giving effect to such extension or waiver) has not yet expired, and no Debtor has received written notice of any claim by any Tax Authority in a jurisdiction where such Debtor does not file such Tax Returns that it is or may be subject to taxation by that Tax Authority.

   (c)        Except as set forth in Schedule 4.9, no Debtor has received written notice from any Tax Authority of any complaint, action, suit, proceeding, arbitration, hearing, audit, investigation or claim of any kind with respect to income, franchise or other material Taxes of any Debtor or, to the Knowledge of the Company, threatened against or with respect to any Debtor.

   (d)        Except as set forth in Schedule 4.9, no Debtor has been a member of an affiliated, consolidated, combined or unitary group or participated in any other arrangement whereby any income, revenues, receipts, gain or less was determined or taken into account for Tax purposes with reference to or in conjunction with any income, revenues, receipts, gain, loss, asset or liability of any other Person other than a group of which the Company was the parent and

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no Debtor is a party to any Tax-sharing, allocation or indemnity Contract other than one between Debtors.

   (e)        Except as set forth in Schedule 4.9, no Debtor will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period ending after the Closing (i) under Section 481 of the Code (or any predecessor or successor thereof or any analogous or similar law) as a result of change in method of accounting for a taxable period or portion thereof ending on or prior to the Closing, (ii) pursuant to the provisions of any Contract entered into with any Tax Authority or pursuant to a “closing agreement” as defined in Section 7121 of the Code (or any predecessor or successor thereof or any analogous or similar Law) executed on or prior to the Closing, (iii) pursuant to the installment method of accounting, the completed contract method of accounting or the cash method of accounting with respect to a transaction that occurred prior to the Closing, or (iv) with respect to any prepaid amount received on or prior to the Closing.

   (f)        Except as set forth in Schedule 4.9, no Debtor has distributed the stock of another Person, or has not had its stock distributed by another Person, in a transaction that was purported or intended to be governed in whole or in part by Sections 355 or 361 of the Code.

   (g)        Debtors reasonably estimate under the principles used in calculating U.S. federal consolidated income tax liability that (i) their consolidated U.S. federal net operating losses at the end of the taxable year ending April 2008 will be at least $77.0 million and (ii) their consolidated U.S. federal net operating losses for the six-month period ending October 2008 will be at least $8.9 million.

   (h)        Since December 6, 2005, no Debtor has undergone an “ownership change” within the meaning of Section 382(g) of the Code.

   (i)        Since December 6, 2005, no Debtor has participated in any “reportable transaction” as defined in Section 6707A of the Code or Treasury Regulation Section 1.6011-4 (or any predecessor provision).

   (j)        Each Debtor has disclosed on its U.S. federal income Tax Returns all positions taken in such Tax Returns that could give rise to a “substantial understatement” of U.S. federal income Tax within the meaning of Section 6662 of the Code.

   (k)        The Company made a valid election under Code Section 338(h)(10) in connection with the Company’s acquisition in December 2005 of 100% of the stock of Opco.

   (l)        Based solely on the representations and warranties contained in the 2005 stock purchase agreement with respect to Opco, the Company (including any predecessor) was, for at least the ten-year period prior

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to its acquisition by the Company, an S corporation within the meaning of section 1361 of the Code.

This Section 4.9 and Section 4.14 constitute the sole and exclusive representations and warranties regarding Tax matters.

4.10        Intellectual Property.    (a)    Set forth on Schedule 4.10(a) is a complete, true and accurate list and summary description of all owned registrations and applications for Intellectual Property, other than Copyrights (the “Registered Intellectual Property”). There are no claims, demands or proceedings instituted or pending against any Debtor with respect to which any Debtor has been served or otherwise received notice, or, to the Knowledge of the Company, threatened by any Person that contest the validity, use, ownership or enforceability of any Owned Intellectual Property. Except as set forth on Schedule 4.10(a), to the Knowledge of the Company, none of the Owned Intellectual Property is being infringed. Except as set forth on Schedule 4.10(a), to the Knowledge of the Company, none of the Intellectual Property, the Technology, the conduct or operation of the Business and/or websites by any Debtor or any product manufactured and/or sold by any Debtor infringes or is alleged to infringe any intellectual property or proprietary rights of any third party. Subject to the preceding sentence, including the knowledge qualifier contained therein, the Technology, the Owned Intellectual Property and the Licensed Intellectual Property constitute all of the intellectual property and proprietary rights necessary to conduct the operations of the Business as it is currently conducted by the Debtors. Except as set forth on Schedule 4.10(a), a Debtor is the sole owner of all worldwide right, title and interest in and to each item of Registered Intellectual Property, free and clear of all Liens other than Permitted Exceptions. No Debtor has received any written non-infringement or invalidity opinion of counsel regarding any third Person’s intellectual property.

    (b)        Schedule 4.10(b) lists the jurisdiction(s) in which each item of Owned Intellectual Property is filed or registered, including the respective application or registration numbers and filing or registration dates and any filing requirements and fees due within 90 calendar days from the date hereof. Each Trademark included in the Registered Intellectual Property has been properly filed and maintained (including payment of filing, examination and maintenance fees and proofs of use) and all such Trademarks are currently in compliance with all legal requirements, including the payment of filing, examination and maintenance fees and timely filing of affidavits and renewal applications (to the extent that the time period for payment or filing would have otherwise lapsed or expired). No Patents and/or Trademarks included in the Registered Intellectual Property have been or are involved in any opposition, interference, invalidation, reexamination or cancellation, other than proceedings for which a Debtor has not received notice. No governmental resources or funding, facilities or services of a university, college, other educational institution or research center or funding from third parties was used in the development of any Owned Intellectual Property.

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   (c)        Schedule 4.10(c) contains a list of all currently existing licenses, sublicenses, indemnities or other Contracts that relate to any Intellectual Property and to which a Debtor is a party or by which a Debtor is bound, except for any licenses with artists or relating to any off-the-shelf Software. Except with respect to four Contracts disclosed to Purchaser’s outside counsel, with respect to any Licensed Intellectual Property, to the Knowledge of the Company, Debtors have obtained the appropriate permission, license or other Contract and, to the Knowledge of the Company, such permission, license or other Contract is in full force and effect. To the Knowledge of the Company, the Debtors have performed (or will perform) in all material respects all obligations imposed upon them under the Key Artist Contracts, which are required to be performed by them on or prior to the Closing. To the Knowledge of the Company, neither a Debtor nor any other party thereto is in breach of or default under in any respect any Key Artist Contract, nor, to the Knowledge of the Company, is there any event which with notice or lapse of time or both would constitute a default under any Key Artist Contract. The Debtors have no obligation to indemnify or defend any third party in connection with claims for infringement of any Intellectual Property other than contracts with customers for sale of products in the ordinary course of business.

   (d)        The Debtors have taken reasonable precautions to protect the secrecy, confidentiality, and value of confidential Technology and trade secrets used in the Business. To the Knowledge of the Company, no confidential Technology or trade secrets used in the Business has been misappropriated from any Person.

4.11     Contracts and Commitments.    Except as set forth on Schedule 4.11, no Debtor is a party to or otherwise obligated under any of the following (a “Material Contract”):

   (a)        Any Contract providing for an expenditure by a Debtor for the purchase or lease of real property;

   (b)        Any Contract pursuant to which a Debtor is the lessee or sublessee of, or holds or operates, any personal property owned or leased by any other Person (other than leases of personal property leased in the Ordinary Course of Business with annual lease payments no greater than $100,000);

   (c)        Any Contract pursuant to which a Debtor is the lessor or sublessor of, or permits any third party to operate, any real or personal property owned or leased by a Debtor;

   (d)        Any loan agreement, indenture, promissory note, conditional sales agreement, security agreement, letter of credit arrangement, guarantee, indemnity, surety, foreign exchange contract, accommodation or other similar type of Contract, other than the First-Lien Credit Agreement, the Second-Lien Credit Agreement, the DIP Loan Agreement and the LIBOR Swap;

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   (e)        Any Contract which involves (i) a sharing of profits, (ii) future payments of $100,000 or more per annum to other Persons other than Contracts entered into in the Ordinary Course of Business with customers, suppliers or artists, or (iii) any joint venture, general or limited partnership or similar contract or arrangement;

   (f)        Any sales agency, sales representation, distributorship or franchise Contract that is not terminable without penalty within 60 days;

   (g)        Any Contract binding on a Debtor that is terminable upon or provides for the payment of any cash or other benefits upon the sale or change of control of a Debtor or a majority of its stock or assets other than Contracts with artists or customers;

   (h)        Except for Contracts with suppliers of tangible materials entered into in the Ordinary Course of Business of the Debtors, any Contract prohibiting competition, prohibiting a Debtor from freely engaging in any business anywhere in the world or prohibiting the disclosure of trade secrets or other confidential or proprietary information other than Contracts with artists or customers; and

   (i)        Any Contract listed or required to be listed on the Disclosure Schedule pursuant to Section 4.6 or not made in the Ordinary Course of Business the Liabilities under which may be reasonably expected to exceed $50,000 individually or $250,000 in the aggregate, including any Contract under which an Excluded Liability may be reasonably expected to arise.

4.12     Validity, Etc. of Contracts.    (a)    Except as set forth on Schedule 4.12, each Contract to which a Debtor is a party or is otherwise obligated is a valid and binding obligation of such Debtor in accordance with its terms and conditions, except as such enforceability may be limited by (a) bankruptcy, insolvency or other similar laws affecting the enforcement of creditors’ rights generally and (b) equitable principles of general applicability (whether considered in a proceeding at law or in equity). Neither such Debtor nor, to the Knowledge of the Company, any other party to a Material Contract is in default under or in violation of such Material Contract, and there are no disputes with regard to any Material Contract, except for defaults or disputes which would not have a Company Material Adverse Effect. No event has occurred which, with the passage of time or the giving of notice, or both, would constitute a default under or a violation of any such Material Contract or would cause the acceleration of any obligation of any party thereto or the creation of a Lien upon any asset of any of the Debtors, except for defaults or disputes which would not have a Company Material Adverse Effect.

   (b)        As of the date hereof, none of the Business’ top ten customers, suppliers, account representatives or artists, measured by sales in the case of customers, and payments in the case of suppliers, account

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representatives and artists, in each case for the year ended April 25, 2008, has informed any Debtor that it has or intends to terminate or materially reduce its level of business with any Debtor.

4.13     Affiliated Transactions, Etc.    Except as disclosed on Schedule 4.13 and except for payments of compensation to or reimbursement of business expenses of officers and directors of a Debtor in the Ordinary Course of Business, no director, officer or Affiliate of a Debtor, or any direct or indirect shareholder of the Company, or to the Knowledge of the Company, any individual who is related by blood or marriage to any of the foregoing, is a party to any Contract or other transaction or arrangement with a Debtor or has any material interest in any property used by or in connection with the Business or Contract to which the Company is a party. Section 4.13 of the Disclosure Schedule lists all payments to or for the benefit of the Company’s direct or indirect shareholders since December 31, 2007 and all Contracts between or among any such shareholder and the Company or Opco.

4.14     Employee Benefits.    (a) Schedule 4.14(a) lists: (i) all “employee benefit plans”, as defined in Section 3(3) of ERISA, (ii) all employment, individual consulting or other compensation Contracts with any Person, and (iii) all bonus or other incentive, equity or equity-based compensation, deferred compensation, severance pay, sick leave, vacation pay, salary continuation, disability, hospitalization, medical, life insurance, scholarship programs, plans or arrangements, as to which any Debtor has any obligation or liability, contingent or otherwise, for current or former employees (collectively, the “Employee Benefit Plans”). Employee Benefit Plans subject to Title IV of ERISA (the “Title IV Plans”) are separately identified on Schedule 4.14(a). None of the Employee Benefit Plans is a multiemployer plan as defined in Section 3(37) of ERISA or a Multiple Employer Plan or has been subject to Sections 4063 or 4064 of ERISA.

   (b)     True, correct and complete copies of the following documents, with respect to each of the Employee Benefit Plans (as applicable), have been made available to Purchaser (i) any plans and related trust documents, and all amendments thereto, (ii) the most recent Forms 5500 and schedules thereto, (iii) the most recent financial statements and actuarial valuations, (iv) the most recent IRS determination letter, and (v) the most recent summary plan descriptions (including letters or other documents updating such descriptions).

   (c)     Each of the Employee Benefit Plans intended to qualify under Section 401 of the Code (“Qualified Plans”) has been determined by the IRS to be so qualified, and, except as disclosed on Schedule 4.14(c), to the Knowledge of the Company, nothing has occurred with respect to the operation of any such plan which could reasonably be expected to result in the revocation of such favorable determination.

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  (d)        Except with respect to the Title IV Plans, all contributions and premiums required by Law or by the terms of any Employee Benefit Plan or any Contract relating thereto have been timely made to any funds or trusts established thereunder or in connection therewith in all material respects.

  (e)        Each of the Employee Benefit Plans has been maintained in accordance with its terms and all provisions of applicable Law, except for such non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

  (f)        Except as set forth on Schedule 4.14(f), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any employee of the Company; (ii) increase any benefits otherwise payable under any Employee Benefit Plan; or (iii) result in the acceleration of the time of payment or vesting of any such benefits.

4.15     Litigation.    Except as set forth on Schedule 4.15, as of the date of this Agreement, there are no Legal Proceedings pending against any Debtor or in which a Debtor is a plaintiff nor, to the Knowledge of the Company, are any Legal Proceedings threatened against any Debtor before any Governmental Body.

4.16     Compliance with Laws; Permits.    Each Debtor (i) is in compliance with all Laws, including Environmental Laws, applicable to its respective operations or assets or the Business, except where the failure to be in compliance would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, and (ii) currently has all Permits which are required for the operation of the Business as presently conducted, except where the absence of which would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.

4.17     Financial Advisors.    Except as set forth on Schedule 4.17, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for any of the Debtors in connection with the transactions contemplated by this Agreement. No Person listed on Schedule 4.17 is entitled to any fee or commission or like payment from Parent or Purchaser in respect thereof.

4.18     Foreign Corrupt Practices Act.    No Debtor and, to the Knowledge of the Company, none of their Affiliates or any other Person acting on their behalf has, in connection with the operation of their respective businesses, (a) used any corporate or other funds for unlawful contributions, payments, gifts or entertainment, or made any unlawful expenditures relating to political activity to government officials, candidates or members of political parties or organizations, or established or maintained any unlawful or unrecorded funds in violation of Section 104 of the Foreign Corrupt Practices Act of 1977, as amended, or any other similar applicable foreign, federal or state law, (b) paid, accepted or received any unlawful contributions, payments, expenditures or gifts, or (c)

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violated or operated in noncompliance with any export restrictions, anti-boycott regulations, embargo regulations or other similar and applicable domestic or foreign laws and regulations.

4.19    No Other Representations or Warranties; Schedules.    Except for the representations and warranties contained in this Article IV (as modified by the Disclosure Schedule), neither the Company nor any other Person makes any other express or implied representation or warranty with respect to Debtors, the Business or the transactions contemplated by this Agreement, and the Company disclaims any other representations or warranties, whether made by the Company, any Affiliate of the Company, or any of the Company’s or their Affiliates’ respective officers, directors, employees, agents or representatives. Except for the representations and warranties contained in Article IV (as modified by the Disclosure Schedules), the Company (i) expressly disclaims and negates any representation or warranty, expressed or implied, at common law, by statute, or otherwise, relating to the condition of its assets (including any implied or expressed warranty of merchantability or fitness for a particular purpose, or of conformity to models or samples of materials) and (ii) disclaims all liability and responsibility for any representation, warranty, projection, forecast, statement or information made, communicated, or furnished (orally or in writing) to Purchaser or its Affiliates or representatives (including any opinion, information, projection or advice that may have been or may be provided to Parent or Purchaser by any director, officer, employee, agent, consultant, or representative of the Company or any of its Affiliates). The Company makes no representations or warranties to Parent or Purchaser regarding the probable success or profitability of the Business. The disclosure of any matter or item in any Schedule hereto shall not be deemed to constitute an acknowledgment that any such matter is required to be disclosed or is material or that such matter would result in a Company Material Adverse Effect.

V.    REPRESENTATIONS AND WARRANTIES OF PARENT

AND PURCHASER

Parent and Purchaser each hereby jointly and severally represents and warrants to the Company that:

5.1    Organization and Good Standing.    Each of Parent and Purchaser is an entity duly organized, validly existing and in good standing under the laws of its state of incorporation or formation and has the requisite corporate or limited liability company power and authority to own, lease and operate its properties and to carry on its business as now conducted.

5.2    Authorization of Agreement and Parent Notes.    Each of Parent and Purchaser has the requisite corporate or limited liability company power and authority to execute and deliver this Agreement, the Parent Notes and the New Indenture and each other agreement, document or instrument contemplated hereby or thereby to which it is a party and to perform its obligations hereunder

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and thereunder. The execution and delivery of this Agreement, the Parent Notes and the New Indenture and each other agreement, document or instrument contemplated hereby or thereby to which Parent and Purchaser is a party and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate or limited liability company action on the part of each of Parent and Purchaser. This Agreement, the Parent Notes, the AG Indenture and the New Indenture and each other agreement, document or instrument contemplated hereby or thereby to which Parent and Purchaser is a party has been, or at the Closing will be, duly and validly executed and delivered by Parent and Purchaser and (assuming the due authorization, execution and delivery by the other parties hereto) this Agreement, the Parent Notes, the AG Indenture and the New Indenture and each other agreement, document or instrument contemplated hereby or thereby to which Parent and Purchaser is a party constitutes, or at the Closing will constitute, legal, valid and binding obligations of each of Parent and Purchaser, to the extent a party thereto, enforceable against each such entity in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

5.3     Conflicts; Consents of Third Parties.     (a)   The execution, delivery and, in the case of the Parent Notes and the New Indenture, issuance by Parent, of this Agreement, the Parent Notes and the New Indenture and each other agreement, document or instrument contemplated hereby or thereby to which Parent or Purchaser is a party, the consummation of the transactions contemplated hereby and thereby, or compliance by Parent or Purchaser with any of the provisions hereof or thereof do not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under any provision of (i) the certificate of incorporation and by-laws or comparable organizational documents of Parent or Purchaser; (ii) any Contract or Permit to which Parent or Purchaser is a party or by which any of the properties or assets of Parent or Purchaser are bound; (iii) any Order of any Governmental Body applicable to Parent or Purchaser or any of the properties or assets of Parent or Purchaser as of the date hereof; or (iv) any applicable Law, other than, in the case of clauses (ii), (iii) and (iv), such conflicts, violations, defaults, terminations or cancellations that would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

(b)        No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of Parent or Purchaser in connection with the execution and delivery of this Agreement, the Parent Notes and the New Indenture and each other agreement, document or instrument contemplated hereby or thereby to which Parent or Purchaser is a party, the compliance by

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Parent or Purchaser with any of the provisions hereof or thereof, the consummation of the transactions contemplated hereby or thereby, the taking by Parent or Purchaser of any other action contemplated hereby or thereby, except for (i) compliance with the applicable requirements of the HSR Act and (ii) such other consents, waivers, approvals, Orders, Permits, authorizations, declarations, filings and notifications, the failure of which to obtain or make, would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

5.4        Litigation.     There are no Legal Proceedings pending or, to the Knowledge of Parent, threatened against Parent or Purchaser, or to which Parent or Purchaser is otherwise a party before any Governmental Body, which, if adversely determined, would reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect. Neither Parent nor Purchaser is subject to any Order of any Governmental Body except to the extent the same would not reasonably be expected to have, individually or in the aggregate, a Purchaser Material Adverse Effect.

5.5        Financial Advisors.    Except for such of the following as to which no Debtor could have any Liability, no Person has acted, directly or indirectly, as a broker, finder or financial advisor for Parent or Purchaser in connection with the transactions contemplated by this Agreement and no Person is entitled to any fee or commission or like payment in respect thereof.

5.6        Financial Capability.    Purchaser shall have, and Parent shall cause Purchaser to have, at the Closing, sufficient funds available to pay the cash portion of the Purchase Price and any expenses incurred by Parent and Purchaser in connection with the transactions contemplated by this Agreement. From January 1, 2008 to and including the date hereof, except for matters that have been publicly disclosed by Parent prior to the date hereof or as disclosed by Parent prior to the execution and delivery of this Agreement in writing making specific reference to this Section 5.6, and except for reports relating to this Agreement and the transactions contemplated hereby, which Parent hereby agrees to file as promptly as practicable after the date hereof, Parent has timely filed or caused to be filed all reports and other information required to be filed by it with the Securities and Exchange Commission (the “SEC”) pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (such reports and other information, “Parent Filed SEC Reports”). None of the Parent Filed SEC Reports, as of the date of filing, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. From January 1, 2008 to and including the date hereof, no change has occurred in Parent’s business or consolidated financial condition or results of operations that materially and adversely affects, or is reasonably likely to materially and adversely affect, Parent’s ability to discharge its Liabilities in accordance with the terms thereof, including its Liabilities under the Parent Notes.

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5.7     Condition of the Business.    Notwithstanding anything contained in this Agreement to the contrary, each of Parent and Purchaser acknowledges and agrees that Debtors are not making any representations or warranties whatsoever, express or implied, beyond those expressly given by the Company in Article IV (as modified by the Schedules hereto), and each of Parent and Purchaser acknowledges and agrees that, except for the representations, warranties and covenants contained therein, the Company Capital Stock and the Business are being transferred on a “where is” and, as to condition, “as is” basis. Each of Parent and Purchaser acknowledges that it has conducted to its satisfaction its own independent investigation of the Business and, in making the determination to proceed with the transactions contemplated by this Agreement, each of Parent and Purchaser has relied on the results of its own independent investigation.

VI.     BANKRUPTCY COURT MATTERS

6.1     Bankruptcy Court Filings.    (a)   As promptly as practicable after the execution of this Agreement, but in no event later than the Petition Date, the Company shall, and shall cause the other Debtors to, commence the Bankruptcy Case and file the Plan and Disclosure Statement.

(b)        On the Petition Date, the Company and Opco shall file with the Bankruptcy Court a motion seeking entry of the Break-Up Fee Order and the DIP Loan Order, and the Company and Opco shall thereafter pursue diligently the entry of the Break-Up Fee Order and the DIP Loan Order. Parent and Purchaser agree that they will promptly take such actions as are reasonably requested by the Company to assist in obtaining entry of the Break-Up Fee Order and the DIP Loan Order. In the event the entry of the Break-Up Fee Order or the DIP Loan Order shall be appealed, the Company, Parent and Purchaser shall use their respective commercially reasonable efforts to defend such appeal, including opposing any stay requested in connection therewith.

6.2     Competing Transactions.    (a)  Notwithstanding any other provision hereof, prior to the Measurement Date, the Company may solicit, engage in discussions regarding or encourage the solicitation of Competing Transactions involving higher or better competing bids in accordance with the terms of this Section 6.2. Without limiting the generality or effect of the foregoing, the Company may furnish information to any Person other than Parent or Purchaser (a “Third Party”) (and its Representatives) in response to such Third Party’s written proposal regarding a Competing Transaction and engage in discussions or negotiations with a Third Party (and its Representatives) relating to any such proposal if the Company determines in good faith and consistent with its fiduciary duties (after consultation with outside counsel) that such Competing Transaction is reasonably expected to result in a Competing Transaction that the Company determines in good faith, after consulting in good faith with the Professionals for the First-Lien Debtholders and Second-Lien Debtholders, to be a higher or better

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proposal for the Company and its creditors than the transactions with Parent and Purchaser pursuant to the terms of this Agreement and the Plan.

(b)    Any Competing Transaction may not be deemed a higher or better offer than the transactions with Parent and Purchaser pursuant to the terms of this Agreement and the Plan, and no Debtor may enter into any Contract providing for any Competing Transaction, unless the Competing Transaction:

(i)        provides for equal treatment of all holders within each class of First-Lien Debt (including Purchaser) and Second-Lien Debt (except as any such holder may agree in writing in its sole discretion);

(ii)        (A) provides consideration in cash or its indubitable equivalent payable to the First-Lien Debtholders in an amount greater than or equal to the sum of First-Lien Debtholder Cash Amount and the First-Lien Noteholder Amount (such amount shall be calculated in the case of the Parent Notes assuming that Purchaser did not contribute the Contributed First-Lien Debt, but received a distribution thereon that was the same in kind and amount as that received by all other First-Lien Debtholders) and (B) provides aggregate consideration in cash or its indubitable equivalent payable to the Second-Lien Debtholders in an amount greater than or equal to the Second-Lien Debtholder Note Amount;

(iii)        provides for payment upon consummation of a Competing Transaction or termination of a Competing Transaction Plan or the Contract providing for a Competing Transaction to Purchaser in an amount equal to the Break-Up Fee;

(iv)        includes a written offer accompanied by definitive documentation which the Third Party has signed and the Company has determined it would, subject to the terms hereof, be willing to accept, and such offer is binding and irrevocable for not less than ten Business Days without material modification;

(v)        is accompanied by written evidence of available cash and such other evidence of ability to consummate the proposed Competing Transaction as the Company may reasonably request; and

(vi)        is not subject to any due diligence or financing contingency.

For purposes of this Section 6.2 (b), Parent Notes shall be valued as set forth in the Undertaking.

(c)        The Company shall keep Parent, Purchaser and the Professionals for the First-Lien Debtholders and Second-Lien Debtholders informed of such inquiries and proposals promptly, and in any event within 48

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hours after the initial receipt thereof (including by providing copies of all written inquiries, proposals and offers, including the documentation relating thereto), and may not accept any proposal for a Competing Transaction without giving Parent and Purchaser not less than four Business Days’ prior written notice of the material terms thereof (including copies of all written documents providing therefor) and the opportunity to increase the consideration payable under this Agreement in response thereto.

(d)        In the event that the Company consummates (A) a Competing Transaction with a Third Party or (B) a transaction with Parent and Purchaser at an amount above the Purchase Price, any consideration above the Purchase Price shall be paid, subject to Sections 6.2(b)(i) and 6.2(b)(ii), (x) first, to the First-Lien Debtholders until the First-Lien Debt has been satisfied in full and (y) second, in the event that the First-Lien Debt has been satisfied in full, to the Second-Lien Debtholders until the Second-Lien Debt has been satisfied in full.

6.3     Break-Up Fee.     In the event that this Agreement is terminated pursuant to Section 3.4(h) or Section 3.4(i), the Company and Opco, jointly and severally, shall pay to Purchaser, upon the consummation of a Competing Transaction, a cash amount equal to $4.119 million, such amount being equal to 3% of the aggregate consideration payable hereunder, plus up to $1.0 million of Parent’s or Purchaser’s documented, reasonable out-of-pocket expenses incurred in connection with this Agreement and the transactions contemplated hereby since July 1, 2008 (collectively, the “Break-Up Fee”); provided, however, that such expenses may not include costs and expenses (including attorneys fees and expenses) incurred by Parent or Purchaser, in connection with the litigation pending in United States District Court for the Northern District of Illinois among Parent, Purchaser, the Company, Opco and RPG Investment Holdings, LLC (“RPGI”) or any other litigation (except for litigation in the Bankruptcy Court or with respect to Excluded Liabilities) between Parent and its Affiliates, on one hand, and RPGI and its Affiliates, on the other hand. The Break-Up Fee shall constitute an administrative expense of Debtors under the Bankruptcy Code (which shall be a super-priority administrative expense claim with priority over any and all administrative expenses of the kind specified in Sections 503(b) and 507(b) of the Bankruptcy Code). Notwithstanding anything to the contrary contained herein, upon payment of the Break-Up Fee, the Company and its respective Representatives and Affiliates and Purchaser, Parent and their respective Representatives and Affiliates shall each be fully released and discharged from any Liability under or resulting from this Agreement and no such Person shall have any other remedy or cause of action under or relating to this Agreement or any applicable Law, including for reimbursement of expenses.

VII.    COVENANTS

7.1     Access to Information.    The Company agrees that, prior to the Closing Date, (i) Purchaser shall be entitled, through its officers, employees,

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consultants and representatives (including its legal advisors and accountants), to make such investigation of the properties, businesses and operations of the Company and the Business and such examination of the books and records of the Company and the Business as it reasonably requests and to make extracts and copies of such books and records and (ii) the Company will provide Purchaser reasonable access and cooperation to plan for post-closing transition subject to reasonable limitations so as to minimize disruption to operations, employees, suppliers and customers, provided, however, that nothing herein shall obligate the Company or Opco to furnish information to Parent or Purchaser that either of them would not be obligated so to furnish under the confidentiality agreements, dated November 7, 2008, among Opco, Parent and each of Parent’s legal and financial advisors. Any such investigation and examination shall be conducted upon reasonable advance notice and under reasonable circumstances and shall be subject to restrictions under applicable Law. The Company shall cause its and the other Debtors’ respective officers, employees, consultants, agents, accountants, attorneys and other Representatives to cooperate with Purchaser and Purchaser’s Representatives in connection with such investigation and examination, and Purchaser and its Representatives shall cooperate with the Company and its Representatives and shall use their reasonable efforts to minimize any disruption to the Business.

7.2     Conduct of the Business Pending the Closing.    (a)  Except (i)  as set forth on Schedule 7.2(a), (ii) as required by applicable Law, (iii) as otherwise expressly contemplated by this Agreement, or (iv) with the prior written consent of Purchaser, during the period from the date of this Agreement to the Closing, the Company shall and shall cause the other Debtors to:

(A)        conduct the Business only in the Ordinary Course of Business; and

(B)        use their commercially reasonable efforts to (1) preserve the present business operations, organization and goodwill of the Business and (2) preserve the present relationships with customers and suppliers of the Business.

(b)       Except (i) as set forth on Schedule 7.2(b), (ii) as required by applicable Law, (iii) as otherwise contemplated by this Agreement, or (iv) with the prior written consent of Purchaser, during the period from the date of this Agreement to the Closing, the Company shall not, and shall cause the other Debtors not to:

(i)        (A)    increase the level of compensation of any director or officer of Debtor payable or to become payable by the Debtors to any of their respective directors or officers, except pursuant to existing Contracts, specifically listed on the Disclosure Schedule, (B) grant any bonus, benefit or other direct or indirect compensation to any director or officer that is not required by the terms of any existing Employee Benefit

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Plan, (C) amend any Employee Benefit Plan to increase the coverage or benefits available thereunder or create any new Employee Benefit Plan, or (D) enter into any employment, deferred compensation, severance, individual consulting, non-competition or similar Contract (or amend any such Contract) to which any Debtor is a party or involving a director or executive officer of such Debtor, except, in each case, as required by any of the Employee Benefit Plans;

(ii)        make or rescind any material election relating to Taxes, settle or compromise any material claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes or, except as may be required by the Code or GAAP, make any material change to any of its methods of accounting or methods of reporting income or deductions for Tax or accounting practice or policy from those employed in the preparation of its most recent financial statements or Tax Returns, as applicable;

(iii)        subject any of its assets to any Lien, except for Permitted Exceptions;

(iv)        other than in the Ordinary Course of Business, acquire any assets or sell, assign, license, transfer, convey, lease or otherwise dispose of any of its material assets (except pursuant to an existing Contract specifically listed on the Disclosure Schedule);

(v)        cancel or compromise any material debt or claim or waive or release any material right of Debtors;

(vi)        enter into any commitment for capital expenditures of a type that would be required to be disclosed in Section 4.6(h) of the Disclosure Schedule had such commitment been made prior to the date hereof in order to avoid a breach of Section 4.6(h);

(vii)        enter into, modify or terminate any labor or collective bargaining Contract or, through negotiation or otherwise, make any commitment or incur any liability to any labor organization;

(viii)        enter into any Contract or other commitment to restrict or limit any Intellectual Property;

(ix)         engage in any transaction with any officer, director or Affiliate of any Debtor or any such individual other than the payment of compensation and benefits and the reimbursement of business expenses of officers and directors in the Ordinary Course of Business; or

(x)        agree to do anything prohibited by this Section 7.2 or do or agree to do anything that would cause the Company’s

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representations and warranties herein to be incorrect in any material respect.

(c)        The Company shall use its commercially reasonable efforts, and Purchaser shall, and Parent shall cause Purchaser to, cooperate with the Company, to obtain at the earliest practicable date all consents and approvals required to consummate the transactions contemplated by this Agreement, including the consents and approvals referred to in Sections 4.3(a), 4.3(b) and 8.1(d) hereof.

(d)        The Company shall not, and shall cause the other Debtors not to, make any payment on or in respect of any, or enter into any Contract relating to, Excluded Liability.

7.3     Regulatory Approvals.    (a) Parent, Purchaser and the Company shall (i) make or cause to be made all filings required of each of them or any of their respective Affiliates under the HSR Act or other Antitrust Laws with respect to the transactions contemplated hereby as promptly as practicable and, in any event, within ten Business Days after the date of this Agreement in the case of all filings required under the HSR Act, (ii) subject to the other provisions of this Section 7.3, comply, at the earliest practicable date, with any request under the HSR Act or other Antitrust Laws for additional information, documents or other materials received by each of them or any of their respective subsidiaries from Federal Trade Commission (the “FTC”), the Antitrust Division of the United States Department of Justice (the “Antitrust Division”) or any other Governmental Body in respect of such filings or such transactions, and (iii) cooperate with each other in connection with any such filing (including, to the extent permitted by applicable Law, providing copies of all such documents to the non-filing parties prior to filing and considering all reasonable additions, deletions or changes suggested in connection therewith) and in connection with resolving any investigation or other inquiry of any of the FTC, the Antitrust Division or other Governmental Body under any Antitrust Laws with respect to any such filing or any such transaction. Each such party shall use commercially reasonable efforts to furnish to each other all information required for any application or other filing to be made pursuant to any applicable Law in connection with the transactions contemplated by this Agreement. Each such party shall promptly inform the other parties hereto of any oral communication with, and provide copies of written communications with, any Governmental Body regarding any such filings or any such transaction. No party hereto shall independently participate in any formal meeting with any Governmental Body in respect of any such filings, investigation, or other inquiry without giving the other parties hereto prior notice of the meeting and, to the extent permitted by such Governmental Body, the opportunity to attend and/or participate. Subject to applicable Law, the parties hereto will consult and cooperate with one another in connection with any analyses, appearances, presentations, memoranda, briefs, arguments, opinions and proposals made or submitted by or on behalf of any party hereto relating to proceedings under the HSR Act or other Antitrust Laws. The

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Company and Purchaser may, as each deems advisable and necessary, reasonably designate any competitively sensitive material provided to the other under this Section 7.3 as “outside counsel only.” Such materials and the information contained therein shall be given only to the outside legal counsel of the recipient and will not be disclosed by such outside counsel to employees, officers or directors of the recipient, unless express written permission is obtained in advance from the source of the materials (the Company or Purchaser, as the case may be).

(b)        Subject to the other provisions of this Section 7.3, each of Parent, Purchaser and the Company shall use its commercially reasonable efforts to resolve such objections, if any, as may be asserted by any Governmental Body with respect to the transactions contemplated by this Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other United States federal or state or foreign statutes, rules, regulations, orders, decrees, administrative or judicial doctrines or other laws that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, the “Antitrust Laws”). Subject to the other provisions of this Section 7.3, in connection therewith, if any Legal Proceeding is instituted (or threatened to be instituted) challenging any transaction contemplated by this Agreement is in violation of any Antitrust Law, each of Parent, Purchaser and the Company shall cooperate and use its commercially reasonable efforts to contest and resist any such Legal Proceeding, and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement, including by pursuing all available avenues of administrative and judicial appeal and all available legislative action, unless, by mutual agreement, Parent, Purchaser and the Company decide that litigation is not in their respective best interests; provided, however, that if any such Legal Proceeding is instituted or threatened to be instituted by a Governmental Body, Purchaser and the Company shall each have the right to terminate this Agreement, in each case after consulting in good faith with the Professionals for the First-Lien Debtholders and the Second-Lien Debtholders. Subject to the other provisions of this Section 7.3, each of Parent, Purchaser and the Company shall use its commercially reasonable efforts to take such action as may be required to cause the expiration of the notice periods under the HSR Act or other Antitrust Laws with respect to such transactions, consistent with the judgment of its counsel, as promptly as possible after the execution of this Agreement. In connection with and without limiting the foregoing, and subject to the Company’s and Purchaser’s right to terminate the Agreement and the other provisions of this Section 7.3, each of Parent, Purchaser and the Company agrees to use its commercially reasonable efforts, consistent with the judgment of its counsel, to take promptly any and all steps necessary to avoid or eliminate each and every impediment under any Antitrust Laws that may be asserted by any Federal, state and local and non-United States antitrust or competition authority, so as to

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enable the parties to close the transactions contemplated by this Agreement as expeditiously as possible. Without limiting the generality or effect of any other provision hereof, the Company and Purchaser also shall each have the right to terminate this Agreement if the Company’s costs and expenses with respect to compliance with a so-called “second request” for information under the HSR Act (a “Second Request”) would result in the Company needing financing in excess of the amount available under the DIP Loan Agreement and Parent or Purchaser, or any combination of First-Lien Debtholders or Second-Lien Debtholders (acting in each of their respective sole discretion), do not agree to pay or finance such amount.

   (c)        Notwithstanding the foregoing provisions of this Section 7.3, any other provisions of this Agreement or any implied duty of good faith or other legal doctrine, in no event shall Parent or Purchaser be required to agree to any of the following actions: (i) any prohibition of or limitation on the ownership or operation of any portion of the Debtors’, Parent’s or any of their respective Affiliate’s business or assets, (ii) any requirement that any of the Debtors, Parent or any of their respective Affiliates divest, hold separate or otherwise dispose of any portion of any of their respective business or assets, (iii) any limitation on Parent’s or Purchaser’s ability to acquire or hold, or exercise full rights of ownership of the Company Capital Stock, the Debtors, their respective assets or the Business, or (iv) any other limitation on the Debtors’, Parent’s or any of their respective Affiliate’s ability to effectively control its business or operations.

   (d)        In addition, notwithstanding the foregoing provisions of this Section 7.3 or any other provisions of this Agreement or any implied duty of good faith or other legal doctrine, in the event that any representative of Parent or Purchaser is informed by any representative of any Governmental Body with authority to act under the HSR Act (“HSR Authority”) that such HSR Authority has determined or intends to make a Second Request of Parent, Purchaser, any Debtor or any of their respective Affiliates, or a Second Request is made, Parent and Purchaser may, consistent with the judgment of their counsel, withdraw any filing previously made under the HSR Act in order to prevent the issuance of such Second Request and, in the event that Parent or Purchaser determine, consistent with the judgment of their counsel, they are unable to negotiate with the applicable HSR Authority a request for information that is not unduly burdensome, either Parent or Purchaser may terminate this Agreement upon notice to the Company, provided that it will be a precondition to Parent’s right to terminate this Agreement under this Section 7.3(d) that not later than 15 calendar days prior to such termination Parent shall have refiled under the HSR Act following such withdrawal (if requested by the Company and if the Company likewise so refiles).

   (e)        Parent shall make all filings required to be made by it in respect of the New Indenture under the Trust Indenture Act of 1939 (the “TIA”) and shall use its commercially reasonable efforts to cause (a) the New Indenture

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to be qualified thereunder and (b) the Parent Notes also to be eligible to be traded on the Depository Trust Corporation trading platform.

   (f)        Parent will pay the filing fee required to be paid under the HSR Act as contemplated hereby.

7.4        Further Assurances.    Subject to the other provisions of this Agreement, each of Parent, Purchaser and the Company shall use its commercially reasonable efforts to (i) take all actions necessary or appropriate to consummate the transactions contemplated by this Agreement and (ii) cause the fulfillment at the earliest practicable date of all of the conditions to their respective obligations to consummate the transactions contemplated by this Agreement.

7.5        Publicity.    The initial press release announcing this Agreement shall be in the form expressly agreed to by the Company and Purchaser. None of the parties hereto shall publish any press release or similar statement concerning this Agreement or the transactions contemplated hereby without obtaining the prior written approval of the other party hereto, which approval will not be unreasonably withheld or delayed, unless, in the sole judgment of Parent or the Company, as the case may be, disclosure is otherwise required by applicable Law, or by the Bankruptcy Court with respect to filings to be made with the Bankruptcy Court, in connection with this Agreement, provided that the party intending to make such release shall use its commercially reasonable efforts consistent with such applicable Law or Bankruptcy Court requirement to consult with the other party with respect to the text thereof.

7.6        Supplementation and Amendment of Schedules.    The Company may, at its option, include in the Disclosure Schedule items that are not material in order to avoid any misunderstanding, and such inclusion, or any references to dollar amounts, shall not be deemed to be an acknowledgement or representation that such items are material, to establish any standard of materiality or to define further the meaning of such terms for purposes of this Agreement. From time to time prior to the Closing, the Company shall have the right to supplement or amend the Disclosure Schedule with respect to any matter hereafter arising or discovered after the delivery of the Disclosure Schedule pursuant to this Agreement. No such supplement or amendment shall have any effect on the satisfaction of the condition to closing set forth in Section 8.1(a).

7.7        Past Service Credit.    Parent and Purchaser agree that, with respect to all of its employee benefit programs and arrangements covering or otherwise benefiting any of the Employees on or after the Closing Date, service with Debtors and its Subsidiaries shall be counted for purposes of determining any period of eligibility to participate or to vest in benefits, including vacation rights, provided under such programs and arrangements.

7.8        Medical Plan.    Parent and Purchaser shall, and shall cause any of their Affiliates to, provide a medical plan as of the Closing Date so as to ensure

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uninterrupted coverage of all Employees. Such medical plan shall grant credit for amounts paid by participants under the Employee Benefit Plans during the applicable plan year preceding the Closing Date, and shall not exclude pre-existing conditions to the extent of coverage under the existing Employee Benefit Plans.

7.9        Severance Pay.    Parent and Purchaser shall, and shall cause any of their Affiliates to, maintain for a period of six months following the Closing Date severance pay plans providing substantially the same severance pay benefits to each Employee as provided under the severance pay plans described in Schedule 7.9.

7.10        Continuation of Cash Compensation and Employee Benefits.    Parent and Purchaser shall, and shall cause any of their Affiliates to, for a period of not less than six months following the Closing Date, provide each Employee with cash compensation and employee benefits that are substantially comparable in the aggregate as are in effect as of the Closing Date, provided, however, that nothing herein will (a) prohibit or otherwise effect the right of the Parent, Purchaser or any Debtor to terminate or amend any Employee Benefit Plans after the Closing in accordance with the terms thereof if and to the extent that Parent determines in good faith that such change is consistent with changes in its benefit plans generally and such action does not discriminate against Employees, or to substitute therefor benefits under any Parent plan that Parent determines in good faith does not discriminate between Employees and other similarly situated employees of Parent and its Subsidiaries or (b) to constitute a guarantee of employment after the Closing.

7.11        Characterization of Transactions.    Parent, Purchaser and the Debtors shall characterize the transactions contemplated by this Agreement for income tax purposes as contemplated by the Disclosure Statement and the Plan.

7.12        Material Pleadings; Material Contracts.    For so long as this Agreement is in effect, the Debtors shall not, without the written consent of the Purchaser (not to be unreasonably withheld or delayed), file any Material Pleading in the Bankruptcy Case or file a motion or motions with the Bankruptcy Court seeking to reject or assume a Material Contract.

7.13        Shareholder Liabilities.    For so long as this Agreement is in effect, Purchaser shall take the lead in litigating or negotiating any matters related to Shareholder Liabilities, including claims against the Debtors’ estates related thereto; provided, however, that Purchaser shall consult with Professionals for the First-Lien Debtholders and Second-Lien Debtholders in connection with any such litigation and shall not settle such litigation if the effect of such settlement decreases the recoveries of the First-Lien Debtholders or the Second-Lien Debtholders without the prior written consent of the Professionals for the First-Lien Debtholders and the Second-Lien Debtholders affected thereby. The Company shall cause each of the Debtors to reasonably cooperate with Parent

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and its counsel and the Professionals for the First-Lien Debtholders and Second-Lien Debtholders in any such litigation, proceedings or negotiations and, on behalf of itself and each of the other Debtors, hereby irrevocably authorizes Purchaser to settle any Claim relating to Shareholder Liabilities on such terms as Purchaser may determine, provided, however, that such settlement is subject to the occurrence of the Closing.

VIII.    CONDITIONS TO CLOSING

8.1        Conditions Precedent to Obligations of Parent and Purchaser. The obligation of Parent and Purchaser to consummate the transactions contemplated by this Agreement is subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Purchaser in whole or in part to the extent permitted by applicable Law):

   (a)        the representations and warranties of the Company set forth in this Agreement shall be true and correct at and as of the Closing, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date) and except for any breaches that, taken together, do not result in or constitute a Company Material Adverse Effect, and Purchaser shall have received a certificate signed by an authorized officer of the Company, dated the Closing Date, to the foregoing effect;

   (b)        the Company and Opco shall have performed and complied in all material respects with all obligations and agreements required in this Agreement to be performed or complied with by the Company or Opco prior to the Closing Date, and Purchaser shall have received a certificate signed by an authorized officer of the Company and Opco, dated the Closing Date, to the forgoing effect;

   (c)        the Company shall have delivered, or caused to be delivered, to Purchaser all of the items set forth in Section 3.2;

   (d)        since September 26, 2008, no Company Material Adverse Effect shall have occurred;

   (e)        Purchaser shall have received a certificate signed by an authorized officer of the Company, dated the Closing Date, certifying that, to the best of his or her knowledge and belief after due inquiry, the representation of the Company and Opco in Section 4.9(h) is true and correct at and as of the Closing and Purchaser shall not have reasonable basis to believe that such certificate is not true and correct; and

   (f)        the condition set forth in Section 9.1(a) of the Plan shall have been satisfied (including Parent’s satisfaction with the terms of the Confirmation Order as provided in the Plan).

44

8.2        Conditions Precedent to Obligations of the Company.    The obligation of the Company to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions (any or all of which may be waived by the Company in whole or in part to the extent permitted by applicable Law):

   (a)        the representations and warranties of Parent and Purchaser set forth in this Agreement shall be true and correct at and as of the Closing, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct on and as of such earlier date) and except for any breaches that, taken together, do not result in or constitute a Purchaser Material Adverse Effect, and the Company shall have received a certificate signed by an authorized officer of each of Parent and Purchaser, dated the Closing Date, to the foregoing effect;

   (b)        Parent and Purchaser shall have performed and complied in all material respects with all obligations and agreements required by this Agreement to be performed or complied with by Parent or Purchaser on or prior to the Closing Date, and the Company shall have received a certificate signed by an authorized officer of Parent and Purchaser, dated the Closing Date, to the foregoing effect;

   (c)        Purchaser shall have delivered, or Parent shall have caused to be delivered, to the Company all of the items set forth in Section 3.3; and

   (d)        the condition set forth in Section 9.1(a) of the Plan shall have been satisfied.

8.3        Conditions Precedent to Obligations of Parent, Purchaser and the Company.    The respective obligations of Purchaser and the Company to consummate the transactions contemplated by this Agreement are subject to the fulfillment, on or prior to the Closing Date, of each of the following conditions (any or all of which may be waived by Purchaser and the Company in whole or in part to the extent permitted by applicable Law):

   (a)        there shall not be in effect any Order by a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby;

   (b)        the waiting period applicable to the transactions contemplated by this Agreement under the HSR Act shall have expired or been terminated; and

   (c)        the New Indenture shall have been qualified under the TIA.

8.4        Frustration of Closing Conditions.    Neither the Company nor Purchaser may rely on the failure of any condition set forth in Sections 8.1, 8.2 or

45

8.3, as the case may be, if such failure was caused by such party’s failure to comply with any provision of this Agreement.

IX.    MISCELLANEOUS

9.1        No Survival of Representations and Warranties.    The parties hereto agree that the representations and warranties contained in this Agreement shall not survive the Closing hereunder, and none of the parties shall have any liability to each other after the Closing for any breach thereof, provided, however, that for the avoidance of doubt such termination shall not affect any party’s rights under the Plan.

9.2        Expenses.    Except as otherwise provided in this Agreement; each of the Company, Parent and Purchaser shall bear its own expenses incurred in connection with the negotiation and execution of this Agreement and each other agreement, document and instrument contemplated by this Agreement and the consummation of the transactions contemplated hereby.

9.3        Injunctive Relief.    Damages at law may be an inadequate remedy for the breach of any of the covenants, promises and agreements contained in this Agreement, and, accordingly, any party hereto shall be entitled to seek injunctive relief with respect to any such breach, including specific performance of such covenants, promises or agreements or an order enjoining a party from any threatened, or from the continuation of any actual, breach of the covenants, promises or agreements contained in this Agreement. The rights set forth in this Section 9.3 shall be in addition to any other rights which a party hereto may have at law or in equity pursuant to this Agreement.

9.4        Submission to Jurisdiction; Consent to Service of Process.    (a) Without limiting any party’s right to appeal any order of the Bankruptcy Court, (i) the Bankruptcy Court shall retain exclusive jurisdiction to enforce the terms of this Agreement and to decide any claims or disputes which may arise or result from, or be connected with, this Agreement, any breach or default hereunder, or the transactions contemplated hereby, and (ii) any and all proceedings related to the foregoing shall be filed and maintained only in the Bankruptcy Court, and the parties hereby consent to and submit to the jurisdiction and venue of the Bankruptcy Court and shall receive notices at such locations as indicated in Section 9.8 hereof; provided, however, that if the Bankruptcy Case has closed, the parties agree to unconditionally and irrevocably submit to the exclusive jurisdiction of the United States District Court for the Southern District of New York sitting in New York County or the Commercial Division, Civil Branch of the Supreme Court of the State of New York sitting in New York County and any appellate court from any thereof, for the resolution of any such claim or dispute. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute brought in such court or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a

46

judgment in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

   (b)        Each of the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action or proceeding by delivery of a copy thereof in accordance with the provisions of Section 9.8.

9.5        Waiver of Right to Trial by Jury.    Each party to this Agreement waives any right to trial by jury in any action, matter or proceeding regarding this Agreement or any provision hereof.

9.6        Entire Agreement; Amendments and Waivers.    This Agreement (including the schedules and exhibits hereto) represent the entire understanding and agreement between the parties hereto with respect to the subject matter hereof. This Agreement can be amended, supplemented or changed, and any provision hereof can be waived, only by written instrument making specific reference to this Agreement signed by the party against whom enforcement of any such amendment, supplement, modification or waiver is sought. No action taken pursuant to this Agreement, including any investigation by or on behalf of any party, shall be deemed to constitute a waiver by the party taking such action of compliance with any representation, warranty, covenant or agreement contained herein. The waiver by any party hereto of a breach of any provision of this Agreement shall not operate or be construed as a further or continuing waiver of such breach or as a waiver of any other or subsequent breach. No failure on the part of any party to exercise, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of such right, power or remedy by such party preclude any other or further exercise thereof or the exercise of any other right, power or remedy. All remedies hereunder are cumulative and are not exclusive of any other remedies provided by law.

9.7        Governing Law.    This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and performed in such State.

9.8        Notices.    All notices and other communications under this Agreement shall be in writing and shall be deemed given (i) when delivered personally by hand, (ii) when sent by facsimile (with written confirmation of transmission) or (iii) one Business Day following the day sent by overnight courier (with written confirmation of receipt), in each case at the following addresses and facsimile numbers (or to such other address or facsimile number as a party may have specified by notice given to the other party pursuant to this provision):

   If to the Company, to:

47

   Recycled Paper Greetings, Inc.

   111 N. Canal Street

   Suite 700

   Chicago, Illinois 60606

   Facsimile No. (773) 281-7140

   Attention:  Camille Cleveland, Esq.

       General Counsel

   With a copy (which shall not constitute notice) to:

   Weil, Gotshal & Manges LLP

   767 Fifth Avenue

   New York, NY    10153

   Facsimile No.:    (212) 310-8007

   Attention:  Ted S. Waksman, Esq.

       Michael F. Walsh, Esq.

   If to Purchaser or Parent, to:

   American Greetings Corporation

   One American Road

   Cleveland, Ohio    44144

   Facsimile No.:    (216) 252-6777

   Attention:  Catherine M. Kilbane, Esq.

       General Counsel

   With a copy (which shall not constitute notice) to:

   Jones Day

   222 East 41 ^st Street

   New York, NY 10017

   Facsimile No.: (212) 755-7306

   Attention:   Robert A. Profusek

9.9        Severability.    If any term or other provision of this Agreement is invalid, illegal, or incapable of being enforced by any law or public policy, all other terms or provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

48

9.10        Binding Effect; Assignment.    This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns. Nothing in this Agreement shall create or be deemed to create any third party beneficiary rights in any Person or entity not a party to this Agreement, provided, however, that the First-Lien Debtholders and the Second-Lien Debtholders party to the Undertaking may, if approved by the holders of two-thirds of the outstanding Indebtedness in either such class (excluding Purchaser) enforce the rights to consultation with any respective Professionals specifically set forth in Section 6.2 and the limitations in clause (iii) of Section 3.4(a), solely to the extent set forth in this proviso, are intended third-party beneficiaries of such provision. No assignment or delegation of this Agreement or of any rights or obligations hereunder may be made by either the Company, Parent or Purchaser (by operation of law or otherwise) without the prior written consent of the other parties hereto and any attempted assignment or delegation without the required consents shall be void, provided that Purchaser may assign or delegate some or all of its rights or obligations hereunder to one or more Subsidiaries formed by it prior to the Closing. No assignment or delegation of any obligations hereunder shall relieve the parties hereto of any such obligations. Upon any such permitted assignment or delegation, the references in this Agreement to the Company, Parent or Purchaser shall also apply to any such assignee or delegatee unless the context otherwise requires.

9.11        Non-Recourse.    No past, present or future director, officer, employee or incorporator of the Company, Parent or Purchaser will have any liability for any obligations or liabilities of any party to this Agreement or any Exhibit hereto, such obligations being solely of the parties hereto.

9.12        Counterparts.    This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement.

[SIGNATURE PAGE FOLLOWS]

49

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first written above.

AMERICAN GREETINGS CORPORATION
By:	/s/Zev Weiss
	Name:  Zev Weiss
	Title:     CEO
LAKESHORE TRADING COMPANY
By:	/s/Zev Weiss
	Name:  Zev Weiss
	Title:     CEO
RPG HOLDINGS, INC.
By:	/s/Jude Rake
	Name:  Jude Rake
	Title:     CEO
RECYCLED PAPER GREETINGS, INC.
By:	/s/Jude Rake
	Name:  Jude Rake
	Title:     CEO
The Petition Date:
January 2, 2009

The Registrant will furnish supplementally to the Commission copies of any omitted Schedule or Exhibit to this Agreement upon the Commission’s request.

EX-4.(V)

Exhibit 4(v)

FIRST SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this “First Supplemental Indenture”), dated as of February 24, 2009, between American Greetings Corporation, an Ohio corporation (the “Issuer”) and The Bank of Nova Scotia Trust Company of New York, as trustee under the Original Indenture referred to below (the “Trustee”).

W I T N E S S E T H :

WHEREAS, the Issuer and the Trustee entered into that certain Indenture, dated as of May 24, 2006 (the “Original Indenture”), providing for the issuance by the Issuer of its 7 3/8% Senior Notes due 2016 (the “Notes”);

WHEREAS, pursuant to Section 8.01 of the Original Indenture, the Issuer and the Trustee may enter into supplemental indentures to establish the form or terms of a series of Additional Notes issued pursuant to the Indenture;

WHEREAS, pursuant to Section 2.02 of the Original Indenture, the aggregate principal amount of the Notes may be increased by the issuing of Additional Notes in an unlimited aggregate principal amount, so long as permitted by the terms of the Original Indenture; and

WHEREAS, the Issuer and the Trustee have duly authorized the execution and delivery of this First Supplemental Indenture to provide for the issuance of the Additional Notes as set forth herein and have done all things necessary to make this First Supplemental Indenture (together with the Original Indenture, the “Indenture”) a valid agreement of the parties hereto, in accordance with its terms;

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Issuer and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

1.        Definitions.

  Capitalized terms used herein without definition shall have the meanings assigned to them in the Original Indenture or in the form of Note attached as Exhibit A to the Original Indenture.

  For all purposes of this First Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words “herein,” “hereof” and “hereby” and other words of similar import used in this First Supplemental Indenture refer to this First Supplemental Indenture as a whole and not to any particular section hereof.

2.        Additional Notes.  Subject to Section 2.02 of the Original Indenture, the Trustee shall authenticate the Additional Notes for original issuance on the date of this First Supplemental Indenture in the aggregate principal amount of $21,993,000. The Additional Notes shall be treated as a single series with the $200,000,000 aggregate principal amount of Notes initially issued under the

- 1 -

Indenture and shall have the same terms and rank equally and ratably with the Notes in all respects, except for the interest accrued prior to the issue date of the Additional Notes. The Additional Notes shall be substantially in the form set forth in Exhibit A to the Original Indenture.

3.        Ratification of Original Indenture; Supplemental Indentures Part of Original Indenture.  Except as expressly amended hereby, the Original Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This First Supplemental Indenture shall form a part of the Original Indenture for all purposes, and every Holder heretofore or hereafter authenticated and delivered shall be bound hereby.

4.        Governing Law.  THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

5.        Trustee Makes No Representation.  The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this First Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Issuer.

6.        Multiple Counterparts.  The parties may sign multiple counterparts of this First Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement.

7.        Headings.  The headings of this First Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

[Remainder of page intentionally left blank; signature page follows.]

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IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be duly executed as of the date and year first above written.

AMERICAN GREETINGS CORPORATION
By:	/s/Stephen J. Smith
	Name: Stephen J. Smith
	Title:   Senior Vice President and
	Chief Financial Officer
THE BANK OF NOVA SCOTIA TRUST             COMPANY OF NEW YORK               as Trustee
By:	/s/Warren A. Goshine
	Name: Warren A. Goshine
	Title:   Vice President

[Signature Page to First Supplemental Indenture]

EX-4.(VI)

Exhibit 4(vi)

AMERICAN GREETINGS CORPORATION

as Issuer,

and

THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK

as Trustee

INDENTURE

Dated as of February 24, 2009

7 3/8% Notes due 2016

CROSS-REFERENCE TABLE¹

TIA Section	Indenture   Section
310(a)(1)	7.10
(a)(2)	7.10
(a)(3)	N.A.
(a)(4)	N.A
(b)	7.08; 7.10; 12.02
(b)(1)	7.10
(b)(9)	7.10
(c)	N.A.
311(a)	7.11
(b)	7.11
(c)	N.A.
312(a)	2.05
(b)	11.03
(c)	11.03
313(a)	7.06
(b)(1)	7.06
(b)(2)	7.06
(c)	7.06; 12.02
(d)	7.06
314(a)	4.02; 4.08; 12.02
(b)	N.A.
(c)(1)	12.04; 12.05
(c)(2)	12.04; 12.05
(c)(3)	N.A.
(d)	N.A.
(e)	12.05
(f)	N.A.
315(a)	7.01; 7.02
(b)	7.05; 12.02
(c)	7.01
(d)	6.05; 7.01; 7.02
(e)	6.11
316(a) (last sentence)	2.09
(a)(1)(A)	6.05
(a)(1)(B)	6.04
(a)(2)	8.02
(b)	6.07
(c)	8.04
317(a)(1)	6.08
(a)(2)	6.09
(b)	2.04
318(a)	12.01
1           to be updated

N.A. means Not Applicable

NOTE:  This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture.

TABLE OF CONTENTS

		Page
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01.	DEFINITIONS.	1
SECTION 1.02.	INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.	26
SECTION 1.03.	RULES OF CONSTRUCTION.	26
ARTICLE 2 THE NOTES
SECTION 2.01.	FORM AND DATING.	27
SECTION 2.02.	EXECUTION AND AUTHENTICATION.	27
SECTION 2.03.	REGISTRAR AND PAYING AGENT.	28
SECTION 2.04.	PAYING AGENT TO HOLD ASSETS IN TRUST.	28
SECTION 2.05.	NOTEHOLDER LISTS.	29
SECTION 2.06.	TRANSFER AND EXCHANGE.	29
SECTION 2.07.	REPLACEMENT NOTES.	29
SECTION 2.08.	OUTSTANDING NOTES.	30
SECTION 2.09.	TREASURY NOTES.	30
SECTION 2.10.	TEMPORARY NOTES.	30
SECTION 2.11.	CANCELLATION.	30
SECTION 2.12.	DEFAULTED INTEREST.	31
SECTION 2.13.	DEPOSIT OF MONEYS.	31
SECTION 2.14.	CUSIP NUMBER.	31
SECTION 2.15.	BOOK-ENTRY PROVISIONS FOR GLOBAL NOTES.	32
SECTION 2.16.	REGISTRATION OF TRANSFERS AND EXCHANGES.	32
SECTION 2.17.	LEGENDS.	34
ARTICLE 3
REDEMPTION
SECTION 3.01.	NOTICES TO TRUSTEE.	34
SECTION 3.02.	SELECTION OF NOTES TO BE REDEEMED.	34
SECTION 3.03.	NOTICE OF REDEMPTION.	35
SECTION 3.04.	EFFECT OF NOTICE OF REDEMPTION.	36
SECTION 3.05.	DEPOSIT OF REDEMPTION PRICE.	36
SECTION 3.06.	NOTES REDEEMED IN PART.	36
ARTICLE 4
COVENANTS
SECTION 4.01.	PAYMENT OF NOTES.	36

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		Page
SECTION 4.02.	REPORTS TO HOLDERS.	37
SECTION 4.03.	WAIVER OF STAY, EXTENSION OR USURY LAWS.	37
SECTION 4.04.	COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT; TAX INFORMATION.	38
SECTION 4.05.	PAYMENT OF TAXES AND OTHER CLAIMS.	38
SECTION 4.06.	CORPORATE EXISTENCE.	39
SECTION 4.07.	MAINTENANCE OF OFFICE OR AGENCY.	39
SECTION 4.08.	COMPLIANCE WITH LAWS.	39
SECTION 4.09.	MAINTENANCE OF PROPERTIES AND INSURANCE.	40
SECTION 4.10.	LIMITATIONS ON ADDITIONAL INDEBTEDNESS.	40
SECTION 4.11.	LIMITATIONS ON RESTRICTED PAYMENTS.	42
SECTION 4.12.	LIMITATIONS ON ASSET SALES.	44
SECTION 4.13.	LIMITATIONS ON TRANSACTIONS WITH AFFILIATES.	48
SECTION 4.14.	LIMITATION ON LIENS.	49
SECTION 4.15.	CHANGE OF CONTROL.	50
SECTION 4.16.	LIMITATIONS ON DIVIDEND AND OTHER RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES.	52
SECTION 4.17.	LIMITATIONS ON SALE AND LEASEBACK TRANSACTIONS.	53
SECTION 4.18.	LIMITATIONS ON DESIGNATION OF UNRESTRICTED SUBSIDIARIES.	53
SECTION 4.19.	ADDITIONAL NOTE GUARANTEES.	54
SECTION 4.20.	COVENANT TERMINATION.	55
ARTICLE 5
SUCCESSOR CORPORATION
SECTION 5.01.	LIMITATIONS ON MERGERS, CONSOLIDATIONS, ETC.	55
SECTION 5.02.	SUCCESSOR PERSON SUBSTITUTED.	56
ARTICLE 6
DEFAULTS AND REMEDIES
SECTION 6.01.	EVENTS OF DEFAULT.	56
SECTION 6.02.	ACCELERATION.	58
SECTION 6.03.	OTHER REMEDIES.	58
SECTION 6.04.	WAIVER OF PAST DEFAULTS AND EVENTS OF DEFAULT.	59
SECTION 6.05.	CONTROL BY MAJORITY.	59
SECTION 6.06.	LIMITATION ON SUITS.	59
SECTION 6.07.	RIGHTS OF HOLDERS TO RECEIVE PAYMENT.	60
SECTION 6.08.	COLLECTION SUIT BY TRUSTEE.	60
SECTION 6.09.	TRUSTEE MAY FILE PROOFS OF CLAIM.	60
SECTION 6.10.	PRIORITIES.	61
SECTION 6.11.	UNDERTAKING FOR COSTS.	61

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		Page
ARTICLE 7
TRUSTEE
SECTION 7.01.	DUTIES OF TRUSTEE.	61
SECTION 7.02.	RIGHTS OF TRUSTEE.	63
SECTION 7.03.	INDIVIDUAL RIGHTS OF TRUSTEE.	64
SECTION 7.04.	TRUSTEE’S DISCLAIMER.	64
SECTION 7.05.	NOTICE OF DEFAULTS.	64
SECTION 7.06.	REPORTS BY TRUSTEE TO HOLDERS.	64
SECTION 7.07.	COMPENSATION AND INDEMNITY.	65
SECTION 7.08.	REPLACEMENT OF TRUSTEE.	65
SECTION 7.09.	SUCCESSOR TRUSTEE BY CONSOLIDATION, MERGER OR CONVERSION.	66
SECTION 7.10.	ELIGIBILITY; DISQUALIFICATION.	66
SECTION 7.11.	PREFERENTIAL COLLECTION OF CLAIMS AGAINST THE ISSUER.	67
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 8.01.	WITHOUT CONSENT OF HOLDERS.	67
SECTION 8.02.	WITH CONSENT OF HOLDERS.	68
SECTION 8.03.	COMPLIANCE WITH TIA.	69
SECTION 8.04.	REVOCATION AND EFFECT OF CONSENTS.	69
SECTION 8.05.	NOTATION ON OR EXCHANGE OF NOTES.	69
SECTION 8.06.	TRUSTEE TO SIGN AMENDMENTS, ETC.	70
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 9.01.	SATISFACTION AND DISCHARGE OF INDENTURE.	70
SECTION 9.02.	LEGAL DEFEASANCE.	71
SECTION 9.03.	COVENANT DEFEASANCE.	71
SECTION 9.04.	CONDITIONS TO LEGAL DEFEASANCE OR COVENANT DEFEASANCE.	72
SECTION 9.05.	APPLICATION OF TRUST MONEY.	73
SECTION 9.06.	REPAYMENT TO THE ISSUER.	74
SECTION 9.07.	REINSTATEMENT.	74
ARTICLE 10
SUBORDINATION
SECTION 10.01.	NOTES SUBORDINATED TO THE CREDIT AGREEMENT.	74
SECTION 10.02.	NO PAYMENT ON NOTES IN CERTAIN CIRCUMSTANCES.	75

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		Page
SECTION 10.03.	PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.	76
SECTION 10.04.	PAYMENTS MAY BE PAID PRIOR TO DISSOLUTION.	77
SECTION 10.05.	SUBROGATION.	77
SECTION 10.06.	OBLIGATIONS OF THE ISSUER UNCONDITIONAL.	78
SECTION 10.07.	NOTICE TO TRUSTEE.	78
SECTION 10.08.	RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.	78
SECTION 10.09.	TRUSTEE’S RELATION TO THE SENIOR CREDITORS.	79
SECTION 10.10.	SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR OMISSIONS OF THE ISSUER OR SENIOR CREDITORS.	79
SECTION 10.11.	NOTEHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE SUBORDINATION OF NOTES.	79
SECTION 10.12.	THIS ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT.	80
SECTION 10.13.	TRUSTEE’S COMPENSATION NOT PREJUDICED.	80
SECTION 10.14.	SUBORDINATION OF GUARANTORS.	80
ARTICLE 11
GUARANTEES
SECTION 11.01.	UNCONDITIONAL GUARANTEE.	80
SECTION 11.02.	SEVERABILITY.	81
SECTION 11.03.	LIMITATION ON GUARANTOR’S LIABILITY.	81
SECTION 11.04.	SUCCESSORS AND ASSIGNS.	81
SECTION 11.05.	NO WAIVER.	82
SECTION 11.06.	RELEASE OF GUARANTOR.	82
SECTION 11.07.	EXECUTION OF SUPPLEMENTAL INDENTURE FOR FUTURE GUARANTORS.	82
SECTION 11.08.	NOTATION OF NOTE GUARANTEE.	83
SECTION 11.09.	SUBORDINATION OF SUBROGATION AND OTHER RIGHTS.	83
ARTICLE 12
MISCELLANEOUS
SECTION 12.01.	TIA CONTROLS.	83
SECTION 12.02.	NOTICES.	83
SECTION 12.03.	COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.	84
SECTION 12.04.	CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.	84
SECTION 12.05.	STATEMENTS REQUIRED IN CERTIFICATE AND OPINION.	85
SECTION 12.06.	RULES BY TRUSTEE AND AGENTS.	85
SECTION 12.07.	LEGAL HOLIDAYS.	85
SECTION 12.08.	GOVERNING LAW.	85
SECTION 12.09.	NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.	85
SECTION 12.10.	NO RECOURSE AGAINST OTHERS.	86
SECTION 12.11.	SUCCESSORS.	86
SECTION 12.12.	CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES.	86
SECTION 12.13.	MULTIPLE COUNTERPARTS.	86

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		Page
SECTION 12.14.	TABLE OF CONTENTS, HEADINGS, ETC.	86
SECTION 12.15.	SEPARABILITY.	86
Signatures		S-1
EXHIBITS
Exhibit A	Form of Note	A-1
Exhibit B	Form of Supplemental Indenture	B-1

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INDENTURE, dated as of February 24, 2009, among American Greetings Corporation, an Ohio corporation (the “Issuer”) and The Bank of Nova Scotia Trust Company of New York, a trust company organized and existing under the laws of the State of New York, as trustee (the “Trustee”).

The Issuer has duly authorized the creation of an issue of 7 3/8% Notes due 2016 (the “Initial Notes”) and, to provide therefor, the Issuer has duly authorized the execution and delivery of this Indenture. All things necessary to make the Notes, when duly issued and executed by the Issuer, and authenticated and delivered hereunder, the valid obligations of the Issuer, and to make this Indenture a valid and binding agreement of the Issuer in accordance with their and its terms, have been done.

Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders:

ARTICLE 1

DEFINITIONS AND INCORPORATION BY REFERENCE

Section 1.01.         Definitions.

“Acceleration Notice” has the meaning given such term in Section 6.02 of this Indenture.

“Acquired Indebtedness” means (1) with respect to any Person that becomes a Restricted Subsidiary after the Issue Date, Indebtedness of such Person and its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary that was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary and (2) with respect to the Issuer or any Restricted Subsidiary, any Indebtedness of a Person (other than the Issuer or a Restricted Subsidiary) existing at the time such Person is merged with or into the Issuer or a Restricted Subsidiary, or Indebtedness expressly assumed by the Issuer or any Restricted Subsidiary in connection with the acquisition of an asset or assets from another Person, which Indebtedness was not, in any case, incurred by such other Person in connection with, or in contemplation of, such merger or acquisition.

“Affiliate” of any Person means any other Person which directly or indirectly controls or is controlled by, or is under direct or indirect common control with, the referent Person. For purposes of this definition, “control” of a Person shall mean the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise. No Person (other than the Issuer or any Subsidiary of the Issuer) in whom a Receivables Subsidiary makes an Investment in connection with a Qualified Receivables Transaction will be deemed to be an Affiliate of the Issuer or any of its Subsidiaries solely by reason of such Investment.

“Agent” means any Registrar, Paying Agent, co-Registrar, Authenticating Agent or agent for services of notices and demands.

“amend” means to amend, supplement, restate, amend and restate or otherwise modify, including successively, and “amendment” shall have a correlative meaning.

“Applicable Premium” means, with respect to a Note at any Redemption Date, the greater of:

(1)        1.0% of the principal amount of such Note; and

(2)        the excess of:

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(A)        the present value at such Redemption Date of (i) the redemption price of such Note on June 1, 2011 (such redemption price being that described above, plus (ii) all required remaining scheduled interest payments due on such Note through June 1, 2011, other than accrued interest to such redemption date, computed using a discount rate equal to the Treasury Rate plus 50 basis points per annum discounted on a semi-annual bond equivalent basis, over

(B)        the principal amount of such Note on such Redemption Date.

Calculation of the Applicable Premium shall be made by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate; provided, however, that such calculation shall not be a duty or obligation of the Trustee.

“asset” means any asset or property.

“Asset Acquisition” means:

(1)        an Investment by the Issuer or any Restricted Subsidiary of the Issuer in any other Person if, as a result of such Investment, such Person shall become a Restricted Subsidiary of the Issuer, or shall be merged with or into the Issuer or any Restricted Subsidiary of the Issuer, or

(2)        the acquisition by the Issuer or any Restricted Subsidiary of the Issuer of all or substantially all of the assets of any other Person or any division or line of business of any other Person.

“Asset Sale” means any sale, issuance, conveyance, transfer, lease, assignment or other disposition by the Issuer or any Restricted Subsidiary to any Person other than the Issuer or any Restricted Subsidiary (including by means of a Sale and Leaseback Transaction or a merger or consolidation) (collectively, for purposes of this definition, a “transfer”), in one transaction or a series of related transactions, of any assets of the Issuer or any of its Restricted Subsidiaries other than in the ordinary course of business. For purposes of this definition, the term “Asset Sale” shall not include:

(1)        transfers of cash or Cash Equivalents;

(2)        transfers of assets (including Equity Interests) that are governed by, and made in accordance with, Article 5 of this Indenture;

(3)        Permitted Investments and Restricted Payments permitted under Section 4.11 of this Indenture;

(4)        the creation of or realization on any Lien permitted under this Indenture;

(5)        transfers of damaged, worn-out or obsolete equipment or assets;

(6)        sales of accounts receivable and related assets of the type specified in the definition of “Qualified Receivables Transaction” to a Receivables Subsidiary for the fair market value thereof;

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(7)        transfers of accounts receivable and related assets of the type specified in the definition of “Qualified Receivables Transaction” (or a fractional undivided interest therein) by a Receivables Subsidiary in a Qualified Receivables Transaction;

(8)        sales or grants of licenses or sublicenses to use the trademarks, copyrights, patents, trade secrets, know-how and other Intellectual Property, and licenses, leases or subleases of other assets, of the Issuer or any Restricted Subsidiary;

(9)        sales of inventory in the ordinary course of business; and

(10)      any transfer or series of related transfers that, but for this clause, would be Asset Sales if, after giving effect to such transfers, the aggregate Fair Market Value of the assets transferred in such transaction or any such series of related transactions does not exceed $5.0 million.

“Attributable Indebtedness”, when used with respect to any Sale and Leaseback Transaction, means, as at the time of determination, the present value (discounted at a rate borne by the Notes, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such Sale and Leaseback Transaction.

“Bankruptcy Law” means Title 11 of the United States Code, as amended, or any similar federal or state law for the relief of debtors.

“Blockage Period” has the meaning given to such term in Section 10.02 of this Indenture.

“Board of Directors” means, with respect to any Person, (i) in the case of any corporation, the board of directors of such Person, (ii) in the case of any limited liability company, the board of managers of such Person, (iii) in the case of any partnership, the Board of Directors of the general partner of such Person and (iv) in any other case, the functional equivalent of the foregoing or, in each case, other than for purposes of the definition of “Change of Control,” any duly authorized committee of such body.

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

“Business Day” means a day other than a Saturday, Sunday or other day on which banking institutions in New York are authorized or required by law to close.

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

“Capitalized Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under a Capitalized Lease, and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP.

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“Cash Equivalents” means:

(1)        securities issued or directly and fully guaranteed or insured by the United States of America or any agency or instrumentality thereof (provided that the full faith and credit of the United States of America is pledged in support thereof) having maturities of not more than one year from the date of acquisition;

(2)        U.S. dollar denominated time deposits, certificates of deposit and bankers’ acceptances of (x) any lender under the Credit Agreement, (y) any domestic commercial bank of recognized standing having capital and surplus in excess of $500,000,000 or (z) any bank (or the parent company of such bank) whose short-term commercial paper rating from S&P is at least A-1, A-2 or the equivalent thereof or from Moody’s is at least P-1, P-2 or the equivalent thereof (any such bank, an “Approved Bank”), in each case with maturities of not more than six months from the date of acquisition;

(3)        commercial paper issued by any lender under the Credit Agreement or Approved Bank or by the parent company of any lender under the Credit Agreement or Approved Bank and commercial paper issued by, or guaranteed by, any industrial or financial company with a short-term commercial paper rating of at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent thereof by Moody’s, or guaranteed by any industrial company with a long-term unsecured debt rating of at least A or A2, or the equivalent of each thereof, from S&P or Moody’s, as the case may be, and in each case maturing within 180 days after the date of acquisition;

(4)        fully collateralized repurchase agreements entered into with any lender under the Credit Agreement or Approved Bank having a term of not more than 30 days and covering securities described in clause (1) above;

(5)        investments in money market funds substantially all the assets of which are compromised of securities of the types described in clauses (1) through (4) above;

(6)        investments in money market funds access to which is provided as part of “sweep” accounts maintained with a lender under the Credit Agreement or an Approved Bank;

(7)        investments in industrial development revenue bonds that (a) “re-set” interest rates not less frequently than quarterly, (b) are entitled to the benefit of a remarketing arrangement with an established broker dealer, and (c) are supported by a direct pay letter of credit covering principal and accrued interest that is issued by an Approved Bank;

(8)        investments in pooled funds or investment accounts consisting of investments of the nature described in the foregoing clause (7);

(9)        investments in auction rate securities that (a) are money market or debt instruments with a long term nominal maturity issued by a municipality or mutual fund company or other similar entity, (b) re-set interest through a “dutch auction” process, and (c) are rated AAA or AA by S&P or the equivalent rating by Moody’s; and

(10)      with respect to any Foreign Subsidiary of the Issuer, the approximate equivalent of any of clauses (1) through (9) above in the jurisdiction in which such Foreign Subsidiary is organized.

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“Certificated Notes” means one or more certificated Notes in registered form.

“Change of Control” means the occurrence of any of the following events:

(1)        the direct or indirect sale, transfer, conveyance or other disposition (other than by way of merger or consolidation or the pledge of assets under any Credit Facility permitted to be incurred under this Indenture ), in one or a series of related transactions, of all or substantially all of the properties or assets of the Issuer and its Restricted Subsidiaries taken as a whole to any “person” (as that term is used in Section 13(d)(3) of the Exchange Act) other than a Permitted Holder or a Related Party of a Permitted Holder; or

(2)        the first day on which a majority of the members of the Board of Directors of the Issuer are not Continuing Directors; or

(3)        the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any “person” (as defined above), other than the Permitted Holders and their Related Parties, becomes the beneficial owner, directly or indirectly, of more than 50% of the Voting Stock of the Issuer, measured by voting power rather than number of shares; or

(4)        the adoption of a plan relating to the liquidation or dissolution of the Issuer.

For purposes of this definition, a Person shall not be deemed to have beneficial ownership of securities subject to a stock purchase agreement, merger agreement or similar agreement until the consummation of the transactions contemplated by such agreement.

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

“Consolidated Amortization Expense” for any period means the amortization expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without duplication, amortization expense with respect to discontinued operations.

“Consolidated Cash Flow” for any period means, without duplication, the sum of the amounts for such period of:

(1)        Consolidated Net Income, plus

(2)        in each case only to the extent (and in the same proportion) deducted in determining Consolidated Net Income and with respect to the portion of Consolidated Net Income attributable to any Restricted Subsidiary only if a corresponding amount would be permitted at the date of determination to be distributed to the Issuer by such Restricted Subsidiary, pursuant to the terms of its charter and all agreements, instruments, judgments, decrees, orders, statutes, rules and governmental regulations applicable to such Restricted Subsidiary or its stockholders,

(a)        Consolidated Income Tax Expense,

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(b)        Consolidated Amortization Expense (but only to the extent not included in Consolidated Interest Expense),

(c)        Consolidated Depreciation Expense,

(d)        Consolidated Interest Expense (including debt issuance costs and financing fees and expenses incurred in connection with the Transactions), and

(e)        all other non-cash items reducing the Consolidated Net Income (excluding any non-cash charge that results in an accrual of a reserve for cash charges in any future period) for such period,

in each case determined on a consolidated basis in accordance with GAAP, minus

(3)        the aggregate amount of all non-cash items, determined on a consolidated basis, to the extent such items increased Consolidated Net Income for such period.

“Consolidated Depreciation Expense” for any period means the depreciation expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without duplication, depreciation expense with respect to discontinued operations.

“Consolidated Income Tax Expense” for any period means the provision for taxes of the Issuer and the Restricted Subsidiaries or any penalty or interest related thereto, determined on a consolidated basis in accordance with GAAP and including, without duplication, provision for taxes with respect to discontinued operations.

“Consolidated Interest Coverage Ratio” means the ratio of Consolidated Cash Flow during the most recent four consecutive full fiscal quarters for which financial statements are available (the “Four-Quarter Period”) ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Interest Coverage Ratio (the “Transaction Date”) to Consolidated Interest Expense for the Four-Quarter Period. For purposes of this definition, Consolidated Cash Flow and Consolidated Interest Expense shall be calculated after giving effect on a pro forma basis for the period of such calculation to:

(1)        the incurrence of any Indebtedness or the issuance of any Preferred Stock of the Issuer or any Restricted Subsidiary (and the application of the proceeds thereof) and any repayment of other Indebtedness or redemption of other Preferred Stock (and the application of the proceeds therefrom) (other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to any revolving credit arrangement) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such incurrence, repayment, issuance or redemption, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four-Quarter Period; and

(2)        any Asset Sale or Asset Acquisition (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of the Issuer or any Restricted Subsidiary (including any Person who becomes a Restricted Subsidiary as a result of such Asset Acquisition) incurring Acquired Indebtedness and also including any Consolidated Cash Flow (including any pro forma expense and cost reductions calculated on a basis consistent

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with Regulation S-X under the Securities Act) associated with any such Asset Acquisition) occurring during the Four-Quarter Period or at any time subsequent to the last day of the Four-Quarter Period and on or prior to the Transaction Date, as if such Asset Sale or Asset Acquisition (including the incurrence of, or assumption or liability for, any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four-Quarter Period.

In calculating Consolidated Interest Expense for purposes of determining the denominator (but not the numerator) of this Consolidated Interest Coverage Ratio:

(1)        interest on outstanding Indebtedness determined on a fluctuating basis as of the Transaction Date and which will continue to be so determined thereafter shall be deemed to have accrued at a fixed rate per annum equal to the rate of interest on such Indebtedness in effect on the Transaction Date;

(2)        if interest on any Indebtedness actually incurred on the Transaction Date may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rates, then the interest rate in effect on the Transaction Date will be deemed to have been in effect during the Four-Quarter Period; and

(3)        notwithstanding clause (1) or (2) above, interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Hedging Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of these agreements.

“Consolidated Interest Expense” for any period means the sum, without duplication, of the total interest expense of the Issuer and the Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP and including, without duplication,

(1)        imputed interest on Capitalized Lease Obligations and Attributable Indebtedness,

(2)        commissions, discounts and other fees and charges owed with respect to letters of credit securing financial obligations, bankers’ acceptance financing and receivables financings,

(3)        the net costs associated with Hedging Obligations related to interest rates,

(4)        amortization of debt issuance costs, debt discount or premium and other financing fees and expenses (other than debt issuance costs and other financing fees and expenses incurred in connection with the Transactions),

(5)        the interest portion of any deferred payment obligations,

(6)        all other non-cash interest expense,

(7)        capitalized interest,

(8)        the product of (a) all dividend payments on any series of Disqualified Equity Interests of the Issuer or any Preferred Stock of any Restricted Subsidiary (other than any such Disqualified Equity Interests or any Preferred Stock held by the Issuer or a Wholly-Owned Restricted Subsidiary or to the extent paid in Qualified Equity Interests), multiplied by (b) a fraction, the numerator of which is one and the denominator of which is one minus the then

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current combined federal, state and local statutory tax rate of the Issuer and the Restricted Subsidiaries, expressed as a decimal,

(9)        all interest payable with respect to discontinued operations, and

(10)      all interest on any Indebtedness described in clause (7) or (8) of the definition of Indebtedness.

“Consolidated Net Income” for any period means the net income (or loss) of the Issuer and the Restricted Subsidiaries for such period determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded from such net income (to the extent otherwise included therein), without duplication:

(1)        the net income (or loss) of any Person (other than a Restricted Subsidiary) in which any Person other than the Issuer and the Restricted Subsidiaries has an ownership interest, except to the extent that cash in an amount equal to any such income has actually been received by the Issuer or any of its Wholly-Owned Restricted Subsidiaries during such period;

(2)        except to the extent includible in the consolidated net income of the Issuer pursuant to the foregoing clause (1), the net income (or loss) of any Person that accrued prior to the date that (a) such Person becomes a Restricted Subsidiary or is merged into or consolidated with the Issuer or any Restricted Subsidiary or (b) the assets of such Person are acquired by the Issuer or any Restricted Subsidiary;

(3)        the net income of any Restricted Subsidiary during such period to the extent that the declaration or payment of dividends or similar distributions by such Restricted Subsidiary of that income is not permitted by operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable to that Subsidiary during such period, except that the Issuer’s equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining Consolidated Net Income;

(4)        for the purposes of calculating the Restricted Payments Basket only, in the case of a successor to the Issuer by consolidation, merger or transfer of its assets, any income (or loss) of the successor prior to such merger, consolidation or transfer of assets;

(5)        other than for purposes of calculating the Restricted Payments Basket, any gain (or loss), together with any related provisions for taxes on any such gain (or the tax effect of any such loss), realized during such period by the Issuer or any Restricted Subsidiary upon (a) the acquisition of any securities, or the extinguishment of any Indebtedness, of the Issuer or any Restricted Subsidiary or (b) any Asset Sale by the Issuer or any Restricted Subsidiary;

(6)        gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP;

(7)        unrealized gains and losses with respect to Hedging Obligations;

(8)        the cumulative effect of any change in accounting principles; and

(9)        other than for purposes of calculating the Restricted Payments Basket, any extraordinary or nonrecurring gain (or extraordinary or nonrecurring loss), together with any

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related provision for taxes on any such extraordinary or nonrecurring gain (or the tax effect of any such extraordinary or nonrecurring loss), realized by the Issuer or any Restricted Subsidiary during such period.

In addition any return of capital with respect to an Investment that increased the Restricted Payments Basket pursuant to clause (3)(d) of Section 4.11(a) of this Indenture or decreased the amount of Investments outstanding pursuant to clause (12) of the definition of “Permitted Investments” shall be excluded from Consolidated Net Income for purposes of calculating the Restricted Payments Basket.

For purposes of this definition of “Consolidated Net Income,” “nonrecurring” means any gain or loss as of any date that is not reasonably likely to recur within the two years following such date; provided that if there was a gain or loss similar to such gain or loss within the two years preceding such date, such gain or loss shall not be deemed nonrecurring.

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Issuer who: (1) was a member of such Board of Directors on the Reference Date; or (2) was nominated for election or elected to such Board of Directors with the approval of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election.

“Corporate Trust Office” means the office of the Trustee at which at any particular time its corporate trust business shall be principally administered, which office at the date of execution of this Indenture is located at One Liberty Plaza, 23rd Floor, New York, NY 10006 or such other office designated in writing by the Trustee.

“Coverage Ratio Exception” has the meaning set forth in the proviso in Section 4.10(a) of this Indenture.

“Credit Agreement” means the Credit Agreement dated April 4, 2006 by and among the Issuer, as Borrower, the foreign subsidiary borrowers party thereto, National City Bank, as global agent, National City Bank and UBS Securities LLC, as lead arrangers and UBS Securities LLC, as syndication agent, and the other agents and lenders named therein, including any notes, guarantees, collateral and security documents, instruments and agreements executed in connection therewith (including Hedging Obligations related to the Indebtedness incurred thereunder), and in each case as amended, as amended and restated, as modified, or as refinanced from time to time and whether with the same or any other agents, lender or group of lenders.

“Credit Agreement Obligations” means “Obligations”, as defined in the Credit Agreement and any Obligations owing by the Issuer or any Subsidiary of the Issuer under “Designated Hedge Agreements”, as defined in the Credit Agreement.

“Credit Facilities” means one or more debt facilities (which may be outstanding at the same time and including, without limitation, the Credit Agreement, but excluding any Qualified Receivables Transaction that may be outstanding at any time) providing for revolving credit loans, term loans or letters of credit and, in each case, as such agreements may be amended, refinanced or otherwise restructured, in whole or in part from time to time (including increasing the amount of available borrowings thereunder or adding Subsidiaries of the Issuer as additional borrowers or guarantors thereunder) with respect to all or any portion of the Indebtedness under such agreement or agreements or

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any successor or replacement agreement or agreements and whether by the same or any other agent, lender or group of lenders.

“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

“Default” means (1) any Event of Default or (2) any event, act or condition that, after notice or the passage of time or both, would be an Event of Default.

“Default Notice” has the meaning given to such term in Section 10.02 of this Indenture.

“Depository” means, with respect to the Notes issued in the form of one or more Global Notes, The Depository Trust Company or another Person designated as Depository by the Issuer, which Person must be a clearing agency registered under the Exchange Act.

“Designation” has the meaning given to this term described under Section 4.18 of this Indenture.

“Designation Amount” has the meaning given to this term described under Section 4.18 of this Indenture.

“Disqualified Equity Interests” of any Person means any class of Equity Interests of such Person that, by its terms, or by the terms of any related agreement or of any security into which it is convertible, puttable or exchangeable, is, or upon the happening of any event or the passage of time would be, required to be redeemed by such Person, whether or not at the option of the holder thereof, or matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, in whole or in part, on or prior to the date which is 91 days after the final maturity date of the Notes; provided, however, that any class of Equity Interests of such Person that, by its terms, authorizes such Person to satisfy in full its obligations with respect to the payment of dividends or upon maturity, redemption (pursuant to a sinking fund or otherwise) or repurchase thereof or otherwise by the delivery of Equity Interests that are not Disqualified Equity Interests, and that is not convertible, puttable or exchangeable for Disqualified Equity Interests or Indebtedness, will not be deemed to be Disqualified Equity Interests so long as such Person satisfies its obligations with respect thereto solely by the delivery of Equity Interests that are not Disqualified Equity Interests; provided, further, however, that any Equity Interests that would not constitute Disqualified Equity Interests but for provisions thereof giving holders thereof (or the holders of any security into or for which such Equity Interests are convertible, exchangeable or exercisable) the right to require the Issuer to redeem such Equity Interests upon the occurrence of a change in control or an asset sale occurring prior to the 91st day after the final maturity date of the Notes shall not constitute Disqualified Equity Interests if the change of control or asset sale provisions applicable to such Equity Interests are no more favorable to such holders than the provisions described under Sections 4.15 and 4.12 of this Indenture, respectively, and such Equity Interests specifically provide that the Issuer will not redeem any such Equity Interests pursuant to such provisions prior to the Issuer’s purchase of the Notes as required pursuant to the provisions described under Sections 4.15 and 4.12 of this Indenture, respectively.

“Equity Interests” of any Person means (1) any and all shares or other equity interests (including common stock, preferred stock, limited liability company interests and partnership interests) in such Person and (2) all rights to purchase, warrants or options (whether or not currently exercisable), participations or other equivalents of or interests in (however designated) such shares or other interests in such Person.

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“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

“Fair Market Value” means, with respect to any asset, the price (after taking into account any liabilities relating to such assets) that would be negotiated in an arm’s-length transaction for cash between a willing seller and a willing and able buyer, neither of which is under any compulsion to complete the transaction, as such price is determined in good faith by the Board of Directors of the Issuer or a duly authorized committee thereof, as evidenced by a resolution of such Board or committee.

“Foreign Subsidiary” means any Restricted Subsidiary of the Issuer which (i) is not organized under the laws of (x) the United States or any state thereof or (y) the District of Columbia and (ii) conducts substantially all of its business operations outside the United States of America.

“GAAP” means generally accepted accounting principles in the United States, as in effect on the Reference Date.

“guarantee” means a direct or indirect guarantee by any Person of any Indebtedness of any other Person and includes any obligation, direct or indirect, contingent or otherwise, of such Person (1) to purchase or pay (or advance or supply funds for the purchase or payment of) Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services (unless such purchase arrangements are on arm’s-length terms and are entered into in the ordinary course of business), to take-or-pay, or to maintain financial statement conditions or otherwise); or (2) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); “guarantee,” when used as a verb, and “guaranteed” have correlative meanings.

“Guarantors” means each Person that is required to, or at the election of the Issuer does, become a Guarantor by the terms of this Indenture after the Issue Date, in each case, until such Person is released from its Note Guarantee in accordance with the terms of this Indenture.

“Hatchery” means The Hatchery, LLC, a Delaware limited liability company.

“Hedging Obligations” of any Person means the net obligations of such Person under swap, cap, collar, forward purchase or similar agreements or arrangements dealing with interest rates, currency exchange rates or commodity prices, either generally or under specific contingencies.

“Holder” means any registered holder, from time to time, of the Notes.

“incur” means, with respect to any Indebtedness or Obligation, incur, create, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to such Indebtedness or Obligation; provided that (1) the Indebtedness of a Person existing at the time such Person became a Restricted Subsidiary shall be deemed to have been incurred by such Restricted Subsidiary and (2) neither the accrual of interest nor the accretion of original issue discount or the accretion or accumulation of dividends on any Equity Interests shall be deemed to be an incurrence of Indebtedness.

“Indebtedness” of any Person at any date means, without duplication:

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(1)        all liabilities, contingent or otherwise, of such Person for borrowed money (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof);

(2)        all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3)        all reimbursement obligations of such Person in respect of letters of credit, letters of guaranty, bankers’ acceptances and similar credit transactions;

(4)        all obligations of such Person to pay the deferred and unpaid purchase price of property or services, except trade payables, obligations to pay royalty fees or other payments under license agreements and accrued expenses incurred by such Person in the ordinary course of business in connection with obtaining goods, materials or services;

(5)        the maximum fixed redemption or repurchase price of all Disqualified Equity Interests of such Person;

(6)        all Capitalized Lease Obligations of such Person;

(7)        all Indebtedness of others secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person;

(8)        all Indebtedness of others guaranteed by such Person to the extent of such guarantee; provided that Indebtedness of the Issuer or its Subsidiaries that is guaranteed by the Issuer or the Issuer’s Subsidiaries shall only be counted once in the calculation of the amount of Indebtedness of the Issuer and its Subsidiaries on a consolidated basis;

(9)        all Attributable Indebtedness;

(10)      to the extent not otherwise included in this definition, Hedging Obligations of such Person; and

(11)      all obligations of such Person under conditional sale or other title retention agreements relating to assets purchased by such Person.

The amount of any Indebtedness which is incurred at a discount to the principal amount at maturity thereof as of any date shall be deemed to have been incurred at the accreted value thereof as of such date. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above, the maximum liability of such Person for any such contingent obligations at such date and, in the case of clause (7), the lesser of (a) the Fair Market Value of any asset subject to a Lien securing the Indebtedness of others on the date that the Lien attaches and (b) the amount of the Indebtedness secured. For purposes of clause (5), the “maximum fixed redemption or repurchase price” of any Disqualified Equity Interests that do not have a fixed redemption or repurchase price shall be calculated in accordance with the terms of such Disqualified Equity Interests as if such Disqualified Equity Interests were redeemed or repurchased on any date on which an amount of Indebtedness outstanding shall be required to be determined pursuant to this Indenture.

“Indenture” means this Indenture as amended, restated or supplemented from time to time.

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“Independent Director” means a director of the Issuer who:

(1)        is independent with respect to the transaction at issue;

(2)        does not have any material financial interest in the Issuer or any of its Affiliates (other than as a result of holding securities of the Issuer); and

(3)        has not and whose Affiliates or affiliated firm has not, at any time during the twelve months prior to the taking of any action hereunder, directly or indirectly, received, or entered into any understanding or agreement to receive, any compensation, payment or other benefit, of any type or form, from the Issuer or any of its Affiliates, other than customary directors’ fees for serving on the Board of Directors of the Issuer or any Affiliate and reimbursement of out-of-pocket expenses for attendance at the Issuer’s or Affiliate’s board and board committee meetings (provided that a director of the Issuer that otherwise meets the independence requirements of the New York Stock Exchange, as determined in the good faith judgment of the Issuer’s Board of Directors, shall not be disqualified from being an “Independent Director” solely as a result of this clause (3)).

“Independent Financial Advisor” means an accounting, appraisal or investment banking firm of nationally recognized standing that is, in the reasonable judgment of the Issuer’s Board of Directors, qualified to perform the task for which it has been engaged and disinterested and independent with respect to the Issuer and its Affiliates.

“interest” means, with respect to the Notes, interest on the Notes.

“Initial Notes” has the meaning provided in the preamble to this Indenture.

“Intellectual Property” means all patents, patent applications, trademarks, trade names, service marks, copyrights, technology, trade secrets, proprietary information, domain names, know how and processes necessary for the conduct of the Issuer’s or any Restricted Subsidiary’s business as currently conducted.

“Interest Payment Date” means the stated maturity of an installment of interest on the Notes.

“Investment Grade Rating” means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB- (or the equivalent) by S&P.

“Investment Grade Status” shall be deemed to have been reached on the date that the Notes have an Investment Grade Rating from both Rating Agencies, provided that no Default or Event of Default has occurred and is continuing on such date.

“Investments” of any Person means:

(1)        all direct or indirect investments by such Person in any other Person in the form of loans, advances or capital contributions or other credit extensions constituting Indebtedness of such other Person, and any guarantee of Indebtedness of any other Person;

(2)        all purchases (or other acquisitions for consideration) by such Person of Indebtedness, Equity Interests or other securities of any other Person (other than any such

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purchase that constitutes a Restricted Payment of the type described in clause (2) of the definition thereof);

(3)        all other items that would be classified as investments on a balance sheet of such Person prepared in accordance with GAAP (including, if required by GAAP, purchases of assets outside the ordinary course of business); and

(4)        the Designation of any Subsidiary as an Unrestricted Subsidiary.

Except as otherwise expressly specified in this definition, the amount of any Investment (other than an Investment made in cash) shall be the Fair Market Value thereof on the date such Investment is made. The amount of Investment pursuant to clause (4) shall be the Designation Amount determined in accordance with Section 4.18 of this Indenture. If the Issuer or any Restricted Subsidiary sells or otherwise disposes of any Equity Interests of any Restricted Subsidiary, or any Restricted Subsidiary issues any Equity Interests, in either case, such that, after giving effect to any such sale or disposition, such Person is no longer a Subsidiary, the Issuer shall be deemed to have made an Investment on the date of any such sale or other disposition equal to the Fair Market Value of the Equity Interests of and all other Investments in such Restricted Subsidiary retained. Notwithstanding the foregoing, purchases or redemptions of Equity Interests of the Issuer shall be deemed not to be Investments.

“Issue Date” means February 24, 2009, the date on which the Initial Notes are originally issued.

“Lenders” means the lenders from time to time party to the Credit Agreement.

“Lien” means, with respect to any asset, any mortgage, deed of trust, lien (statutory or other), pledge, lease, easement, restriction, covenant, charge, security interest or other encumbrance of any kind or nature in respect of such asset, whether or not filed, recorded or otherwise perfected under applicable law, including any conditional sale or other title retention agreement.

“Maturity Date” means June 1, 2016.

“Moody’s” means Moody’s Investors Service, Inc., and its successors.

“Net Available Proceeds” means, with respect to any Asset Sale, the proceeds thereof in the form of cash or Cash Equivalents, net of:

(1)        brokerage commissions and other fees and expenses (including fees, discounts and expenses of legal counsel, accountants and investment banks, consultants and placement agents) of such Asset Sale;

(2)        provisions for taxes payable as a result of such Asset Sale (after taking into account any available tax credits or deductions and any tax sharing arrangements);

(3)        amounts required to be paid to any Person (other than the Issuer or any Restricted Subsidiary and other than under a Credit Facility) owning a beneficial interest in the assets subject to the Asset Sale or having a Lien thereon;

(4)        payments of unassumed liabilities (not constituting Indebtedness) relating to the assets sold at the time of, or within 30 days after the date of, such Asset Sale; and

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(5)        appropriate amounts to be provided by the Issuer or any Restricted Subsidiary, as the case may be, as a reserve required in accordance with GAAP against any adjustment in the sale price of such asset or assets or liabilities associated with such Asset Sale and retained by the Issuer or any Restricted Subsidiary, as the case may be, after such Asset Sale, including pensions and other postemployment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale, all as reflected in an Officers’ Certificate delivered to the Trustee; provided, however, that any amounts remaining after adjustments, revaluations or liquidations of such reserves shall constitute Net Available Proceeds.

“Net Leverage Ratio” means the ratio of (a) pro forma consolidated Indebtedness of the Issuer and its Restricted Subsidiaries less unrestricted cash and Cash Equivalents of the Issuer and its Restricted Subsidiaries at the date of the transaction giving rise to the need to calculate the Net Leverage Ratio to (b) Consolidated Cash Flow for the Four Quarter Period; provided, however, that for the purposes of this definition of “Net Leverage Ratio,” the expenses incurred through the end of fiscal year 2008 related to the “Win at Cards” initiative and scan-based trading arrangements of the Issuer and its Restricted Subsidiaries shall, without duplication, be added back to Consolidated Cash Flow to the extent deducted in determining Consolidated Net Income.

“Non-Recourse Debt” means Indebtedness of an Unrestricted Subsidiary:

(1)        as to which neither the Issuer nor any Restricted Subsidiary (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable as a guarantor or otherwise, or (c) constitutes the lender; and

(2)        no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness (other than the Credit Agreement or Notes) of the Issuer or any Restricted Subsidiary to declare a default on the other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity.

“Note Guarantee” means the guarantee by each Guarantor of the obligations of the Issuer with respect to the Notes.

“Notes” means the Initial Notes and any Additional Notes treated as a single class of securities, as amended or supplemented from time to time in accordance with the terms hereof, that are issued pursuant to this Indenture.

“Obligation” means any principal, interest, penalties, fees, indemnification, reimbursements, costs, expenses, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means any of the following of the Issuer: the Chairman of the Board of Directors, the Chief Executive Officer, the Chief Financial Officer, the President, any Senior Vice President or Vice President, the Treasurer, the Assistant Treasurer, the Secretary or the Assistant Secretary.

“Officers’ Certificate” means a certificate signed by two Officers.

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“Opinion of Counsel” means a written opinion delivered to the Trustee from legal counsel who may be counsel for the Issuer and who is reasonably acceptable to the Trustee complying with the requirements of this Indenture.

“Pari Passu Indebtedness” means any Indebtedness of the Issuer or any Guarantor that ranks pari passu in right of payment with the Notes or the Note Guarantees, as applicable, including the 7 3/8% Senior Notes and guarantees thereof.

“Permitted Business” means the businesses engaged in by the Issuer and its Subsidiaries on the Reference Date as described in the prospectus supplement dated May 19, 2006, relating to the 7 3/8% Senior Notes and businesses that are reasonably related thereto or reasonable extensions thereof.

“Permitted Holders” mean Morry Weiss, Judith S. Weiss, Harry H. Stone, Gary Weiss, Jeffrey Weiss, Zev Weiss, Elie Weiss, the Irving I. Stone Limited Liability Co., The Irving Stone Irrevocable Trust originally dated April 21, 1947, as amended, the Irving I. Stone Oversight Trust, the Irving Stone Support Foundation, The Irving I. Stone Foundation, the 540 Investment Company Limited Partnership and the American Greetings Corporation Retirement Profit Sharing and Savings Plan or any Person controlled by, or any successor Person to, any of the foregoing.

“Permitted Indebtedness” has the meaning given to such term in Section 4.10(b) of this Indenture.

“Permitted Investment” means:

(1)        Investments by the Issuer or any Restricted Subsidiary in (a) any Restricted Subsidiary or (b) in any Person that will become immediately after such Investment a Restricted Subsidiary or that will merge or consolidate into the Issuer or a Restricted Subsidiary;

(2)        Investments in the Issuer by any Restricted Subsidiary;

(3)        loans and advances to directors, employees and officers of the Issuer and the Restricted Subsidiaries for bona fide business purposes and to purchase Equity Interests of the Issuer not in excess of $5.0 million in aggregate principal amount at any one time outstanding;

(4)        Hedging Obligations entered into for bona fide hedging purposes of the Issuer or any Restricted Subsidiary not for the purpose of speculation;

(5)        cash and Cash Equivalents;

(6)        receivables owing to the Issuer or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Issuer or any such Restricted Subsidiary deems reasonable under the circumstances;

(7)        Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

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(8)        the Indebtedness of a Receivables Subsidiary to the Issuer or a Restricted Subsidiary and Indebtedness of a Restricted Subsidiary to the Issuer, in each case, in connection with a Qualified Receivables Transaction;

(9)        Investments made by the Issuer or any Restricted Subsidiary as a result of consideration received in connection with an Asset Sale made in compliance with Section 4.12 of this Indenture;

(10)      lease, utility and other similar deposits in the ordinary course of business;

(11)      Investments made by the Issuer or a Restricted Subsidiary for consideration consisting only of Qualified Equity Interests of the Issuer;

(12)      stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Issuer or any Restricted Subsidiary or in satisfaction of judgments;

(13)      the acquisition by a Receivables Subsidiary in connection with a Qualified Receivables Transaction of Equity Interests of a trust or other Person established by such Receivables Subsidiary to effect such Qualified Receivables Transaction; and any other Investment by the Issuer or a Subsidiary of the Issuer in a Receivables Subsidiary or any Investment by a Receivables Subsidiary in any other Person in connection with a Qualified Receivables Transaction; provided, that such other Investment is in the form of a note or other instrument that the Receivables Subsidiary or other Person is required to repay as soon as practicable from available cash collections less amounts required to be established as reserves pursuant to contractual agreements with entities that are not Affiliates of the Issuer entered into as part of a Qualified Receivables Transaction; and

(14)      other Investments in an aggregate amount not to exceed $50.0 million at any one time outstanding (with each Investment being valued as of the date made and without regard to subsequent changes in value); provided that no Investment made in reliance on this clause (14) shall be made in any Person that is the direct or indirect holder of a majority of the outstanding Equity Interests of the Issuer.

The amount of Investments outstanding at any time pursuant to clause (14) above shall be deemed to be reduced:

(a)        upon the disposition or repayment of or return on any Investment made pursuant to clause (14) above, by an amount equal to the return of capital with respect to such Investment to the Issuer or any Restricted Subsidiary (to the extent not included in the computation of Consolidated Net Income); and

(b)        upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, by an amount equal to the lesser of (x) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (y) the aggregate amount of Investments in such Subsidiary that increased (and did not previously decrease) the amount of Investments outstanding pursuant to clause (14) above.

“Permitted Junior Securities” means unsecured debt or Equity Interests of the Issuer or any Guarantor or any successor corporation issued pursuant to a plan of reorganization or readjustment of

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the Issuer or any Guarantor, as applicable, that are subordinated to the payment of all then outstanding Credit Agreement Obligations of the Issuer or any Guarantor, as applicable (and any debt securities issued in exchange for such Credit Agreement Obligations), at least to the same extent that the Notes and the related Guarantee are subordinated to the payment of all Credit Agreement Obligations of the Issuer or any Guarantor, as applicable, on the Issue Date, so long as to the extent that any Credit Agreement Obligations of the Issuer or any Guarantor, as applicable, outstanding on the date of consummation of any such plan of reorganization or readjustment are not paid in full in cash on such date, the holders of any such Credit Agreement Obligations not so paid in full in cash have consented to the terms of such plan of reorganization or readjustment.

“Permitted Liens” means the following types of Liens:

(1)        Liens for taxes, assessments or governmental charges or claims either (a) not delinquent or (b) contested in good faith by appropriate proceedings and as to which the Issuer or the Restricted Subsidiaries shall have set aside on its books such reserves as may be required pursuant to GAAP;

(2)        statutory Liens of landlords and Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and other Liens imposed by law incurred in the ordinary course of business for sums not yet delinquent or being contested in good faith, if such reserve or other appropriate provision, if any, as shall be required by GAAP shall have been made in respect thereof;

(3)        Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money);

(4)        Liens upon specific items of inventory or other goods and proceeds of any Person securing such Person’s obligations in respect of bankers’ acceptances issued or created for the account of such Person to facilitate the purchase, shipment or storage of such inventory or other goods and Liens upon inventory on consignment incurred by the consignee or in connection with any scan-based trading arrangements by the retail customer thereof;

(5)        judgment Liens not giving rise to a Default so long as such Liens are adequately bonded and any appropriate legal proceedings which may have been duly initiated for the review of such judgment have not been finally terminated or the period within which the proceedings may be initiated has not expired;

(6)        easements, rights-of-way, zoning restrictions and other similar charges, restrictions or encumbrances in respect of real property or immaterial imperfections of title which do not, in the aggregate, impair in any material respect the ordinary conduct of the business of the Issuer and the Restricted Subsidiaries taken as a whole;

(7)        Liens securing reimbursement obligations with respect to commercial letters of credit which encumber documents and other assets relating to such letters of credit and products and proceeds thereof;

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(8)        Liens encumbering deposits made to secure obligations arising from statutory, regulatory, contractual or warranty requirements of the Issuer or any Restricted Subsidiary, including rights of offset and setoff;

(9)        bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by the Issuer or any Restricted Subsidiary, in each case granted in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness;

(10)      leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Issuer or any Restricted Subsidiary;

(11)      Liens arising from filing Uniform Commercial Code financing statements regarding leases;

(12)      Liens securing all of the Notes and Liens securing any Note Guarantee;

(13)      Liens securing Hedging Obligations entered into for bona fide hedging purposes of the Issuer or any Restricted Subsidiary and not for the purpose of speculation;

(14)      Liens existing on the Issue Date securing Indebtedness outstanding on the Issue Date;

(15)      Liens in favor of the Issuer or a Guarantor;

(16)      Liens securing Indebtedness under the Credit Facilities in an aggregate principal amount at any time outstanding not to exceed $650.0 million;

(17)      Liens securing Purchase Money Indebtedness and Capitalized Lease Obligations; provided that such Liens shall not extend to any asset other than the specified asset being financed and additions and improvements thereon;

(18)      Liens securing Acquired Indebtedness permitted to be incurred under this Indenture; provided that the Liens do not extend to assets not subject to such Lien at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than those securing such Acquired Indebtedness prior to the incurrence of such Acquired Indebtedness by the Issuer or a Restricted Subsidiary;

(19)      Liens on assets of a Person existing at the time such Person is acquired or merged with or into or consolidated with the Issuer or any such Restricted Subsidiary (and not created in anticipation or contemplation thereof);

(20)      Liens on assets of Foreign Subsidiaries securing Indebtedness of Foreign Subsidiaries;

(21)      Liens to secure Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (12), (14), (16), (17), (18) and (19); provided that in the case

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of Liens securing Refinancing Indebtedness of Indebtedness secured by Liens referred to in the foregoing clauses (14), (17), (18) and (19), such Liens do not extend to any additional assets (other than improvements thereon and replacements thereof);

(22)      Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods;

(23)      Liens on assets of the Issuer, a Restricted Subsidiary or a Receivables Subsidiary incurred in connection with a Qualified Receivables Transaction; and

(24)      Liens incurred in the ordinary course of business of the Issuer or any Restricted Subsidiary with respect to obligations (other than Indebtedness) that do not in the aggregate exceed $25.0 million at any one time outstanding.

“Person” means any individual, corporation, partnership, limited liability company, joint venture, incorporated or unincorporated association, joint-stock company, trust, unincorporated organization or government or other agency or political subdivision thereof or other entity of any kind.

“Plan of Liquidation” with respect to any Person, means a plan that provides for, contemplates or the effectuation of which is preceded or accompanied by (whether or not substantially contemporaneously, in phases or otherwise): (1) the sale, lease, conveyance or other disposition of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety; and (2) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance or other disposition of all or substantially all of the remaining assets of such Person to holders of Equity Interests of such Person.

“Preferred Stock” means, with respect to any Person, any and all preferred or preference stock or other equity interests (however designated) of such Person whether now outstanding or issued after the Issue Date.

“principal” means, with respect to the Notes, the principal of, and premium, if any, on the Notes.

“Publicly Traded Securities” mean any equity securities listed on a national securities exchange of a Person with a publicly traded market capitalization of not less than $1.0 billion that are freely transferable without any restriction under the Securities Act; provided that the Issuer and its Subsidiaries own less than 5% of the Equity Interests in such Person after giving effect to such Asset Sale.

“Purchase Money Indebtedness” means Indebtedness, including Capitalized Lease Obligations, of the Issuer or any Restricted Subsidiary incurred for the purpose of financing all or any part of the purchase price of property, plant or equipment used in the business of the Issuer or any Restricted Subsidiary or the cost of installation, construction or improvement thereof; provided, however, that (1) the amount of such Indebtedness shall not exceed such purchase price or cost and (2) such Indebtedness shall be incurred within 90 days after such acquisition of such asset by the Issuer or such Restricted Subsidiary or such installation, construction or improvement.

“Qualified Equity Interests” of any Person means Equity Interests of such Person other than Disqualified Equity Interests; provided that such Equity Interests shall not be deemed Qualified Equity Interests to the extent sold or owed to a Subsidiary of such Person or financed, directly or

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indirectly, using funds (1) borrowed from such Person or any Subsidiary of such Person until and to the extent such borrowing is repaid or (2) contributed, extended, guaranteed or advanced by such Person or any Subsidiary of such Person (including, without limitation, in respect of any employee stock ownership or benefit plan). Unless otherwise specified, Qualified Equity Interests refer to Qualified Equity Interests of the Issuer.

“Qualified Equity Offering” means the issuance and sale of Qualified Equity Interests of the Issuer to Persons other than any Permitted Holder.

“Qualified Receivables Transaction” means any transaction or series of transactions entered into by the Issuer or any of its Subsidiaries pursuant to which the Issuer or any of its Subsidiaries sells, conveys or otherwise transfers (directly or through the Issuer or a Restricted Subsidiary) to (i) a Receivables Subsidiary (in the case of a transfer by the Issuer or any of its Subsidiaries) and (ii) any other Person (in the case of a transfer by a Receivables Subsidiary), or grants a security interest in, any accounts receivable (whether now existing or arising in the future) of the Issuer or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable.

“Rating Agencies” means Moody’s Investors Service, Inc. and Standard & Poor’s Ratings Services, a division of the McGraw Hill Companies, Inc.

“Receivables Subsidiary” means a Subsidiary of the Issuer which engages in no activities other than in connection with the financing of accounts receivable and which is designated by the Board of Directors of the Issuer (as provided below) as a Receivables Subsidiary (a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) is guaranteed by the Issuer or any Subsidiary of the Issuer (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction), (ii) is recourse to or obligates the Issuer or any Subsidiary of the Issuer in any way other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction or (iii) subjects any property or asset of the Issuer or any Subsidiary of the Issuer (other than accounts receivable and related assets as provided in the definition of “Qualified Receivables Transaction”), directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to representations, warranties, covenants and indemnities entered into in the ordinary course of business in connection with a Qualified Receivables Transaction, (b) with which neither the Issuer nor any Subsidiary of the Issuer has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Issuer or such Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Issuer, other than fees payable in the ordinary course of business in connection with servicing accounts receivable and (c) with which neither the Issuer nor any Subsidiary of the Issuer has any obligation to maintain or preserve such Subsidiary’s financial condition or cause such Subsidiary to achieve certain levels of operating results. Any such designation by the Board of Directors of the Issuer shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Issuer giving effect to such designation and an officers’ certificate certifying that such designation complied with the foregoing conditions.

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“Record Date” for interest payable on any Interest Payment Date (except a date for payment of default interest) means the May 15 and November 15 (whether or not a Business Day) as the case may be, immediately preceding such Interest Payment Date.

“redeem” means to redeem, repurchase, purchase, defease, retire, discharge or otherwise acquire or retire for value; and “redemption” shall have a correlative meaning; provided that this definition shall not apply for purposes of paragraph 6 of the Notes.

“Redemption Date” when used with respect to any Note to be redeemed means the date fixed for such redemption pursuant to this Indenture.

“Redemption Price” when used with respect to any Note to be redeemed means the price fixed for such redemption pursuant to this Indenture and the Notes.

“Redesignation” has the meaning given to such term described under Section 4.18 of this Indenture.

“Reference Date” means May 24, 2006.

“refinance” means to refinance, repay, prepay, replace, renew or refund.

“Refinancing Indebtedness” means Indebtedness of the Issuer or a Restricted Subsidiary incurred in exchange for, or the proceeds of which are used to redeem or refinance in whole or in part, any Indebtedness of the Issuer or any Restricted Subsidiary (the “Refinanced Indebtedness”); provided that:

(1)        the principal amount (and accreted value, in the case of Indebtedness issued at a discount) of the Refinancing Indebtedness does not exceed the principal amount (and accreted value, as the case may be) of the Refinanced Indebtedness plus the amount of accrued and unpaid interest on the Refinanced Indebtedness, any reasonable premium paid to the holders of the Refinanced Indebtedness and reasonable expenses incurred in connection with the incurrence of the Refinancing Indebtedness;

(2)        the obligor of Refinancing Indebtedness does not include any Person (other than the Issuer or any Guarantor) that is not an obligor of the Refinanced Indebtedness;

(3)        if the Refinanced Indebtedness was subordinated in right of payment to the Notes or the Note Guarantees, as the case may be, then such Refinancing Indebtedness, by its terms, is subordinate in right of payment to the Notes or the Note Guarantees, as the case may be, at least to the same extent as the Refinanced Indebtedness;

(4)        the Refinancing Indebtedness has a final stated maturity either (a) no earlier than the Refinanced Indebtedness being repaid or amended or (b) after the maturity date of the Notes;

(5)        the portion, if any, of the Refinancing Indebtedness that is scheduled to mature on or prior to the maturity date of the Notes has a Weighted Average Life to Maturity at the time such Refinancing Indebtedness is incurred that is equal to or greater than the Weighted Average Life to Maturity of the portion of the Refinanced Indebtedness being repaid that is scheduled to mature on or prior to the maturity date of the Notes; and

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(6)        the proceeds of the Refinancing Indebtedness shall be used substantially concurrently with the incurrence thereof to redeem or refinance the Refinanced Indebtedness, unless the Refinanced Indebtedness is not then due and is not redeemable or prepayable at the option of the obligor thereof or is redeemable or prepayable only with notice, in which case such proceeds shall be held in a segregated account of the obligor of the Refinanced Indebtedness until the Refinanced Indebtedness becomes due or redeemable or prepayable or such notice period lapses and then shall be used to refinance the Refinanced Indebtedness; provided that in any event the Refinanced Indebtedness shall be redeemed or refinanced within one year of the incurrence of the Refinancing Indebtedness.

“Related Party” means (i) any controlling stockholder, 80% (or more) owned Subsidiary, or immediate family member (in the case of an individual) of any Permitted Holder, or (ii) any trust, corporation, partnership or other entity the beneficiaries, stockholders, partners, owners or Persons beneficially holding an 80% or more controlling interest of which consist of any one or more Permitted Holders and/or such other Persons referred to in the immediately preceding clause (i).

“Representative” means the agent or representative of the Lenders under the Credit Agreement, provided that if, and for so long as, the Lenders lack such a representative, then the Representative shall at all times constitute the holders of a majority in outstanding principal amount of the Obligations due and owing under the Credit Agreement.

“Restricted Payment” means any of the following:

(1)        the declaration or payment of any dividend or any other distribution on Equity Interests of the Issuer or any Restricted Subsidiary or any payment made to the direct or indirect holders (in their capacities as such) of Equity Interests of the Issuer or any Restricted Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding (a) dividends or distributions payable solely in Qualified Equity Interests or through accretion or accumulation of such dividends on such Equity Interests and (b) in the case of Restricted Subsidiaries, dividends or distributions payable to the Issuer or to a Restricted Subsidiary and pro rata dividends or distributions payable to minority stockholders of any Restricted Subsidiary;

(2)        the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary, including, without limitation, any payment in connection with any merger or consolidation involving the Issuer but excluding any such Equity Interests held by the Issuer or any Restricted Subsidiary; or

(3)        any Investment other than a Permitted Investment.

“Restricted Payments Basket” has the meaning given to such term in Section 4.11(a) of this Indenture.

“Restricted Subsidiary” means any Subsidiary of the Issuer other than an Unrestricted Subsidiary.

“Rule 144A” means Rule 144A promulgated under the Securities Act.

“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc., and its successors.

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“Sale and Leaseback Transactions” means with respect to any Person an arrangement with any bank, insurance company or other lender or investor or to which such lender or investor is a party, providing for the leasing by such Person of any asset of such Person which has been or is being sold or transferred by such Person to such lender or investor or to any Person to whom funds have been or are to be advanced by such lender or investor on the security of such asset, but excluding any such arrangements between or among (a) the Issuer and one or more Restricted Subsidiaries and (b) Restricted Subsidiaries.

“Secretary’s Certificate” means a certificate signed by the Secretary of the Issuer.

“Securities Act” means the U.S. Securities Act of 1933, as amended.

“Senior Creditors” means the holders of the Credit Agreement Obligations, including, without limitation, the Lenders and the Representative.

“7 3/8% Senior Notes” means the $200,000,000 in aggregate principal amount of 7 3/8% Senior Notes Due 2016 issued by the Issuer on the Reference Date pursuant to the Indenture dated May 24, 2006 (as said indenture may be supplemented or otherwise modified, the “Senior Notes Indenture”).

“Significant Subsidiary” means (1) any Restricted Subsidiary that would be a “significant subsidiary” as defined in Regulation S-X promulgated pursuant to the Securities Act as such Regulation is in effect on the Reference Date and (2) any Restricted Subsidiary that, when aggregated with all other Restricted Subsidiaries that are not otherwise Significant Subsidiaries and as to which any event described in clause (g) or (h) of Section 6.01 of this Indenture has occurred and is continuing, or which are being released from their Guarantees (in the case of clause (9) of the provisions of Section 8.01, would constitute a Significant Subsidiary under clause (1) of this definition.

“Subsidiary” means, with respect to any Person:

(1)        any corporation, limited liability company, association or other business entity of which more than 50% of the total voting power of the Equity Interests entitled (without regard to the occurrence of any contingency) to vote in the election of the Board of Directors thereof is at the time owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of such Person (or a combination thereof); and

(2)        any partnership (a) the sole general partner or the managing general partner of which is such Person or a Subsidiary of such Person or (b) the only general partners of which are such Person or of one or more Subsidiaries of such Person (or any combination thereof).

Unless otherwise specified, “Subsidiary” refers to a Subsidiary of the Issuer.

“Subsidiary Guarantor” means any Guarantor that is a Subsidiary.

“Transactions” means (i) the Issuer’s share repurchase program for repurchases of up to an additional $150.0 million of Equity Interests, (ii) the redemption, exchange, repayment and net share settlement of the Issuer’s 7.0% Convertible Subordinated Notes due 2006 and its new 7.0% Convertible Subordinated Notes due 2006, (iii) the purchase by the Issuer of any notes issued by the Issuer pursuant to the Indenture dated July 27, 1998 and the amendment of such Indenture in connection therewith; (iv) the transactions related to the execution and delivery of the Credit Agreement on April 4, 2006 by the Issuer; (v) the reduction of the availability under the Issuer’s accounts receivable securitization agreement from

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$200.0 million to $150.0 million and related modifications thereto; and (vi) the issuance by the Issuer of the 7 3/8% Senior Notes pursuant to the Senior Notes Indenture.

“Treasury Rate” means, with respect to a Redemption Date, the yield to maturity at the time of computation of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15(519) that has become publicly available at least two Business Days prior to such Redemption Date (or, if such Statistical Release is no longer published, any publicly available source of similar market data)) most nearly equal to the period from such Redemption Date to June 1, 2011; provided, however, that if the period from such Redemption Date to June 1, 2011 is not equal to the constant maturity of a United States Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of United States Treasury securities for which such yields are given, except that if the period from such Redemption Date to June 1, 2011 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year shall be used.

“Trust Indenture Act” or “TIA” means the Trust Indenture Act of 1939, as amended.

“Trust Officer” means, when used with respect to the Trustee, any officer of the Trustee located at the Corporate Trust Office of the Trustee who has direct responsibility for the administration of this Indenture and, for the purposes of Sections 7.01(c)(2) and 7.05, also means, with respect to a particular corporate trust matter, any other officer, trust officer or person performing similar functions to whom such matter is referred because of his or her knowledge of and familiarity of the particular subject.

“Trustee” means the party named as such in this Indenture until a successor replaces it pursuant to this Indenture and thereafter means the successor.

“Unrestricted Subsidiary” means (1) any Subsidiary that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors of the Issuer in accordance with Section 4.18 of this Indenture and (2) any Subsidiary of an Unrestricted Subsidiary. As of the Issue Date, the Hatchery will be an Unrestricted Subsidiary.

“U.S. Government Obligations” means direct non-callable obligations of, or guaranteed by, the United States of America for the payment of which guarantee or obligations the full faith and credit of the United States is pledged.

“Voting Stock” with respect to any Person, means securities of any class of Equity Interests of such Person entitling the holders thereof (whether at all times or only so long as no senior class of stock or other relevant equity interest has voting power by reason of any contingency) to vote in the election of members of the Board of Directors of such Person.

“Weighted Average Life to Maturity” when applied to any Indebtedness at any date, means the number of years obtained by dividing (1) the sum of the products obtained by multiplying (a) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment by (2) the then outstanding principal amount of such Indebtedness.

“Wholly-Owned Restricted Subsidiary” means a Restricted Subsidiary of which 100% of the Equity Interests (except for directors’ qualifying shares or certain minority interests owned by other

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Persons solely due to local law requirements that there be more than one stockholder, but which interest is not in excess of what is required for such purpose) are owned directly by the Issuer or through one or more Wholly-Owned Restricted Subsidiaries.

Section 1.02.         Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the portion of such provision required to be incorporated herein in order for this Indenture to be qualified under the TIA is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

“indenture securities” means the Notes.

“indenture securityholder” means a Holder.

“indenture to be qualified” means this Indenture.

“indenture trustee” or “institutional trustee” means the Trustee.

“obligor on the indenture securities” means the Issuer, the Guarantors or any other obligor on the Notes.

All other terms used in this Indenture that are defined by the TIA, defined in the TIA by reference to another statute or defined by Commission rule have the meanings therein assigned to them.

Section 1.03.         Rules of Construction.

Unless the context otherwise requires:

(a)        a term has the meaning assigned to it herein, whether defined expressly or by reference;

(b)        an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP;

(c)        “or” is not exclusive;

(d)        words in the singular include the plural, and in the plural include the singular;

(e)        words used herein implying any gender shall apply to every gender; and

(f)        “$”, “U.S. Dollars” and “Dollars” each refers to United States dollars, or such other money of the United States of America that at the time of payment is legal tender for payment of public and private debts.

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ARTICLE 2

THE NOTES

Section 2.01.         Form and Dating.

The Initial Notes and the Trustee’s certificate of authentication shall be substantially in the form of Exhibit A hereto. The Notes may have notations, legends or endorsements required by law, stock exchange rule or Depository rule or usage. The form of the Notes and any notation, legend or endorsement on them shall be satisfactory to both the Issuer and the Trustee. Each Note shall be dated the date of its issuance and shall show the date of its authentication.

The terms and provisions contained in the Notes, annexed hereto as Exhibit A, shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Issuer and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

The Notes shall be issued initially in the form of one or more permanent global Notes (the “Global Notes”) in registered form, substantially in the form set forth in Exhibit A, and shall be deposited with the Trustee, as custodian for the Depository, duly executed by the Issuer and authenticated by the Trustee as hereinafter provided. The aggregate principal amount of any Global Note may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided.

Section 2.02.         Execution and Authentication.

The Notes shall be executed on behalf of the Issuer by two Officers of the Issuer or an Officer and the Secretary of the Issuer. Such signatures may be either manual or facsimile.

If an Officer whose signature is on a Note no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until an authorized signatory of the Trustee signs the certificate of authentication on the Note. Such signature shall be manual. Such signature shall be conclusive evidence that the Note has been authenticated under this Indenture.

The Trustee or an authentication agent (the “Authenticating Agent”) shall authenticate (i) Initial Notes for original issue on the date of this Indenture in the aggregate principal amount not to exceed $32,693,000, and (ii) additional Notes (“Additional Notes”) for original issue following the date of this Indenture in unlimited aggregate principal amount (so long as permitted by the terms of this Indenture, including, without limitation, Section 4.10 hereof) for original issue upon a written order of the Issuer in the form of an Officer’s Certificate in aggregate principal amount as specified in such order. The Officer’s Certificate shall specify the amount of Notes to be authenticated, the date on which the Notes are to be authenticated and the aggregate principal amount of Notes outstanding on the date of authentication, and shall further specify the amount of such Notes to be issued as a Global Note or Certificated Notes. The aggregate principal amount of Notes outstanding at any time may not exceed such amount except as provided in Section 2.07 hereof.

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Notwithstanding the foregoing, all Notes issued under this Indenture shall vote and consent together on all matters (as to which any of such Notes may vote or consent) as one class and no series of Notes will have the right to vote or consent as a separate class on any matter.

The Trustee may appoint an Authenticating Agent to authenticate Notes. Any such appointment shall be evidenced by an instrument signed by a Trust Officer, a copy of which shall be furnished to the Issuer. An Authenticating Agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such Authenticating Agent. An Authenticating Agent has the same right as an Agent to deal with the Issuer and Affiliates of the Issuer.

The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and integral multiples thereof.

Section 2.03.         Registrar and Paying Agent.

The Issuer shall maintain an office or agency where Notes may be presented for registration of transfer or for exchange (“Registrar”), an office or agency located in the Borough of Manhattan, City of New York, State of New York where Notes may be presented for payment (“Paying Agent”) and an office or agency where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Registrar shall provide the Issuer a current copy of such register from time to time upon request of the Issuer. The Issuer may have one or more co-Registrars and one or more additional Paying Agents. Neither the Issuer nor any Affiliate of the Issuer may act as Paying Agent. The Issuer may change any Paying Agent, Registrar or co-Registrar without notice to any Holder.

The Issuer shall enter into an appropriate agency agreement with any Agent not a party to this Indenture. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Issuer shall notify the Trustee of the name and address of any such Agent. If the Issuer fails to maintain a Registrar or Paying Agent, or agent for service of notices and demands, or fails to give the foregoing notice, the Trustee shall act as such. The Issuer initially appoints the Trustee as Registrar, Paying Agent and agent for service of notices and demands in connection with the Notes.

Section 2.04.         Paying Agent To Hold Assets in Trust.

The Issuer shall require each Paying Agent other than the Trustee to agree in writing that each Paying Agent shall hold in trust for the benefit of the Holders or the Trustee all assets held by the Paying Agent for the payment of principal of, premium, if any, or interest on the Notes (whether such assets have been distributed to it by the Issuer or any other obligor on the Notes), and shall notify the Trustee in writing of any Default in making any such payment. The Issuer at any time may require a Paying Agent to distribute all assets held by it to the Trustee and account for any assets disbursed and the Trustee may at any time during the continuance of any Payment Default, upon written request to a Paying Agent, require such Paying Agent to forthwith distribute to the Trustee all assets so held in trust by such Paying Agent together with a complete accounting of such sums. Upon distribution to the Trustee of all assets that shall have been delivered by the Issuer to the Paying Agent, the Paying Agent shall have no further liability for such assets.

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Section 2.05.         Noteholder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of Holders. If the Trustee is not the Registrar, the Issuer shall furnish or cause the Registrar to furnish to the Trustee on or before each April 1 and October 1 in each year, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Holders which list may be conclusively relied on by the Trustee.

Section 2.06.         Transfer and Exchange.

Subject to the provisions of Sections 2.15 and 2.16 hereof, when Notes are presented to the Registrar or a co-Registrar with a request to register the transfer of such Notes or to exchange such Notes for an equal principal amount of Notes of other authorized denominations of the same series, the Registrar or co-Registrar shall register the transfer or make the exchange as requested if its requirements for such transaction are met; provided, however, that the Notes presented or surrendered for registration of transfer or exchange shall be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Issuer and the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing. To permit registrations of transfer and exchanges, the Issuer shall execute and the Trustee shall authenticate Notes at the Registrar’s or co-Registrar’s request. No service charge shall be made for any registration of transfer or exchange, but the Issuer may require payment of a sum sufficient to cover any transfer tax or similar governmental charge in connection therewith payable by the transferor of such Notes (other than any such transfer taxes or similar governmental charge payable upon exchanges or transfers pursuant to Section 2.10, 3.06, 4.12, 4.15 or 9.06 hereof, in which event the Issuer shall be responsible for the payment of such taxes).

Without the prior consent of the Issuer, the Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing, (ii) selected for redemption in whole or in part pursuant to Article 3 hereof, except the unredeemed portion of any Note being redeemed in part, or (iii) between a Record Date and the next succeeding Interest Payment Date.

Any Holder of a Global Note shall, by acceptance of such Global Note, agree that transfers of beneficial interests in such Global Notes may be effected only through a book entry system maintained by the Holder of such Global Note (or its agent), and that ownership of a beneficial interest in the Note shall be required to be reflected in a book entry.

Section 2.07.         Replacement Notes.

If a mutilated Note is surrendered to the Trustee or if the Holder presents evidence to the satisfaction of the Issuer and the Trustee that the Note has been lost, destroyed or wrongfully taken, the Issuer shall issue and the Trustee shall authenticate a replacement Note. An indemnity or a security bond may be required by the Issuer or the Trustee that is sufficient in the judgment of the Issuer and the Trustee to protect the Issuer, the Trustee or any Agent from any loss which any of them may suffer if a Note is replaced. In every case of destruction, loss or theft, the applicant shall also furnish to the Issuer and to the Trustee evidence to their satisfaction of the destruction, loss or the theft of such Note and the ownership thereof. Each of the Issuer and the Trustee may charge for its expenses in replacing a Note. In the event any such mutilated, lost, destroyed or wrongfully taken Note has become due and payable, the Issuer in its discretion may pay such Note instead of issuing a new Note in replacement thereof. The provisions of

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this Section 2.07 are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to replacement or payment of mutilated, lost, destroyed or wrongfully taken Notes.

Every replacement Note is an additional obligation of the Issuer.

Section 2.08.         Outstanding Notes.

Notes outstanding at any time are all Notes authenticated by the Trustee except for those cancelled by it, those delivered to it for cancellation, and those described in this Section 2.08 as not outstanding.

If a Note is replaced pursuant to Section 2.07 hereof (other than a mutilated Note surrendered for replacement), it ceases to be outstanding until the Issuer and the Trustee receive proof satisfactory to each of them that the replaced Note is held by a protected purchaser. A mutilated Note ceases to be outstanding upon surrender of such Note and replacement thereof pursuant to Section 2.07 hereof.

If on a Redemption Date or the Maturity Date, the Paying Agent holds U.S. legal tender sufficient to pay all of the principal and interest due on the Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue.

Section 2.09.         Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any direction, waiver, consent or notice, Notes owned by the Issuer or any of its Affiliates shall be considered as though they are not outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Notes which a Trust Officer of the Trustee actually knows are so owned shall be so considered. The Issuer shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired.

Section 2.10.         Temporary Notes.

Until definitive Notes are ready for delivery, the Issuer may prepare and the Trustee shall authenticate temporary Notes upon receipt of a written order of the Issuer in the form of an Officers’ Certificate. The Officers’ Certificate shall specify the amount of temporary Notes to be authenticated and the date on which the temporary Notes are to be authenticated. Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Issuer considers appropriate for temporary Notes. Without unreasonable delay, the Issuer shall prepare and the Trustee shall authenticate upon receipt of a written order of the Issuer pursuant to Section 2.02 definitive Notes in exchange for temporary Notes.

Section 2.11.         Cancellation.

The Issuer at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent, and no one else, shall cancel and, at the written direction of the Issuer, dispose of and deliver evidence of such disposal of all Notes surrendered for registration of transfer, exchange, payment or

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cancellation in accordance with their then existing procedures therefor. Subject to Section 2.07 hereof, the Issuer may not issue new Notes to replace Notes that it has paid or delivered to the Trustee for cancellation. If the Issuer shall acquire any of the Notes, such acquisition shall not operate as a redemption or satisfaction of the Indebtedness represented by such Notes unless and until the same are surrendered to the Trustee for cancellation pursuant to this Section 2.11. In no event shall the Trustee be required to destroy cancelled Notes.

Section 2.12.         Defaulted Interest.

The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium and interest on overdue interest (including post-petition interest in any proceeding under any Bankruptcy Law), to the extent lawful on demand at a rate that is 2% per annum in excess of the rate then in effect on the Notes.

If the Issuer defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus (to the extent lawful) any interest payable on the defaulted interest to the Persons who are Holders on a subsequent special record date, which date shall be the fifteenth day next preceding the date fixed by the Issuer for the payment of defaulted interest or the next succeeding Business Day if such date is not a Business Day. At least 15 days before the subsequent special record date, the Issuer shall mail to each Holder, as of a recent date selected by the Issuer, with a copy to the Trustee, a notice that states the subsequent special record date, the payment date and the amount of defaulted interest, and interest payable on such defaulted interest, if any, to be paid.

Notwithstanding the foregoing, any interest which is paid prior to the expiration of the 30-day period set forth in Section 6.01(a) hereof shall be paid to Holders as of the Record Date for the Interest Payment Date for which interest has not been paid.

Section 2.13.         Deposit of Moneys.

Prior to 11:00 a.m., New York City time, on each Interest Payment Date, Redemption Date, Change of Control Payment Date, Net Proceeds Payment Date and Maturity Date, the Issuer shall have deposited with the Paying Agent in immediately available funds U.S. legal tender sufficient to make payments, if any, due on such Interest Payment Date, Redemption Date, Change of Control Payment Date, Net Proceeds Payment Date or Maturity Date, as the case may be, in a timely manner which permits the Trustee to remit payment to the Holders on such Interest Payment Date, Redemption Date, Change of Control Payment Date, Net Proceeds Payment Date or Maturity Date, as the case may be. The principal and interest on Global Notes shall be payable to the Depository or its nominee, as the case may be, as the sole registered owner and the sole Holder of the Global Notes represented thereby. The principal and interest on Notes in certificated form shall be payable at the office of the Paying Agent.

Section 2.14.         CUSIP Number.

The Issuer in issuing the Notes may use “CUSIP,” “ISIN” or such other numbers, and if so, the Trustee shall use such CUSIP, ISIN or such other numbers in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP, ISIN or such other numbers printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Issuer shall promptly notify the Trustee of any change in the CUSIP, ISIN or such other number.

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Section 2.15.         Book-Entry Provisions for Global Notes.

(a)        The Global Notes initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Section 2.17 hereof.

Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Indenture with respect to any Global Note held on their behalf by the Depository or under the Global Notes, and the Depository may be treated by the Issuer, the Trustee and any agent of the Issuer or the Trustee as the absolute owner of the Global Notes for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Issuer, the Trustee or any agent of the Issuer or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder.

(b)        Interests of beneficial owners in the Global Notes may be transferred or exchanged for Certificated Notes in accordance with the rules and procedures of the Depository and the provisions of Section 2.16 hereof. In addition, if (i) the Depository (x) notifies the Issuer that it is no longer willing or able to act as Depository for any Global Note or (y) has ceased to be a clearing company registered under the Exchange Act and, in each case, a qualified successor depositary is not appointed by the Issuer within 90 days of such notice or (ii) the Issuer, at its option, notifies the Trustee in writing that it elects to cause the issuance of Certified Notes, then, upon surrender by the relevant Holder of its Global Note, Certified Notes will be issued to each such Holder identified as being the beneficial owner.

(c)        In connection with the transfer of Global Notes as an entirety to beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to be surrendered to the Trustee for cancellation, and the Issuer shall execute, and the Trustee shall, upon receipt of an authentication order from the Issuer in the form of an Officers’ Certificate, authenticate and deliver, to each beneficial owner identified by the Depository in writing in exchange for its beneficial interest in the Global Notes, an equal aggregate principal amount of Certificated Notes of authorized denominations.

(d)        The Holder of any Global Note may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

Section 2.16.         Registration of Transfers and Exchanges.

(a)        Transfer and Exchange of Certificated Notes. When Certificated Notes are presented to the Registrar or co-Registrar with a request:

(1)        to register the transfer of the Certificated Notes; or

(2)        to exchange such Certificated Notes for an equal principal amount of Certificated Notes of other authorized denominations,

the Registrar or co-Registrar shall register the transfer or make the exchange as requested if the requirements under this Indenture as set forth in this Section 2.16 for such transactions are met; provided, however, that the Certificated Notes presented or surrendered for registration of transfer or exchange shall

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be duly endorsed or accompanied by a written instrument of transfer in form satisfactory to the Registrar or co-Registrar, duly executed by the Holder thereof or his attorney duly authorized in writing.

(b)        Restrictions on Transfer of a Certificated Note for a Beneficial Interest in a Global Note. A Certificated Note may not be exchanged for a beneficial interest in a Global Note except upon satisfaction of the requirements set forth below. Upon receipt by the Registrar or co-Registrar of a Certificated Note, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Registrar or co-Registrar, together with written instructions from the Holder thereof directing the Registrar or co-Registrar to make, or to direct the Depository to make, an endorsement on the applicable Global Note to reflect an increase in the aggregate amount of the Notes represented by the Global Note,

then the Registrar or co-Registrar shall cancel such Certificated Note and cause, or direct the Depository to cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or co-Registrar, the principal amount of Notes represented by the Global Note to be increased accordingly.

(c)        Transfer of a Beneficial Interest in a Global Note for a Certificated Note.

(1)        Any Person having a beneficial interest in a Global Note may upon request exchange such beneficial interest for a Certificated Note. Upon receipt by the Registrar or co-Registrar of written instructions, or such other form of instructions as is customary for the Depository, from the Depository or its nominee on behalf of any Person having a beneficial interest in a Global Note and upon receipt by the Trustee of a written order or such other form of instructions as is customary for the Depository or the Person designated by the Depository as having such a beneficial interest containing registration instructions, then the Registrar or co-Registrar will cause, in accordance with the standing instructions and procedures existing between the Depository and the Registrar or co-Registrar, the aggregate principal amount of the applicable Global Note to be reduced and, following such reduction, the Issuer will execute and, upon receipt of an authentication order in the form of an Officers’ Certificate in accordance with Section 2.02 hereof, the Trustee will authenticate and deliver to the transferee a Certificated Note in the appropriate principal amount.

(2)        Certificated Notes issued in exchange for a beneficial interest in a Global Note pursuant to this Section 2.16(c) hereof shall be registered in such names and in such authorized denominations as the Depository, pursuant to instructions from its direct or indirect participants or otherwise, shall instruct the Registrar or co-Registrar in writing. The Registrar or co-Registrar shall deliver such Certificated Notes to the Persons in whose names such Certificated Notes are so registered.

(d)        Restrictions on Transfer and Exchange of Global Notes. Notwithstanding any other provisions of this Indenture, a Global Note may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository.

(e)        General.

None of the Issuer, the Trustee, any agent of the Issuer or the Trustee (including any Paying Agent or Registrar) will have any responsibility or liability for any aspect of the records relating to

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or payments made on account of beneficial ownership interests of a global security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.15 hereof or this Section 2.16. The Issuer shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

Section 2.17.         Legends.

Each Global Note shall bear the following legend:

THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE IN WHOLE OR IN PART FOR NOTES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, AND TRANSFERS OF INTERESTS IN THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION 2.16 OF THE INDENTURE.

ARTICLE 3

REDEMPTION

Section 3.01.         Notices to Trustee.

If the Issuer elects to redeem Notes pursuant to paragraph 6 of the Notes, at least 60 days prior to the Redemption Date or such other period as the Trustee may agree to, the Issuer shall notify the Trustee in writing of the Redemption Date, the principal amount of Notes to be redeemed and the Redemption Price, and deliver to the Trustee an Officers’ Certificate stating that such redemption will comply with the conditions contained herein and in the Notes, as appropriate.

Section 3.02.         Selection of Notes To Be Redeemed.

In the event that less than all of the Notes are to be redeemed at any time, selection of the Notes to be redeemed shall be made by the Trustee in compliance with the requirements of the principal national securities exchange, if any, on which such Notes are listed or, if such Notes are not then listed on a national security exchange, on a pro rata basis, by lot or by such method as the Trustee shall deem fair and appropriate; provided, however, that no Notes of a principal amount of $1,000 or less shall be redeemed in part; provided, further, that if a partial redemption is made with the proceeds of any Qualified Equity Offering, selection of the Notes or portions thereof for redemption shall be made by the

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Trustee only on a pro rata basis or on as nearly a pro rata basis as is practicable (subject to the procedures of the Depository), unless such method is otherwise prohibited. A new Note in a principal amount equal to the unredeemed portion thereof will be issued in the name of the Holder thereof upon delivery of the original Note to the Paying Agent and cancellation of the original Note. On and after the Redemption Date, interest will cease to accrue on Notes or portions thereof called for redemption as long as the Issuer has deposited with the Paying Agent funds in U.S. legal tender in satisfaction of the applicable Redemption Price pursuant to this Indenture.

Section 3.03.         Notice of Redemption.

Notice of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the Redemption Date to each Holder to be redeemed at its registered address, except that redemption notices may be mailed more than 60 days prior to a Redemption Date if the notice is issued in connection with a satisfaction and discharge of this Indenture. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed.

The notice shall identify the Notes to be redeemed (including the CUSIP, ISIN or other number(s) thereof) and shall state:

(1)        the Redemption Date;

(2)        the Redemption Price and the amount of accrued interest, if any, to be paid;

(3)        that, if any Note is being redeemed in part, the portion of the principal amount (equal to $1,000 in principal amount or any integral multiple thereof) of such Note to be redeemed and that, on and after the Redemption Date, upon surrender of such Note, a new Note or Notes in principal amount equal to the unredeemed portion thereof will be issued;

(4)        the name, address and telephone number of the Paying Agent;

(5)        that Notes called for redemption must be surrendered to the Paying Agent at the address specified to collect the Redemption Price plus accrued interest, if any;

(6)        that, unless the Issuer defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders is to receive payment of the Redemption Price plus accrued interest to the Redemption Date upon surrender of the Notes to the Paying Agent;

(7)        the subparagraph of the Notes pursuant to which the Notes called for redemption are being redeemed; and

(8)        if fewer than all the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed and the aggregate principal amount of Notes to be outstanding after such partial redemption.

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Section 3.04.         Effect of Notice of Redemption.

Once the notice of redemption described in Section 3.03 hereof is mailed, Notes called for redemption become due and payable on the Redemption Date and at the Redemption Price, including any premium, plus accrued interest to the Redemption Date, if any. Upon surrender to the Paying Agent, such Notes shall be paid at the Redemption Price, including any premium, plus accrued interest to the Redemption Date, if any; provided that if the Redemption Date is after a Record Date and on or prior to the Interest Payment Date, the accrued interest shall be payable to the Holder of the redeemed Notes registered on the relevant Record Date.

Section 3.05.         Deposit of Redemption Price.

(a)        On or prior to 11:00 a.m., New York City time, on each Redemption Date, the Issuer shall have deposited with the Paying Agent in immediately available funds U.S. legal tender sufficient to pay the Redemption Price of and accrued interest on all Notes to be redeemed on that date.

(b)        On and after any Redemption Date, if U.S. legal tender sufficient to pay the Redemption Price of and accrued interest on Notes called for redemption shall have been made available in accordance with clause (a), the Notes called for redemption will cease to accrue interest and the only right of the Holders of such Notes will be to receive payment of the Redemption Price of and, subject to the first proviso in Section 3.04, accrued and unpaid interest on such Notes to the Redemption Date. If any Note called for redemption shall not be so paid, interest will continue to accrue and be paid, from the Redemption Date until such redemption payment is made, on the unpaid principal of the Note and any interest not paid on such unpaid principal, in each case, at the rate and in the manner provided for in Section 2.12 hereof.

Section 3.06.         Notes Redeemed in Part.

Upon surrender of a Note that is redeemed in part, the Trustee shall authenticate for a Holder a new Note equal in principal amount to the unredeemed portion of the Note surrendered.

ARTICLE 4

COVENANTS

Section 4.01.         Payment of Notes.

The Issuer shall pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture. An installment of principal or interest shall be considered paid on the date it is due if the Trustee or Paying Agent holds, for the benefit of the Holders, on that date U.S. legal tender designated for and sufficient to pay such installment in full and is not prohibited from paying such money to the Holders pursuant to the terms of this Indenture.

The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium and interest on overdue interest (including post-petition interest in any proceeding under any Bankruptcy Law), to the extent lawful as provided for in Section 2.12 hereof on demand at a rate that is 2% per annum in excess of the rate then in effect on the Notes.

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Section 4.02.         Reports to Holders.

Whether or not required by the Commission, so long as any Notes are outstanding, the Issuer shall furnish to the Holders of Notes, or file electronically with the Commission through the Commission’s Electronic Data Gathering, Analysis and Retrieval System (or any successor system), within the time periods that would be applicable to the Issuer under Section 13(a) or 15(d) of the Exchange Act:

(1)        all quarterly and annual financial information that would be required to be contained in a filing with the Commission on Forms 10-Q and 10-K if the Issuer were required to file these Forms, including a “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and, with respect to the annual information only, a report on the annual financial statements by the Issuer’s certified independent accountants; and

(2)        all current reports that would be required to be filed with the Commission on Form 8-K if the Issuer were required to file these reports.

In addition, whether or not required by the Commission, the Issuer shall file a copy of all of the information and reports referred to in clauses (1) and (2) above with the Commission for public availability within the time periods specified in the Commission’s rules and regulations (unless the Commission will not accept the filing) and make the information available to securities analysts and prospective investors upon request. The Issuer and the Guarantors have agreed that, for so long as any Notes remain outstanding, the Issuer will furnish to the Holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

The Issuer shall file with the Trustee promptly after it files such annual and quarterly reports, information, documents and other reports with the Commission, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may by rules and regulations prescribe) which the Issuer is required to file with the Commission pursuant to Section 13 or 15(d) of the Exchange Act. The Issuer also shall comply with the other provisions of TIA Section 314(a).

Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates).

Section 4.03.         Waiver of Stay, Extension or Usury Laws.

The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead (as a defense or otherwise) or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law which would prohibit or forgive the Issuer from paying all or any portion of the principal of, premium, if any, and/or interest on the Notes as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) the Issuer hereby expressly waives all benefit or advantage of any such law, and covenant that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

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Section 4.04.         Compliance Certificate; Notice of Default; Tax Information.

(a)        The Issuer shall deliver to the Trustee, within 90 days after the end of its fiscal year an Officers’ Certificate (one of the signers of which shall be the principal executive officer, principal financial officer, principal accounting officer or treasurer of the Issuer) stating that a review of the activities of the Issuer and its Subsidiaries during such fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Issuer has kept, observed, performed and fulfilled their obligations under this Indenture, and further stating, as to each such Officer signing such certificate, that to the best of his or her knowledge the Issuer has kept, observed, performed and fulfilled each and every covenant contained in this Indenture and is not in default in the performance or observance of any of the terms, provisions and conditions hereof (or, if a Default or Event of Default shall have occurred, describing all or such Defaults or Events of Default of which he or she may have knowledge and what action the Issuer is taking or proposes to take with respect thereto) and that to the best of his or her knowledge no event has occurred and remains in existence by reason of which payments on account of the principal of or interest, if any, on the Notes are prohibited or if such event has occurred, a description of the event and what action the Issuer is taking or proposes to take with respect thereto. The Officers’ Certificate shall also notify the Trustee should the Issuer elect to change the manner in which it fixes its fiscal year end.

(b)        The annual financial statements delivered pursuant to Section 4.02 hereof shall be accompanied by a written report addressed to the Trustee of the Issuer’s independent accountants (who shall be a firm of established national reputation) that in conducting their audit of the financial statements included therein nothing has come to their attention that would lead them to believe that a Default or Event of Default has occurred under this Indenture insofar as they relate to accounting matters or, if any such violation has occurred, specifying the nature and period of existence thereof, it being understood that such accountants shall not be liable directly or indirectly to any Person for any failure to obtain knowledge of any such violation.

(c)        (i) If any Default or Event of Default has occurred and is continuing or (ii) if any Holder seeks to exercise any remedy hereunder with respect to a claimed default under this Indenture or the Notes, the Issuer shall deliver to the Trustee, at its address set forth in Section 12.02 hereof, by registered or certified mail or facsimile transmission followed by hard copy by overnight courier, registered or certified mail, an Officers’ Certificate specifying such Default or Event of Default, notice or other action, the status thereof and what action the Issuer is taking or proposes to take within five Business Days of such Officer’s becoming aware of such occurrence.

(d)        The Issuer, or one of its representatives, agents or employees, shall calculate and deliver to the Trustee all original issue discount information to be reported by the Trustee to Holders as required by applicable law.

Section 4.05.         Payment of Taxes and Other Claims.

The Issuer shall pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (i) all material taxes, assessments and governmental charges (including withholding taxes and any penalties, interest and additions to taxes) levied or imposed upon it or any of its Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful claims for labor, materials and supplies that, if unpaid, might by law become a Lien upon the property of it or any of its Subsidiaries; provided, however, that the Issuer shall not be required to pay or discharge or cause to be paid or

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discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate proceedings properly instituted and diligently conducted for which adequate reserves, to the extent required under GAAP, have been taken.

Section 4.06.         Corporate Existence.

Subject to Article 5 hereof, the Issuer shall do or cause to be done all things necessary to preserve and keep in full force and effect (i) its corporate existence, and the corporate, partnership or limited liability company or other existence of each Subsidiary, in accordance with the respective organizational documents (as the same may be amended from time to time) of each Subsidiary and (ii) the material rights (charter and statutory), licenses and franchises of the Issuer and its Subsidiaries except where the failure to preserve and keep in full force and effect any such rights, licenses and franchise shall not have a material adverse effect on the financial condition, business, operations or prospects of the Issuer and its Subsidiaries taken as a whole; and provided that the Issuer shall not be required to preserve any such right, license or franchise, or the corporate, limited liability company, partnership or other existence of any of its Subsidiaries, if the Board of Directors of the Issuer shall determine that the preservation thereof is no longer desirable in the conduct of the business of the Issuer and its Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any material respect to the rights of the Holders under this Indenture or the Notes.

Section 4.07.         Maintenance of Office or Agency.

The Issuer shall maintain an office or agency in the Borough of Manhattan, The City of New York where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Issuer in respect of the Notes and this Indenture may be served. The Issuer shall give prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Issuer shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Corporate Trust Office of the Trustee located at One Liberty Plaza, 23rd Floor, New York, NY 10006.

The Issuer may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations. The Issuer shall give prompt written notice to the Trustee of such designation or rescission and of any change in the location of any such other office or agency.

The Issuer hereby initially designates the Corporate Trust Office of the Trustee located at One Liberty Plaza, 23rd Floor, New York, NY 10006.

Section 4.08.         Compliance with Laws.

The Issuer shall comply, and shall cause each of its Subsidiaries to comply, with all applicable statutes, rules, regulations, orders and restrictions of the United States of America, all states and municipalities thereof, and of any governmental department, commission, board, regulatory authority, bureau, agency and instrumentality of the foregoing, in respect of the conduct of their respective businesses and the ownership of their respective properties, except for such noncompliances as would not in the aggregate have a material adverse effect on the financial condition or results of operations of the Issuer and its Subsidiaries taken as a whole.

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Section 4.09.         Maintenance of Properties and Insurance.

(a)        The Issuer shall cause all material properties owned by or leased by it or any of its Subsidiaries used or useful to the conduct of the Issuer’s business or the business of any of its Subsidiaries to be maintained and kept in normal condition, repair and working order and supplied with all necessary equipment and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in its judgment may be necessary, so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 4.09 shall prevent the Issuer or any of its Subsidiaries from discontinuing the use, operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is, in the judgment of the Board of Directors of the Issuer or of the Board of Directors of any Subsidiary of the Issuer concerned, or of an officer (or other agent employed by the Issuer or of any of its Subsidiaries) of the Issuer or any of its Subsidiaries having managerial responsibility for any such property, desirable in the conduct of the business of the Issuer or any Subsidiary of the Issuer, and if such discontinuance or disposal is not adverse in any material respect to the rights of the Holders under this Indenture or the Notes.

(b)        The Issuer shall maintain, and shall cause its respective Subsidiaries to maintain, insurance with responsible carriers against such risks and in such amounts, and with such deductibles, retentions, self-insured amounts and co-insurance provisions, as are customarily carried by similar businesses of similar size, including property and casualty loss, workers’ compensation and interruption of business insurance.

Section 4.10.         Limitations on Additional Indebtedness.

(a)        The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, incur any Indebtedness; provided that the Issuer or any Guarantor may incur additional Indebtedness and any Restricted Subsidiary may incur Acquired Indebtedness, in each case (1) if, after giving effect thereto, the Consolidated Interest Coverage Ratio would be at least 2.00 to 1.00 (the “Coverage Ratio Exception”) and (2) if such additional Indebtedness or Acquired Indebtedness is in an aggregate principal amount in excess of $10,000,000, either:

(A)        such Indebtedness is pari passu in right of payment with the Notes or such Guarantor’s Note Guarantee, as the case may be, and is expressly subordinated in right of payment to the Credit Agreement Obligations at least to the same extent as the Notes, or

(B)        such Indebtedness is expressly subordinated in right of payment to the Notes or such Guarantor’s Note Guarantee, as the case may be, or

(C)        at the Issuer’s option, either:

(i) the Issuer elects to redeem the Notes in whole, but not in part, at a purchase price equal to 100% of the principal amount thereof plus accrued but unpaid interest, if any, to, the Redemption Date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date); or

(ii) the Issuer elects to have Article 10 of this Indenture and paragraph 5 of the Notes cease to apply to all outstanding Notes.

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(b)        Notwithstanding the above, each of the following shall be permitted (the “Permitted Indebtedness”):

(1)        Indebtedness of the Issuer and any Restricted Subsidiary under the Credit Facilities in an aggregate principal amount at any time outstanding not to exceed $650.0 million;

(2)        the Notes issued on the Issue Date and the Note Guarantees;

(3)        Indebtedness of the Issuer and the Restricted Subsidiaries to the extent outstanding on the Issue Date (other than Indebtedness referred to in clause (1), (2) or (5)), including the 7 3/8% Senior Notes and the guarantees related thereto;

(4)        Indebtedness under Hedging Obligations entered into for bona fide hedging purposes of the Issuer or any Restricted Subsidiary not for the purpose of speculation and guarantees thereof by the Issuer or any Restricted Subsidiary; provided that in the case of Hedging Obligations relating to interest rates, (a) such Hedging Obligations relate to payment obligations on Indebtedness otherwise permitted to be incurred by this Section 4.10, and (b) the notional principal amount of such Hedging Obligations at the time incurred does not exceed the principal amount of the Indebtedness to which such Hedging Obligations relate;

(5)        Indebtedness of the Issuer owed to a Restricted Subsidiary and Indebtedness of any Restricted Subsidiary owed to the Issuer or any other Restricted Subsidiary; provided, however, that upon any such Restricted Subsidiary ceasing to be a Restricted Subsidiary or such Indebtedness being owed to any Person other than the Issuer or a Restricted Subsidiary, the Issuer or such Restricted Subsidiary, as applicable, shall be deemed to have incurred Indebtedness not permitted by this clause (5);

(6)        Indebtedness in respect of bid, performance or surety bonds issued for the account of the Issuer or any Restricted Subsidiary in the ordinary course of business, including guarantees or obligations of the Issuer or any Restricted Subsidiary with respect to letters of credit supporting such bid, performance or surety obligations (in each case other than for an obligation for money borrowed);

(7)        Purchase Money Indebtedness and Capitalized Lease Obligations incurred by the Issuer or any Restricted Subsidiary, and Refinancing Indebtedness thereof, in an aggregate amount not to exceed at any time outstanding $25.0 million and guarantees thereof by the Issuer or any Restricted Subsidiary;

(8)        Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business; provided, however, that such Indebtedness is extinguished within five Business Days of incurrence;

(9)        Indebtedness arising in connection with endorsement of instruments for deposit in the ordinary course of business;

(10)      Refinancing Indebtedness with respect to Indebtedness incurred pursuant to the Coverage Ratio Exception or clause (2) or (3) above or this clause (10);

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(11)      indemnification, adjustment of purchase price, earn-out or similar obligations, in each case, incurred or assumed in connection with the acquisition or disposition of any business or assets of the Issuer or any Restricted Subsidiary or Equity Interests of a Restricted Subsidiary, other than guarantees of Indebtedness incurred by any Person acquiring all or any portion of such business, assets or Equity Interests for the purpose of financing or in contemplation of any such acquisition;

(12)      Indebtedness of Foreign Subsidiaries in an aggregate amount not to exceed $30.0 million at any time outstanding and guarantees thereof by the Issuer or any Restricted Subsidiary;

(13)      the incurrence by a Receivables Subsidiary of Indebtedness in a Qualified Receivables Transaction that is without recourse to the Issuer or to any other Subsidiary of the Issuer or their assets (other than such Receivables Subsidiary and its assets and, as to the Issuer or any Subsidiary of the Issuer, other than pursuant to representations, warranties, covenants and indemnities customary for such transactions) and is not guaranteed by any such Person; and

(14)      Indebtedness of the Issuer or any Restricted Subsidiary in an aggregate amount not to exceed $25.0 million at any time outstanding.

For purposes of determining compliance with this Section 4.10, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (1) through (14) above or is entitled to be incurred pursuant to the Coverage Ratio Exception, the Issuer shall, in its sole discretion, classify such item of Indebtedness and may divide and classify such Indebtedness in more than one of the types of Indebtedness described, except that Indebtedness incurred under the Credit Facilities on the Reference Date or on the Issue Date shall be deemed to have been incurred under clause (1) above, and may later reclassify any item of Indebtedness described in clauses (1) through (14) above (provided that at the time of reclassification it meets the criteria in such category or categories). In addition, for purposes of determining any particular amount of Indebtedness under this Section 4.10, guarantees, Liens or letter of credit obligations supporting Indebtedness otherwise included in the determination of such particular amount shall not be included so long as incurred by a Person that could have incurred such Indebtedness. In addition, notwithstanding the foregoing, all Indebtedness outstanding on the Issue Date, including the Notes, that was incurred on or after the Reference Date but on or prior to the Issue Date pursuant to Sections 4.10(b)(1), (b)(7), (b)(12) or (b)(14) of the Senior Notes Indenture shall be deemed to have been incurred under this Indenture on the Issue Date pursuant to clauses (1), (7), (12) or (14) above, respectively, and shall not be deemed to have been incurred on the Issue Date pursuant to clause (2) or (3) above, provided that after the Issue Date, the Issuer may reclassify any item of Indebtedness described in clauses (7), (12) and (14) above (provided that at the time of reclassification it meets the criteria in such category or categories).

Section 4.11.         Limitations on Restricted Payments.

(a)        The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, make any Restricted Payment if at the time of such Restricted Payment:

(1)        a Default shall have occurred and be continuing or shall occur as a consequence thereof;

(2)        the Issuer cannot incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception; or

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(3)        the amount of such Restricted Payment, when added to the aggregate amount of all other Restricted Payments made after the Issue Date (other than Restricted Payments made pursuant to clauses (2), (3), (4), (5), (6), (7) or (8) of Section 4.11(b)), exceeds the sum (the “Restricted Payments Basket”) of (without duplication):

(A)        50% of Consolidated Net Income for the period (taken as one accounting period) commencing on the first day of the fiscal quarter in which the Issue Date occurs to and including the last day of the fiscal quarter ended immediately prior to the date of such calculation for which consolidated financial statements are available (or, if such Consolidated Net Income shall be a deficit, minus 100% of such aggregate deficit), plus

(B)        100% of the aggregate net cash proceeds received by the Issuer either (x) as contributions to the common equity of the Issuer after the Issue Date or (y) from the issuance and sale of Qualified Equity Interests after the Issue Date, other than (A) any such proceeds which are used to redeem Notes in accordance with paragraph 6(c) of the Notes or (B) any such proceeds or assets received from a Subsidiary of the Issuer, plus

(C)        the aggregate amount by which Indebtedness incurred by the Issuer or any Restricted Subsidiary subsequent to the Issue Date is reduced on the Issuer’s balance sheet upon the conversion or exchange (other than by a Subsidiary of the Issuer) into Qualified Equity Interests (less the amount of any cash, or the fair value of assets, distributed by the Issuer or any Restricted Subsidiary upon such conversion or exchange), plus

(D)        in the case of the disposition or repayment of or return on any Investment that was treated as a Restricted Payment made after the Issue Date, an amount (to the extent not included in the computation of Consolidated Net Income) equal to the lesser of (i) 100% of the aggregate amount received by the Issuer or any Restricted Subsidiary in cash or other property (valued at the Fair Market Value thereof) as the return of capital with respect to such Investment and (ii) the amount of such Investment that was treated as a Restricted Payment, in either case, less the cost of the disposition of such Investment and net of taxes, plus

(E)        upon a Redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the lesser of (i) the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary immediately following such Redesignation, and (ii) the aggregate amount of the Issuer’s Investments in such Subsidiary to the extent such Investments reduced the Restricted Payments Basket and were not previously repaid or otherwise reduced.

(b)        The foregoing provisions shall not prohibit:

(1)        the payment by the Issuer or any Restricted Subsidiary of any dividend within 60 days after the date of declaration thereof, if on the date of declaration the payment would have complied with the provisions of this Indenture ;

(2)        the redemption of any Equity Interests of the Issuer or any Restricted Subsidiary in exchange for, or out of the proceeds of the substantially concurrent issuance and sale of, Qualified Equity Interests;

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(3)        other than pursuant to clause (8) below, the redemption of Equity Interests of the Issuer held by officers, directors or employees or former officers, directors or employees (or their transferees, estates or beneficiaries under their estates), upon their death, disability, retirement, severance or termination of employment or service; provided that the aggregate cash consideration paid for all such redemptions shall not exceed (A) $5.0 million during any calendar year (with unused amounts being available to be used in the following calendar year, but not in any succeeding calendar year) plus (B) the amount of any net cash proceeds received by or contributed to the Issuer from the issuance and sale after the Issue Date of Qualified Equity Interests of the Issuer to its officers, directors or employees that have not been applied to the payment of Restricted Payments pursuant to this clause (3), plus (C) the net cash proceeds of any “key-man” life insurance policies that have not been applied to the payment of Restricted Payments pursuant to this clause (3);

(4)        repurchases of Equity Interests that occur or are deemed to occur upon the exercise of stock options if the Equity Interests represents a portion of the exercise price thereof;

(5)        Restricted Payments pursuant to the Transactions;

(6)        Restricted Payments if after giving effect thereto the Issuer’s Net Leverage Ratio is not greater than 3.0 to 1.0;

(7)        other Restricted Payments in an amount not to exceed $50.0 million less the amount of any Restricted Payments (as defined in the Senior Notes Indenture) deemed made on or after the Reference Date and on or prior to the Issue Date pursuant to Section 4.11(b)(7) of the Senior Notes Indenture; provided that Restricted Payments made pursuant to this clause (7) shall not exceed $25.0 million in the aggregate in any twelve-month period; or

(8)        the purchase or retirement of Class B Common Stock of the Issuer from any Permitted Holder in an aggregate amount not to exceed $10.0 million in any twelve-month period;

provided that no proceeds from the issuance and sale of Qualified Equity Interests used to make a payment pursuant to clause (2) or (3)(B) above shall increase the Restricted Payments Basket.

Section 4.12.         Limitations on Asset Sales.

(a)        The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, consummate any Asset Sale unless at least 75% of the total consideration in such Asset Sale consists of cash or Cash Equivalents.

For purposes of the preceding clause (a), the following shall be deemed to be cash:

(1)        the amount (without duplication) of any Indebtedness of the Issuer or such Restricted Subsidiary that is expressly assumed by the transferee in such Asset Sale and with respect to which the Issuer or such Restricted Subsidiary, as the case may be, is unconditionally released by the holder of such Indebtedness,

(2)        the amount of any obligations or Publicly Traded Securities received from such transferee that are within 90 days converted by the Issuer or such Restricted Subsidiary to cash (to the extent of the cash actually so received), and

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(3)        the Fair Market Value of (i) any assets (other than securities) received by the Issuer or any Restricted Subsidiary to be used by it in a Permitted Business, (ii) Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the acquisition of such Person by the Issuer or (iii) a combination of (i) and (ii).

(b)        If at any time any non-cash consideration received by the Issuer or any Restricted Subsidiary, as the case may be, in connection with any Asset Sale is repaid or converted into or sold or otherwise disposed of for cash (other than interest received with respect to any such non-cash consideration), then the date of such repayment, conversion or disposition shall be deemed to constitute the date of an Asset Sale hereunder and the Net Available Proceeds thereof shall be applied in accordance with this Section 4.12.

(c)        If the Issuer or any Restricted Subsidiary engages in an Asset Sale, the Issuer or such Restricted Subsidiary shall, no later than 365 days following the consummation thereof, apply all or any of the Net Available Proceeds therefrom to:

(1)        satisfy all mandatory repayment obligations under any Credit Facility arising by reason of such Asset Sale;

(2)        repay any Indebtedness which was secured by the assets sold in such Asset Sale;

(3)        in the case of any Asset Sale by a Foreign Subsidiary, repay any liability of one or more Foreign Subsidiaries;

(4)        (A) invest all or any part of the Net Available Proceeds thereof in the purchase of assets (other than securities) to be used by the Issuer or any Restricted Subsidiary in the Permitted Business, (B) acquire Qualified Equity Interests in a Person that is a Restricted Subsidiary or in a Person engaged in a Permitted Business that shall become a Restricted Subsidiary immediately upon the consummation of such acquisition or (C) a combination of (A) and (B); and/or

(5)        make a Net Proceeds Offer (and redeem Pari Passu Indebtedness) in accordance with the procedures described below and in this Indenture.

The amount of Net Available Proceeds not applied or invested as provided in clauses (1), (2), (3) or (4) of this Section 4.12(c) will constitute “Excess Proceeds.”

(d)        When the aggregate amount of Excess Proceeds equals or exceeds $20.0 million, the Issuer shall be required to make an offer to purchase from all Holders and, if applicable, redeem (or make an offer to do so) any Pari Passu Indebtedness of the Issuer the provisions of which require the Issuer to redeem such Indebtedness with the proceeds from any Asset Sales (or offer to do so), in an aggregate principal amount of Notes and such Pari Passu Indebtedness equal to the amount of such Excess Proceeds as follows:

(1)        the Issuer shall (a) make an offer to purchase (a “Net Proceeds Offer”) to all Holders in accordance with the procedures set forth in this Indenture , and (b) redeem (or make an offer to do so) any such other Pari Passu Indebtedness, pro rata in proportion to the respective principal amounts of the Notes and such other Indebtedness required to be redeemed, the

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maximum principal amount of Notes and Pari Passu Indebtedness that may be redeemed out of the amount (the “Payment Amount”) of such Excess Proceeds;

(2)        the offer price for the Notes will be payable in cash in an amount equal to 100% of the principal amount of the Notes tendered pursuant to a Net Proceeds Offer, plus accrued and unpaid interest thereon, if any, to the date such Net Proceeds Offer is consummated (the “Offered Price”), in accordance with the procedures set forth in this Indenture and the redemption price for such Pari Passu Indebtedness (the “Pari Passu Indebtedness Price”) shall be as set forth in the related documentation governing such Indebtedness;

(3)        if the aggregate Offered Price of Notes validly tendered and not withdrawn by Holders thereof exceeds the pro rata portion of the Payment Amount allocable to the Notes, Notes to be purchased will be selected on a pro rata basis; and

(4)        upon completion of such Net Proceeds Offer in accordance with the foregoing provisions, the amount of Excess Proceeds with respect to which such Net Proceeds Offer was made shall be deemed to be zero.

(e)        To the extent that the sum of the aggregate Offered Price of Notes tendered pursuant to a Net Proceeds Offer and the aggregate Pari Passu Indebtedness Price paid to the holders of such Pari Passu Indebtedness is less than the Payment Amount relating thereto (such shortfall constituting a “Net Proceeds Deficiency”), the Issuer may use the Net Proceeds Deficiency, or a portion thereof, for general corporate purposes, subject to the provisions of this Indenture.

(f)        In the event of the transfer of substantially all (but not all) of the assets of the Issuer and the Restricted Subsidiaries as an entirety to a Person in a transaction covered by and effected in accordance with the provisions of Article 5, the successor shall be deemed to have sold for cash at Fair Market Value the assets of the Issuer and the Restricted Subsidiaries not so transferred for purposes of this Section 4.12, and the successor shall comply with the provisions of this Section 4.12 with respect to such deemed sale as if it were an Asset Sale (with such Fair Market Value being deemed to be Net Available Proceeds for such purpose).

(g)        Upon the commencement of a Net Proceeds Offer, the Issuer shall send, by first class mail, a notice to the Trustee and to each Holder at is registered address. The notice shall contain all instructions and materials necessary to enable such Holder to tender Notes pursuant to the Net Proceeds Offer. Any Net Proceeds Offer shall be made to all Holders. The notice, which shall govern the terms of the Net Proceeds Offer, shall state:

(1)        that the Net Proceeds Offer is being made pursuant to this Section 4.12;

(2)        the Payment Amount, the Offered Price, and the date on which Notes tendered and accepted for payment shall be purchased, which date shall be at least 30 days and not later than 60 days from the date such notice is mailed (the “Net Proceeds Payment Date”);

(3)        that any Notes not tendered or accepted for payment shall continue to accrue interest;

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(4)        that, unless the Issuer defaults in making such payment, any Notes accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest on and after the Net Proceeds Payment Date;

(5)        that Holders electing to have any Notes purchased pursuant to any Net Proceeds Offer shall be required to surrender the Notes, with the form entitled “Option of Holder to Elect Purchase” on the reverse of the Note completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the second Business Day preceding the Net Proceeds Payment Date;

(6)        that Holders shall be entitled to withdraw their election if the Paying Agent receives, not later than the Net Proceeds Payment Date, a notice setting forth the name of the Holder, the principal amount of the Note the Holder delivered for purchase and a statement that such Holder is withdrawing his election to have such Note purchased;

(7)        that if the aggregate principal amount of Notes surrendered by Holders exceeds the Payment Amount allocable to the Notes, the Issuer shall select the Notes to be purchased on a pro rata basis (with such adjustments as may be deemed appropriate by the Issuer so that only Notes in denominations of $1,000, or integral multiples thereof, shall be purchased);

(8)        that Holders whose Notes were purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry);

(9)        any other procedures that a Holder must follow to accept a Net Proceeds Offer or effect withdrawal of such acceptance; and

(10)      the name, address and telephone number of the Paying Agent.

(h)        On the Net Proceeds Payment Date, the Issuer shall, to the extent lawful: (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Net Proceeds Offer, subject to proration if the aggregate Notes tendered exceed the Payment Amount allocable to the Notes; (2) deposit with the Paying Agent an amount of U.S. legal tender equal to the lesser of the Payment Amount allocable to the Notes and the amount sufficient to pay the Offered Price in respect of all Notes or portions thereof so accepted; and (3) deliver or cause to be delivered to the Trustee the Notes so accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions thereof being repurchased by the Issuer.

(i)        The Issuer shall publicly announce the results of the Net Proceeds Offer on or as soon as practicable after the Net Proceeds Payment Date.

(j)        The Paying Agent shall promptly as practicable mail to each Holder of Notes properly tendered the Offered Price for such Notes, and the Trustee shall promptly as practicable authenticate and mail (or cause to be transferred by book-entry) to each Holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note shall be in a principal amount of $1,000 or an integral multiple thereof. However, if the Net Proceeds Payment Date is on or after an interest record date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Net Proceeds Offer.

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(k)        The Issuer will comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other applicable laws and regulations in connection with the purchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of Section 4.12 of this Indenture, the Issuer shall comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the provisions of Section 4.12 of this Indenture by virtue of this compliance.

Section 4.13.         Limitations on Transactions with Affiliates.

(a)        The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, in one transaction or a series of related transactions, sell, lease, transfer or otherwise dispose of any of its assets to, or purchase any assets from, or enter into any contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (an “Affiliate Transaction”), unless:

(1)        such Affiliate Transaction is on terms that are no less favorable to the Issuer or the relevant Restricted Subsidiary than those that would have been obtained in a comparable transaction at such time on an arm’s-length basis by the Issuer or that Restricted Subsidiary from a Person that is not an Affiliate of the Issuer or that Restricted Subsidiary; and

(2)        the Issuer delivers to the Trustee:

(A)        with respect to any Affiliate Transaction involving aggregate value in excess of $10.0 million, an Officers’ Certificate certifying that such Affiliate Transaction complies with clause (1) above and a Secretary’s Certificate which sets forth and authenticates a resolution that has been adopted by the Independent Directors approving such Affiliate Transaction; and

(B)        with respect to any Affiliate Transaction involving aggregate value of $25.0 million or more, the certificates described in the preceding clause (a) and a written opinion as to the fairness of such Affiliate Transaction to the Issuer or such Restricted Subsidiary from a financial point of view issued by an Independent Financial Advisor to the Board of Directors of the Issuer.

(b)        The foregoing restrictions shall not apply to:

(1)        transactions exclusively between or among (a) the Issuer and one or more Restricted Subsidiaries or (b) Restricted Subsidiaries; provided, in each case, that no Affiliate of the Issuer (other than another Restricted Subsidiary) owns Equity Interests of any such Restricted Subsidiary unless otherwise required by applicable law;

(2)        director, officer and employee compensation (including bonuses) and other benefits (including insurance policies, retirement, health, stock option and other benefit plans) and indemnification arrangements, in each case determined to be reasonable by the Independent Directors;

(3)        the entering into of a tax sharing agreement, or payments pursuant thereto, between the Issuer and/or one or more Subsidiaries, on the one hand, and any other Person with which the Issuer or such Subsidiaries are required or permitted to file a consolidated tax return or

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with which the Issuer or such Subsidiaries are part of a consolidated group for tax purposes to be used by such Person to pay taxes, and which payments by the Issuer and the Restricted Subsidiaries are not in excess of the tax liabilities that would have been payable by them on a stand-alone basis;

(4)        loans and advances permitted by clause (3) of the definition of “Permitted Investments”;

(5)        Restricted Payments of the type described in clause (1) or (2) of the definition of “Restricted Payment” and which are made in accordance with Section 4.11 of this Indenture;

(6)        (x) any agreement in effect on the Reference Date and disclosed in the registration statement (through incorporation by reference or otherwise), of which the prospectus supplement dated May 19, 2006 is a part relating to the 7 3/8% Senior Notes, as in effect on the Reference Date or as thereafter amended or replaced in any manner, that, taken as a whole, is not more disadvantageous to the Holders or the Issuer in any material respect than such agreement as it was in effect on the Reference Date or (y) any transaction pursuant to any agreement referred to in the immediately preceding clause (x);

(7)        transactions between or among the Issuer or any Restricted Subsidiary participating in a Qualified Receivables Transaction, on the one hand, and/or any Receivables Subsidiary, on the other hand, or transactions between a Receivables Subsidiary and any Person in which the Receivables Subsidiary has an Investment;

(8)        any transaction with a joint venture or similar entity which would constitute an Affiliate Transaction solely because the Issuer or a Restricted Subsidiary owns an equity interest in or otherwise controls such joint venture or similar entity; provided that, other than with respect to the Hatchery, no Affiliate of the Issuer or any of its Subsidiaries other than the Issuer or a Restricted Subsidiary shall have a beneficial interest in such joint venture or similar entity; and

(9)        (a) any transaction with an Affiliate where the only consideration paid by the Issuer or any Restricted Subsidiary is Qualified Equity Interests or (b) the issuance or sale of any Qualified Equity Interests.

Section 4.14.         Limitation on Liens.

The Issuer shall not, and shall not permit any Guarantor to, directly or indirectly, create, incur, assume or permit or suffer to exist any Lien (other than Permitted Liens) of any nature whatsoever against any assets of the Issuer or any Guarantor (including Equity Interests of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, which Lien secures Indebtedness or trade payables, unless contemporaneously therewith:

(1)        in the case of any Lien securing an obligation that ranks pari passu with the Notes or a Note Guarantee, effective provision is made to secure the Notes or such Note Guarantee, as the case may be, at least equally and ratably with or prior to such obligation with a Lien on the same collateral; and

(2)        in the case of any Lien securing an obligation that is subordinated in right of payment to the Notes or a Note Guarantee, effective provision is made to secure the Notes or such

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Note Guarantee, as the case may be, with a Lien on the same collateral that is prior to the Lien securing such subordinated obligation,

in each case, for so long as such obligation is secured by such Lien.

Section 4.15.         Change of Control.

(a)        Upon the occurrence of any Change of Control, each Holder shall have the right to require that the Issuer purchase all or any portion (equal to $1,000 or an integral multiple thereof) of that Holder’s Notes for a cash price (the “Change of Control Purchase Price”) equal to 101% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest, if any, thereon to the date of purchase.

(b)        Within 30 days following the date on which the Change of Control occurs, the Issuer must send or cause to be sent by first-class mail, a notice to each Holder, with a copy to the Trustee, describing the transaction or transactions that constitute the Change of Control and offering to purchase Notes on the terms described below. Such notice shall govern the terms of the Change of Control Offer and shall state:

(1)        that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes tendered shall be accepted for payment;

(2)        the Change of Control Purchase Price and the purchase date (which shall be a Business Day no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of Control Payment Date”));

(3)        that any Note not tendered shall continue to accrue interest;

(4)        that, unless the Issuer defaults in the payment of the Change of Control Purchase Price, any Notes accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date;

(5)        that such Change of Control Offer shall remain open for at least 20 Business Days or for such longer period as is required by law and that Holders accepting the offer to have their Notes purchased pursuant to a Change of Control Offer shall be required to surrender the Notes, with the form entitled “Option of the Holder to Elect Purchase” on the reverse of the Note completed, or transfer by book-entry transfer, to the Paying Agent at the address specified in the notice prior to the close of business on the second Business Day preceding the Change of Control Payment Date;

(6)        that Holders shall be entitled to withdraw their acceptance if the Paying Agent receives, not later than the Change of Control Payment Date, a notice setting forth the name of the Holder, the principal amount of the Notes delivered for purchase, and a statement that such Holder is withdrawing his election to have such Notes purchased;

(7)        that Holders whose Notes are being purchased only in part shall be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered (or transferred by book-entry);

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(8)        any other procedures that a Holder must follow to accept a Change of Control Offer or effect withdrawal of such acceptance; and

(9)        the name, address and telephone number of the Paying Agent.

(c)        The Issuer shall publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date.

(d)        On the Change of Control Payment Date, the Issuer shall, to the extent lawful, (1) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount of U.S. legal tender equal to the Change of Control Purchase Price in respect of all Notes or portions of Notes properly tendered, and (3) deliver or cause to be delivered to the Trustee the Notes properly accepted together with an Officers’ Certificate stating the aggregate principal amount of Notes or portions of Notes being purchased by the Issuer.

(e)        The Paying Agent shall as promptly as practicable mail to each Holder of Notes properly tendered the Change of Control Purchase Price for such Notes, and the Trustee shall as promptly as practicable authenticate and mail to each Holder a new Note in principal amount equal to any unpurchased portion of the Notes surrendered, if any; provided however, that each such new Note shall be in a principal amount of $1,000 or an integral multiple of $1,000. However, if the Change of Control Payment Date is on or after an interest record date and on or before the related Interest Payment Date, any accrued and unpaid interest shall be paid to the Person in whose name a Note is registered at the close of business on such record date, and no additional interest shall be payable to Holders who tender Notes pursuant to the Change of Control Offer.

(f)        The Issuer shall comply with applicable tender offer rules, including the requirements of Rule 14e-1 under the Exchange Act and any other laws and regulations to the extent such laws and regulations are applicable in connection with a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.15, the Issuer shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the provisions of this Section 4.15 by virtue thereof.

(g)        The provisions of this Section 4.15 that require the Issuer to make a Change of Control Offer following a Change of Control shall be applicable regardless of whether any other provisions of this Indenture are applicable to the transaction giving rise to the Change of Control.

(h)        The Issuer’s obligation to make a Change of Control Offer shall be satisfied if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn under such Change of Control Offer.

(i)        Notwithstanding anything to the contrary in this Indenture, a Change of Control Offer may be made in advance of a Change of Control, conditional upon such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making of the Change of Control Offer.

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Section 4.16.         Limitations on Dividend and Other Restrictions Affecting Restricted Subsidiaries.

The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to:

(a)        pay dividends or make any other distributions on or in respect of its Equity Interests;

(b)        make loans or advances or pay any Indebtedness or other obligation owed to the Issuer or any other Restricted Subsidiary; or

(c)        transfer any of its assets to the Issuer or any other Restricted Subsidiary;

except for:

(1)        encumbrances or restrictions existing under or by reason of applicable law, regulation or order;

(2)        encumbrances or restrictions existing under this Indenture, the Notes and the Note Guarantees;

(3)        non-assignment, pledge or security interest provisions of any contract or any lease entered into in the ordinary course of business;

(4)        encumbrances or restrictions existing under agreements existing on the date of this Indenture (including, without limitation, the Credit Facilities, the 7 3/8% Senior Notes and the Senior Notes Indenture) as in effect on that date;

(5)        restrictions relating to any Lien permitted under this Indenture imposed by the holder of such Lien;

(6)        restrictions imposed under any agreement to sell assets permitted under this Indenture to any Person pending the closing of such sale;

(7)        any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person or the properties or assets of the Person so acquired;

(8)        any other agreement governing Indebtedness entered into after the Issue Date that contains encumbrances and restrictions that are not materially more restrictive with respect to any Restricted Subsidiary than those in effect on the Issue Date with respect to that Restricted Subsidiary pursuant to agreements in effect on the Issue Date;

(9)        customary provisions in partnership agreements, limited liability company organizational governance documents, joint venture agreements and other similar agreements that restrict the transfer of ownership interests in such partnership, limited liability company, joint venture or similar Person;

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(10)      Purchase Money Indebtedness incurred in compliance with Section 4.10 of this Indenture that impose restrictions of the nature described in clause (c) of this Section 4.16 on the assets acquired;

(11)      restrictions on cash or other deposits or net worth imposed by suppliers or landlords under contracts entered into in the ordinary course of business;

(12)      encumbrances or restrictions contained in Indebtedness of Foreign Subsidiaries permitted to be incurred under this Indenture;

(13)      any encumbrances or restrictions imposed by any amendments or refinancings of the contracts, instruments or obligations referred to in clauses (1) through (12) above; provided that such amendments or refinancings are not materially more restrictive with respect to such encumbrances and restrictions than those prior to such amendment or refinancing; and

(14)      Indebtedness or other contractual requirements of a Receivables Subsidiary in connection with a Qualified Receivables Transaction, provided that such restrictions apply only to such Receivables Subsidiary and contractual restrictions against the sale of accounts receivable or the assets related thereto other than in connection with a Qualified Receivables Transaction.

Section 4.17.         Limitations on Sale and Leaseback Transactions.

The Issuer shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, enter into any Sale and Leaseback Transaction; provided that the Issuer or any Restricted Subsidiary may enter into a Sale and Leaseback Transaction if:

(1)        the Issuer or such Restricted Subsidiary could have (a) incurred the Indebtedness attributable to such Sale and Leaseback Transaction pursuant to Section 4.10 of this Indenture and (b) incurred a Lien to secure such Indebtedness without equally and ratably securing the Notes pursuant Section 4.14 of this Indenture;

(2)        the gross cash proceeds of such Sale and Leaseback Transaction are at least equal to the Fair Market Value of the asset that is the subject of such Sale and Leaseback Transaction; and

(3)        the transfer of assets in such Sale and Leaseback Transaction is permitted by, and the Issuer or the applicable Restricted Subsidiary applies the proceeds of such transaction in accordance with, Section 4.12 of this Indenture.

Section 4.18.         Limitations on Designation of Unrestricted Subsidiaries.

(a)        After the Issue Date, the Issuer may designate any Subsidiary (including any newly formed or newly acquired Subsidiary) of the Issuer as an “Unrestricted Subsidiary” under this Indenture (a “Designation”) only if:

(1)        no Default shall have occurred and be continuing at the time of or after giving effect to such Designation; and

(2)        the Issuer would be permitted to make, at the time of such Designation, (a) a Permitted Investment or (b) an Investment pursuant to Section 4.11(a) of this Indenture, in either

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case, in an amount (the “Designation Amount”) equal to the Fair Market Value of the Issuer’s proportionate interest in such Subsidiary on such date.

After the Issue Date, no Subsidiary shall be Designated as an “Unrestricted Subsidiary” unless such Subsidiary has no Indebtedness other than Non-Recourse Debt.

(b)        If, at any time, any Unrestricted Subsidiary fails to meet the preceding requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of the Subsidiary and any Liens on assets of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary at such time and, if the Indebtedness is not permitted to be incurred under Section 4.10 of this Indenture or the Lien is not permitted under Section 4.14 of this Indenture, the Issuer shall be in default of the applicable covenant.

(c)        The Issuer may redesignate an Unrestricted Subsidiary as a Restricted Subsidiary (a “Redesignation”) only if:

(1)        no Default shall have occurred and be continuing at the time of and after giving effect to such Redesignation; and

(2)        all Liens, Indebtedness and Investments of such Unrestricted Subsidiary outstanding immediately following such Redesignation would, if incurred or made at such time, have been permitted to be incurred or made for all purposes of this Indenture.

(d)        All Designations and Redesignations must be evidenced by resolutions of the Board of Directors of the Issuer, delivered to the Trustee certifying compliance with the foregoing provisions.

Section 4.19.         Additional Note Guarantees.

If, after the Issue Date, (a) any Restricted Subsidiary (including any newly formed, newly acquired or newly Redesignated Restricted Subsidiary) either (i) guarantees any Indebtedness of the Issuer (other than Indebtedness under the Credit Agreement) or guarantees any Indebtedness (other than Indebtedness incurred pursuant to clauses (4), (5), (6), (7), (8), (9), (11), (12) or (14) of the definition of Permitted Indebtedness) of any other Restricted Subsidiary or (ii) incurs any Indebtedness other than Permitted Indebtedness or (b) the Issuer otherwise elects to have any Restricted Subsidiary become a Guarantor, then, in each such case, the Issuer shall cause such Restricted Subsidiary to:

(1)        execute and deliver to the Trustee (a) a supplemental indenture in form and substance satisfactory to the Trustee pursuant to which such Restricted Subsidiary shall unconditionally guarantee all of the Issuer’s obligations under the Notes and this Indenture and (b) a notation of guarantee in respect of its Note Guarantee; and

(2)        deliver to the Trustee one or more opinions of counsel that such supplemental indenture (a) has been duly authorized, executed and delivered by such Restricted Subsidiary and (b) constitutes a valid and legally binding obligation of such Restricted Subsidiary in accordance with its terms.

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Section 4.20.         Covenant Termination.

Immediately after the Notes have reached Investment Grade Status, and notwithstanding that the Notes may later cease to have an Investment Grade Rating from either or both of the Rating Agencies, the Issuer and its Restricted Subsidiaries shall be released from their obligations to comply with this Article 4 except for the covenants described under the following sections of this Indenture:

(a)        Section 4.02,

(b)        Section 4.14, and

(c)        Section 4.17(1)(b) and (2).

Immediately after the Notes have reached Investment Grade Status the Issuer shall not designate any Subsidiary of the Issuer as an “Unrestricted Subsidiary” under this Indenture.

ARTICLE 5

SUCCESSOR CORPORATION

Section 5.01.         Limitations on Mergers, Consolidations, Etc.

(a)        The Issuer shall not, directly or indirectly, in a single transaction or a series of related transactions, (i) consolidate or merge with or into another Person, or sell, lease, transfer, convey or otherwise dispose of or assign all or substantially all of the assets of the Issuer or the Issuer and the Restricted Subsidiaries (taken as a whole) or (ii) adopt a Plan of Liquidation unless, in either case:

(1)        either:

(A)        the Issuer shall be the surviving or continuing Person; or

(B)        the Person formed by or surviving such consolidation or merger or to which such sale, lease, conveyance or other disposition shall be made (or, in the case of a Plan of Liquidation, any Person to which assets are transferred) (collectively, the “Successor”) is a corporation, limited liability company or limited partnership organized and existing under the laws of any State of the United States of America or the District of Columbia, and the Successor expressly assumes, by agreements in form and substance reasonably satisfactory to the Trustee, all of the obligations of the Issuer under the Notes and this Indenture;

(2)        immediately prior to and immediately after giving effect to such transaction and the assumption of the obligations as set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, no Default shall have occurred and be continuing; and

(3)        immediately after giving effect to such transaction and the assumption of the obligations set forth in clause (1)(b) above and the incurrence of any Indebtedness to be incurred in connection therewith, and the use of any net proceeds therefrom on a pro forma basis, the

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Issuer or the Successor, as the case may be, could incur $1.00 of additional Indebtedness pursuant to the Coverage Ratio Exception.

(b)        For purposes of this Section 5.01, any Indebtedness of the Successor which was not Indebtedness of the Issuer immediately prior to the transaction shall be deemed to have been incurred in connection with such transaction.

(c)        For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties or assets of one or more Restricted Subsidiaries, the Equity Interests of which constitute all or substantially all of the properties and assets of the Issuer, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Issuer.

Section 5.02.         Successor Person Substituted.

(a)        Upon any consolidation, combination or merger of the Issuer or a Guarantor, or any transfer of all or substantially all of the assets of the Issuer in accordance with Section 5.01, in which the Issuer or such Guarantor is not the continuing obligor under the Notes or its Note Guarantee, the surviving entity formed by such consolidation or into which the Issuer or such Guarantor is merged or the Person to which the conveyance, lease or transfer by the Issuer is made will succeed to, and be substituted for, and may exercise every right and power of, the Issuer or such Guarantor under this Indenture, the Notes and the Note Guarantees with the same effect as if such surviving entity had been named therein as the Issuer or such Guarantor and, except in the case of a lease, the Issuer or such Guarantor, as the case may be, will be released from the obligation to pay the principal of and interest on the Notes or in respect of its Note Guarantee, as the case may be, and all of the Issuer’s or such Guarantor’s other obligations and covenants under the Notes, this Indenture and its Note Guarantee, if applicable.

(b)        Notwithstanding the foregoing, any Restricted Subsidiary may consolidate with, merge with or into or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all of its assets to the Issuer or another Restricted Subsidiary.

ARTICLE 6

DEFAULTS AND REMEDIES

Section 6.01.         Events of Default.

Each of the following is an “Event of Default”:

(a)        the failure by the Issuer to pay interest on any of the Notes when the same becomes due and payable and the continuance of any such failure for 30 days (whether or not such payment shall be prohibited by Article 10 of this Indenture);

(b)        the failure by the Issuer to pay the principal on any of Notes, when such principal becomes due and payable, whether at stated maturity, upon redemption, upon purchase, upon acceleration or otherwise (whether or not such payment shall be prohibited by Article 10 of this Indenture);

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(c)        failure by the Issuer (A) to comply with Article 5 or (B) to make a payment to purchase Notes tendered pursuant to Section 4.15;

(d)        failure by the Issuer to comply with any other agreement or covenant in this Indenture and continuance of this failure for 60 days after notice of the failure has been given to the Issuer by the Trustee or by the Holders of at least 25% of the aggregate principal amount of the Notes then outstanding;

(e)        default under any mortgage, indenture or other instrument or agreement under which there may be issued or by which there may be secured or evidenced Indebtedness by the Issuer or any Restricted Subsidiary, whether such Indebtedness now exists or is incurred after the Issue Date, which default (A) is caused by a failure to pay at final maturity principal on such Indebtedness within the applicable express grace period and any extensions thereof, (B) results in the acceleration of such Indebtedness prior to its express final maturity or (C) results in the commencement of judicial proceedings to foreclose upon, or to exercise remedies under applicable law or applicable security documents to take ownership of, the assets securing such Indebtedness, and, in each case, the principal amount of such Indebtedness, together with the principal amount of any other Indebtedness with respect to which an event described in clause (A), (B) or (C) has occurred and is continuing, aggregates $20.0 million or more;

(f)        one or more judgments or orders that exceed $20.0 million in the aggregate (net of amounts covered by insurance or bonded) for the payment of money have been entered by a court or courts of competent jurisdiction against the Issuer or any Restricted Subsidiary and such judgment or judgments have not been satisfied, stayed, annulled or rescinded within 60 days of being entered;

(g)        the Issuer or any of its Significant Subsidiaries pursuant to or within the meaning of any Bankruptcy Law:

(A)        commences a voluntary case,

(B)        consents to the entry of an order for relief against it in an involuntary case,

(C)        consents to the appointment of a Custodian of it or for all or substantially all of its assets, or

(D)        makes a general assignment for the benefit of its creditors;

(h)        a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that:

(A)        is for relief against the Issuer or any of its Significant Subsidiaries as debtor in an involuntary case,

(B)        appoints a Custodian of the Issuer or any of its Significant Subsidiaries or a Custodian for all or substantially all of the assets of the Issuer or any of its Significant Subsidiaries, or

(C)        orders the liquidation of the Issuer, or any of its Significant Subsidiaries, and the order or decree remains unstayed and in effect for 60 days; or

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(i)        any Note Guarantee of any Significant Subsidiary ceases to be in full force and effect (other than in accordance with the terms of such Note Guarantee and this Indenture) or is declared null and void and unenforceable or found to be invalid or any Guarantor denies its liability under its Note Guarantee (other than by reason of release of a Guarantor from its Note Guarantee in accordance with the terms of this Indenture and the Note Guarantee).

Section 6.02.         Acceleration.

If an Event of Default (other than an Event of Default specified in Section 6.01(g) or (h) with respect to the Issuer) shall have occurred and be continuing under this Indenture, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding by written notice to the Issuer and the Trustee (the “Acceleration Notice”), may declare all amounts owing under the Notes to be due and payable and the Issuer and the Trustee shall promptly deliver such Acceleration Notice to the Representative. Upon such declaration of acceleration, the aggregate principal of and accrued and unpaid interest on the outstanding Notes shall become due and payable, provided, that so long as there are any Credit Agreement Obligations outstanding no such acceleration shall be effective until the first to occur of an acceleration under the Credit Agreement or 5 Business Days after the receipt by the Representative of such Acceleration Notice, provided, however, that after such acceleration, but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of such outstanding Notes may rescind and annul such acceleration:

(1)        if the rescission would not conflict with any judgment or decree;

(2)        if all Events of Default, other than nonpayment of principal or interest that has become due solely because of the acceleration, have been cured or waived;

(3)        to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid;

(4)        the Issuer has paid all sums paid or advanced by the Trustee hereunder and its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances and those of its agents and counsel; and

(5)        in the event of the cure or waiver of an Event of Default of the type described in Section 6.01(g) or (h) above, the Trustee shall have received an Officers’ Certificate and an Opinion of Counsel that such Event of Default has been cured or waived.

No such rescission shall affect any subsequent Default or impair any right consequent thereto. If an Event of Default specified in Section 6.01(g) or (h) occurs with respect to the Issuer and is continuing, then all unpaid principal of, premium, if any, and accrued and unpaid interest on all of the outstanding Notes shall ipso facto become and be immediately due and payable without any notice, declaration or other act on the part of the Trustee or any Holder.

Section 6.03.         Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of, or premium, if any, and interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture and

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may take any necessary action requested of it as Trustee to settle, compromise, adjust or otherwise conclude any proceedings to which it is a party.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative to the extent permitted by law.

Section 6.04.         Waiver of Past Defaults and Events of Default.

Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a majority in aggregate principal amount of the Notes then outstanding have the right to waive past Defaults under this Indenture except a Default or Event of Default in the payment of the principal of, or interest on, any Note as specified in clauses (a) and (b) of Section 6.01. The Issuer shall deliver to the Trustee an Officers’ Certificate stating that the requisite percentage of Holders have consented to such waiver and attaching copies of such consents. In case of any such waiver, the Issuer, the Trustee and the Holders shall be restored to their former positions and rights hereunder and under the Notes, respectively.

Upon any such waiver, such Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.

Section 6.05.         Control by Majority.

The Holders of a majority in aggregate principal amount of the outstanding Notes have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee or exercising any trust or power conferred on the Trustee by this Indenture. The Trustee, however, may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines may be unduly prejudicial to the rights of another Holder not taking part in such direction, and the Trustee shall have the right to decline to follow any such direction if the Trustee, being advised by counsel, determines that the action so directed may not lawfully be taken or if the Trustee in good faith shall, by a Trust Officer, determine that the proceedings so directed may involve it in personal liability; provided that the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction. In the event the Trustee takes any action or follows any direction pursuant to this Indenture, the Trustee shall be entitled to indemnification reasonably satisfactory to it against any loss or expense caused by taking such action or following such direction.

Section 6.06.         Limitation on Suits.

(a)        Subject to Section 6.07 below, no Holder shall have any right to institute any proceeding with respect to this Indenture or any remedy thereunder, unless the Trustee:

(1)        has failed to act for a period of 60 days after receiving written notice of a continuing Event of Default by such Holder and a request to act by Holders of at least 25% in aggregate principal amount of Notes outstanding;

(2)        has been offered indemnity satisfactory to it in its reasonable judgment; and

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(3)        has not received from the Holders of a majority in aggregate principal amount of the outstanding Notes a direction inconsistent with such request.

(b)        However, such limitations do not apply to a suit instituted by a Holder for enforcement of payment of the principal of or interest on such Note on or after the due date therefor (after giving effect to the grace period specified in Section 6.01(a)).

(c)        The Issuer is required to deliver to the Trustee annually a statement regarding compliance with this Indenture and, upon any Officer of the Issuer becoming aware of any Default, a statement specifying such Default and what action the Issuer is taking or proposes to take with respect thereto.

Section 6.07.         Rights of Holders To Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of, or accrued interest on, any Note held by such Holder on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of the Holder.

Section 6.08.         Collection Suit by Trustee.

If an Event of Default occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Issuer for the whole amount of unpaid principal, premium and accrued interest remaining unpaid, together with, to the extent that payment of such interest is lawful, interest on overdue principal and interest on overdue installments of interest, in each case at the rate set forth in Section 4.01 hereof, and such further amounts as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

Section 6.09.         Trustee May File Proofs of Claim.

The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Holders allowed in any judicial proceedings relative to the Issuer (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same after deduction of its charges and expenses to the extent that any such charges and expenses are not paid out of the estate in any such proceedings and any custodian in any such judicial proceeding is hereby authorized by each Holder to make such payments to the Trustee, and in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 7.07 hereof.

Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder in any such proceedings.

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Section 6.10.         Priorities.

Any money collected by the Trustee pursuant to this Article and any other money or property distributable in respect of the Issuer’s obligations under this Indenture after an Event of Default shall be applied in the following order:

FIRST: to the Trustee (including any predecessor Trustee) for amounts due under Section 7.07 hereof, including payment of all compensation, expenses and liabilities incurred, and all advances made, by the Trustee and the costs and expenses of collection;

SECOND: if the Holders are forced to proceed against the Issuer or any Guarantor directly without the Trustee, to Holders for their collection costs;

THIRD: to Holders for amounts due and unpaid on the Notes for principal, premium, if any, and interest as to each, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes; and

FOURTH: to the Issuer or, to the extent the Trustee collects any amounts from any Guarantor, to such Guarantor.

The Trustee, upon prior written notice to the Issuer, may fix a record date and payment date for any payment to Holders pursuant to this Section 6.10.

Section 6.11.         Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in principal amount of the Notes then outstanding.

ARTICLE 7

TRUSTEE

Section 7.01.         Duties of Trustee.

(a)        If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise thereof as a prudent person would exercise or use under the circumstances in the conduct of such person’s own affairs.

(b)        Except during the continuance of an Event of Default:

(1)        The Trustee need perform only those duties as are specifically set forth in this Indenture and no covenants or obligations shall be implied in this Indenture against the Trustee.

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(2)        In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions which are specifically required to be delivered to the Trustee by any provision of this Indenture to determine whether or not they conform to the requirements of this Indenture.

(c)        Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(1)        This paragraph does not limit the effect of paragraphs (b) or (d) of this Section 7.01.

(2)        The Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.

(3)        The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05 hereof.

(d)        No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(e)        Whether or not herein expressly provided, every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.01.

(f)        The Trustee shall not be liable for interest on any money or assets received by it except as the Trustee may agree in writing with the Issuer. Assets held in trust by the Trustee need not be segregated from other assets except to the extent required by law.

(g)        Unless otherwise specifically provided in this Indenture, any demand, request, direction or notice from the Issuer shall be sufficient if signed by an Officer of the Issuer.

(h)        The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Issuer, personally or by agent or attorney at the sole cost of the Issuer and shall incur no liability or additional liability of any kind by reason of such inquiry or investigation.

(i)        The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

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(j)        The permissive right of the Trustee to take or refrain from taking any actions enumerated in this Indenture shall not be construed as a duty.

Section 7.02.         Rights of Trustee.

Subject to Section 7.01 hereof:

(a)        The Trustee may rely on any document reasonably believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

(b)        Before the Trustee acts or refrains from acting with respect to any matters contemplated by this Indenture or the Notes it may consult with counsel and may require an Officers’ Certificate or an Opinion of Counsel, or both, which shall conform to the provisions of Section 12.05 hereof. The Trustee shall be protected and shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion.

(c)        The Trustee may act through attorneys and agents and shall not be responsible for the misconduct or negligence of any attorney or agent (other than an agent who is an employee of the Trustee) so long as the appointment of such agent was made with due care.

(d)        The Trustee shall not be liable for any action it takes or omits to take in good faith which it reasonably believes to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.

(e)        The Trustee may consult with counsel of its selection, and the advice or opinion of such counsel as to matters of law shall be full and complete authorization and protection from liability in respect of any action taken, omitted or suffered by it hereunder in good faith and in reliance thereon.

(f)        The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee security or indemnity satisfactory to the Trustee against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction.

(g)        The Trustee may request that the Issuer deliver an Officers’ Certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate, including any person specified as so authorized in any such certificate previously delivered and not superseded.

(h)        The Trustee shall not be responsible or liable for any failure or delay in the performance of its obligations under this Indenture arising out of or caused, directly or indirectly, by circumstances beyond its reasonable control, including, without limitation, acts of God; earthquakes; fire; flood; terrorism; wars and other military disturbances; sabotage; epidemics; riots; interruptions; loss or malfunctions of utilities, computer (hardware or software) or communication services; accidents; labor disputes; acts of civil or military authority and governmental action.

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(i)        Anything in this Indenture notwithstanding, in no event shall the Trustee be liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to loss of profit), even if the Issuer has been advised as to the likelihood of such loss or damage and regardless of the form of action.

Section 7.03.         Individual Rights of Trustee.

The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may make loans to, accept deposits from, perform services for or otherwise deal with the Issuer, or any Affiliates thereof, with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. The Trustee, however, shall be subject to Sections 7.10 and 7.11 hereof.

Section 7.04.         Trustee’s Disclaimer.

The Trustee shall not be responsible for and makes no representation as to the validity or adequacy of this Indenture or the Notes, it shall not be accountable for the Issuer’s use of the proceeds from the sale of Notes or any money paid to the Issuer pursuant to the terms of this Indenture and it shall not be responsible for any statement of the Issuer in this Indenture or the Notes other than the Trustee’s certificate of authentication.

Section 7.05.         Notice of Defaults.

The Trustee shall not be deemed to have notice of any Default unless a Trust Officer of the Trustee has received written notice of such Default at the Corporate Trust Office of the Trustee.

If a Default occurs and is continuing, the Trustee shall mail to each Holder notice of the Default within 30 days after it occurs. Except in the case of a Default in payment of the principal of, or premium, if any, or interest on any Note or a default in the observance or performance of any of the obligations of the Issuer under Article 5, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interest of the Holders.

Section 7.06.         Reports by Trustee to Holders.

If required by TIA Section 313(a), within 60 days after May 15 of any year, commencing the May 15 following the date of this Indenture, the Trustee shall mail to each Holder a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b), (c) and (d).

Reports pursuant to this Section 7.06 shall be transmitted by mail:

(a)        to all registered Holders, as the names and addresses of such Holders appear on the Registrar’s books; and

(b)        to such Holders as have, within the two years preceding such transmission, filed their names and addresses with the Trustee for that purpose.

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A copy of each report at the time of its mailing to Holders shall be filed with the Commission and each stock exchange, if any, on which the Notes are listed. the Issuer shall promptly notify the Trustee when the Notes are listed on any stock exchange or of any delisting thereof.

Section 7.07.         Compensation and Indemnity.

The Issuer shall pay to the Trustee from time to time such compensation as shall be agreed in writing between the Issuer and the Trustee for the Trustee’s services. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Trustee upon request for all reasonable fees and expenses, including out-of-pocket expenses incurred or made by it in connection with the performance of its duties under this Indenture or in connection with the collection of any funds. Such expenses shall include the reasonable fees and expenses of the Trustee’s agents and counsel.

The Issuer shall indemnify each of the Trustee and its agents, employees, stockholders and directors and officers for, and hold them harmless against, any loss, liability or expense incurred by them (including attorney’s fees and expenses) arising out of or in connection with the administration of this trust including the reasonable costs and expenses of defending themselves against any claim or liability in connection with the exercise or performance of any of their rights, powers or duties hereunder, except for such actions to the extent caused by any negligence, bad faith or willful misconduct on their part. The Trustee shall notify the Issuer promptly, in writing, of any claim asserted against the Trustee for which it may seek indemnity. At the Trustee’s sole discretion, the Issuer shall defend the claim and the Trustee shall cooperate and may participate in the defense; provided that any settlement of a claim shall be approved in writing by the Trustee. The Issuer need not pay for any settlement made without its written consent, which consent shall not be unreasonably withheld. The Issuer need not reimburse any expense or indemnify against any loss or liability to the extent incurred by the Trustee through its negligence, bad faith or willful misconduct.

To secure the Issuer’s payment obligations in this Section 7.07, the Trustee shall have a lien prior to the Notes on all assets or money held or collected by the Trustee, in its capacity as Trustee, except assets or money held in trust to pay principal of, premium or interest on particular Notes.

In addition and without prejudice to the rights provided to the Trustee under any provision of this Indenture, when the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.01(f) or (g) hereof occurs, such expenses and the compensation for such services are intended to constitute expenses of administration under any Bankruptcy Law.

The obligation of the Issuer under this Section 7.07 shall survive the resignation or removal of the Trustee and the termination or satisfaction and discharge of this Indenture.

“Trustee” for purposes of this Section shall include any predecessor Trustee and the Trustee in each of its capacities hereunder and to each agent, custodian and other person employed to act hereunder; provided, however, that the negligence, willful misconduct or bad faith of any Trustee hereunder shall not affect the rights of any other Trustee hereunder.

Section 7.08.         Replacement of Trustee.

The Trustee may resign at any time by so notifying the Issuer in writing. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee

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and the Issuer in writing and may appoint a successor Trustee. The Issuer may remove the Trustee at its election if:

(a)        the Trustee fails to comply with Section 7.10 hereof;

(b)        the Trustee is adjudged a bankrupt or an insolvent;

(c)        a receiver or other public officer takes charge of the Trustee or its property; or

(d)        the Trustee otherwise becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Issuer shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Issuer.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Issuer. Immediately after that, the retiring Trustee shall transfer, after payment of all sums then owing to the Trustee pursuant to Section 7.07 hereof, all property held by it as Trustee to the successor Trustee, subject to the lien provided in Section 7.07 hereof, the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Holder.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Issuer or the Holders of at least 10% in principal amount of the outstanding Notes may petition, at the expense of the Issuer, any court of competent jurisdiction for the appointment of a successor Trustee.

If the Trustee, after written request by any Holder who has been a bona fide holder of securities for any period of time specified under TIA Section 3.10, fails to comply with Section 7.10 hereof, such Holder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the Issuer’s obligations under Section 7.07 hereof shall continue for the benefit of the retiring Trustee.

Section 7.09.         Successor Trustee by Consolidation, Merger or Conversion.

If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation, subject to this Article 7, the successor corporation without any further act shall be the successor Trustee.

Section 7.10.         Eligibility; Disqualification.

This Indenture shall always have a Trustee which shall be eligible to act as Trustee under TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee shall have a combined capital and surplus, together with its corporate parent, of at least $100,000,000 as set forth in its most recent published annual report of condition. If the Trustee has or shall acquire any “conflicting interest” within the meaning of TIA Section 310(b), the Trustee and the Issuer shall comply with the provisions of TIA Section 310(b);

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provided, however, that there shall be excluded from the operation of TIA Section 310(b)(1) any indenture or indentures under which other securities or certificates of interest or participation in other securities of the Issuer are outstanding if the requirements for such exclusion set forth in TIA Section 310(b)(1) are met. If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 7.10, the Trustee shall resign immediately in the manner and with the effect hereinbefore specified in this Article 7.

Section 7.11.         Preferential Collection of Claims Against the Issuer.

The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein. The provisions of TIA Section 311 shall apply to the Issuer as obligors of the Notes.

ARTICLE 8

AMENDMENTS, SUPPLEMENTS AND WAIVERS

Section 8.01.         Without Consent of Holders.

The Issuer and the Guarantors, if any, when authorized by a Board Resolution, and the Trustee may amend or supplement this Indenture, the Notes or the Note Guarantees without notice to or consent of any Holder:

(1)        to cure any ambiguity, defect or inconsistency;

(2)        to provide for uncertificated Notes in addition to or in place of certificated Notes;

(3)        to provide for the assumption of the Issuer’s or a Guarantor’s obligations to the Holders in the case of a merger, consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s assets in accordance with Article 5;

(4)        to add any Note Guarantee or to effect the release of any Guarantor from any of its obligations under its Note Guarantee or this Indenture (to the extent permitted by this Indenture);

(5)        to make any change that would provide any additional rights or benefits to the Holders or does not materially adversely affect the rights of any Holder;

(6)        to effect or maintain the qualification of this Indenture under the Trust Indenture Act;

(7)        to secure the Notes or any Note Guarantees or any other obligation under this Indenture;

(8)        to evidence and provide for the acceptance of appointment by a successor trustee; or

(9)        to provide for the issuance of Additional Notes in accordance with this Indenture.

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Section 8.02.         With Consent of Holders.

(a)        Subject to Section 6.07 hereof, the Issuer and the Guarantors, if any, when each is authorized by a Board Resolution of their respective Boards of Directors, and the Trustee may amend or supplement this Indenture or the Notes or the Note Guarantees with the written consent (which may include consents obtained in connection with a tender offer or exchange offer for Notes) of the Holders of at least a majority in principal amount of the outstanding Notes. Subject to Section 6.07 hereof, the Holders of a majority in principal amount of the outstanding Notes may waive compliance by the Issuer, or any Guarantor with any provision of this Indenture, the Notes, or the Note Guarantees. However, without the consent of each Holder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 6.04 hereof, may not:

(1)        reduce, or change the maturity of, the principal of any Note (it being understood that any amendment or waiver of Section 4.12 requiring the application of Net Available Proceeds to make a Net Proceeds Offer shall not constitute a change of the maturity of the principal of any Note under this clause (1));

(2)        reduce the rate of or extend the time for payment of interest on any Note;

(3)        reduce any premium payable upon redemption of the Notes or change the date on which any Notes are subject to redemption (other than provisions relating to the purchase of Notes described under Sections 4.12 and 4.15, except that if a Change of Control has occurred, no amendment or other modification of the obligation of the Issuer to make a Change of Control Offer relating to such Change of Control shall be made without the consent of each Holder of the Notes affected);

(4)        make any Note payable in money or currency other than that stated in the Notes;

(5)        modify or change any provision of this Indenture or the related definitions to affect the ranking of the Notes or any Note Guarantee in a manner that adversely affects the Holders, including, without limitation, Article 10 and the related definitions used therein;

(6)        reduce the percentage of Holders necessary to consent to an amendment or waiver to this Indenture or the Notes;

(7)        waive a default in the payment of principal of or premium or interest on any Notes (except a rescission of acceleration of the Notes by the Holders thereof as provided in this Indenture and a waiver of the payment default that resulted from such acceleration);

(8)        impair the rights of Holders to receive payments of principal of or interest on the Notes on or after the due date therefor or to institute suit for the enforcement of any payment on the Notes;

(9)        release any Guarantor that is a Significant Subsidiary from any of its obligations under its Note Guarantee or this Indenture, except as permitted by this Indenture; or

(10)      make any change in these amendment and waiver provisions.

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The consent of the Holders of the Notes is not necessary under this Indenture to approve the particular form of any proposed amendment or waiver. It is sufficient if such consent approves the substance of the proposed amendment or waiver.

After an amendment under this Indenture becomes effective, the Issuer is required to mail to Holders of the Notes a notice briefly describing such amendment. However, the failure to give such notice to all Holders of the Notes, or any defect therein, will not impair or affect the validity of the amendment.

Section 8.03.         Compliance with TIA.

Every amendment to or supplement of this Indenture, the Notes or the Note Guarantees shall comply with the TIA as then in effect.

Section 8.04.         Revocation and Effect of Consents.

Until an amendment, waiver or supplement becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. Subject to the following paragraph, any such Holder or subsequent Holder may revoke the consent as to such Holder’s Note or portion of such Note by notice to the Trustee or the Issuer received before the date on which the Trustee receives an Officers’ Certificate certifying that the Holders of the requisite principal amount of Notes have consented (and not theretofore revoked such consent) to the amendment, supplement or waiver.

The Issuer may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver. If a record date is fixed, then notwithstanding the last sentence of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date.

After an amendment, supplement or waiver becomes effective, it shall bind every Holder, unless it makes a change described in any of clauses (1) through (10) of Section 8.02 hereof, in which case, the amendment, supplement or waiver shall bind only each Holder who has consented to it and every subsequent Holder of a Note or portion of a Note that evidences the same debt as the consenting Holder’s Note; provided that any such waiver shall not impair or affect the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates expressed in such Note, or to bring suit for the enforcement of any such payment on or after such respective dates without the consent of such Holder.

Section 8.05.         Notation on or Exchange of Notes.

If an amendment, supplement, or waiver changes the terms of a Note, the Trustee may request the Holder to deliver it to the Trustee. In such case, the Trustee shall place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Issuer or the Trustee so determine, in exchange for the Note the Issuer shall issue and the Trustee shall authenticate a new Note that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment supplement or waiver.

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Section 8.06.         Trustee To Sign Amendments, etc.

The Trustee shall be entitled to receive, and shall be fully protected in relying upon, an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article 8 is authorized or permitted by this Indenture and that such amendment, supplement or waiver constitutes the legal, valid and binding obligation of the Issuer and any Guarantors, enforceable in accordance with its terms (subject to customary exceptions). The Trustee may, but shall not be obligated to, execute any such amendment, supplement or waiver which affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

ARTICLE 9

DISCHARGE OF INDENTURE; DEFEASANCE

Section 9.01.         Satisfaction and Discharge of Indenture.

(a)        This Indenture shall be discharged and shall cease to be of further effect (except those obligations referred to in Section 9.01(c)) as to all outstanding Notes and the Trustee, on written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when:

(1)        all the Notes that have been authenticated and delivered (except lost, stolen or destroyed Notes which have been replaced or paid and Notes for whose payment money has been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from this trust) have been delivered to the Trustee for cancellation, or

(2)        (a) all Notes not delivered to the Trustee for cancellation otherwise (i) have become due and payable, (ii) will become due and payable, or may be called for redemption, within one year or (iii) have been called for redemption pursuant to paragraph 6 of the Notes and, in any case, the Issuer has irrevocably deposited or caused to be deposited with the Trustee as trust funds, in trust solely for the benefit of the Holders, U.S. legal tender, U.S. Government Obligations or a combination thereof, in such amounts as will be sufficient (without consideration of any reinvestment of interest) to pay and discharge the entire Indebtedness (including all principal and accrued interest) on the Notes not theretofore delivered to the Trustee for cancellation, provided, that from and after the time of deposit, the money deposited shall not be subject to the rights of the Senior Creditors under the Credit Agreement pursuant to the provisions of Article 10, (b) the Issuer has paid all other sums payable by it under this Indenture, and (c) the Issuer has delivered irrevocable instructions to the Trustee to apply the deposited money toward the payment of the Notes at maturity or on the date of redemption, as the case may be.

(b)        In addition, the Issuer must deliver an Officers’ Certificate and an Opinion of Counsel stating that all conditions precedent to satisfaction and discharge have been complied with.

(c)        Notwithstanding Section 9.01(a), the Issuer’s obligations in Article 2 and Sections 4.01, 4.07, 7.07, 9.06 and 9.07 hereof shall survive until the Notes are no longer outstanding pursuant to the last paragraph of Section 2.08 hereof. After the Notes are no longer outstanding, the Issuer’s obligations in Sections 7.07, 9.06 and 9.07 hereof shall survive.

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(d)        After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Issuer’s and each Guarantor’s obligations under the Notes, the Note Guarantees and this Indenture except for those surviving obligations specified above.

(e)        The Issuer shall provide notice of discharge or defeasance pursuant to this Article 9 within ten (10) days after deposit of funds or U.S. Government Obligations. If payment at stated maturity of less than all of the Notes of any series is to be provided for in the manner and with the effect provided in this Section 9.01, the Trustee shall select such Notes, or portions or principal amount thereof, in the manner specified by Section 3.02 for selection for redemption of less than all the Notes of a series.

Section 9.02.         Legal Defeasance.

(a)        The Issuer may, at its option at any time, elect to have this section be applied to all outstanding Notes upon compliance with the conditions set forth in Section 9.04.

(b)        Upon the Issuer’s exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Issuer and each Guarantor shall, subject to the satisfaction of the conditions set forth in Section 9.04 hereof, be deemed to have been discharged from their respective obligations with respect to all outstanding Notes and the Note Guarantees on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Issuer and each Guarantor shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes and the Note Guarantees, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 9.05 hereof and the other Sections of this Indenture referred to in clauses (i) and (ii) below, and to have satisfied all their other respective obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Issuer, shall execute proper instruments acknowledging the same), and Holders of Notes and any amounts deposited under Section 9.04 of this Indenture shall cease to be subject to any obligations to, or the rights of any Senior Creditor under Article 10 or otherwise, except for the following provisions, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 9.05 hereof, and as more fully set forth in such Section, payments in respect of the principal of, and interest on, such Notes when such payments are due from such trust fund, (ii) the Issuer’s obligations with respect to such Notes under Article 2 and Section 4.07 hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Issuer’s obligations in connection therewith and (iv) this Section 9.02. Subject to compliance with this Article 9, the Issuer may exercise its option under this Section 9.02 notwithstanding the prior exercise of its option under Section 9.03 below with respect to the Notes.

Section 9.03.         Covenant Defeasance.

(a)        The Issuer may, at its option by Board Resolution of the Board of Directors of the Issuer, at any time, elect to have this Section be applied to all outstanding Notes upon compliance with the conditions set forth in Section 9.04.

(b)        Upon the Issuer’s exercise under paragraph (a) hereof of the option applicable to this paragraph (b), the Issuer and each Guarantor shall, subject to the satisfaction of the conditions set forth in Section 9.04 hereof, be released from their respective obligations under the

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covenants contained in Sections 4.05 and 4.08 through 4.21 hereof, inclusive, and subclause (3) of Section 5.01(a) hereof with respect to the outstanding Notes and the Note Guarantees on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”); provided, however, that Covenant Defeasance will not be effective until such time as Events of Default contained in Section 6.01(g) and (h) no longer apply, and Holders of Notes and any amounts deposited under Section 9.04 of this Indenture shall cease to be subject to any obligations to, or the rights of any Senior Creditor under Article 10 or otherwise, and the Notes and the Note Guarantees shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder. For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes and the Note Guarantees, the Issuer and each Guarantor may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event or Default under Section 6.01(c) hereof, but, except as specified above, the remainder of this Indenture, and such Notes and the Note Guarantees shall be unaffected thereby. In addition, upon the Issuer’s exercise under paragraph (a) hereof of the option applicable to this paragraph (b), subject to the satisfaction of the conditions set forth in Section 9.04 hereof, the Events of Default described under clauses (c) through (f) of Section 6.01 and the Events of Default described under clauses (g) and (h) of Section 6.01 (but only with respect to Significant Subsidiaries of the Issuer), in each case, will no longer constitute an Event of Default.

Section 9.04.         Conditions to Legal Defeasance or Covenant Defeasance.

The following shall be the conditions to the application of either Section 9.02 or 9.03 hereof to the outstanding Notes and the Note Guarantees:

(1)        the Issuer must irrevocably deposit with the Trustee (or other qualifying trustee), as trust funds, in trust solely for the benefit of the Holders, cash in U.S. legal tender or U.S. Government Obligations, or a combination thereof, in such amounts as will be sufficient (without consideration of any reinvestment of interest), in the opinion of a nationally recognized investment bank, appraisal firm or firms of independent public accountants selected by the Issuer, to pay the principal of and interest on the Notes on the scheduled due dates or on the applicable Redemption Date, as the case may be, provided that the Trustee shall have received an irrevocable written order from the Issuer instructing the Trustee to apply such U.S. legal tender or the proceeds of such U.S. Government Obligations to said payments with respect to such Notes, provided, further, that from and after the time of deposit, the money deposited shall not be subject to the rights of the Senior Creditors under the Credit Agreement pursuant to Article 10 of this Indenture;

(2)        in the case of an election under Section 9.02 hereof, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that (A) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, Legal Defeasance and discharge and will be subject to

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federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(3)        in the case of an election under Section 9.03 hereof, the Issuer shall have delivered to the Trustee an Opinion of Counsel reasonably acceptable to the Trustee confirming that the Holders will not recognize income, gain or loss for federal income tax purposes as a result of such deposit, Covenant Defeasance and discharge and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(4)        no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting solely from the borrowing of funds to be applied to such deposit);

(5)        such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of or constitute a default under this Indenture or any other material agreement or instrument to which the Issuer or any of its Subsidiaries is a party or by which the Issuer or any of its Subsidiaries is bound (other than any such Default or default resulting solely from the borrowing of funds to be applied to such deposit);

(6)        the Issuer shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Issuer with the intent of preferring the Holders over any other creditors of the Issuer or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Issuer or others; and

(7)        the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that the conditions precedent provided for in, in the case of the Officers’ Certificate, clauses (1) through (6) and, in the case of the Opinion of Counsel, clauses (2) and/or (3) and (5) of this Section 9.04 have been complied with.

Section 9.05.         Application of Trust Money.

All money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee pursuant to Section 9.01 or 9.04 hereof in respect of the outstanding Notes shall be held in trust and applied by the Trustee, in accordance with the provisions of such Notes and this Indenture, to the payment, either directly or through any Paying Agent as the Trustee may determine, to the Holders of such Notes, of all sums due and to become due thereon in respect of principal, premium, if any, and accrued interest, but such money need not be segregated from other funds except to the extent required by law.

The Issuer and the Guarantors shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 9.01 or 9.04 hereof or the principal, premium, if any, and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders.

Anything in this Article 9 to the contrary notwithstanding, the Trustee shall deliver or pay to the Issuer from time to time upon a written request of the Issuer in the form of an Officers’ Certificate any money or U.S. Government Obligations held by it as provided in Section 9.01 or 9.04 hereof which, in the opinion of a nationally-recognized firm of independent public accountants expressed in a written

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certification thereof delivered to the Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

Section 9.06.         Repayment to the Issuer.

Subject to Sections 9.01, 9.02, 9.03, 9.04, 9.05 and 9.07 hereof, the Trustee and the Paying Agent shall promptly pay to the Issuer upon request any excess U.S. legal tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. Subject to applicable abandoned property laws, the Trustee and the Paying Agent shall pay to the Issuer upon request any money held by them for the payment of principal, premium, if any, or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Issuer cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed, and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing, any unclaimed balance of such money then remaining will be repaid to the Issuer. After payment to the Issuer, Holders entitled to such money must look to the Issuer for payment as general creditors unless an applicable law designates another Person.

Section 9.07.         Reinstatement.

If the Trustee or Paying Agent is unable to apply any money or U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Issuer’s and each Guarantor’s obligations under this Indenture, the Notes and the Note Guarantees shall be revived and reinstated as though no deposit had occurred pursuant to this Article 9 until such time as the Trustee or Paying Agent is permitted to apply all such U.S. legal tender or U.S. Government Obligations in accordance with Section 9.01 hereof; provided, however, that if the Issuer or the Guarantors have made any payment of principal of, premium, if any, or accrued interest on any Notes because of the reinstatement of their obligations, the Issuer and each such Guarantor shall be subrogated to the rights of the Holders of such Notes to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE 10

SUBORDINATION

Section 10.01.       Notes Subordinated to the Credit Agreement.

The Issuer covenants and agrees, and each Holder of the Notes, by its acceptance thereof, likewise covenants and agrees, that all Notes shall be issued subject to the provisions of this Article 10; and the Trustee and each Person holding any Note, whether upon original issue or upon transfer, assignment or exchange thereof, accepts and agrees that the payment of all Obligations on the Notes by the Issuer shall, to the extent and in the manner herein set forth, be subordinated and junior in right of payment to the prior payment in full in cash or Cash Equivalents of all Credit Agreement Obligations; that the subordination is for the benefit of, and shall be enforceable directly by, the Senior Creditors, and that each Senior Creditor whether now a party to the Credit Agreement or that hereafter becomes a party to the Credit Agreement shall be deemed conclusively to have become a Senior Creditor in reliance upon the covenants and provisions contained in this Indenture and the Notes. The Notes shall, in all respects, rank pari passu or senior to all Indebtedness of the Issuer other than the Credit Agreement Obligations, except as may be otherwise agreed by the Holders of the Notes.

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Section 10.02.       No Payment on Notes in Certain Circumstances.

(a)        If a default occurs and is continuing in the payment when due, whether at maturity, by acceleration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Credit Agreement Obligations, no payment, repurchase or redemption of any kind or character shall be made by, or on behalf of, the Issuer or any other Person on its or their behalf with respect to any Obligations on the Notes, or to acquire any of the Notes for cash or property or otherwise, unless, in any such case, such default has been cured or waived to the satisfaction of, and any such acceleration has been rescinded by, the applicable Secured Creditors, or such Credit Agreement Obligations have been paid in full in cash, provided, that the Issuer may pay the Notes without regard to the foregoing if the Issuer and the Trustee receive written notice approving such payment from the Representative or from the other Senior Creditors, provided further, that Holders may receive and retain (1) Permitted Junior Securities, (2) payments or deposits made pursuant to Article 9, and (3) other amounts previously set aside by the Trustee, so long as, on the date or dates the respective amounts were paid into the trust or set aside by the Trustee, such payments were made with respect to the Notes or such amounts were set aside without violating the subordination provisions described herein. In addition, if any event of default (other than a default described in the previous sentence) occurs and is continuing with respect to the Credit Agreement, as such event of default is defined in the Credit Agreement, permitting the Senior Creditors to accelerate the maturity thereof and if the Representative gives notice of the event of default to the Trustee specifying the election to institute a Blockage Period (a “Default Notice”), then, unless and until all events of default have been cured or waived or have ceased to exist or the Trustee receives notice thereof from the Representative terminating the Blockage Period (as defined below), during the 180 days after the delivery of such Default Notice (the “Blockage Period”), neither the Issuer nor any other Person on its behalf shall (x) make any payment of any kind or character with respect to any Obligations on the Notes (except in the form of Permitted Junior Securities) or (y) acquire any of the Notes for cash or property or otherwise (other than Permitted Junior Securities). The Blockage Period shall end earlier if such Blockage Period is terminated (i) by written notice to the Trustee and the Issuer from the Person or Persons who gave such Default Notice, or (ii) because the Credit Agreement Obligations have been paid in full in cash. Notwithstanding anything herein to the contrary, in no event will a Blockage Period extend beyond 365 days from the date of the occurrence of the event of the default and only one such Blockage Period may be commenced within any 360 consecutive days. No event of default that existed or was continuing on the date of the commencement of any Blockage Period with respect to the Credit Agreement shall be, or be made, the basis for the commencement of a second Blockage Period by the Representative under the Credit Agreement whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days.

(b)        In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee or any Holder when such payment is prohibited by Section 10.02(a), such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the Representative , for the benefit of the Senior Creditors, as their respective interests may appear. The Trustee shall be entitled to rely on information regarding amounts then due and owing under the Credit Agreement, if any, received from the Representative or, if such information is not received from the Representative or the other Senior Creditors, from the Issuer and only amounts included in the information provided to the Trustee shall be paid to the Representative for the benefit of the Senior Creditors.

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Nothing contained in this Article 10 shall limit the right of the Trustee or the Holders of Notes to take any action to accelerate the maturity of the Notes pursuant to Section 6.02 or to pursue any rights or remedies hereunder; provided, that all Credit Agreement Obligations then due or thereafter due or declared to be due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations on the Notes, provided further, that Holders may receive and retain (1) Permitted Junior Securities, (2) payments or deposits made pursuant to Article 9, and (3) other amounts previously set aside by the Trustee, so long as, on the date or dates the respective amounts were paid into the trust or set aside by the Trustee, such payments were made with respect to the Notes or such amounts were set aside without violating the subordination provisions described herein.

Section 10.03.       Payment Over of Proceeds upon Dissolution, Etc.

(a)        Upon any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of the Issuer or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Issuer or its property, whether voluntary or involuntary, all Credit Agreement Obligations shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the Senior Creditors, before any payment or distribution of any kind or character is made on account of any Obligations on the Notes, or for the acquisition of any of the Notes for cash or property or otherwise, except that the Holders of Notes may receive and retain (1) Permitted Junior Securities, (2) payments or deposits made pursuant to Article 9, and (3) other amounts previously set aside by the Trustee, so long as, on the date or dates the respective amounts were paid into the trust or set aside by the Trustee, such payments were made with respect to the Notes or such amounts were set aside without violating the subordination provisions described herein. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, to which the Holders of the Notes or the Trustee under this Indenture would be entitled, except for the provisions hereof, shall be paid by the Issuer or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee under this Indenture if received by them, directly to the Representative, for the benefit of the Senior Creditors, for application to the payment of Credit Agreement Obligations remaining unpaid until all such Credit Agreement Obligations have been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the Senior Creditors, except that Holders of Notes may receive and retain (x) Permitted Junior Securities, (y) payments or deposits made pursuant to Article 9 and (z) or other amounts previously set aside by the Trustee, so long as, on the date or dates the respective amounts were paid into the trust or set aside by the Trustee, such payments were made with respect to the Notes or such amounts were set aside without violating the subordination provisions described herein.

(b)        To the extent any payment of Credit Agreement Obligations (whether by or on behalf of the Issuer, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the

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Credit Agreement Obligations or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred.

(c)        In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Issuer of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by Section 10.03(a), such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the Representative, for the benefit of the Senior Creditors, for application to the payment of Credit Agreement Obligations remaining unpaid until all such Credit Agreement Obligations have been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the Senior Creditors.

(d)        The consolidation of the Issuer with, or the merger of the Issuer with or into, another corporation or the liquidation or dissolution of the Issuer following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article 5 hereof and as long as permitted under the terms of the Credit Agreement shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section 10.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Issuer’s obligations hereunder in accordance with Article 5 hereof.

Section 10.04.       Payments May Be Paid Prior to Dissolution.

Nothing contained in this Article 10 or elsewhere in this Indenture shall prevent (i) the Issuer, except under the conditions described in Sections 10.02 and 10.03, from making payments at any time for the purpose of making payments of principal of and interest on the Notes, or from depositing with the Trustee any moneys for such payments, or (ii) the application by the Trustee of any moneys deposited with it for the purpose of making such payments of principal of, and interest on, the Notes to the Holders entitled thereto unless at least two Business Days prior to the date upon which such payment would otherwise become due and payable a Trust Officer shall have actually received a Default Notice or the written notice provided for in Section 10.07 (provided that, notwithstanding the foregoing, such application shall otherwise be subject to the provisions of the first sentence of Section 10.02(a) and Section 10.03). The Issuer shall give prompt written notice to the Trustee of any dissolution, winding-up, liquidation or reorganization of the Issuer.

Section 10.05.       Subrogation.

Subject to the payment in full in cash or Cash Equivalents of all Credit Agreement Obligations, the Holders of the Notes shall be subrogated to the rights of the Senior Creditors to receive payments or distributions of cash, property or securities of the Issuer applicable to the Credit Agreement until the Notes shall be paid in full in cash or Cash Equivalents; and, for the purposes of such subrogation, no such payments or distributions to the Senior Creditors by or on behalf of the Company or by or on behalf of the Holders by virtue of this Article 10 that otherwise would have been made to the Holders shall, as between the Issuer and the Holders of the Notes, be deemed to be a payment by the Issuer to or on account of the Credit Agreement, it being understood that the provisions of this Article 10 are and are intended solely for the purpose of defining the relative rights of the Holders of the Notes, on the one hand, and the Senior Creditors, on the other hand.

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Section 10.06.       Obligations of the Issuer Unconditional.

Nothing contained in this Article 10 or elsewhere in this Indenture or in the Notes is intended to or shall impair, as between the Issuer and the Holders, the obligation of the Issuer, which is absolute and unconditional, to pay to the Holders the principal of, any premium on and any interest on the Notes as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Issuer other than the Senior Creditors, nor shall anything herein or therein prevent the Holder of any Note or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon an Event of Default under this Indenture, subject to the rights, if any, in respect of cash, property or securities of the Issuer received upon the exercise of any such remedy.

Section 10.07.       Notice to Trustee.

The Issuer shall give prompt written notice to the Trustee of any fact known to the Issuer which would prohibit the making of any payment to or by the Trustee in respect of the Notes pursuant to the provisions of this Article 10. Regardless of anything to the contrary contained in this Article 10 or elsewhere in this Indenture, the Trustee shall not be charged with knowledge of the existence of any default or event of default with respect to the Credit Agreement or of any other facts that would prohibit the making of any payment to or by the Trustee unless and until the Trustee shall have received notice in writing from the Issuer, or from the Representative or any other Senior Creditor, together with proof satisfactory to the Trustee of the authority of such Representative, provided, that prior to the receipt of any such written notice, the Trustee shall be entitled to assume (in the absence of actual knowledge to the contrary) that no such facts exist.

In the event that the Trustee determines in good faith that any evidence is required with respect to the right of any Person as a Senior Creditor to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amounts of Credit Agreement Obligations owed to such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article 10, and if such evidence is not furnished the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.

Section 10.08.       Reliance on Judicial Order or Certificate of Liquidating Agent.

Upon any payment or distribution of assets of the Issuer referred to in this Article 10, the Trustee, subject to the provisions of Article 7 hereof, and the Holders of the Notes shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders of the Notes, for the purpose of ascertaining the persons entitled to participate in such payment or distribution, the Senior Creditors and other holders of Indebtedness of the Issuer, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10.

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Section 10.09.       Trustee’s Relation to the Senior Creditors.

The Trustee and any agent of the Issuer or the Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Credit Agreement Obligations that may at any time be owed to it in its individual or any other capacity to the same extent as any other Senior Creditor and nothing in this Indenture shall deprive the Trustee or any such agent of any of its rights as such Senior Creditor.

With respect to the Senior Creditors, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article 10, and no implied covenants or obligations with respect to the Senior Creditors shall be read into this Indenture against the Trustee. The Trustee shall not be deemed to owe any fiduciary duty to the Senior Creditors.

Whenever a distribution is to be made or a notice given to the Senior Creditors, the distribution may be made and the notice may be given to the Representative.

Section 10.10.       Subordination Rights Not Impaired by Acts or Omissions of the Issuer or Senior Creditors.

No right of any present or future Senior Creditor to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Issuer or by any act or failure to act, in good faith, by any such Senior Creditor, or by any noncompliance by the Issuer with the terms of this Indenture, regardless of any knowledge thereof that any such Senior Creditor may have or otherwise be charged with.

Without in any way limiting the generality of the foregoing paragraph, the Senior Creditors may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders of the Notes and without impairing or releasing the subordination provided in this Article 10 or the obligations hereunder of the Holders of the Notes to the Senior Creditors, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of Obligations owed under, or renew or alter, the Credit Agreement, or otherwise amend in any manner the Credit Agreement, or any instrument evidencing the same or any agreement under which Obligations owed under the Credit Agreement are outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing the Obligations owed under the Credit Agreement; (iii) release any Person liable in any manner for the payment or collection of Obligations owed under the Credit Agreement; and (iv) exercise or refrain from exercising any rights against the Issuer and any other Person.

Section 10.11.       Noteholders Authorize Trustee To Effectuate Subordination of Notes.

Each Holder of Notes by its acceptance of them authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the Senior Creditors and the Holders of Notes, the subordination provided in this Article 10, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Issuer (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of creditors or otherwise) tending towards liquidation of the business and assets of the Issuer, the filing of a claim for the unpaid balance of its Notes and accrued interest in the form required in those proceedings.

If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the

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Representative is or the other Senior Creditors are hereby authorized to have the right to file and is or are hereby authorized to file an appropriate claim for and on behalf of the Holders of said Notes. Nothing herein contained shall be deemed to authorize the Trustee or the Representative or the other Senior Creditors to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee or the Representative or the other Senior Creditors to vote in respect of the claim of any Holder in any such proceeding.

Section 10.12.       This Article 10 Not To Prevent Events of Default.

The failure to make a payment on account of principal of, any premium on or interest on the Notes by reason of any provision of this Article 10 will not be construed as preventing the occurrence of an Event of Default.

Section 10.13.       Trustee’s Compensation Not Prejudiced.

Nothing in this Article 10 will apply to amounts due to the Trustee pursuant to other sections in this Indenture.

Section 10.14.       Subordination of Guarantors.

The Note Guarantee of any Guarantor will be subordinated to the Obligations of such Guarantor under the Credit Agreement to the same extent and in the same manner as the Notes are subordinated to the Obligations of the Issuer under the Credit Agreement.

ARTICLE 11

GUARANTEES

Section 11.01.       Unconditional Guarantee.

Each Guarantor, if any, hereby unconditionally, jointly and severally, guarantees to each Holder of a Note authenticated by the Trustee and to the Trustee and its successors and assigns that the principal of, premium thereon (if any) and interest on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on the overdue principal of and interest on any overdue interest on the Notes and all other obligations of the Issuer to the Holders or the Trustee hereunder or under the Notes will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; subject, however, to the limitations set forth in Section 11.03 hereof. Each Guarantor hereby agrees that to the maximum extent permitted under applicable law, its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any Holder with respect to any provisions hereof or thereof, the recovery of any judgment against the Issuer, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. To the maximum extent permitted under applicable law, each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Issuer, any right to require a proceeding first against the Issuer, protest, notice and all demands whatsoever and covenants that the Note Guarantee will not be discharged except by complete performance of the obligations contained in the Notes and this Indenture. If any Holder or the Trustee is required by any court or otherwise to return

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to the Issuer, any Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Issuer or any Guarantor, any amount paid by the Issuer or any Guarantor to the Trustee or such Holder, each Note Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, to the maximum extent permitted under applicable law, as between a Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations in respect of the Note Guarantees hereby may be accelerated as provided in Article 6 hereof for the purpose of each Note Guarantee, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations guaranteed hereby, and (y) in the event of any acceleration of such obligations as provided in Article 6 hereof, such obligations (whether or not due and payable) shall become due and payable by each Guarantor for the purpose of each Note Guarantee.

Each Guarantor agrees to make immediate payment to the Trustee on behalf of the Holders of all Obligations owing or payable to the respective Holders upon receipt of a demand for payment therefor (if then permitted pursuant to this Indenture) by the Trustee to such Guarantor in writing.

Each Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys’ fees) incurred by the Trustee or any Holder in enforcing any rights under this Article 11.

Section 11.02.       Severability.

In case any provision of this Article 11 shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

Section 11.03.       Limitation on Guarantor’s Liability.

Each Guarantor, and by its acceptance of Notes, each Holder, hereby confirms that it is the intention of all such parties that the Note Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal, foreign or state law to the extent applicable to any Note Guarantee. To effectuate the foregoing intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree that the obligations of such Guarantor under its Note Guarantee and this Article 11 shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including any and all guarantees under the Credit Facilities) that are relevant under such laws, and after giving effect to any collections from, rights to receive contribution from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under this Article 11, result in the obligations of such Guarantor under its Note Guarantee not constituting a fraudulent transfer or conveyance. Each Guarantor that makes a payment for distribution under its Note Guarantee is entitled to a contribution from each other Guarantor in a pro rata amount based on the adjusted net assets of each Guarantor.

Section 11.04.       Successors and Assigns.

This Article 11 shall be binding upon each Guarantor and its successors and assigns and shall ensure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Notes shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture.

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Section 11.05.       No Waiver.

Each of the Guarantors agrees that to the maximum extent permitted under applicable law, (a) neither a failure nor a delay on the part of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege and (b) the rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have under this Article 11 at law, in equity, by statute or otherwise.

Section 11.06.       Release of Guarantor.

A Guarantor shall be released from all of its obligations under its Note Guarantee and its obligations under this Indenture:

(1)        in the event of a sale or other disposition of all or substantially all of the assets of such Guarantor, by way of merger, consolidation or otherwise, or a sale or other disposition of all of the Voting Stock of such Guarantor then held by the Issuer and the Restricted Subsidiaries;

(2)        if such Subsidiary Guarantor is designated as an Unrestricted Subsidiary or otherwise ceases to be a Restricted Subsidiary, in each case in accordance with the provisions of this Indenture, upon effectiveness of such designation or when it first ceases to be a Restricted Subsidiary, respectively; or

(3)        if such Guarantor would no longer be required to issue a Note Guarantee as required under Section 4.19; provided that a Guarantor shall not be permitted to be released from its Note Guarantee if it is an obligor with respect to Indebtedness that would not, under Section 4.10 be permitted to be incurred by a Restricted Subsidiary that is not a Guarantor.

Upon delivery by the Issuer to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect that one of the foregoing requirements has been satisfied and the conditions to the release of a Guarantor from its Note Guarantee under this Section 11.06 have been met, the Trustee shall execute any documents reasonably required in order to evidence the release of such Guarantor from its obligations under its Note Guarantee.

Section 11.07.       Execution of Supplemental Indenture for Future Guarantors.

Each Subsidiary which is required to become a Guarantor shall, and the Issuer shall cause each such Subsidiary to, promptly execute and deliver to the Trustee a supplemental indenture substantially in the form of Exhibit B hereto pursuant to which such Subsidiary shall become a Guarantor under this Article 11 and shall guarantee the obligations of the Issuer under the Notes and this Indenture. Concurrently with the execution and delivery of such supplemental indenture, the Issuer shall deliver to the Trustee an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors’ rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Note Guarantee of such Guarantor is a legal, valid and binding obligation of such Guarantor, enforceable against such Guarantor in accordance with its terms.

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Section 11.08.       Notation of Note Guarantee.

To evidence the Note Guarantee set forth in this Article 11, each Guarantor hereby agrees that a notation of such Note Guarantee shall be placed on each Note authenticated and made available for delivery by the Trustee and that this Note Guarantee shall be executed on behalf of each Guarantor by the manual or facsimile signature of an Officer of each Guarantor. Each Guarantor hereby agrees that the Note Guarantee set forth in Section 11.01 hereof shall remain in full force and effect notwithstanding any failure to endorse on each Note a notation of such Note Guarantee. If an Officer of a Guarantor whose signature is on the Note Guarantee no longer holds that office at the time the Trustee authenticates the Note on which the Note Guarantee is endorsed, the Note Guarantee shall be valid nevertheless. The delivery of any Note by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Note Guarantee set forth in this Indenture on behalf of each Guarantor.

Section 11.09.       Subordination of Subrogation and Other Rights.

Each Guarantor hereby agrees that any claim against the Issuer that arises from the payment, performance or enforcement of such Guarantor’s obligations under the Note Guarantee or this Indenture, including, without limitation, any right of subrogation, shall be subject and subordinate to, and no payment with respect to any such claim of such Guarantor shall be made before, the payment in full in cash of all outstanding Notes in accordance with the provisions provided therefor in this Indenture.

ARTICLE 12

MISCELLANEOUS

Section 12.01.       TIA Controls.

If any provision of this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control.

Section 12.02.       Notices.

Any notices or other communications required or permitted hereunder shall be in writing, and shall be sufficiently given if made by hand delivery, by telecopier or registered or certified mail, postage prepaid, return receipt requested, addressed as follows:

If to the Issuer or any Guarantor:

American Greetings Corporation

One American Road

Cleveland, OH 44144

Attention:    Catherine M. Kilbane, Esq.

Tel: (216) 252-7300

Fax: (216) 252-6777

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Copy to:

Thompson Hine LLP

335 Madison Avenue

12^th Floor

New York, NY 10017

Attention: Katherine D. Brandt

Tel: (212) 908-3915

Fax: (212) 344-6101

If to the Trustee:

The Bank of Nova Scotia Trust Company of New York

One Liberty Plaza, 23rd Floor,

New York, NY 10006

Attn: Trust Officer

Tel: (212) 225-5427

Fax: (212) 225-5436

The Issuer, any Guarantor or the Trustee by written notice to the others may designate additional or different addresses for subsequent notices or communications. Any notice or communication to the Issuer, any Guarantors or the Trustee, shall be deemed to have been given or made as of the date so delivered if personally delivered; when receipt is acknowledged, if telecopied; and five (5) calendar days after mailing if sent by registered or certified mail, postage prepaid (except that a notice of change of address shall not be deemed to have been given until actually received by the addressee). Notwithstanding the foregoing, the Trustee shall not be deemed to have been given notice until such notice is actually received.

Any notice or communication mailed to a Holder shall be mailed to him by first-class mail, postage prepaid, at his address shown on the register kept by the Registrar.

Failure to mail a notice or communication to a Holder or any defect in it shall not affect its sufficiency with respect to other Holders. If a notice or communication to a Holder is mailed in the manner provided above, it shall be deemed duly given, whether or not the addressee receives it.

In case by reason of the suspension of regular mail service, or by reason of any other cause, it shall be impossible to mail any notice as required by this Indenture, then such method of notification as shall be made with the approval of the Trustee shall constitute a sufficient mailing of such notice.

Section 12.03.       Communications by Holders with Other Holders.

Holders may communicate pursuant to TIA Section 312(b) with other Holders with respect to their rights under this Indenture or the Notes. The Issuer, the Guarantors, the Trustee, the Registrar and anyone else shall have the protection of TIA Section 312(c).

Section 12.04.       Certificate and Opinion as to Conditions Precedent.

Upon any request or application by the Issuer or any Guarantor to the Trustee to take any action under this Indenture, the Issuer or such Guarantor, as the case may be, shall furnish to the Trustee:

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(1)        an Officers’ Certificate (which shall include the statements set forth in Section 12.05 below) stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

(2)        an Opinion of Counsel (which shall include the statements set forth in Section 12.05 below) stating that, in the opinion of such counsel, all such conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with.

Section 12.05.       Statements Required in Certificate and Opinion.

Each certificate and opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(1)        a statement that the person making such certificate or opinion has read such covenant or condition and the definitions relating thereto;

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

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

(4)        a statement as to whether or not, in the opinion of such person, such covenant or condition has been complied with.

Section 12.06.       Rules by Trustee and Agents.

The Trustee may make reasonable rules for action by or at meetings of Holders. The Registrar and Paying Agent may make reasonable rules for their functions.

Section 12.07.       Legal Holidays.

A “Legal Holiday” is a Saturday, a Sunday, a federally-recognized holiday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.

Section 12.08.       Governing Law.

THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Section 12.09.       No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture, loan, security or debt agreement of the Issuer or any Subsidiary thereof. No such indenture, loan, security or debt agreement may be used to interpret this Indenture.

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Section 12.10.       No Recourse Against Others.

A director, officer, employee, incorporator or stockholder of the Issuer or any Guarantor shall not have any liability for any obligations of the Issuer under the Notes or this Indenture or of any Guarantor under its Note Guarantee for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes and the Note Guarantees.

Section 12.11.       Successors.

All agreements of each of the Issuer and each Guarantor in this Indenture and the Notes shall bind their respective successors. All agreements of the Trustee, any additional trustee and any Paying Agents in this Indenture shall bind their respective successors.

Section 12.12.       Consent to Jurisdiction; Waiver of Immunities.

The Issuer and the Guarantors irrevocably consent to the jurisdiction of the courts of the State of New York and the courts of the United States of America located in the Borough of Manhattan, City and State of New York over any suit, action or proceeding with respect to this Indenture or the transactions contemplated hereby. The Issuer and the Guarantors waive any objection that they may have to the venue of any suit, action or proceeding with respect to this Indenture or the transactions contemplated hereby in the courts of the State of New York or the courts of the United States of America, in each case, located in the Borough of Manhattan, City and State of New York, or that such suit, action or proceeding brought in the courts of the State of New York or the United States of America, in each case, located in the Borough of Manhattan, City and State of New York was brought in an inconvenient court and agrees not to plead or claim the same.

Section 12.13.       Multiple Counterparts.

The parties may sign multiple counterparts of this Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement.

Section 12.14.       Table of Contents, Headings, etc.

The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

Section 12.15.       Separability.

Each provision of this Indenture shall be considered separable and if for any reason any provision which is not essential to the effectuation of the basic purpose of this Indenture or the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

[Signature Page to Follow]

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IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed all as of the date and year first written above.

AMERICAN GREETINGS CORPORATION,
as Issuer
By:	/s/Stephen J. Smith
	Name:	Stephen J. Smith
	Title:	Senior Vice President and Chief Financial Officer

[Signature Page to Indenture]

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THE BANK OF NOVA SCOTIA TRUST
COMPANY OF NEW YORK       as Trustee
By:	/s/Warren A. Goshine
	Name:	Warren A. Goshine
	Title:	Vice President

[Signature Page to Indenture]

EXHIBIT A

CUSIP No.: [        ]

AMERICAN GREETINGS CORPORATION

7 3/8% NOTE DUE 2016

No. $                    

AMERICAN GREETINGS CORPORATION, an Ohio corporation (the “Issuer,” which term includes any successor entity), for value received promises to pay to CEDE & CO. or registered assigns, the principal sum of [            ] DOLLARS on June 1, 2016.

Interest Payment Dates: June 1 and December 1, commencing [                ].

Record Dates: May 15 and November 15.

Reference is made to the further provisions of this Note contained herein and the Indenture (as defined), which will for all purposes have the same effect as if set forth at this place.

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IN WITNESS WHEREOF, the Issuer has caused this Note to be signed manually or by facsimile by its duly authorized Officers.

AMERICAN GREETINGS CORPORATION
By:
	Name:
	Title:
By:
	Name:
	Title:

Dated: [            ]

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Certificate of Authentication

This is one of the 7 3/8% Notes due 2016 referred to in the within-mentioned Indenture.

THE BANK OF NOVA SCOTIA TRUST
	COMPANY OF NEW YORK as Trustee
By:
	Authorized Signatory

Dated: [            ]

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(REVERSE OF SECURITY)

7 3/8% NOTE DUE 2016

1.        Interest. American Greetings Corporation, an Ohio corporation (the “Issuer”), promises to pay interest on the principal amount of this Note at the rate per annum shown above. Interest on the Notes will accrue from the most recent date on which interest has been paid or, if no interest has been paid, from the date of the original issuance of the Notes. The Issuer will pay interest semi-annually in arrears on each Interest Payment Date, commencing [            ]. Interest will be computed on the basis of a 360-day year of twelve 30-day months.

The Issuer shall pay interest (including post-petition interest in any proceeding under any Bankruptcy Law) on overdue principal and premium and on overdue installments of interest (including post-petition interest in any proceeding under any Bankruptcy Law) (without regard to any applicable grace periods) to the extent lawful from time to time on demand at a rate that is 2% per annum in excess of the rate then in effect on the Notes.

2.        Method of Payment. The Issuer shall pay interest on the Notes (except defaulted interest) to the Persons who are the registered Holders at the close of business on the May 15 or November 15 immediately preceding the Interest Payment Date (whether or not such day is a Business Day) even if the Notes are cancelled on registration of transfer or registration of exchange after such Record Date. Holders must surrender Notes to a Paying Agent to collect principal payments. Payments of principal and premium, if any, will be made (on presentation of such Notes if in certificated form) in money of the United States that at the time of payment is legal tender for payment of public and private debts; provided, however, that the Issuer may pay principal, premium and interest by check payable in such money or if a Holder has given wire transfer instructions to the Issuer at least ten Business Days prior to the applicable payment date, the Issuer will make all payments on such Holder’s Notes by wire transfer of immediately available funds to the account specified in those instructions. The Issuer may deliver any such interest payment to the Paying Agent or to a Holder at the Holder’s registered address.

3.        Paying Agent and Registrar. Initially, The Bank of Nova Scotia Trust Company of New York, a trust company organized and existing under the laws of the State of New York (the “Trustee”), will act as Paying Agent and Registrar. The Issuer may change any Paying Agent, Registrar or co-Registrar without notice to the Holders. Neither the Issuer nor any of its Subsidiaries or Affiliates may act as Paying Agent but may act as Registrar or co-Registrar.

4.        Indenture. The Issuer issued this Note under an Indenture, dated as of February 24, 2009 (the “Indenture”), by and among the Issuer and the Trustee. This Note is one of a duly authorized issue of Initial Notes of the Issuer designated as its 7 3/8% Notes due 2016 (the “Notes”). The Notes include the Initial Notes and the Additional Notes, if any. The Initial Notes and the Additional Notes are treated as a single class of securities under the Indenture. Capitalized terms herein are used as defined in the Indenture unless otherwise defined herein. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code Sections 77aaa-77bbbb) (the “TIA”), as in effect on the date of the Indenture. Notwithstanding anything to the contrary herein, the Notes are subject to all such terms, and Holders are referred to the Indenture and the TIA for a statement of them. The Notes are general unsecured obligations of the Issuer.

5.        Subordination. The Notes are subordinated in right of payment, in the manner and to the extent set forth in the Indenture, to the prior payment in full in cash or Cash Equivalents of all Credit Agreement Obligations, whether outstanding on the date of the Indenture or thereafter created,

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incurred, assumed or guaranteed. Each Holder by its acceptance hereof agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes.

6.        Redemption.

(a)      Optional Redemption. Except as set forth below, the Notes shall not be redeemed prior to June 1, 2011. At any time or from time to time on or after June 1, 2011, the Issuer, at its option, may redeem the Notes, in whole or in part, at the Redemption Prices (expressed as percentages of principal amount) set forth below, together with accrued and unpaid interest thereon, if any, to the Redemption Date, if redeemed during the 12-month period beginning June 1 of the years indicated:

Year	Percentage
2011	103.688	%
2012	102.458	%
2013	101.229	%
2014 and thereafter	100.000	%

(b)      Redemption at Applicable Premium. In addition, at any time prior to June 1, 2011, the Notes may also be redeemed or purchased (by the Issuer or any other Person) in whole or in part, at the Issuer’s option, at a price equal to 100% of the principal amount thereof plus the Applicable Premium as of, and accrued but unpaid interest, if any, to, the Redemption Date or the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date).

(c)      Redemption upon Consummation of Certain Qualified Equity Offerings. Notwithstanding the foregoing, at any time or from time to time prior to June 1, 2009, the Issuer, at its option, may redeem up to 35% of the aggregate principal amount of the Notes issued under the Indenture with the net cash proceeds of one or more Qualified Equity Offerings at a Redemption Price equal to 107.375% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest thereon, if any, to the Redemption Date; provided that (1) at least 65% of the aggregate principal amount of Notes issued under the Indenture remains outstanding immediately after the occurrence of such redemption and (2) the redemption occurs within 90 days of the date of the closing of any such Qualified Equity Offering.

(d)      Redemption Upon Issuance of Other Subordinated Indebtedness. Notwithstanding the foregoing, at any time or from time to time, the Issuer, at its option, may redeem all, but not less than all of the aggregate principal amount of the Notes issued under the Indenture at a price equal to 100% of the principal amount thereof plus accrued but unpaid interest, if any, to the Redemption Date (subject to the right of the Holders of record on the relevant record date to receive interest due on the relevant interest payment date), in connection with the issuance by the Issuer or any Guarantor of Indebtedness in accordance with Section 4.10(a) of the Indenture.

7.        Notice of Redemption. Notice of redemption under paragraph 6 of this Note will be mailed at least 30 days but not more than 60 days before the redemption date to each Holder to be redeemed at such Holder’s registered address, except that redemption notices may be mailed more than 60 days prior to a redemption date if the notice is issued in connection with a satisfaction and discharge of the Indenture.

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Except as set forth in the Indenture, if monies for the redemption of the Notes called for redemption shall have been deposited with the Paying Agent for redemption on such redemption date, then, unless the Issuer defaults in the payment of such redemption price plus accrued interest, if any, the Notes called for redemption will cease to bear interest from and after such redemption date and the only right of the Holders of such Notes will be to receive payment of the redemption price plus accrued interest, if any.

8.        Offers to Purchase. The Indenture provides that, after certain Asset Sales and upon the occurrence of a Change of Control, and subject to further limitations contained therein, the Issuer will make an offer to purchase certain amounts of the Notes in accordance with the procedures set forth in the Indenture.

9.        Denominations; Transfer; Exchange. The Notes are in registered form, without coupons, in denominations of $1,000 and integral multiples thereof. A Holder shall register the transfer or exchange of Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay certain transfer taxes or similar governmental charges payable in connection therewith as permitted by the Indenture. The Registrar need not register the transfer of or exchange of any Notes or portions thereof selected for redemption.

10.      Persons Deemed Owners. The registered holder of a Note shall be treated as the owner of it for all purposes.

11.      Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee and the Paying Agent will pay the money back to the Issuer. After that, Holders entitled to money must look to the Issuer for payment as general creditors unless an “abandoned property” law designates another person.

12.      Legal Defeasance and Covenant Defeasance. If the Issuer at any time deposits with the Trustee U.S. legal tender or U.S. Government Obligations sufficient to pay the principal of and interest on the Notes to redemption or maturity and complies with the other provisions of the Indenture relating to defeasance, the Issuer will be discharged from certain provisions of the Indenture and the Notes (including certain covenants, but excluding its obligation to pay the principal of and interest on the Notes).

13.      Amendments, Supplements, and Waivers. Subject to certain exceptions, the Indenture or the Notes may be amended or supplemented with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding, and any existing Default or Event of Default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding. Without notice to or consent of any Holder, the parties thereto may amend or supplement the Indenture or the Notes to, among other things, cure any ambiguity, defect or inconsistency, provide for uncertificated Notes in addition to or in place of certificated Notes to provide for the assumption of the Issuer’s or any Guarantor’s obligations to the Holders in the case of a merger, consolidation or sale of all or substantially all of the assets in accordance with Article 5 of the Indenture, to release any Guarantor from any of its obligations under its Note Guarantee or the Indenture (to the extent permitted by the Indenture), to make any change that does not materially adversely affect the rights of any Holder or, in the case of the Indenture, to maintain the qualification of the Indenture under the Trust Indenture Act.

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14.      Restrictive Covenants. The Indenture imposes certain limitations on the ability of each of the Issuer and its Subsidiaries to, among other things, incur additional Indebtedness, make payments in respect of its Equity Interests, enter into transactions with Affiliates, create dividend or other payment restrictions affecting Restricted Subsidiaries, enter into sale and leaseback transactions, sell assets, create liens, issue capital stock, make certain Investments, merge or consolidate with any other Person, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets. Such limitations are subject to a number of important qualifications and exceptions. The Issuer must annually report to the Trustee on compliance with such limitations.

15.      Successor Entity. When a successor entity assumes, in accordance with the Indenture, all the obligations of its predecessor under the Notes and the Indenture, and immediately before and thereafter no Default or Event of Default exists and certain other conditions are satisfied, the predecessor entity will be released from those obligations.

16.      Defaults and Remedies. Events of Default are set forth in the Indenture. If an Event of Default (other than an Event of Default specified in Section 6.01(g) or (h)) shall occur and be continuing, the Trustee, by written notice to the Issuer, or the Holders of at least 25% in aggregate principal amount of the Notes then outstanding by written notice to the Issuer and the Trustee, may declare (an “acceleration declaration”) all amounts owing under the Notes to be due and payable; provided, however, that after such acceleration but before a judgment or decree based on acceleration, the Holders of a majority in aggregate principal amount of the outstanding Notes may rescind and annul such acceleration and its consequences if all existing Events of Default, other than the nonpayment of principal, premium and interest that has become due solely because of the acceleration, have been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. In case an Event of Default specified in Section 6.01(g) or (h) of the Indenture occurs with respect to the Issuer and is continuing, such principal amount, together with premium and interest with respect to all of the Notes, shall be due and payable immediately without any declaration or other act on the part of the Trustee or the Holders.

17.      Trustee Dealings with the Issuer. The Trustee under the Indenture, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Issuer, and may otherwise deal with the Issuer, its Subsidiaries or their respective Affiliates as if it were not the Trustee.

18.      No Recourse Against Others. As more fully described in the Indenture, no director, officer, employee, stockholder or incorporator, as such, of the Issuer shall have any liability for any obligation of the Issuer under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. Such waiver and release are part of the consideration for the issuance of the Notes.

19.      Authentication. This Note shall not be valid until the Trustee or Authenticating Agent manually signs the certificate of authentication on this Note.

20.      Governing Law. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

21.      Abbreviations and Defined Terms. Customary abbreviations may be used in the name of a Holder or an assignee, such as: TEN COM (= tenants in common), TENENT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

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22.      CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be printed on the Notes as a convenience to the Holders. No representation is made as to the accuracy of such numbers as printed on the Notes and reliance may be placed only on the other identification numbers printed hereon.

23.      Indenture. Each Holder, by accepting a Note, agrees to be bound by all of the terms and provisions of the Indenture, as the same may be amended from time to time.

The Issuer will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to: American Greetings Corporation, One American Road, Cleveland, Ohio 44144, Attention: General Counsel, fax: (216) 252-6777.

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FORM OF NOTE GUARANTEE NOTATION

For value received, each Guarantor (which term includes any successor Person under the Indenture) has, jointly and severally, unconditionally guaranteed, to the extent set forth in, and subject to the provisions of, the Indenture dated as of February 24, 2009 (the “Indenture”) among American Greetings Corporation (the “Issuer”), the Guarantors party thereto and The Bank of Nova Scotia Trust Company of New York, a trust company organized and existing under the laws of the State of New York, as trustee (the “Trustee”), that (i) the principal of, premium, if any, and interest, if any, on the Notes will be promptly paid in full when due, whether at maturity, by acceleration, redemption or otherwise, and interest on the overdue principal of, premium, if any, and interest, if any, on the Notes, if lawful (subject in all cases to any applicable grace period provided herein), and all other obligations of the Issuer to the Holders or the Trustee hereunder or thereunder will be promptly paid in full, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any Notes or any of such other obligations, the same will be promptly paid in full when due in accordance with the terms of the extension or renewal, whether at stated maturity, by acceleration or otherwise. Failing payment when due of any amount so guaranteed for whatever reason, the Guarantors shall be jointly and severally obligated to pay the same immediately. The obligations of the Guarantors to the Holders of Notes and to the Trustee pursuant to the Indenture (including the Note Guarantees) are set forth in Article 11 of the Indenture, and reference is hereby made to the Indenture for the precise terms of the Note Guarantees. Each Holder of a Note, by accepting the same agrees to and shall be bound by such provisions.

Capitalized terms used but not defined herein have the meanings given to them in the Indenture.

[NAME OF EACH GUARANTOR]
By:
	Name:
	Title:

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ASSIGNMENT FORM

If you the Holder want to assign this Note, fill in the form below and have your signature guaranteed:

I or we assign and transfer this Note to:

(Print or type name, address and zip code and

social security or tax ID number of assignee)

and irrevocably appoint ,

agent to transfer this Note on the books of American Greetings Corporation. The agent may substitute another to act for him.

Date:	Signed:
		(Sign exactly as your name appears on the other side of this Note)

Medallion Guarantee:

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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[OPTION OF HOLDER TO ELECT PURCHASE]

If you want to elect to have this Note purchased by American Greetings Corporation pursuant to Section 4.12 or Section 4.15 of the Indenture, check the appropriate box:

Section 4.12 ¨

Section 4.15 ¨

If you want to elect to have only part of this Note purchased by American Greetings Corporation pursuant to Section 4.12 or Section 4.15 of the Indenture, state the amount you elect to have purchased:

$

Date:
	NOTICE: The signature on this assignment must correspond with the name as it appears upon the face of the within Note in every particular without alteration or enlargement or any change whatsoever and be guaranteed by the endorser’s bank or broker.

Medallion Guarantee:

Signatures must be guaranteed by an “eligible guarantor institution” meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program (“STAMP”) or such other “signature guarantee program” as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended.

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EXHIBIT B

FORM OF SUPPLEMENTAL INDENTURE

SUPPLEMENTAL INDENTURE (this “Supplemental Indenture”), dated as of [        ], among [        ] (the “New Guarantor”), a subsidiary of American Greetings Corporation (or its successor), an Ohio corporation (the “Issuer”), the Guarantors (the “Existing Guarantors”), if any, under the Indenture referred to below, and The Bank of Nova Scotia Trust Company of New York, as trustee under the Indenture referred to below (the “Trustee”).

W I T N E S S E T H :

WHEREAS the Issuer has heretofore executed and delivered to the Trustee an Indenture (as such may be amended from time to time, the “Indenture”), dated as of February 24, 2009 providing for the issuance of its 7 3/8% Notes due 2016 (the “Notes”);

WHEREAS under certain circumstances the Issuer is required to cause the New Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Guarantor shall unconditionally guarantee all of the Issuer’s obligations under the Notes pursuant to a Note Guarantee on the terms and conditions set forth herein; and

WHEREAS pursuant to Section 8.01 of the Indenture, the Trustee, the Issuer and the Existing Guarantors are authorized to execute and deliver this Supplemental Indenture;

NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Guarantor, the Issuer, the Existing Guarantors, if any, and the Trustee mutually covenant and agree for the equal and ratable benefit of the Holders as follows:

1.        Definitions.

(a)      Capitalized terms used herein without definition shall have the meanings assigned to them in the Indenture.

(b)      For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words “herein,” “hereof” and “hereby” and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular section hereof.

2.        Agreement to Guarantee. The New Guarantor hereby agrees, jointly and severally with all other Guarantors, to guarantee the Issuer’s obligations under the Notes on the terms and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. From and after the date hereof, the New Guarantor shall be a Guarantor for all purposes under the Indenture and the Notes.

3.        Ratification of Indenture; Supplemental Indentures Part of Indenture. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall

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form a part of the Indenture for all purposes, and every Holder heretofore or hereafter authenticated and delivered shall be bound hereby.

4.        Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

5.        Trustee Makes No Representation. The Trustee shall not be responsible in any manner whatsoever for or in respect of the validity or sufficiency of this Supplemental Indenture or for or in respect of the recitals contained herein, all of which are made solely by the Issuer.

6.        Multiple Counterparts. The parties may sign multiple counterparts of this Supplemental Indenture. Each signed counterpart shall be deemed an original, but all of them together represent one and the same agreement.

7.        Headings. The headings of this Supplemental Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

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IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date and year first above written.

[NEW GUARANTOR]
By:
	Name:
	Title:
By:
	Name:
	Title:
AMERICAN GREETINGS CORPORATION
By:
	Name:
	Title:
By:
	Name:
	Title:

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[EXISTING GUARANTORS:]
By:
	Name:
	Title:
By:
	Name:
	Title:
THE BANK OF NOVA SCOTIA TRUST COMPANY OF NEW YORK         as Trustee
By:
	Name:
	Title:

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EX-10.(XIII)

Exhibit 10(xiii)

AMENDMENT TO FORM OF EMPLOYMENT AGREEMENT WITH SPECIFIED

OFFICERS

Amendment to comply with Code Section 409A

WHEREAS, American Greetings Corporation (the “Corporation”) and certain specified employees and officers of the Corporation (individually, the “Employee”*), including, without limitation those identified on Attachment A, have each entered into employment agreements (each, an “Employment Agreement”) with the Corporation setting forth the terms and conditions of the Employee’s employment with the Corporation, the form of which is set forth on Attachment B;

WHEREAS, the Corporation desires to amend any such Employment Agreement to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and rulings promulgated thereunder; and

WHEREAS, the Corporation previously delegated the authority to adopt amendments to any benefit plan or agreement of the Corporation to incorporate such changes as may be necessary to comply with law, including, without limitation, Code Section 409A, to certain specified officers, including the Senior Vice President of Human Resources; provided, that no such amendment shall result in a material increase in the liability or payment obligations of the Corporation without prior approval of the Compensation and Management Development Committee of the Board of Directors of the Corporation.

NOW, THEREFORE, this Amendment (the “Amendment”) shall amend each such Employment Agreement as set forth below:

1. Effective as of January 1, 2009, a new Section shall be added to the Employment Agreement to read as follows:

“Compliance with Code Section 409A. Notwithstanding the other provisions of the Employment Agreement entered into with the Corporation, all provisions of the Employment Agreement shall be construed and interpreted to comply with Code Section 409A and the regulations and rulings promulgated thereunder and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Section 409A or regulations thereunder.

(a)        Definitions. The terms used in the Employment Agreement shall have the following meaning:

(i)        “Separation from Service” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(h).

(ii)       “Specified Employee” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(i).

(b)        Bonus. Any bonus or incentive compensation earned and payable to Employee under the Employment Agreement shall be paid no later than 2 ¹/2 months following the close of the Corporation’s fiscal year to which the bonus relates, or 2 ¹/2 months following the close of the calendar year in which such fiscal year ends, if later.

(c)        Delay of Payment for Specified Employees. Notwithstanding any provision of the Employment Agreement to the contrary, in the event the Employee is a Specified Employee as of the date of such Employee’s Separation from Service, any amounts that are subject to Code Section 409A that become payable upon the Employee’s Separation from Service shall be held for delayed payment and shall be distributed on or immediately after the date which is six months after the date of the Employee’s Separation from Service.

(d)        Separation from Service. Payments under the Employment Agreement that provide for payment upon the Employee’s termination of employment (or similarly used term) shall be amended to provide that no such payment shall be permitted unless such termination qualifies as a Separation from Service.

For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under the Employment Agreement shall be treated as a separate payment of compensation for purposes of applying the Code Section 409A deferral election rules and the exclusion from Code Section 409A for certain short-term deferral amounts. Any amounts payable under the Employment Agreement solely on account of an involuntary separation from service within the meaning of Code Section 409A shall be excludible from the requirements of Code Section 409A, either as involuntary separation pay or as short-term deferral amounts (e.g., amounts payable under the schedule prior to March 15 of the calendar year following the calendar year of involuntary separation) to the maximum extent possible.

Payments made under the Employment Agreement, including payments made upon a Separation from Service over the severance period, shall be paid in equal installments in accordance with the Corporation’s normal payroll practices.

(e)        In-Kind Benefits. Any reimbursements or in-kind benefits shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that: (i) any reimbursement is for expenses incurred during the period of time specified in accordance with the Employment Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(f)        Amendment of Inconsistent Provisions. To the extent that any provision of the Employment Agreement is inconsistent with the requirements of Code Section 409A and the regulations and rulings promulgated thereunder, the Employment Agreement is hereby amended to delete such inconsistent provisions.”

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2.        Except as otherwise provided herein, the Employment Agreement shall be unaffected by this Amendment.

IN WITNESS WHEREOF, the Corporation has adopted this Amendment on the date set forth below.

AMERICAN GREETINGS CORPORATION
By	/s/Brian McGrath
Brian McGrath, Senior Vice President of Human Resources

Date:     12-19-08

***

The foregoing Amendment amends the employment agreements for the following officers, which agreements have been previously filed as exhibits by American Greetings Corporation:

    Joseph B. Cipollone

    Brian T. McGrath

    Stephen J. Smith

    Erwin Weiss

    Josef A. Mandelbaum

    Douglas Rommel

    Jeffery Weiss

    Zev Weiss

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EX-10.(XIV)

Exhibit 10(xiv)

SEVERANCE BENEFITS PLAN (OFFICERS) - SUMMARY PLAN DESCRIPTION

PURPOSE

The purpose of the American Greetings Severance Benefits Plan (Officers) (the “Plan”) is to provide severance benefits to officers of American Greetings Corporation (“American Greetings Corporation” or “Company”) employed in the United States, who lose their positions with the Company involuntarily.

ELIGIBILITY

  (a) You may be eligible for benefits under this Plan if you are employed as an officer of the Company in the United States on a regular full-time or regular part-time basis and your employment is involuntarily terminated due to (i) a change in operations; (ii) a facility relocation or closing; (iii) a reduction in force for economic or other reasons; or (iv) any other reason elected by the Company in its sole discretion, except for gross violation of obligations to the Company.

  (b) You will not be eligible for benefits under this Plan if you are terminated for any reason, including, but not limited to those stated in paragraph (a) above, and prior to your termination, or within a reasonable time after your termination, the Company or any entity which continues to operate that part of American Greetings business in which you were employed offers you any comparable position. (Comparable position shall be determined at the sole discretion of the Plan Administrator on a non-discriminatory basis.)

  (c) You will not be eligible for benefits under this Plan if you resign (including but not limited to resignation prior to the date of involuntary termination for any of the reasons stated in paragraph (a) above), abandon your job, fail to return from an approved leave of absence, initiate your termination on any similar basis, or are terminated for gross violation of obligations to the Company, as determined by the Plan Administrator in its sole’s discretion.

SCHEDULE OF BENEFITS

The amount of severance benefits you receive will be governed by whether you choose to participate in the Company’s standard or enhanced severance benefit program.

The benefits you receive under this plan will be based on your base salary, exclusive of bonus and/or commission, at the time you are notified of your termination. Any performance/merit reviews that are pending or in process will not affect the amount of your severance benefits. A month’s pay is determined by an employee’s annual base

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salary (exclusive of bonus, commissions, or other incentive) as specified in that person’s PL-1 divided by 12.

SEVERANCE PAY
1.   Standard Severance Benefits – An officer will receive one-half month’s pay.
2.   Enhanced Severance Benefits – An officer who signs a waiver and release agreement at the time of termination in a form prepared by the Company will receive:
One (1) month’s base salary (exclusive of bonus, commission or other incentive) for each year of continuous service completed with the Company, up to a maximum total benefit (standard plus enhanced) not to exceed:
Sr. Vice President	24 months
Vice President and Executive Directors	18 months
The minimum total benefit (standard plus enhanced) provided will be:
Sr. Vice President	12 months
Vice President and Executive Director	6 months
HEALTH CARE COVERAGE
Continued health care coverage concurrently with COBRA in the plan in which you are currently enrolled, at the employee payroll deduction rate through the end of the severance period. Thereafter, you are eligible for the remainder of the COBRA period at the full COBRA cost. The monthly premium for health care will be deducted directly from your severance payment.
OUTPLACEMENT SERVICES
An officer who signs a waiver and release agreement at the time of termination in a form prepared by the Company will receive outplacement services to assist him/her in seeking employment. The Company will select the service provider and will make direct payments to the service provider. Services provided will be a six (6) month program.

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METHOD OF PAYMENT

You will receive your severance pay via a monthly direct deposit into the account(s) you currently have designated for payroll deposits. The Company reserves the right to pay any portion of the severance pay in a lump sum, at Company’s discretion.

SOURCE OF BENEFITS

The Company shall pay your benefits under the Plan from its general assets.

REVIEW OF DENIAL OF BENEFITS

In the event that you do not receive benefits to which you think you are entitled; you may file a claim for those benefits. In the event that your claim is denied, in whole or in part, you will be notified in writing. The notice will tell you why your claim was denied, and either request any additional information necessary to grant your claim or tell you what to do to appeal the denial. To appeal, you must file a form prescribed by the Company, setting forth the facts and benefits claimed. The Plan Administrator will rule on your claim within sixty days of receipt of your appeal. A copy of the ruling and a statement supporting the decision will be given to you.

PLAN ADMINISTRATION

The following information about the Severance Benefits Plan and how it is administered may be useful to you:

PLAN NAME

The official name of the plan is the American Greetings Corporation Severance Benefits Plan (Officers) (the “Plan”).

PLAN NUMBER

The plan number American Greetings has assigned to this severance benefits plan is #        .

PLAN YEAR

The Plan is administered on a fiscal year basis: March 1 through February 28.

TYPE OF PLAN

The Plan is a severance benefits plan.

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PLAN SPONSOR AND PLAN ADMINISTRATOR

American Greetings Corporation is the Plan Sponsor and Plan Administrator. The address and telephone numbers are:

American Greetings Corporation

One American Road

Cleveland, OH 44144

— 1-216/252-7300

— 1-800/321-3040

EMPLOYER IDENTIFICATION NUMBER

The employer identification number (EIN) assigned by the Internal Revenue Service to American Greetings Corporation is #34-0065325.

AGENT FOR SERVICE OF LEGAL PROCESS

If you decide to take action against the Plan for any reason, the agent for legal process on the plan is the following:

Sr. Vice President, Human Resources

American Greetings Corporation

One American Road

Cleveland, OH 44144

Legal process may also be served on the Plan Administrator.

AMENDMENT OR TERMINATION OF THE PLAN

The Company reserves the right to amend the Plan as consistent with and necessary for meeting its strategic goals and objectives. The Company further reserves the right to terminate the plan at any time and for any reason without the consent of any employee.

INTERPRETATION OF THE PLAN

The Plan Administrator has full discretion and authority to make the final decision regarding all areas of interpretation and administration, including eligibility for benefits, level of benefits provided, interpretation of Plan language (including this summary plan description), and administrative procedures. The decision of the Plan Administrator is final and binding on all individuals dealing with or claiming benefits under the Plan. If challenged in court, the Plan intends for the Plan Administrator’s decision to be upheld unless found by a court of competent authority to be arbitrary or capricious.

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EFFECTIVE DATE

The benefits summarized in this summary plan description are effective as of February 1, 2003. This summary plan description supercedes and replaces any previously distributed materials regarding the severance benefit plan.

YOUR ERISA RIGHTS

As a participant in the American Greetings Corporation Severance Benefits Plan (Officers), you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974, as amended (ERISA).

The Plan is designed to meet the legal requirements established by ERISA, as amended. It will be amended to conform to any changes in the law or government regulations.

Your rights under ERISA include the right to receive certain information and the right to file a lawsuit if you believe your rights have been violated. The following is a description of your ERISA rights.

RECEIVE INFORMATION ABOUT YOUR PLAN AND BENEFITS

You can visit the Plan Administrator’s office and examine without charge all documents governing the Plan.

You can obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including updated summary plan descriptions. The Plan Administrator may make a reasonable charge for the copies.

PRUDENT ACTIONS BY PLAN FIDUCIARIES

In addition to creating rights for plan participants, ERISA imposes duties on the people who are responsible for the operation of the employee benefit plans. The people who operate your plan, called “fiduciaries” of the plan, have a duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one, including your employer or any other group or person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your rights under ERISA.

ENFORCE YOUR RIGHTS

If your claim for a severance benefit is denied or ignored in whole or in part, you have a right to know why this was done, to obtain without charge, copies of documents relating to the decision, and to appeal any denial, all within certain time schedules.

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Under ERISA, there are steps you can take to enforce the above rights. For instance:

— If you request a copy of plan documents or the latest annual report from the plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent for reasons beyond the Plan Administrator’s control.

— If you have a claim for benefits that is denied or ignored in whole or in part, you may file suit in a state or federal court.

— If it should happen that plan fiduciaries misuse the plan’s money or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, if for example, it finds your claim is frivolous.

ASSISTANCE WITH YOUR QUESTIONS

If you have any questions about the plan, you should contact the Plan Administrator. If you have questions about this statement or your ERISA rights or if you need assistance in obtaining documents from the Plan Administrator, you should contact:

—  The nearest office of the Pension and Welfare Benefits Administration,

      U.S. Department of Labor (listed in your telephone directory), or

—  Division of Technical Assistance and Inquiries, Pension and Welfare

      Benefits Administration, U.S. Department of Labor, 200 Constitution

      Avenue, N.W., Washington, D.C. 20210.

You also can obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Pension and Welfare Benefits Administration at 1-800/998-7542.

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EX-10.(XV)

Exhibit 10(xv)

AMENDMENT TO AMERICAN GREETINGS

SEVERANCE BENEFITS PLAN (OFFICERS)

Amendment to comply with Code Section 409A

THIS AMENDMENT (the “Amendment”) to the American Greetings Severance Benefits Plan (Officers) (the “Plan”) is effective as of January 1, 2009.

WHEREAS, the Company sponsors the Plan for the benefit of certain executives;

WHEREAS, the Company desires to amend the Plan to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and rulings promulgated thereunder; and

WHEREAS, the Corporation previously delegated the authority to adopt amendments to any benefit plan or agreement of the Corporation to incorporate such changes as may be necessary to comply with law, including, without limitation, Code Section 409A, to certain specified officers, including the Senior Vice President of Human Resources; provided, that no such amendment shall result in a material increase in the liability or payment obligations of the Corporation without prior approval of the Compensation and Management Development Committee of the Board of Directors of the Corporation.

NOW, THEREFORE, the Plan is hereby amended, effective as of January 1, 2009, as follows:

1.        The Section titled “Method of Payment” is amended in its entirety to read as follows:

“You will receive your severance pay via a monthly direct deposit into the account(s) you currently have designated for payroll deposits.”

2.        A new Section shall be added to the Plan as follows:

“COMPLIANCE WITH CODE SECTION 409A. Notwithstanding the other provisions of the Plan to the contrary, all provisions of the Plan shall be construed and interpreted to comply with Code Section 409A and the regulations and rulings promulgated thereunder and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Section 409A or regulations thereunder.

 (a)        Definitions. The terms used in the Plan shall have the following meaning:

     (i)         “Separation from Service” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(h).

     (ii)         “Specified Employee” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(i).

  (b)         Delay of Payment for Specified Employees. Notwithstanding any provision of the Plan to the contrary, in the event you are a Specified Employee as of the date of your Separation from Service, any amounts that are subject to Code Section 409A that become payable upon your Separation from Service shall be held for delayed payment and shall be distributed on or immediately after the date which is six months after the date of your Separation from Service. The first payment made to the Specified Employee following the six-month delay shall be equal to the first six monthly installment payments that would have commenced immediately following the Specified Employee’s Separation from Service if the Specified Employee had not been subject to the required six-month delay. The delayed payments shall not be adjusted for interest.

  (c)        Separation from Service. Payments under the Plan that provide for payment upon your termination of employment (or similarly used term) shall be amended to provide that no such payment shall be permitted unless such termination qualifies as a Separation from Service.

  For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under the Plan shall be treated as a separate payment of compensation for purposes of applying the Code Section 409A deferral election rules and the exclusion from Code Section 409A for certain short-term deferral amounts. Any amounts payable under the Plan solely on account of an involuntary separation from service within the meaning of Code Section 409A shall be excludible from the requirements of Code Section 409A, either as involuntary separation pay or as short-term deferral amounts (e.g., amounts payable under the schedule prior to March 15 of the calendar year following the calendar year of involuntary separation) to the maximum extent possible.

  (d)        In-Kind Benefits. Any reimbursements or in-kind benefits shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that: (i) any reimbursement is for expenses incurred during the period of time specified in accordance with the Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

  (e)        Amendment of Inconsistent Provisions. To the extent that any provision of the Plan is inconsistent with the requirements of Code Section 409A and the regulations and rulings promulgated thereunder, the Plan is hereby amended to delete such inconsistent provisions.”

3.          Except as otherwise provided herein, the Plan shall be unaffected by this Amendment.

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IN WITNESS WHEREOF, the Corporation has adopted this Amendment on the date set forth below.

AMERICAN GREETINGS CORPORATION

By          /s/Brian McGrath                            

Brian McGrath, Senior Vice President of

Human Resources

Date:    12-18-09                                             

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EX-10.(XXXV)

Exhibit 10(xxxv)

AMENDMENT TO EMPLOYMENT CONTRACT

MICHAEL GOULDER

Amendment to comply with Code Section 409A

THIS AMENDMENT (the “Amendment”) to the terms of employment of Michael Goulder (the “Executive”) with American Greetings Corporation (“American Greetings”), as reflected in the terms of that certain offer letter dated October 17, 2002 (the “Employment Terms”) is effective as of January 1, 2009.

WHEREAS, the Corporation desires to amend the Employment Terms to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and rulings promulgated thereunder; and

WHEREAS, the Corporation previously delegated the authority to adopt amendments to any benefit plan or agreement of the Corporation to incorporate such changes as may be necessary to comply with law, including, without limitation, Code Section 409A, to certain specified officers, including the Senior Vice President of Human Resources; provided, that no such amendment shall result in a material increase in the liability or payment obligations of the Corporation without prior approval of the Compensation and Management Development Committee of the Board of Directors of the Corporation.

NOW, THEREFORE, this Amendment shall amend the Employment Terms as set forth below:

1. Effective as of January 1, 2009, a new Section 9 shall be added to the Employment Terms to read as follows:

“9.     Compliance with Code Section 409A. Notwithstanding the other provisions set forth in this offer letter, all provisions of this offer letter and your employment reflected herein shall be construed and interpreted to comply with Code Section 409A and the regulations and rulings promulgated thereunder and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Section 409A or regulations thereunder.

(a)      Definitions. The terms used in this offer letter shall have the following meaning:

(i)        “Separation from Service” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(h).

(ii)       “Specified Employee” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(i).

(b)      Delay of Payment for Specified Employees. Notwithstanding any provision set forth in this offer letter to the contrary, in the event the Executive is a Specified Employee as of the date of such Executive’s Separation from Service, any amounts that are

subject to Code Section 409A that are payable upon the Executive’s Separation from Service shall be held for delayed payment and shall be distributed on or immediately after the date which is six months after the date of the Executive’s Separation from Service. All payments made under the terms set forth in this offer letter shall be made in installment payments in accordance with the Corporation’s normal payroll practices. The first payment made to the Executive following the six-month delay shall be equal to the first six monthly installment payments that would have commenced immediately following the Executive’s Separation from Service if the Executive had not been subject to the required six-month delay. The delayed payments shall not be adjusted for interest.

(c)        In-Kind Benefits. Any reimbursements or in-kind benefits shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that: (i) any reimbursement is for expenses incurred during the period of time specified in accordance with the terms set forth in this offer letter, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(d)        Amendment of Inconsistent Provisions. To the extent that any provision of the terms set forth in this offer letter are inconsistent with the requirements of Code Section 409A and the regulations and rulings promulgated thereunder, the terms set forth in this offer letter are is hereby amended to delete such inconsistent provisions.”

2.      This Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

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3.        Except as otherwise provided herein, the Employment Terms shall be unaffected by this Amendment.

AMERICAN GREETINGS CORPORATION

/s/Brian McGrath

By: Brian McGrath

Title: Senior Vice President, Human Resources

Date: 112-19-08

/s/Michael Goulder

Michael Goulder

Date: 12-23-08

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EX-10.(XXXVII)

Exhibit 10(xxxvii)

AMENDMENT TO EMPLOYMENT CONTRACT

ERWIN WEISS

Amendment to comply with Code Section 409A

THIS AMENDMENT (the “Amendment”) to the employment contract dated May 6, 2002 (the “Agreement”) between American Greetings Corporation (the “Corporation”) and Erwin Weiss (the “Executive”) is effective as of January 1, 2009.

WHEREAS, the Corporation desires to amend the Agreement to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and rulings promulgated thereunder; and

WHEREAS, the Corporation previously delegated the authority to adopt amendments to any benefit plan or agreement of the Corporation to incorporate such changes as may be necessary to comply with law, including, without limitation, Code Section 409A, to certain specified officers, including the Senior Vice President of Human Resources; provided, that no such amendment shall result in a material increase in the liability or payment obligations of the Corporation without prior approval of the Compensation and Management Development Committee of the Board of Directors of the Corporation.

NOW, THEREFORE, this Amendment shall amend the Agreement as set forth below:

1. Effective as of January 1, 2009, a new Section 6 shall be added to the Agreement to read as follows:

“6.     Compliance with Code Section 409A. Notwithstanding the other provisions of this employment agreement, all provisions of this employment agreement shall be construed and interpreted to comply with Code Section 409A and the regulations and rulings promulgated thereunder and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Section 409A or regulations thereunder.

(a)        Definitions. The terms used in the employment agreement shall have the following meaning:

(i)        “Separation from Service” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(h).

(ii)       “Specified Employee” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(i).

(b)        Delay of Payment for Specified Employees. Notwithstanding any provision of this employment agreement to the contrary, in the event the Executive is a Specified Employee as of the date of such Executive’s Separation from Service, any amounts that are subject to Code Section 409A that are payable upon the Executive’s Separation from Service shall be held for delayed payment and shall be distributed on or immediately after the date which

is six months after the date of the Executive’s Separation from Service. All payments made under this employment agreement, other than the payment set forth in Section 3, shall be made in installment payments in accordance with the Corporation’s normal payroll practices. The payment set forth in Section 3 shall be made in a single lump sum. The first payment made to the Executive following the six-month delay shall be equal to the first six monthly installment payments that would have commenced immediately following the Executive’s Separation from Service if the Executive had not been subject to the required six-month delay. The delayed payments shall not be adjusted for interest.

(c)        In-Kind Benefits. Any reimbursements or in-kind benefits shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that: (i) any reimbursement is for expenses incurred during the period of time specified in accordance with this employment agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

(d)        Amendment of Inconsistent Provisions. To the extent that any provision of this employment agreement is inconsistent with the requirements of Code Section 409A and the regulations and rulings promulgated thereunder, this employment agreement is hereby amended to delete such inconsistent provisions.”

2.     This Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

3.     Except as otherwise provided herein, the Agreement shall be unaffected by this Amendment.

AMERICAN GREETINGS CORPORATION

/s/Brian McGrath

By: Brian McGrath

Title: Senior Vice President, Human Resources

Date: 12-19-08

/s/Erwin Weiss

Erwin Weiss

Date: 12-19-08

EX-10.(XLVII)

Exhibit 10(x1vii)

AMENDMENT TO EMPLOYMENT AGREEMENT

JOSEF A. MANDELBAUM

Amendment to comply with Code Section 409A

December 23, 2008

    THIS AMENDMENT (the “Amendment”) to the letter agreement (the “Agreement”) between AG Interactive, Inc. (formerly known as AmericanGreetings.com, Inc.) (the “Corporation”) and Josef A. Mandelbaum (the “Executive”) is effective as of January 1, 2009.

    WHEREAS, the Corporation and the Executive (the “Parties”) previously entered into the Agreement, dated February 4, 2000, setting forth the terms and conditions of the Executive’s employment with the Corporation; and

    WHEREAS, the Parties desire to amend the Agreement to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and rulings promulgated thereunder.

    NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as follows:

    1.  Effective as of January 1, 2009, a new Section 16 shall be added to the Agreement to read as follows:

“16.      Compliance with Code Section 409A.  Notwithstanding the other provisions of the Agreement entered into with the Corporation, all provisions of the Agreement shall be construed and interpreted to comply with Code Section 409A and the regulations and rulings promulgated thereunder and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Section 409A or regulations thereunder.

    (a)        Definitions.  The terms used in the Agreement shall have the following meaning:

     (i)        “Separation from Service” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(h).

     (ii)        “Specified Employee” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(i).

    (b)        Bonus.  Any bonus or incentive compensation earned and payable to Executive under the Agreement shall be paid no later than 2 ¹/2 months following the close of the Corporation’s fiscal year to which the bonus relates, or 2 ¹/2 months following the close of the calendar year in which such fiscal year ends, if later.

    (c)        Delay of Payment for Specified Employees.  Notwithstanding any provision of the Agreement to the contrary, in the event the Executive is a Specified Employee

as of the date of such Executive’s Separation from Service, any amounts that are subject to Code Section 409A that become payable upon the Executive’s Separation from Service shall be held for delayed payment and shall be distributed on or immediately after the date which is six months after the date of the Executive’s Separation from Service. The first payment made to the Executive following the six-month delay shall be equal to the first six monthly installment payments that would have commenced immediately following the Executive’s Separation from Service if the Executive had not been subject to the required six-month delay. The delayed payments shall not be adjusted for interest.

    (d)        Separation from Service.  Payments under the Agreement that provide for payment upon the Executive’s termination of employment (or similarly used term) shall be amended to provide that no such payment shall be permitted unless such termination qualifies as a Separation from Service.

    For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under the Agreement shall be treated as a separate payment of compensation for purposes of applying the Code Section 409A deferral election rules and the exclusion from Code Section 409A for certain short-term deferral amounts. Any amounts payable under the Agreement solely on account of an involuntary separation from service within the meaning of Code Section 409A shall be excludible from the requirements of Code Section 409A, either as involuntary separation pay or as short-term deferral amounts (e.g., amounts payable under the schedule prior to March 15 of the calendar year following the calendar year of involuntary separation) to the maximum extent possible.

    Payments made under Section 10(a) of the Agreement shall be paid in equal installments over the severance period set forth in the Agreement in accordance with the Corporation’s normal payroll practices. Payments made under Section 10(b) of the Agreement shall be paid within sixty days following the Executive’s Separation from Service; provided any bonus due with respect to the portion of the period in which Executive Separates from Service shall be paid in accordance with Section 16(b) above.

    In the event that the Executive desires to initiate a Separation from Service due to the “Failure By Company to Maintain Employment Conditions” (“Good Reason Resignation”) in accordance with Section 9 of the Agreement, such Separation from Service shall only constitute a Good Reason Resignation if the Executive provides written notice to the Corporation specifying in reasonable detail the events or conditions upon which the Executive is basing such Good Reason Resignation and the Executive provides such written notice within 90 days of the event that gives rise to the Good Reason Resignation. Within 30 days after notice has been received, the Corporation shall have the opportunity, but shall have no obligation, to cure such events or conditions that give rise to the Good Reason Resignation. If the Corporation does not cure such events or conditions within the 30-day period, the Executive must terminate employment within 30 days following the end of the cure period in order to have a Good Reason Resignation and, if the Executive timely terminates employment, payment will commence in accordance with Section 9 based on the Good Reason Resignation.

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    (e)        In-Kind Benefits.  Any reimbursements or in-kind benefits shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that: (i) any reimbursement is for expenses incurred during the period of time specified in accordance with the Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

    (f)        Amendment of Inconsistent Provisions.  To the extent that any provision of the Agreement is inconsistent with the requirements of Code Section 409A and the regulations and rulings promulgated thereunder, the Agreement is hereby amended to delete such inconsistent provisions.”

   2.        This Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

   3.        Except as otherwise provided herein, the Agreement shall be unaffected by this Amendment.

AG INTERACTIVE, INC.

/s/Catherine M. Kilbane

By: Catherine Kilbane

Title: Secretary

Date:  12-23-08

/s/Josef Mandelbaum

Josef A. Mandelbaum

Date:  12-23-08

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EX-10.(XLIX)

Exhibit 10(x1ix)

AMENDMENT TO EMPLOYMENT AGREEMENT

JOHN BEEDER

Amendment to comply with Code Section 409A

December 22, 2008

    THIS AMENDMENT (the “Amendment”) to the Executive Employment Agreement (the “Agreement”) between American Greetings Corporation (the “Corporation”) and John Beeder (the “Executive”) is effective as of January 1, 2009.

    WHEREAS, the Corporation and the Executive (the “Parties”) previously entered into the Agreement, dated June 12, 2008, setting forth the terms and conditions of the Executive’s employment with the Corporation; and

    WHEREAS, the Parties desire to amend the Agreement to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and rulings promulgated thereunder.

    NOW, THEREFORE, the Parties, intending to be legally bound, hereby agree as follows:

    1.  Effective as of January 1, 2009, a new Section 24 shall be added to the Agreement to read as follows:

“24.      Compliance with Code Section 409A.  Notwithstanding the other provisions of the Agreement entered into with the Corporation, all provisions of the Agreement shall be construed and interpreted to comply with Code Section 409A and the regulations and rulings promulgated thereunder and, if necessary, any provision shall be held null and void to the extent such provision (or part thereof) fails to comply with Section 409A or regulations thereunder.

    24.1.    Definitions.  The terms used in the Agreement shall have the following meaning:

   (i)        “Separation from Service” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(h).

   (ii)        “Specified Employee” shall have the meaning set forth in Treasury Regulations Section 1.409A-1(i).

    24.2.    Bonus.  Any bonus or incentive compensation earned and payable to Executive under the Agreement shall be paid no later than 2 ¹/2 months following the close of the Corporation’s fiscal year to which the bonus relates, or 2 ¹/2 months following the close of the calendar year in which such fiscal year ends, if later.

    24.3.    Delay of Payment for Specified Employees.  Notwithstanding any provision of the Agreement to the contrary, in the event the Executive is a Specified Employee

as of the date of such Executive’s Separation from Service, any amounts that are subject to Code Section 409A that become payable upon the Executive’s Separation from Service shall be held for delayed payment and shall be distributed on or immediately after the date which is six months after the date of the Executive’s Separation from Service. The first payment made to the Executive following the six-month delay shall be equal to the first six monthly installment payments that would have commenced immediately following the Executive’s Separation from Service if the Executive had not been subject to the required six-month delay. The delayed payments shall not be adjusted for interest.

    24.4.    Separation from Service.  Payments under the Agreement that provide for payment upon the Executive’s termination of employment (or similarly used term) shall be amended to provide that no such payment shall be permitted unless such termination qualifies as a Separation from Service.

    For purposes of the limitations on nonqualified deferred compensation under Section 409A, each payment of compensation under the Agreement shall be treated as a separate payment of compensation for purposes of applying the Code Section 409A deferral election rules and the exclusion from Code Section 409A for certain short-term deferral amounts. Any amounts payable under the Agreement solely on account of an involuntary separation from service within the meaning of Code Section 409A shall be excludible from the requirements of Code Section 409A, either as involuntary separation pay or as short-term deferral amounts (e.g., amounts payable under the schedule prior to March 15 of the calendar year following the calendar year of involuntary separation) to the maximum extent possible.

    Payments made upon a Separation from Service shall be paid in equal installments over the severance period set forth in the Agreement in accordance with the Corporation’s normal payroll practices.

    In the event that the Executive desires to initiate a Separation from Service due to “Good Reason” (“Good Reason Resignation”) in accordance with Section 4.5.c. of the Agreement, such Separation from Service shall only constitute a Good Reason Resignation if the Executive provides written notice to the Corporation specifying in reasonable detail the events or conditions upon which the Executive is basing such Good Reason Resignation and the Executive provides such written notice within 90 days of the event that gives rise to the Good Reason Resignation. Within 30 days after notice has been received, the Corporation shall have the opportunity, but shall have no obligation, to cure such events or conditions that give rise to the Good Reason Resignation. If the Corporation does not cure such events or conditions within the 30-day period, the Executive must terminate employment within 30 days following the end of the cure period in order to have a Good Reason Resignation and, if the Executive timely terminates employment, payment will commence in accordance with Section 4.5.c based on the Good Reason Resignation.

    24.5    In-Kind Benefits.  Any reimbursements or in-kind benefits shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that: (i) any reimbursement is for expenses incurred during the period of time specified in accordance with the Agreement, (ii) the amount of expenses eligible for

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reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

    24.6    Amendment of Inconsistent Provisions.  To the extent that any provision of the Agreement is inconsistent with the requirements of Code Section 409A and the regulations and rulings promulgated thereunder, the Agreement is hereby amended to delete such inconsistent provisions.”

2.        This Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

3.        Except as otherwise provided herein, the Agreement shall be unaffected by this Amendment.

AMERICAN GREETINGS CORPORATION

/s/Brian McGrath                                               

By: Brian McGrath

Title: Senior Vice President, Human Resources

Date:  12-19-08

/s/John Beeder                                                    

John Beeder

Date:  12-22-08

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EX-10.(LXIII)

Exhibit 10(1xiii)

SPLIT-DOLLAR AGREEMENT

THIS AGREEMENT made and entered into as of the 7^th day of May, 2001, by and between American Greetings Corporation, an Ohio corporation, with principal offices and place of business in the State of Ohio (the “Corporation”), and the Morry Weiss and Judith S. Weiss 2001 Irrevocable Insurance Trust, dated March 1, 2001, Gary Weiss, Jeffrey Weiss, Zev Weiss and Elie Weiss co-trustees (the “Owner”).

WITNESSETH:

WHEREAS, the Owner wishes to provide life insurance protection in the event of the death of Morry Weiss and Judith Weiss (the “Insureds”), under a policy of life insurance insuring the lives of the Insureds (the “Policy”), which is described in Exhibit A attached hereto and by this reference made part hereof, and which was issued by Security Life of Denver (the “Insurer”); and

WHEREAS, Morry Weiss (the “Insured Employee”) is the Chairman and Chief Executive Officer of the Corporation; and

WHEREAS, the Corporation desires to pay a portion of the premiums due on the Policy as an additional employment benefit for the Insured Employee, on the terms and conditions hereinafter set forth; and

WHEREAS, the Owner of the Policy possesses all incidents of ownership in and to the Policy; and

WHEREAS, the Corporation wishes to have the Policy collaterally assigned to it by the Owner, in order to secure the repayment of the amounts that it will pay toward the premiums on the Policy.

NOW, THEREFORE, in consideration of the premises and of the mutual promises contained herein, the parties hereto agree as follows:

1. Purchase of Policy. The Owner has purchased the Policy from the Insurer in the total initial face amount of $30,000,000. The parties hereto have taken all necessary actions to cause the Insurer to issue the Policy, and shall take any further actions that may be necessary to cause the Policy to conform to the provisions of this Agreement. The parties hereto agree that the Policy shall be subject to the terms and conditions of this Agreement and of the collateral assignment filed with the Insurer pursuant to Section 4 hereof.

2. Ownership of Policy. The Owner shall be the sole and absolute Owner of the Policy, and may exercise all ownership rights granted to the Owner thereof by the terms of the Policy, except as may otherwise be provided herein.

3. Payment of Premiums.

a. Thirty (30) days prior to the due date of each Policy premium, the Owner shall pay to the Corporation an amount equal to the Insured Employee’s imputed income related to the value of the death benefits provided for under the Policy. The amount of such contributions

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shall be confirmed annually by the Insurer. The Owner shall pay such required contribution to the Corporation prior to the premium due date. If the Owner fails to make such timely payment, the Corporation, in its sole discretion, may elect to make the Owner’s premium payment, which payment shall be recovered by the Corporation as provided herein.

b. On or before the due date of each Policy premium, or within the grace period provided therein, the Corporation shall pay the full amount of the premium to the Insurer, and shall, upon request, promptly furnish the Insured Employee evidence of timely payment of such premium. The Corporation shall annually furnish the Insured Employee a statement of the amount of income reportable by the Insured Employee for federal and state income tax purposes, if any, as a result of the insurance protection provided under the Policy or for any other reason with respect to the Policy.

4. Collateral Assignment. To secure the repayment to the Corporation of the amount of the premiums on the Policy paid by it hereunder, the Owner shall assign the Policy to the Corporation as collateral, under the form used by the Insurer for such assignments. The collateral assignment of the Policy to the Corporation hereunder shall not be terminated, altered or amended by the Owner, without the express written consent of the Corporation. The parties hereto agree to take all action necessary to cause such collateral assignment to conform to the provisions of this Agreement.

5. Rights of Corporation.

a. The Corporation shall have an interest in the Policy equal to the amount of the cash value of the Policy in proportion to the premiums the Corporation has paid under Section 3 hereof.

b. The Corporation may pledge or assign its interest in the Policy, subject to the terms and conditions of this Agreement, for the sole purpose of securing a loan from the Insurer or from a third party. The amount of such loan, including accumulated interest thereon, shall not exceed the lesser of (i) the amount of the premiums on the Policy paid by the Corporation hereunder or (ii) the cash surrender value of the Policy as of the date of the loan. Interest charges on such loan shall be paid by the Corporation. If the Corporation so encumbers the Policy, other than by a policy loan from the Insurer, then, upon the death of the Insureds or upon termination of this Agreement, the Corporation shall promptly take all action necessary to secure the release or discharge of such encumbrance.

c. The Owner shall name the Corporation as a beneficiary under the Policy to the extent of the Corporation’s interest in the Policy described in this Section.

6. Limitations on Owner’s Rights in Policy.

a. Except as otherwise provided herein, the Owner shall not sell, assign, transfer, borrow against, surrender or cancel the Policy, nor change the beneficiary designation provision thereof, without, in any such case, the express written consent of the Corporation.

b. Notwithstanding any provision hereof to the contrary, the Owner shall have the right to absolutely and irrevocably give to a donee (including another trust) all of its right, title and interest in and to the Policy, subject to the collateral assignment of the Policy to the Corporation pursuant hereto. The Owner may exercise this right by executing a written transfer

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of ownership in the form used by the Insurer for irrevocable gifts of insurance policies, and delivering this form to the Corporation. Upon receipt of such form, executed by the Owner and duly accepted by the donee thereof, the Corporation shall consent thereto in writing, and shall thereafter treat the Owner’s donee as the sole owner of all such Owner’s right, title and interest in and to the Policy, subject to this Agreement and the collateral assignment of the Policy, all such rights being vested in and exercisable only by such donee.

7. Collection of Death Proceeds.

a. Upon the second to die of the Insureds, the Corporation shall cooperate with the Owner to take whatever action is necessary to collect the death benefit provided under the Policy; when such benefit has been collected and paid as provided herein, this Agreement shall thereupon terminate.

b. Upon the second to die of the Insureds, the Corporation shall have the unqualified right to receive a portion of such death benefit equal to the amount of the premiums paid by it hereunder. The balance of the death benefit provided under the Policy, if any, shall be paid directly to the other beneficiary or beneficiaries designated by the Owner, in the manner and in the amount or amounts provided in the beneficiary designation provision of the Policy.

In no event shall the amount payable to the Corporation hereunder exceed the Policy proceeds payable at the death of the Insureds. No amount shall be paid from such death benefit to the other beneficiary or beneficiaries designated by the Owner until the full amount due the Corporation hereunder has been paid. The parties hereto agree that the beneficiary designation provision of the Policy shall conform to the provisions hereof.

c. Notwithstanding any provision hereof to the contrary, in the event that, for any reason whatsoever, no death benefit is payable under the Policy upon the death of the Insureds and in lieu thereof the Insurer refunds all or any part of the premiums paid for the Policy, the Corporation and the Owner or its donee shall have the unqualified right to share such premiums based on the relative proportion of the respective cumulative premiums paid by the Corporation and by the Owner.

8. Termination of Agreement.

a. This Agreement shall terminate upon the occurrence of the earliest of the following events: (i) total cessation of the Corporation’s business; (ii) bankruptcy, receivership or dissolution of the Corporation; or (iii) death of the second insured.

b. In addition, the Owner, by written notice to the Corporation signed by the Owner, may terminate this Agreement by written notice to the Corporation. Such termination shall be effective as of the date of such notice.

9. Disposition of the Policy on Termination of the Agreement During the Insured Employee’s Lifetime.

a. For sixty (60) days after the date of termination of this Agreement pursuant to Sections 8.a. (i) and (ii), above, the Owner shall have the option of obtaining the release of the collateral assignment of the Policy to the Corporation. To obtain such release, the Owner shall repay to the Corporation the total amount of the premium payments made by the Corporation

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hereunder or, if less, the then total cash surrender value of the Policy. Upon receipt of such amount, the Corporation shall release the collateral assignment of the Policy, by the execution and delivery of an appropriate instrument of release.

b. If the Owner fails to exercise such option within such 60-day period, then, at the request of the Corporation, the Owner shall execute any document or documents required by the Insurer to transfer the interest of the Owner in the Policy to the Corporation. Thereafter, neither the Owner nor its successors and assigns shall have any further interest in and to the Policy, either under the terms thereof or under this Agreement. Alternatively, the Corporation may enforce its right to be repaid the amount of the premiums on the Policy paid by it from the cash surrender value of the Policy under the collateral assignment of the Policy; provided that in the event the cash surrender value of the Policy exceeds the amount due the corporation, such excess shall be paid to the Owner.

10. Insurer Not a Party.

a. The Corporation is hereby designated as the administrator under this Agreement. The Administrator shall have the authority to control and manage the operation and administration of this Agreement, shall have the sole and absolute discretion to interpret the provisions of this Agreement (including, without limitation, by supplying omissions from, correcting deficiencies in, or resolving inconsistencies or ambiguities in, the language of this Agreement) and shall make any determinations and findings with respect to the rights of the parties hereunder as may be required for the purposes of this Agreement.

b. (1) Claim.

A person who believes that he or she is being denied a benefit to which he or she is entitled under this Agreement (a “Claimant”) may file a written request for such benefit with the Corporation, setting forth his or her claim. The request may be addressed to the Secretary of the Corporation or the Senior Vice President, Human Resources, of the Corporation at its then principal place of business.

(2) Claim Decision.

Upon receipt of a claim, the Compensation Committee of the Corporation shall provide the Claimant with a written determination within ninety (90) days. The Compensation Committee may, however, extend the reply period for an additional ninety (90) days for reasonable cause.

If the claim is denied in whole or in part, the Compensation Committee shall provide a written determination setting forth: (a) the specific reason or reasons for such denial; (b) the specific reference to pertinent provisions of this Agreement on which such denial is based; (c) a description of any additional material or information necessary for the Claimant to perfect his or her claim and an explanation why such material or such information is necessary; (d) appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review; and (e) the time limits for requesting a review under subsection (3) and for review under subsection (4) hereof.

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(3) Request for Review.

Within sixty (60) days after the receipt by the Claimant of the written determination described above, the Claimant may request in writing that the Board of Directors of the Corporation review the determination of the Compensation Committee. Such request must be addressed to the Secretary of the Corporation or the Senior Vice President, Human Resources, of the Corporation, at its then principal place of business. The Claimant or his or her duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by such Board. If the Claimant does not request a review of the Compensation Committee’s determination within such 60-day period, the Claimant shall be barred and estopped from challenging such determination.

(4) Review of Decision.

Within sixty (60) days after receipt of a request for review by the Secretary of the Corporation or the Senior Vice President, Human Resources, of the Corporation, the Board will review the Compensation Committee’s determination. After considering all materials presented by the Claimant, the Board will provide a written determination setting forth the specific reasons for the decision and containing specific references to the pertinent provisions of this Agreement on which the decision is based. If special circumstances require that the 60-day period be extended, the Board will so notify the Claimant and will render the decision as soon as possible, but no later than one hundred and twenty (120) days after receipt of the request for review.

11. Amendment. This Agreement may not be amended, altered or modified, except by a written instrument signed by the parties hereto, or their respective successors or assigns, and may not be otherwise terminated except as provided herein.

12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Corporation and its successors and assigns, and the Owner and its successors and assigns.

13. Notices. Any notice, consent or demand required or permitted to be given under the provisions of this Agreement shall be in writing, and shall be signed by the party giving or making the same. If such notice, consent or demand is mailed to a party hereto, it shall be sent by United States certified mail, postage prepaid, addressed to such party’s last known address as shown on the records of the Corporation. The date of such mailing shall be deemed the date of notice, consent or demand; provided, however, that all such notices shall be effective only upon receipt.

14. Governing Law. This Agreement, and the rights of the parties hereunder, shall be governed by and construed in accordance with the laws of the State of Ohio.

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in counterparts, as of the day and year first above written.

	MORRY WEISS AND JUDITH S. WEISS 2001     IRREVOCABLE INSURANCE TRUST
	By:	/s/ Gary Weiss
		Gary Weiss, Trustee
	By:	/s/ Jeffrey Weiss
		Jeffrey Weiss, Trustee
	By:	/s/ Zev Weiss
		Zev Weiss, Trustee
	By:	/s/ Elie Weiss
		Elie Weiss, Trustee
ATTEST:	AMERICAN GREETINGS CORPORATION
/s/ Mary Kay Incandela	By:	/s/ Jon Groetzinger, Jr.
	Title:	Secretary

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EXHIBIT A

The following life insurance policy is subject to the attached Split-Dollar Agreement.

Insurer	Security Life of Denver
Insured	Morry Weiss and Judith Weiss
Policy Number	610025927
Face Amount	$30,000,000
Date of Issue	May 7, 2001

EX-10.(LXIV)

Exhibit 10(1xiv)

Agreement to Terminate Split-Dollar Agreement

between American Greetings Corporation and the

Morry Weiss and Judith S. Weiss 2001 Irrevocable Insurance Trust

THIS AGREEMENT made and entered into this 16th day of February 2009 between American Greetings Corporation (the “Corporation”), an Ohio corporation, and the Morry Weiss and Judith S. Weiss 2001 Irrevocable Insurance Trust (the “Owner”) dated March 1, 2001 having Gary Weiss, Jeffrey Weiss, Zev Weiss and Elie Weiss as its co-trustees.

WHEREAS, the Corporation and the Owner executed a split-dollar life insurance agreement dated as of May 7th, 2001 (the “Split-Dollar Agreement”) on the lives of Morry Weiss and Judith Weiss (the “Insured”), under which the Owner possesses all incidents of ownership in and to the policy, subject to certain limitations in favor of the Corporation.

WHEREAS, pursuant to the Split-Dollar Agreement, the Corporation has paid a portion of the $185,000 annual premiums and has a collateral interest in the policy held by the Owner as security for the reimbursement of an amount equal to the premiums paid by the Corporation but not to exceed the cash value of the policy. The Owner has also paid a portion of the premiums.

WHEREAS, the Corporation acknowledges that its obligation to pay premiums under the Split-Dollar Agreement was not conditioned on continued services by Morry Weiss.

WHEREAS, the enactment of the Sarbanes-Oxley Act of 2002 (the “Act”) brought into question whether the Corporation could continue to pay premiums and increase the reimbursement amount with respect to the insurance policy that is the subject of the Split-Dollar Agreement. The Act prohibits new loans between the Corporation and certain individuals, and certain features of the continuing arrangement could be characterized as a loan prohibited by the Act.

WHEREAS, pursuant to the terms of the insurance policy, the Corporation has not made further premium payments since the enactment of the Act and any additional amount paid with respect to the policy since enactment of the Act has not been subject to reimbursement by the Corporation.

WHEREAS, the parties acknowledge that the cash value of the policy subject to the Split-Dollar Agreement does not exceed the aggregate premiums paid by the Corporation pursuant to the Agreement.

As a result of limitations imposed by the Act on the continuation of the Split-Dollar Agreement, the Corporation and the Owner agree to the following terms:

1. In accordance with Section 8b of the Split-Dollar Agreement, this Agreement provides notice by the Owner to the Corporation to terminate the Split-Dollar Agreement.

2. On February 16, 2009, the Owner will pay the Corporation $1,212,000 or such other amount as is equal to the maximum available cash value in the life insurance policy on the lives of the

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Insured that has been subject to the Split-Dollar Agreement, as of the date that the Owner submits a request for withdrawal.

3. Upon (a) the Corporation's receipt of payment in the amount described in paragraph 2 above and (b) the receipt of written notification by the Owner from Morry Weiss that the agreement between Morry Weiss and the Corporation, as described in Section 7 below, has been signed, the Split Dollar Agreement shall terminate without further action.

4. As a result of the termination of the Split Dollar Agreement, the Corporation hereby agrees to release any and all interest in the life insurance policy on the lives of the Insured, the Owner agrees that the Corporation will make no further payments to the insurance company, and the Owner will have an unrestricted interest in the insurance policy that has been subject to the Split Dollar Agreement.

5. This Agreement and the rights of the parties hereunder will be governed by and construed in accordance with the laws of the state of Ohio without regard to conflicts of laws.

6. This Agreement settles any and all claims by the Owner and the Corporation with respect to the Split Dollar Agreement.

7. Contemporaneous with the Owner's written agreement with the Corporation to terminate the Split Dollar Agreement, the parties acknowledge that Morry Weiss and the Corporation will enter an agreement by which the Corporation will pay a fixed amount to Morry Weiss.

8. This Agreement may not be amended except by a written instrument signed by the Corporation and the Owner, or their respective successors or assigns.

9. This Agreement shall be binding upon and inure to the benefit of the Corporation and its successors and assigns and the Owner and its successors and assigns.

10. Each of the parties hereto shall use its reasonable efforts to take or cause to be taken all action and to do or cause to be done all things necessary to consummate and make effective the transactions contemplated by this Agreement, at the reasonable request of another party, before, at or after the termination of the Split Dollar Agreement.

THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT, IN COUNTERPARTS, AS OF THE DAY AND YEAR FIRST WRITTEN ABOVE.

MORRY WEISS AND JUDITH S. WEISS

2001 IRREVOCABLE INSURANCE TRUST

By:	/s/Gary Weiss
Gary Weiss, Trustee

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By:	/s/Jeffrey Weiss
Jeffrey Weiss, Trustee
By:	/s/Zev Weiss
Zev Weiss, Trustee
By:	/s/Elie Weiss
Elie Weiss, Trustee

AMERICAN GREETINGS CORPORATION

By: /s/Catherine M. Kilbane    

Title: Senior Vice President, General Counsel and Secretary

2/9/09

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EX-10.(LXV)

Exhibit 10(1xv)

Agreement between American Greetings Corporation and

Morry Weiss in connection with Termination of the Split Dollar Agreement

THIS AGREEMENT made and entered into this 16th day of February 2009 between American Greetings Corporation (the “Corporation”), an Ohio corporation, and Morry Weiss.

WHEREAS, the Corporation and the Morry Weiss and Judith S. Weiss 2001 Irrevocable Trust (the “Owner”) executed a split-dollar life insurance agreement dated as of May 7th, 2001 (the “Split-Dollar Agreement”) on the lives of Morry Weiss and Judith Weiss (the “Insured”), under which the Owner possesses all incidents of ownership on the policy, subject to certain limitations.

WHEREAS, pursuant to the Split-Dollar Agreement, the Corporation has paid a portion of the $185,000 annual premiums and has a collateral interest in the policy held by the Owner as security for the reimbursement of an amount equal to the premiums paid by the Corporation but not to exceed the cash value of the policy. The Owner has also paid a portion of the premiums.

WHEREAS, the Corporation acknowledges that its obligation to pay premiums under the Split-Dollar Agreement was not conditioned on continued services by Morry Weiss.

WHEREAS, the enactment of the Sarbanes-Oxley Act of 2002 (the “Act”) brought into question whether the Corporation could continue to pay premiums and increase the reimbursement amount with respect to the insurance policy that is the subject of the Split-Dollar Agreement. The Act prohibits new loans between the Corporation and certain individuals, and certain features of the continuing arrangement could be characterized as a loan prohibited by the Act.

WHEREAS, in accordance with the terms of the insurance policy, the Corporation has not made further premium payments since the enactment of the Act and any additional amount paid with respect to the policy since enactment of the Act has not been subject to reimbursement by the Corporation.

WHEREAS, the parties acknowledge that the cash value of the policy subject to the Split-Dollar Agreement does not exceed the aggregate premiums paid by the Corporation pursuant to the Agreement.

As a result of limitations imposed by the Act on the continuation of the Split-Dollar Agreement, the Corporation and Morry Weiss agree to the following terms:

1. The Corporation will provide written notice to Morry Weiss that it and the Owner have signed an agreement to terminate the Split Dollar Agreement and that the Corporation has received all payments due from the Owner in connection with the termination of the Split Dollar Agreement.

2. In recognition of the services performed by Morry Weiss and the termination of the Split-Dollar Agreement, the Corporation agrees to pay a fixed amount to Morry Weiss. On February 16, 2009, the Corporation will pay $2,324,155 to Morry Weiss, provided that the Corporation

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has received all payments due from the Owner in connection with the termination of the Split Dollar Agreement.

3. Any payment by the Corporation to Morry Weiss will be made only if the Corporation’s Leverage Ratio and Interest Coverage Ratio, as defined in the Credit Agreement executed by the Corporation and dated as of April 4, 2006 with respect to the Corporation’s $650 million credit facility (the “Credit Agreement”), are within the levels permitted by Section 7.07 of the Credit Agreement as in effect on the date of its original execution. The determination of whether the Corporation’s Leverage Ratio and Interest Coverage Ratio are within the permitted levels will be made as of the last day of the fiscal quarter immediately preceding the Payment Date (a “Determination Date”).

4. Subject to the provisions of this Agreement, the Corporation will also pay Morry Weiss $1,174,166.34 on April 15, 2009 and $1,178,080on March 6, 2010. The payment due on February 16, 2009 and each date referenced in this paragraph will be referred to as “Payment Date.” If Morry Weiss is deceased on a Payment Date, such payment shall instead be made to the trustee under the Morry Weiss Trust originally dated February 5, 1979, as amended.

5. If, on a Determination Date, the Leverage Ratio exceeds, or Interest Coverage Ratio is less than, the permitted level in the Credit Agreement, then the payment otherwise due on the immediately following Payment Date shall not be paid and instead shall be added to the amount due on the next Payment Date. If either the Leverage Ratio or Interest Coverage Ratio on the final Determination Date are beyond the permitted levels in the Credit Agreement, then any remaining amounts otherwise due under this Agreement shall be forfeited.

6. The parties understand that the Corporation’s obligation to pay might be subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). For purposes of Section 409A, each amount referenced in this Agreement is treated as a separate payment. The Corporation and Morry Weiss agree that the Payment Date will not be changed to dates different from those stated in this Agreement, except (if at all) to the extent permitted by Section 409A of the Code.

7. The Corporation will withhold any applicable taxes either as a payment is made, or as otherwise required during February 2009 from other compensation due to Morry Weiss.

8. This Agreement and the rights of the parties hereunder will be governed by and construed in accordance with the laws of the state of Ohio without regard to conflicts of laws.

9. Morry Weiss agrees that the amount payable pursuant to this Agreement is in full settlement of any and all obligations due by the Corporation to him in connection with the Split Dollar Agreement.

10. Immediately following the signing of this Agreement, Morry Weiss will provide the Owner with written notification that this Agreement has been signed.

11. This Agreement may not be amended except by a written instrument signed by the Corporation and Morry Weiss, or their respective successors or assigns.

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12. This Agreement shall be binding upon and inure to the benefit of the Corporation and its successors and assigns, and Morry Weiss and his successors and assigns.

13. Each of the parties hereto shall use its reasonable efforts to take or cause to be taken all action and to do or cause to be done all things necessary to consummate and make effective the transactions contemplated by this Agreement, at the reasonable request of another party.

THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT, IN COUNTERPARTS, AS OF THE DAY AND YEAR FIRST WRITTEN ABOVE.

AMERICAN GREETINGS CORPORATION

By: /s/Catherine M. Kilbane            

Title:    Senior Vice President, General Counsel and Secretary

MORRY WEISS

                                /s/Morry Weiss                                

2/9/2009

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EX-10.(LXVI)

Exhibit 10(1xvi)

AMERICAN GREETINGS CORPORATION 2007 OMNIBUS

INCENTIVE COMPENSATION PLAN

2009 PERFORMANCE SHARE GRANT AGREEMENT

Grantee:	[Name]
Maximum Grant:	[Number] Class [    ] Common Shares (the “Shares”)
Performance Period:	March 1, 2009 through     February 29, 2012 (the “Performance Period”)
Grant Date:	[—], 2009

THIS AGREEMENT, dated as of the Grant Date stated above, is by and between American Greetings Corporation (the “Company” or “American Greetings”) and Grantee.

W I T N E S S E T H:

WHEREAS, the Company wishes to give Grantee an opportunity to acquire or enlarge his equity ownership in the Company for the purpose of augmenting Grantee’s proprietary interest in the success of American Greetings and thereby focusing Grantee’s efforts on increasing shareholder value.

A G R E E M E N T

NOW, THEREFORE, the Company and Grantee hereby agree as follows:

1.        Performance Share Grant. Subject to the terms and conditions of this Agreement, the Company hereby grants to Grantee the Maximum Grant of Shares (the “Performance Shares”) as specified above. The grant of Performance Shares shall represent the right to receive such number of Shares, if any, as determined in accordance with Section 2 upon the Company’s achievement of certain financial goals during the Performance Period and the satisfaction of certain vesting requirements set forth in Section 4(b), with payment of such Shares to be made in accordance with Section 4(a). The Performance Shares described in this Agreement are in all respects subject to the terms, conditions and provisions of this Agreement and the Company’s 2007 Omnibus Incentive Compensation Plan (the “Plan”).

2. Award of Performance Shares.

(a)        The number of Performance Shares credited during the Performance Period will be based on the Company’s fiscal year financial performance measured by the Company’s consolidated corporate earnings before interest and taxes (“Fiscal Year EBIT”), as described in Sections 2(a)(i) and 2(a)(ii) herein. The Company’s Fiscal Year EBIT for any fiscal year will be adjusted under the same terms and conditions as “Corporate EBIT” is adjusted under the Company’s 2010 Key Management Incentive Plan. Subject to the certification of the Company’s Compensation and Management Development Committee (the “Committee”) and any subcommittee of outside directors, as required under Section 2(b), and provided that Grantee is actively employed by the Company or a subsidiary thereof as of both the first day and the last day of each such fiscal year with respect to which a calculation is made to determine if Grantee is credited with Performance Shares, Grantee will be credited with all or a portion of the Maximum Grant of Performance Shares as calculated in this

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Section 2(a) if the Company achieves specified Fiscal Year EBIT targets during the Performance Period. Any Performance Shares credited in accordance with this Section 2 shall then be subject to the vesting requirements of Section 4(b).

(i)        Grantee will be entitled to be credited with up to one-half ( ¹/2) of his Maximum Grant of Performance Shares during each of the fiscal years 2010 and 2011 as follows:

  (1)    If the Company’s Fiscal Year EBIT is less than the EBIT Target Minimum, Grantee will be credited with no Performance Shares for that fiscal year;

  (2)        If the Company’s Fiscal Year EBIT is equal to or greater than the EBIT Target Maximum, Grantee will be credited for that fiscal year with a number of Performance Shares equal to one-half ( ¹/2) of the Maximum Grant;

  (3)        If the Company’s Fiscal Year EBIT is equal to or greater than the EBIT Target Minimum but less than the EBIT Target Maximum, Grantee will be credited for that fiscal year with a number of Performance Shares equal to the sum of (a) one-quarter ( ¹/4) of the Maximum Grant and (b) the product of (i) (the Fiscal Year EBIT less the EBIT Target Minimum) divided by (the EBIT Target Maximum less the EBIT Target Minimum) and (ii) one-quarter ( ¹/4) of the Maximum Grant, rounded up to the nearest whole share.

  By way of example and presuming for illustrative purposes only that the EBIT Target Minimum is $100 million; the EBIT Target Maximum is $200 million; Grantee’s Maximum Grant of Performance Shares is 2,000 Shares; and the Company’s Fiscal Year EBIT is $150 million, under this Section 2(a)(i)(3), Grantee will be credited for that fiscal year with 750 Performance Shares, calculated as follows:

  As an additional example, and presuming for illustrative purposes only that the Company’s Fiscal Year EBIT is $110 million and that the facts in the preceding example otherwise remain the same, under this Section 2(a)(i)(3), Grantee will be credited for that fiscal year with 550 Performance Shares, calculated as follows:

If Grantee is not credited with any portion of the one-half ( ¹/2) of the Maximum Grant of Performance Shares that represents the maximum number of Performance Shares that Grantee is entitled to be credited with for either fiscal year 2010 or fiscal year 2011, Grantee shall be entitled to be credited with all or a portion of such remaining Performance Shares in fiscal year 2012, which is the final year of the Performance Period, in accordance with Section 2(a)(ii) below.

(ii)      Subject to Section 2(a)(iii), if any portion of the Maximum Grant of Performance Shares that Grantee is eligible to earn hereunder have not been credited to Grantee during fiscal years 2010 or 2011, with respect to and based upon fiscal 2012 performance, Grantee will be

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entitled to be credited with the greater of the Performance Shares not credited, if any, during fiscal years 2010 or 2011, not to exceed one-half ( ¹/2) of Grantee’s Maximum Grant of Performance Shares, as follows:

(1)        If the Company’s 2012 Fiscal Year EBIT is less than the EBIT Target Minimum, Grantee will be credited with no Performance Shares for that fiscal year;

(2)        If the Company’s 2012 Fiscal Year EBIT is equal to or greater than the EBIT Target Maximum, Grantee will be credited for that fiscal year with a number of Performance Shares equal to one-half ( ¹/2) of the Maximum Grant reduced by the lower of the number of Performance Shares, if any (which includes none), credited in either fiscal year 2010 or fiscal year 2011;

(3)        If the Company’s 2012 Fiscal Year EBIT is equal to or greater than the EBIT Target Minimum but less than the EBIT Target Maximum, Grantee will be credited for that fiscal year with a number of Performance Shares equal to the sum of (a) one-quarter ( ¹/4) of the Maximum Grant and (b) the product of (i) (the 2012 Fiscal Year EBIT less the EBIT Target Minimum) divided by (the EBIT Target Maximum less the EBIT Target Minimum) and (ii) one-quarter ( ¹/4) of the Maximum Grant, rounded up to the nearest whole share, all reduced by the lower of the number of Performance Shares, if any (which includes none), credited in either fiscal year 2010 or fiscal year 2011.

(iii)    Any portion of the Maximum Grant of Performance Shares not credited as of the end of the Performance Period shall be forfeited and Grantee shall have no right to receive such Performance Shares. Except as contemplated by Sections 1(b) and 7(g), in no event may Grantee be credited under this Agreement with more than the total Maximum Grant of Performance Shares specified on the first page of this Agreement.

(b)    If Grantee is credited with any of the Performance Shares as of the end of any fiscal year within the Performance Period as set forth in Section 2(a), and following any vesting in accordance with Section 4(b), subject to the deferral provisions set forth in Section 6, the Company will pay Grantee in accordance with Section 4(a) an award of Shares equal to the number of Performance Shares so credited; provided, however, that prior to the payment of Shares pursuant to this Agreement, the Committee and any subcommittee of “outside directors” as may be required pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (“Code”) must certify that the Company’s financial performance establishing entitlement to the payment of Shares have been achieved.

For purposes of this Agreement:

“EBIT Target Maximum” means the EBIT Target Maximum amount that is established in accordance with Section 162(m) of the Code by the Committee or any subcommittee of “outside directors” and is disclosed to Grantee in writing.

“EBIT Target Minimum” means the EBIT Target Minimum amount that is established in accordance with Section 162(m) of the Code by the Committee or any subcommittee of “outside directors” and is disclosed to Grantee in writing.

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3.         Forfeiture of Uncredited Performance Shares.  Upon Grantee’s Separation from Service, as defined in Code Section 409A, any portion of the Maximum Grant of Performance Shares not deemed credited pursuant to Section 2(a) is forfeited.

4.         Vesting Or Forfeiture of Credited Performance Shares; Payment of Award.

   (a)         Within 90 days after any Performance Shares are deemed both credited by Grantee pursuant to Section 2 and vested pursuant to Section 4(b), but in no event longer than the maximum time period permitted under Code Section 409A to qualify as a short-term deferral, such Performance Shares shall be issued to Grantee in the form of Shares. At such time, Grantee shall enjoy full shareholder and ownership rights with respect to such Shares. Shares shall be delivered to Grantee either through book-entry transfer of beneficial ownership of the Shares or through delivery of a stock certificate representing all such Shares and registered in his or her name. The method of delivery shall be selected by the Company, in its sole discretion. In the case of Grantee’s death, payment of any Shares that Grantee has been credited with and that are vested on his date of death will be made to the beneficiary designated by Grantee in a writing filed with the Company or, if none, to Grantee’s estate.

   (b)         Any Performance Shares deemed to have been credited to Grantee pursuant to Section 2 shall vest over a two-year period as follows:

        (i)         50%, rounded down to the nearest whole Share, shall vest twelve (12) months after the end of the fiscal year in which the Performance Shares are credited; and

        (ii)         The remaining unvested Performance Shares shall vest twenty-four (24) months after the end of the fiscal year in which the Performance Shares are credited.

Notwithstanding the foregoing, if Grantee incurs a Separation from Service, as defined in Code Section 409A, (i) initiated by the Company, other than for Cause, or (ii) as the result of Grantee’s Retirement, death or Disability, any Performance Shares credited to Grantee pursuant to Section 2 but not yet vested pursuant to this Section 4(b) will vest on a pro-rated basis on the Grantee’s date of Separation from Service, based on the period of time from the end of the fiscal year in which the Performance Shares are credited to the date of Separation from Service as a percentage of the relevant vesting period for the Performance Shares under each of the subsections (i) and (ii) above. If Grantee incurs a Separation from Service for any other reason than those specified in the preceding sentence, including, without limitation, any Separation from Service initiated by Grantee other than Retirement, or any Separation from Service initiated by the Company for Cause, any Performance Shares credited to Grantee and not otherwise vested pursuant to this Section 4(b) on the Grantee’s date of Separation from Service are forfeited. In addition, if Grantee’s Separation from Service is initiated by the Company for Cause, or if and to the extent required by applicable law, then any Performance Shares credited to Grantee and vested pursuant to this Section 4(b), but not yet delivered to Grantee, shall also be forfeited and shall not be delivered.

For purposes of this Agreement:

“Cause” has such meaning as may be defined in any agreement between Grantee and the Company and, if none, will mean any one or more of the following: Grantee’s (i) fraud; (ii) misappropriation of funds; (iii) commission of a felony or of an act or series of acts which results in material injury to the business reputation of the Company; (iv) commission of a crime or act or series of acts involving moral turpitude; (v) commission of an act or series of repeated acts of dishonesty that are materially inimical to the best interests of the Company; (vi) willful and repeated failure to perform his or her

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duties, which failure has not been cured in all substantial respects within fifteen (15) days after the Company gives written notice thereof to Grantee; or (vii) breach of any material provision of any employment agreement between the Company and Grantee, which breach has not been cured in all substantial respects within ten (10) days after the Company gives written notice thereof to Grantee.

“Retirement” shall mean Grantee’s Separation from Service after completing ten (10) or more years of continuous service and attaining age sixty-five (65).

“Disability” shall mean that Grantee is “disabled” as such term is defined in Code Section 409A(a)(2).

5.         Ownership Rights.  Except as otherwise provided herein, Grantee will not have the rights of a shareholder of the Company with respect to any Shares issuable upon the crediting or vesting of any Performance Shares. Upon receipt of any portion of Shares issued pursuant to Performance Shares awarded under Section 2 and vested pursuant to Section 4, Grantee shall be entitled to exercise all ownership rights (including, without limitation, the right to vote and the right to receive dividends) with respect to such Shares, provided that voting and dividend rights with respect to the Shares will be exercisable only if the record date for determining shareholders entitled to vote and receive dividends, as the case may be, falls on or after the date as of which Shares are issued to Grantee pursuant to this Agreement.

6.         Deferral of Delivery of Shares. Notwithstanding any provision in this Agreement to the contrary, if any law or regulation of any governmental authority having jurisdiction in the matter requires the Company, the Board, the Committee or Grantee to take any action or refrain from action in connection with the award or delivery of Shares under this Agreement, or to delay such award or delivery, then the award or delivery of such Shares shall be deferred until such action has been taken or such restriction on action has been removed, subject to any applicable requirements under Code Section 409A. If Grantee is eligible to participate in the Company’s Executive Deferred Compensation Plan and the class of common shares that are the subject of the Maximum Grant are otherwise eligible for deferral thereunder, at Grantee’s election, Grantee may also defer receipt of any Performance Shares earned under the Agreement in accordance with the Plan, any such deferred shares to be credited with dividend equivalents, to be paid at the end of any applicable deferral period in shares of the class of common shares that are the subject of the Maximum Grant (excluding fractional amounts), with any such deferral election to be made at a time and in a manner that complies with all applicable requirements under Code Section 409A. In addition, if and to the extent required under Code Section 409A, delivery of shares hereunder to Grantee shall be made no earlier than six months after Grantee’s Separation from Service if Grantee is a “specified employee” on such date.

7.         General Provisions.  Grantee acknowledges that Grantee has read, understands and agrees with all of the provisions in this Agreement and the Plan, including, but not limited to, the following:

   (a)         Administration.  The interpretation and construction by the Board and/or the Committee of any provision of this Agreement, the Plan or any notification or document evidencing the grant of Performance Shares and that any determination by the Board or such Committee pursuant to any provision of this Agreement or the Plan or of any such agreement, notification or document shall be final and conclusive.

   (b)         Notices.  Any notice that is required or permitted under this Agreement shall be in writing (unless otherwise specified in the Agreement or in a writing from the Company to Grantee), and delivered personally or by mail, postage prepaid, addressed as follows: (i) if to the Company, at One American Road, Cleveland, Ohio 44144, Attention: Human Resources Department, or at such other address as the Company by notice to Grantee may have designated from time to time; (ii) if to Grantee, at the address indicated in Grantee’s then-current personnel records, or at such other address

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as Grantee by notice to the Company may have designated from time to time. Such notice shall be deemed given upon receipt.

   (c)         Taxation.  Grantee shall be responsible for all applicable income and withholding taxes and the employee share of FICA taxes with respect to any compensation income generated upon the vesting or issuance of any Performance Shares under this Agreement. No later than the date as of which an amount first becomes subject to applicable federal, state, or local income, wage or employment tax withholding (including employee share of FICA) with respect to the Performance Shares awarded hereunder, Grantee shall pay to the Company, or make arrangements satisfactory to the Committee regarding the payment of, any federal, state or local income, wage or employment taxes of any kind required by law to be withheld with respect to that amount. Unless otherwise determined by the Committee, withholding obligations may be settled (i) with previously owned common shares or (ii) Shares that have been earned and that are issuable hereunder (in the minimum amount necessary to satisfy any applicable withholding requirements). The making of that payment or those arrangements is a condition to the obligations of the Company under the Plan, and the Company may, to the extent permitted by law, deduct any taxes from any payment of any kind otherwise payable to Grantee or the Company may retain such number of the Shares issuable upon the earning of Performance Shares covered by the grant evidenced by this Agreement as shall be equal in value to the amount of the remaining withholding obligation.

   (d)         Nontransferability.  This Agreement and the Performance Shares granted to Grantee shall be nontransferable and shall not be sold, hypothecated or otherwise assigned or conveyed by Grantee to any other person, except as specifically permitted in this Agreement. No assignment or transfer of this Agreement or the rights represented thereby, whether voluntary or involuntary, or by operation of law or otherwise, shall vest in the assignee or transferee any interest or right whatsoever, except as specifically permitted in this Agreement. The Agreement shall terminate, and be of no force or effect, immediately upon any attempt to assign or transfer the Agreement or any of the Performance Shares to which the Agreement applies.

   (e)         Not an Employment Contract.  This Agreement shall not be deemed to limit or restrict the right of the Company to terminate Grantee’s employment at any time, for any reason, with or without Cause, or to limit or restrict the right of Grantee to terminate his employment with the Company at any time.

   (f)         Adjustments.  On any change in the number or kind of outstanding common shares of the Company by reason of a recapitalization, merger, consolidation, reorganization, separation, liquidation, share split, share dividend, combination of shares or any other change in the corporate structure or common shares of the Company, the Company, by action of the Board or the Committee shall make such adjustment, if any, in the number and kind of Performance Shares subject to this agreement as it considers appropriate in order that the rights of Grantee hereunder are neither enlarged nor diminished.

   (g)        Unsecured Creditor Status.  This grant of Performance Shares constitutes a mere promise by the Company to pay Grantee the benefits described in this grant (to the extent credited and vested). Grantee shall have the status of a general unsecured creditor of the Company with respect to the benefits payable under this Agreement.

   (h)         Fractional Shares.  Notwithstanding anything in this Agreement to the contrary, in the event that any adjustment to the Maximum Grant of Performance Shares or an award of Shares or the calculation of an award pursuant to this Agreement would otherwise result in the creation of a fractional share interest, the affected award shall be rounded up to the nearest whole share.

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   (i)        Amendment or Termination.  This Agreement may be amended or terminated at any time by the mutual agreement and written consent of Grantee and the Company, but only to the extent permitted under the Plan. The provisions set forth in this Agreement are subject to the restrictions and other requirements of Code Section 409A and related regulations and rulings. Without limiting the generality of the preceding sentence, such provisions shall be modified and amended, as and where necessary, to bring such provisions into compliance with the requirements set forth in Code Section 409A and related regulations and rulings. This Agreement shall be interpreted (and if necessary, amended) to comply with Code Section 409A and to the extent any provision of this Agreement is inconsistent with Code Section 409A, said Code Section 409A shall control even if such action may reduce or diminish the value of Grantee’s award.

   (j)        Severability.  If any provision of this Agreement should be held illegal or invalid for any reason, such determination shall not affect the other provisions of this Agreement, and it shall be construed as if such provision had never been included herein.

   (k)        Headings/Gender.  Headings in this Agreement are for convenience only and shall not be construed to be part of this Agreement. Any reference to the masculine, feminine or neuter gender shall be a reference to other genders as appropriate.

   (l)        Governing Law.  This Agreement shall be construed, and its provisions enforced and administered, in accordance with the laws of the State of Ohio and, where applicable, federal law.

   (m)      Definitions.  Initial capitalized terms used in this Agreement that are not otherwise defined herein shall have the meaning set forth in the Plan.

   (n)      Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed original, but all of which taken together shall constitute one and the same instrument.

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Grantee has executed this Agreement, as of the Grant Date.

AMERICAN GREETINGS CORPORATION
By:
	Brian McGrath, Senior Vice President,
	Human Resources

GRANTEE

Name:  

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EX-21

Exhibit 21

AMERICAN GREETINGS CORPORATION

Subsidiaries of the Registrant

Subsidiary	State / Jurisdiction of Incorporation
AG.com, Inc.	Delaware
A.G. (U.K.), Inc.	Ohio
AGC Funding Corporation	Delaware
AGC Holdings, LLC	Delaware
AGC, LLC	Delaware
A.G.C. Investments, Inc.	Delaware
A.G. Industries, Inc. (d/b/a AGI In-Store)	North Carolina
American Greetings Interactive France S.A.S.	France
AG Interactive, Inc.	Delaware
Carlton Cards Limited	Canada
Carlton Cards Retail, Inc.	Connecticut
Carlton Mexico, S.A. de C.V.	Mexico
Cloudco, Inc. (d/b/a AG Properties)	Delaware
John Sands (Australia) Ltd.	Delaware
Microcourt Limited	United Kingdom
MIDIRingtones, LLC	Minnesota
PhotoWorks, Inc.	Washington
RPG Holdings, Inc.	Delaware
Recycled Paper Greetings, Inc.	Illinois
UK Greetings Limited	United Kingdom

EX-23

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements of American Greetings Corporation listed below of our reports dated April 28, 2009, with respect to the consolidated financial statements and schedule of American Greetings Corporation and the effectiveness of internal control over financial reporting of American Greetings Corporation included in this Annual Report (Form 10-K) for the year ended February 28, 2009.

Registration Number	Description	Filing Date
2-89471	Post-Effective Amendment No. 1 to Form S-3 Registration Statement	May 27, 1986
33-45673	American Greetings Corporation Employees’ Retirement Profit Sharing Plan – Form S-8 Registration Statement	February 4, 1992
33-58582	American Greetings Corporation 1992 Stock Option Plan – Form S-8 Registration Statement	February 22, 1993
33-61037	American Greetings Corporation 1995 Director Stock Plan – Form S-8 Registration Statement	July 14, 1995
333-08123	American Greetings Corporation 1996 Employee Stock Option Plan – Form S-8 Registration Statement	July 15, 1996
333-41912	American Greetings Corporation 1997 Equity and Performance Incentive Plan (as amended June 24, 2000) – Form S-8 Registration Statement	July 21, 2000
333-65534	American Greetings Corporation 1997 Equity and Performance Incentive Plan (as amended June 22, 2001) – Form S-8 Registration Statement	July 20, 2001
333-121982	American Greetings Corporation 1997 Equity and Performance Incentive Plan (as amended on June 25, 2004) – Form S-8 Registration Statement	January 12, 2005
333-123041	American Greetings Corporation 1995 Director Stock Plan – Form S-8 Registration Statement	February 28, 2005
333-134029	American Greetings Corporation Form S-3 Registration Statement	May 11, 2006
333-144220	American Greetings Corporation 2007 Omnibus Incentive Compensation Plan – Form S-8 Registration Statement	June 29, 2007
333-146244	American Greetings Corporation Employees’ Retirement Profit Sharing Plan – Form S-8 Registration Statement	September 21, 2007

/s/ Ernst & Young LLP

Cleveland, Ohio

April 28, 2009

EX-31.(A)

Exhibit (31) a

Certification of Principal Executive Officer

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

I, Zev Weiss, certify that:

1. I have reviewed this Annual Report on Form 10-K of American Greetings Corporation;

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

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

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

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

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

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

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

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

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

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

April 29, 2009	/s/ Zev Weiss
	Zev Weiss
	Chief Executive Officer
	(principal executive officer)

EX-31.(B)

Exhibit (31) b

Certification of Principal Financial Officer

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

I, Stephen J. Smith, certify that:

1. I have reviewed this Annual Report on Form 10-K of American Greetings Corporation;

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

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

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

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

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

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

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

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

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

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

April 29, 2009	/s/ Stephen J. Smith
	Stephen J. Smith
	Senior Vice President and     Chief Financial Officer (principal financial officer)

EX-32

Exhibit (32)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with this Annual Report of American Greetings Corporation (the “Corporation”) on Form 10-K for the year ended February 28, 2009, as filed with the Securities and Exchange Commission on the date therein specified (the “Report”), each of the undersigned officers of the Corporation certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to such officer’s knowledge:

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

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation as of the dates and for the periods expressed in the Report.

April 29, 2009

/s/ Zev Weiss

Zev Weiss

Chief Executive Officer (principal executive officer)

/s/ Stephen J. Smith

Stephen J. Smith

Senior Vice President and

Chief Financial Officer (principal financial officer)

The foregoing certification is being furnished solely pursuant to 18 U.S.C. §1350 and is not being filed as part of the Report or as a separate disclosure document.