Exhibit 10.3



 






EXHIBIT 10.3




Amendment Number Four to the American Greetings Corporation

Executive Deferred Compensation Plan

and

Amendment Number One to the American Greetings Corporation

Executive Third Party Option Plan




     WHEREAS, the American Greetings Corporation (the “Company”) currently maintains the
American Greetings Corporation Executive Deferred Compensation Plan (the “Plan”), which was adopted
effective October 26, 1993; and



     WHEREAS, the Plan was amended thrice, the third time to establish the American Greetings
Corporation Executive Third Party Option Plan (the “Option Plan”; both the Option Plan and the Plan
are hereinafter collectively referred to as the “Plans”) and to segregate the Option Plan into a
separate amendment to the Plan; and



     WHEREAS, the Company desires to amend the Plan and the Option Plan to update their provisions
in accordance with the American Jobs Creation Act of 2004, the applicable requirements of which are
set forth in Internal Revenue Code (the “Code”) Section 409A, by virtue of specific amendments to
the Plan; and



     WHEREAS, the Company wishes to freeze the Option Plan, effective January 1, 2005, to prohibit
the further issuance of options thereunder, but to permit those options earned and vested as of
December 31, 2004, to remain subject to the Plans’ terms in effect at that time, while subjecting
any options not earned and vested as of that date to the rules established by Code Section 409A,
which are incorporated into the Plans by virtue of this Amendment Number Four; and



     WHEREAS, Section 10.1 of the Plan and Section 20 of the Option Plan permit the Company to
amend the Plan and the Option Plan at any time at the Board of Director’s discretion;



     NOW, THEREFORE, the Plan and the Option Plan are hereby amended as set forth below. Unless
otherwise noted, all provisions of this amendment are effective January 1, 2005.




	A.	 	Amendments to the Plan






	 	1.	 	Section 2.1, Definitions, is hereby amended by deleting the definitions of
“Disability,” “Employer,” and “Unforeseeable Emergency” and replacing them in their
entirety with the following:
	 
	 	 	 	“‘Disability,’ or ‘Disabled’ means the following, in the following
contexts and circumstances:






(i) With respect to Participants’ Deferred Compensation Benefits and Restoration
Benefits that are earned and vested prior to December 31, 2004, a physical or



 









 







mental condition of a Participant resulting from a bodily injury, disease, or mental
disorder which renders him incapable of continuing in the employment of the
Employer, as determined by the Administrator based upon appropriate medical advice
and examination; and




(ii) With respect to Participants’ Deferred Compensation Benefits and Restoration
Benefits that are earned or vest after December 31, 2004, a Participant’s absence
from employment with the Employer due to: (A) his inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which either can be expected to result in death or can be expected
to last for a continuous period of not less than twelve (12) months; or (B) a
medically determinable physical or mental impairment which can be expected to result
in death or last for a continuous period of not less than twelve (12) months, for
which such Participant is scheduled to receive income replacement benefits for a
period of not less than three (3) months under an accident and health plan covering
the employees of such Employer.”




“‘Employer’ means American Greetings Corporation, an Ohio corporation
(“AGCo”) and its controlled subsidiaries and affiliates; provided, that for
Plan Years commencing after December 31, 2004, such term shall also include (to the
extent not previously included in the preceding definition) any corporation, limited
liability company, partnership, or other business organization which is part of a
“controlled group of corporations” that includes AGCo (within the meaning of Code
Section 414(b) and related regulations), or is “under common control” with AGCo
(within the meaning of Code Section 414(c) and related regulations).”




“‘Unforeseeable Emergency’ means:




(i) With respect to Participants’ Deferred Compensation Benefits and Restoration
Benefits that are earned and vested prior to December 31, 2004, an unanticipated
emergency that is caused by an event beyond the control of the Participant and that
would result in severe financial hardship to the individual if early withdrawal were
not permitted; and




(ii) With respect to Participants’ Deferred Compensation Benefits and Restoration
Benefits that are earned or vest after December 31, 2004, any of the following:




(A) a severe financial hardship to the Participant, resulting from an
illness or accident of the Participant, the Participant’s spouse or the
Participant’s dependent (as defined under Code Section 152(a));




(B) loss of the Participant’s property due to casualty; or




(C) other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the Participant’s control.”



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2. Section 2.1, Definitions, is hereby amended by adding the following definitions thereto in the
proper alphabetical sequence:





“‘Specified Employee’ means any individual employed by the Employer for whom
both (i) and (ii) apply:




(i) at any time during the twelve (12) month period ending on the December 31st
preceding the Plan Year under consideration, such individual:




(A) is one of the top fifty (50) compensated officers of AGCo and has annual
“W-2” compensation of at least $130,000; or




(B) owns more than five percent (5%) of AGCo’s stock; or




(C) owns more than one percent (1%) of AGCo’s stock and has annual “W-2”
compensation in excess of One Hundred Fifty Thousand Dollars ($150,000); and




(ii) AGCo’s stock is publicly-traded on the date such individual Separates from
Service.




In making the above determinations, the foregoing compensation amounts shall be
adjusted from time to time in accordance with the cost-of-living adjustments under
Code Section 416(i), and an individual who qualifies as a Specified Employee under
part (i) hereof shall be treated as a Specified Employee for the twelve (12) month
period beginning on the April 1st next following the date he so qualifies.”




“‘Separation from Service’ or ‘Separates from Service’ shall mean a
Participant’s termination from employment with the Employer on account of such
Participant’s death, permanent and total disability, retirement, or other such
termination of employment. A Participant will not be deemed to have experienced a
Separation from Service if such Participant is on military leave, sick leave, or
other bona fide leave of absence, to the extent such leave does not exceed a period
of six (6) months or, if longer, such longer period of time as is protected by
either statute or contract. A Participant will not be deemed to have experienced a
Separation from Service if such Participant continues to provide “significant
services” to the Employer. For purposes of the preceding sentence, a Participant
will be considered to provide “significant services” if such Participant provides
continuing services that average at least twenty percent (20%) of the services
provided by such Participant to the Employer during the immediately preceding three
(3) full calendar year of employment and the annual remuneration paid for such
services is at least twenty percent (20%) of the average annual compensation earned
during the final three (3) full calendar years of employment (or, if less, the
period of employment).”



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3. Section 3.3(d), Agreement Procedure, is hereby deleted in its entirety and replaced with the
following:





	 	 	 	“(d) The deferral period provided for under a prior Agreement (the
‘Prior Deferral Election’) may be extended in accordance with rules established
by the Administrator in compliance with the requirements of Code Section 409A
and related regulations. Notwithstanding the foregoing, in no event shall a
change in a Prior Deferral Election:







     (i) take effect until at least twelve (12) months after the date on
which such Election is made;




     (ii) permit payment due on account of Separation from Service, or
payable in accordance with a specified time or fixed schedule (as set forth
in such Agreement), or payable in connection with a Change in Control, to
commence earlier than five (5) years from the date such payment otherwise
would have commenced in the absence of such extension, and




     (iii) permit payment to commence in accordance with a specified time or
fixed schedule set forth in the Prior Deferral Election less than twelve
(12) months prior to the date of the first payment scheduled under such
Prior Deferral Election.




For purposes of this paragraph (d), any payments to be made to a Participant
under a prior Agreement that consists of installments, or is to be paid
other than in lump sum form, shall be treated as a single payment, and the
date of the first payment in any such series of installments shall be
treated as the date of payment.


4. Section 4.4, Matching Contributions, is hereby amended by adding the following provision to the
end thereto:





“Notwithstanding the foregoing, effective January 1, 2005, no Employer Matching
Contribution shall be credited to any Participant who is otherwise eligible to
receive an Employer Matching Contribution, to the extent such Employer Matching
Contribution corresponds to changes made by such Participant to his or her elective
deferrals in the American Greetings Corporation Employees’ Profit Sharing Plan and
such changes to his or elective deferrals exceeds the Code Section 402(g) limit.”


5. Section 5.3, Restoration Contributions, is hereby deleted in its entirety and replaced with the
following:





“An amount determined by the Board, in its sole discretion, may be credited to a
Participant’s Account for each Plan Year in which the Participant is a participant



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in the American Greetings Corporation Employees’ Retirement Profit Sharing Plan, and
contributions allocated to such Participant’s account(s) thereunder, if any, are
restricted due to the limitations imposed under Code Sections 401(a)(17) and 415.”


6. Section 6.1, Commencement of Benefit Payments, is hereby deleted in its entirety and replaced
with the following:





	 	 	 	“6.1
 Commencement of Benefit Payments. With respect to
Participants’ Deferred Compensation Benefits and Restoration Benefits that are
earned and vested prior to December 31, 2004, and except as provided in Section
10.8, the payment of a Participant’s Deferred Compensation Benefit and
Restoration Benefit shall commence within thirty (30) days after the date on
which the earlier of the following events occur, as applicable:







	 	(a)	 	The expiration of the deferral period provided
under such Participant’s Agreement;
	 
	 	(b)	 	Such Participant incurs an Unforeseeable
Emergency (as determined by the Administrator in accordance with the
Plan), provided, that a payment made in accordance with this
provision (b) shall in any event be limited to the amount necessary to
satisfy such emergency;
	 
	 	(c)	 	Such Participant terminates service with the
Employer for any reason; or
	 
	 	(d)	 	Such Participant’s service is terminated by the
Employer for any reason.






With respect to Deferred Compensation Benefits and Restoration Benefits
earned or vesting after December 31, 2004, and except as provided in Section
10.8, a Participant’s Deferred Compensation Benefit and Restoration Benefit
shall commence after the date on which the earliest of the following events
occur, as applicable:




	 	(a)	 	The expiration of the deferral period provided
under such Participant’s Agreement,
	 
	 	(b)	 	Such Participant incurs an Unforeseeable
Emergency (as determined by the Administrator in accordance with the
Plan), provided, that a payment made in accordance with this
provision (b) shall in any event be limited to the amount necessary to
satisfy such emergency; or
	 
	 	(c)	 	Such Participant incurs a Separation from
Service.




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Notwithstanding the foregoing, in the case of any distribution payable on
account of a Separation from Service to any Participant who qualifies as a
Specified Employee (determined as of such Separation from Service), any such
distribution shall commence no earlier than six (6) months from the date of
such Separation from Service (or if earlier, the date of such Specified
Employee’s death).”


7. Section 6.2, Form of Benefit Payments, is hereby amended by deleting the last paragraph in its
entirety and by deleting the second to last paragraph in its entirety, but replacing it with the
following:





“Except as provided in Article VII, the Participant’s Restoration Benefit shall be
paid in a single lump sum unless a periodic payment is elected by the Participant
under procedures established by the Administrator. For Restoration Benefits
credited or vesting after December 31, 2004, any election to receive a periodic
payment under this Section 6.2 shall be made no later than: (i) the last day of the
Plan Year preceding the Plan Year to which such Restoration Benefit is first
credited; or (ii) in the case of the first year in which a Participant becomes
eligible to participate in the Plan, not later than thirty (30) days from the date
that such Participant first becomes eligible to participate in the Plan.”


8. Section 10.3, No Assignment, is hereby amended by adding the following paragraph to the end
thereto:





“Notwithstanding the foregoing, a Participant’s Deferred Compensation Benefit shall
be subject to division and partition in accordance with the terms of a domestic
relations order satisfying the requirements of a “qualified domestic relations
order” (“QDRO”), as defined in Code Section 414(p) and related regulations;
provided, that (i) a separate benefit shall be recognized and maintained for any
spouse or former spouse determined to have an interest in the Plan as a result of a
QDRO; and (ii) all costs and expenses incurred by the Company or the Administrator
in connection with such QDRO shall be charged against such Participant’s Deferred
Compensation Benefit, as an offset in accordance with the provisions of subsection
(c) hereof, prior to effecting any such division or partition.”


9. Article 10, Miscellaneous Provisions, is hereby amended by adding Section 10.12 to the end
thereto, which shall provide as follows:





“Section 10.12 Tax Liability; Compliance.




(a) Where and to the extent a Participant’s Deferred Compensation Benefit,
including any payment or distribution thereunder, results in a
federal, state or local tax withholding obligation being imposed upon the
Company or the Administrator, or any entity qualifying as an “Employer”



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hereunder, the Company (or such Employer) shall have the right to withhold
such amounts from any Plan benefit(s) due or becoming due and payable to
such Participant.




(b) The Administrator may treat as paid, and then withhold and remit, a
portion of a Participant’s Deferred Compensation Benefit reasonably
determined to be necessary to satisfy any federal, state, or local tax
obligation imposed in connection with such Participant’s Deferred
Compensation Benefit; provided, however, that any amount treated as paid to
a Participant and so applied shall not exceed the amount of such obligation.




(c) The Plan is intended to be operated in compliance with the provisions of
Code Section 409A (including any rulings or regulations promulgated
thereunder). In the event that any provision of the Plan fails to satisfy
the provisions of Code Section 409A, then such provision shall be void and
shall not apply to a Participant’s Deferred Compensation Benefit, to the
extent practicable. In the event that it is determined to not be feasible
to so void a Plan provision as it applies to a Participant’s Deferred
Compensation Benefit, such Plan provision shall be construed in a manner so
as to comply with the requirements of Code Section 409A.”



B. Amendments to the Option Plan



1. Section 2, Provision to Amend Deferral Plan, is hereby amended by deleting the section in its
entirety and replacing it with the following:





	 	 	“2. 	Provision to Amend Deferral Plan. In accordance with §10.1 of
the Deferral Plan, Participants who otherwise have an opportunity to extend the
deferral period for amounts deferred under rules adopted pursuant to §3.3(d) of
the Deferral Plan may elect instead to receive an award of discounted options
hereunder (“Option Agreement”) in full satisfaction of such amounts due under
the Deferral Plan. As a condition to such Option Agreement, any Participant
who becomes a party thereto shall consent and agree that he or she no longer
has any right to such amounts under the Deferral Plan. The Options awarded in
substitution of the Deferred Compensation Benefit shall be governed by the
terms of this Plan, except with respect to the timing of the Options’
elections, which at all times shall be governed by §3.3(d) of the Deferral
Plan.
	 
	 	 	 	The Board of Directors (or the Compensation & Management Development
Committee, to the extent delegated), shall have sole discretion to provide
Participants in the Deferral Plan the opportunity to substitute their rights
to receive deferred compensation under the Deferral
Plan for the right to enter into an Option Agreement pursuant to this Plan,




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	 	 	 	provided the participant makes his or her election prior to the beginning of
the Deferral Period.






Notwithstanding the foregoing, effective January 1, 2005, Participants shall
no longer be eligible to enter into Option Agreements hereunder, or to amend
or modify any existing Option Agreements. Further, any Option Agreements
executed prior to October 4, 2004, shall be subject to the terms of the
Deferral Plan in effect prior to that date. Any Option Agreements executed
on or after October 4, 2004, shall be subject to the terms of the Deferral
Plan, as thereafter amended and in effect.”


2. Section 4, Definitions, is hereby amended by adding the definition of Deferral Period thereto
and replacing the current definition “Termination of Employment” with the following:





“‘Deferral Period’ shall mean the period for which a Participant’s compensation is
deferred under the Deferral Plan. The Deferral Period will be measured against the
Deferral Plan’s Plan Year.”




“‘Termination of Employment’ shall mean, with respect to Employee terminations
occurring prior to January 1, 2005, the date on which the Employee ceases to perform
services for the Company. Effective for Employee’s terminations occurring after
December 31, 2004, ‘Termination of Employment’ shall mean the date of an Employee’s
Separation from Service as defined under the Deferral Plan.”


3. Section 7, Eligibility, is hereby amended by replacing the section in its entirety with the
following:





“All Employees of the Company who are both in the group of Employees determined by
the Board to be part of the select group of management or highly compensated
Employees and are also designated as Participants by the Board are eligible to
receive Options under the Plan. Notwithstanding the foregoing, no Option Agreement
shall be entered into under this Plan after December 31, 2004.”


4. Section 8, Grant of Options, is hereby amended by adding the following provision to the end
thereto:





“No Option Agreement shall be entered into under this Plan after December 31, 2004.”


5. Section 11 is hereby amended by deleting the section in its entirety and replacing it with the
following:





“Exercise. Except as otherwise specifically provided in the Option
Agreement, all Options granted under the Plan will vest at grant and may be
exercisable



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immediately; provided, however, that such Options shall be exercised in accordance
with the applicable Option Agreement.




The Option may be exercised, as provided in the Option Agreement, in full or in part
from the date of the grant at increments of no less than 100% of each grant.
However, in no event shall any option be exercised more than 20 years after the date
of grant, with the option to extend the exercise period at the discretion of the
Board; provided, however, that no extensions shall be permitted after December 31,
2004.




Reinvested dividends shall be attributed proportionally to the property subject to
the Option awards and will be purchased when the underlying award is exercised. For
example, if an original grant of an Option to purchase 400 shares (after the payment
of the exercise price) generated 100 additional shares on such 400 shares from
reinvested dividends, an exercise of one-fourth of the originally granted options
will result in the purchase (after the payment of the exercise price) of 125 shares
in order to proportionally include the resulting reinvested dividends.




In addition, all Options granted under the Plan may only be exercised subject to the
terms specified in the Option Agreement. If such terms conflict with the terms of
this Plan, the terms of this Plan Document shall control.”


6. Section 16, Modification of Option or Plan, shall be amended by adding the following provision
to the end thereto:





“Effective January 1, 2005, the Board shall not modify, extend, or renew any
outstanding Option or the Plan, except as may be required to bring such Option
Agreement or the Plan into compliance with applicable federal, state, or local law.”



     IN WITNESS HEREOF, the Company, by actions of its Board of Directors, has caused this
Amendment Number Four to the Plan and this Amendment Number One to the Option Plan to be executed
on this 14th day of December, 2005.



	 	 	 	 	 
	 	AMERICAN GREETINGS CORPORATION

 	 
	 	By:  	/s/ Brian T. McGrath
 	 
	 	Name: Brian T. McGrath  	 
	 	Title: Vice President, Human Resources  	 
	 




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