Document:

<PAGE>

                                                                Exhibit 10 (xxv)

                     SEVERANCE AGREEMENT AND MUTUAL RELEASE

      This Severance Agreement and Mutual Release ("Agreement") is entered into
between MARY ANN CORRIGAN-DAVIS ("EMPLOYEE") and AMERICAN GREETINGS CORPORATION,
an Ohio corporation ("AG" or "Company"), on the date set forth at the signature
lines below, arising out of the employment relationship between EMPLOYEE and AG.
This Agreement will not become effective and irrevocably binding until seven (7)
days after it is signed by EMPLOYEE. EMPLOYEE may revoke this Agreement at any
time prior to the expiration of such seven (7) days. A revocation must be in
writing and it must be received by the Company by the close of business on the
seventh day.

      In consideration of the mutual covenants and agreements hereinafter set
forth, and intending to be legally bound, the parties agree as follows:

      1. EMPLOYEE hereby acknowledges termination of employment with the Company
effective as of the close of business on February 28, 2005 ("Severance Date").

      2. Commencing on the Severance Date and upon EMPLOYEE signing a release
prepared by the Company in the form of paragraph 8, and provided that EMPLOYEE
has not resigned prior to the Severance Date, EMPLOYEE will receive the
following benefits from the Company:

            a. Severance pay in the amount of $28,335.41 per month for 36 months
      beginning on March 15, 2005, and continuing on the 15th day of each month
      thereafter through February 15, 2008, less applicable deductions,
      including deductions for health care coverage. Any payments due before the
      effective date of this Agreement shall be payable within ten (10) days
      after the effective date. The Company reserves the right to pay any
      portion of the severance pay in a lump sum, at the Company's discretion.
      In the event the Company exercises its right to make a lump sum payment,
      such payment shall be increased ("grossed up") in the amount necessary to
      eliminate any adverse tax consequences to EMPLOYEE.

            b. Continued health care coverage, concurrently with COBRA, in the
      plan in which EMPLOYEE is enrolled at the Severance Date, at the Senior
      Vice President active employee payroll deduction rate, as it may be
      changed from time-to-time, through February 28, 2008; and from March 1,
      2008 through December 31, 2018, EMPLOYEE will continue to be eligible for
      health care coverage at the Senior Vice President active employee rate on
      a pre-tax basis, as it may be changed from time-to-time; and thereafter,
      EMPLOYEE shall be eligible for retiree health care coverage on the terms
      then in effect. The period through February 28, 2008, shall be considered
      as active employment for purposes of qualifying for retiree health care

<PAGE>

            c. EMPLOYEE will be eligible to participate in the Key Management
      Annual Incentive Plan for Fiscal Year 2005, at no less than a "Meets
      Expectations" evaluation level.

            d. AG will pay for up to six (6) months of outplacement services to
      assist EMPLOYEE in seeking employment. The service provider will be
      mutually agreed upon by Company and EMPLOYEE. The Company will make direct
      payments to the service provider. EMPLOYEE may use, and the Company will
      pay for, these outplacement services anytime before February 28, 2008.

            e. EMPLOYEE will have continued use of EMPLOYEE's company car (or a
      replacement car in February 2005 pursuant to the Company's executive car
      policy) through February 28, 2008, at which time EMPLOYEE will return the
      car to AG unless EMPLOYEE exercises the option to purchase the car at a
      discount of $500 below the car's residual value;

            f. EMPLOYEE will continue to be covered under the Company's
      Executive Life Insurance Plan through February 28, 2008;

            g. Stock options granted to EMPLOYEE prior to the Severance Date
      will continue to vest according to the terms of the American Greetings
      Stock Option Plan(s) through February 28, 2008, as if EMPLOYEE were
      actively employed. Vested stock options shall be exercisable through May
      30, 2008. In the event of EMPLOYEE's death prior to February 28, 2008, all
      vested options of EMPLOYEE may be exercised by EMPLOYEE's
      beneficiary(ies), who may exercise such options for a period of one (1)
      year following EMPLOYEE's death.

            h. Company will pay EMPLOYEE $5000 for transition expenses.

            i. The Company agrees to remove EMPLOYEE as an officer and/or
      director of any subsidiary or affiliated company in which she held such a
      position. The Company agrees to continue to insure EMPLOYEE under its
      officers and directors liability insurance policy for any claim based on
      any act while she was an officer and/or director of the Company, and to
      indemnify, protect and defend any claim or lawsuit naming EMPLOYEE as a
      defendant arising from or related to her employment with the Company or
      her status as an officer or director of the Company or any of its
      subsidiaries, as provided in the Company's corporate regulations and
      bylaws, as they may be amended from time to time.

      3. If EMPLOYEE is re-employed by Company, in any capacity other than a
temporary or part time assignment, prior to receipt of all the severance
benefits provided in paragraph 2, EMPLOYEE will forfeit any unpaid severance
benefits.

      4. EMPLOYEE acknowledges that as of the Severance Date EMPLOYEE will cease
to be an employee of AG and thereafter will not be eligible for or receive any
benefits of employment from AG other than those benefits described in this
Agreement; provided, however,

                                       2
<PAGE>

that this Agreement does not waive any benefits EMPLOYEE may be eligible to
receive under the Company's Supplemental Executive Retirement Plan ("SERP"), any
stock option plan, deferred compensation plan, health plan, or the Retirement
Profit Sharing and Savings Plan.

            a. For purposes of calculating "Final Average Compensation", as that
      term is used in paragraph 2.10 of the Company's SERP, the payments
      received under paragraph 2.a. of this Agreement during the period February
      15, 2005 through February 15, 2008 shall be considered "Compensation" for
      the purpose of determining EMPLOYEE's two calendar years which will afford
      the highest average compensation.

      5. Notwithstanding any other provision of this Agreement, EMPLOYEE
acknowledges that the benefits EMPLOYEE will receive under paragraph 2 above are
greater than those benefits EMPLOYEE would have been entitled to receive upon
termination in the absence of this Agreement.

      6. This Agreement is offered as part of an exit incentive or other
employment termination program (the "Program"). Information concerning
eligibility and selection for the Program that is required to be provided under
the federal age discrimination in employment laws is enclosed with this
Agreement. EMPLOYEE acknowledges receipt of the information.

      7. It is agreed by EMPLOYEE that this Agreement, the benefits, including
all benefits set forth in paragraph 2 above, and all other terms of this
Agreement, are each confidential information and shall not be disclosed or
revealed to any person other than EMPLOYEE's attorneys, accountants, tax
advisors, and immediate family members (who must be informed of and agree to be
bound by the terms of this paragraph), any governmental taxing authority, or
pursuant to subpoena, court order or as otherwise required by law; provided
however that Company may disclose the terms to comply with any governmental or
regulatory disclosure obligation.

      8. With respect to any and all events arising out of or related to the
employment relationship between EMPLOYEE and the Company occurring on or before
the Severance Date, EMPLOYEE hereby releases and forever discharges Company and
its agents, officers, directors, employees, subsidiaries, divisions, affiliates,
successors and assigns (collectively "AG Releasees") from any and all claims
and/or causes of action, known or unknown, arising (i) from or during EMPLOYEE
's employment with the Company or (ii) as a result of the termination of that
employment; and EMPLOYEE hereby covenants and agrees that she will not assert
any such claims and/or causes of action against any AG Releasee, including but
not limited to (i) claims and/or causes of action arising under the Age
Discrimination in Employment Act (29 U.S.C. Sec. 621 et seq.); (ii) claims
and/or causes of action arising under federal, state or local laws, including
but not limited to those prohibiting employment discrimination on the basis of
race, color, national origin, religion, sex, age, disability or otherwise; (iii)
claims and/or causes of action growing out of any legal restrictions on AG's
right to terminate its employees, including breach of contract, discharge in
violation of public policy, or promissory estoppel; or (iv) tort claims and/or
causes of action, including infliction of emotional distress, defamation, libel
or slander.

                                       3
<PAGE>

      Likewise, with respect to any and all events arising out of or related to
the employment relationship between EMPLOYEE and the Company occurring on or
before the Severance Date, the Company hereby releases and forever discharges
EMPLOYEE, her heirs, administrators, executors, successors and assigns
(collectively, "Employee Releasees") from any and all claims and/or causes of
action, known or unknown, arising from or relating to EMPLOYEE'S employment with
AG, known or unknown, whether in tort, contract or any other legal theory.

      9. EMPLOYEE represents and warrants that EMPLOYEE has no interest or
obligation that is inconsistent with or in conflict with this Agreement or that
would prevent, limit or impair Employee's performance of any part of this
Agreement.

      10. EMPLOYEE agrees that in the event that EMPLOYEE breaches any of the
terms of this agreement, EMPLOYEE will be liable for any damages incurred by the
AG Releasees as a result of the breach. Additionally, in the event EMPLOYEE
breaches her obligations under paragraphs 11 and 12 of this Agreement, she will
forfeit any payments then remaining due to her under paragraph 2 of this
Agreement. In the event AG breaches any term of this Agreement, AG will be
liable for any damages incurred by Employee Releasees.

      11. EMPLOYEE acknowledges that EMPLOYEE has an obligation of confidence
and nondisclosure with respect to any and all confidential information and trade
secrets that EMPLOYEE acquired during the course of employment with Company.
This obligation of confidence and non-disclosure extends to both Company
information and third-party information held by the Company in confidence, and
this obligation continues after the Severance Date. EMPLOYEE is prohibited from
using or disclosing such information.

      12. EMPLOYEE agrees that from the Severance Date through February 28,
2008, EMPLOYEE shall not be employed directly or indirectly in any capacity or
work as a consultant or independent contractor for any person, firm or company
in the greeting card, stationery, gift wrap or party goods industry in any
capacity similar to that held by EMPLOYEE while employed with the Company.

      13. Any dispute arising out of or relating to this Agreement or EMPLOYEE's
employment shall be resolved pursuant to the Company's alternative dispute
resolution program known as "Solutions" and the arbitration provided for under
the Solutions program shall be final and binding upon the parties, except for
any appeal permitted by law; provided however, that in the event that the
Company seeks injunctive relief to enforce its rights under paragraphs 11 or 12
of this Agreement, the parties consent to the jurisdiction of the state or
federal court in Cuyahoga County, Ohio without regard to the mediation and
arbitration provisions of the Solutions program.

      14. For 90 days after the Severance Date, EMPLOYEE agrees to provide and
cooperate promptly with any reasonable request by the Company to provide such
information, signatures, or certifications (as to matters upon which Employee
can truthfully certify) that may be required for, or otherwise relate to, the
Company's compliance with federal, state or local

                                       4
<PAGE>

laws or regulatory requirements. The Company shall reimburse EMPLOYEE for all
reasonable expenses related to compliance with this paragraph.

      15. EMPLOYEE agrees that she will not make any oral or written statements
that either generally or specifically disparage the Company, its employment
practices, business, products, conduct or policies, or its employees, directors,
or agents. AG agrees that it shall not make any oral or written statements that
either generally or specifically disparage EMPLOYEE or her professional
competence or employability. In addition, the Company will provide EMPLOYEE with
twenty (20) original counterparts of a favorable letter of recommendation signed
by Zev Weiss in a form to be agreed upon by the parties within 30 days of the
Severance Date.

      16.   (a) This Agreement constitutes the entire understanding between
EMPLOYEE and the Company relating to the subject matter contained herein and
this Agreement supersedes any previous agreement(s) that may have been made in
connection with EMPLOYEE's employment with AG. This Agreement may not be
changed, modified, or altered without the express written consent of EMPLOYEE
and an officer of AG.

            (b) AG's or EMPLOYEE'S failure to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver of,
or deprive AG or EMPLOYEE of its or her right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. To be effective, any
waiver must be in writing and signed by EMPLOYEE or by an officer of AG.

            (c) This Agreement shall be construed in accordance with the laws of
the State of Ohio. If any part or section of this Agreement is found to be
contrary to law or unenforceable, the remainder shall remain in force and
effect.

      17. EMPLOYEE is hereby advised and encouraged to consult an attorney prior
to executing this Agreement. EMPLOYEE acknowledges that if EMPLOYEE has executed
this Agreement without consulting an attorney, EMPLOYEE has done so knowingly,
voluntarily and contrary to the express advice herein.

      18. EMPLOYEE acknowledges that EMPLOYEE has been given at least forty-five
(45) days from the date EMPLOYEE first received this Agreement, which date was
on or before December 9, 2004, during which to consider this Agreement. EMPLOYEE
understands that the offer made to EMPLOYEE by this Agreement remains open for
at least forty-five (45) days, and that EMPLOYEE may accept the offer at any
time through February 28, 2005. If EMPLOYEE does not accept this Agreement on or
before that date, the offer set forth in this Agreement is automatically
rescinded unless AG expressly notifies EMPLOYEE in writing otherwise.

      19. The obligations of the Company to pay EMPLOYEE pursuant to paragraph
2(a) above shall, in the event of the death of EMPLOYEE prior to February 28,
2008 be payable to EMPLOYEE'S designated beneficiary, her husband, Edward J.
Davis, which designation may be changed from time to time by EMPLOYEE by written
notice to the Company.

                                       5
<PAGE>

      20. Any notices required in the performance of this Agreement shall be
sent to the following persons by certified mail, return receipt requested:

      If to Company:                 American Greetings Corporation
                                     One American Road
                                     Cleveland, Ohio 44144
                                     Attn: Catherine Kilbane, General Counsel

      With a copy to:                American Greetings Corporation
                                     One American Road
                                     Cleveland, Ohio 44144
                                     Attn: Vice President/Human Resources

      If to EMPLOYEE:                Mary Ann Corrigan-Davis
                                     2373 Chapparal North
                                     Westlake, Ohio 44145

      With a copy to:                Robert J. Valerian, Esq.
                                     Kahn Kleinman, LPA
                                     2600 Erieview Tower
                                     Cleveland, Ohio 44114-1824

      21. All announcements by the Company regarding EMPLOYEE, both internal and
external, except for any filings made by the Company with any government or
regulatory agency shall be mutually agreed upon by the Company and EMPLOYEE
prior to distribution.

      22. After the Severance Date, for a period of 90 days, any telephone calls
received at the Company for EMPLOYEE will be referred to EMPLOYEE's current
assistant, who will then inform the caller that EMPLOYEE is no longer with the
Company and will offer a telephone number where EMPLOYEE may be reached.

      23. The Company warrants to Employee that the individual signing this
Agreement on behalf of the Company has full authority to do so.

AMERICAN GREETINGS CORPORATION

By: /s/ Catherine Kilbane                               Date: 2-28-05
    -------------------------------------

/s/ Mary Ann Corrigan-Davis                             Date: 28 Feb. 2005
-----------------------------------------
      Mary Ann Corrigan-Davis

                                        6Exhibit 10.XXVII

 

Exhibit 10 (xxvii)

	AMERICAN GREETINGS
KEY MANAGEMENT ANNUAL
INCENTIVE PLAN
FISCAL YEAR 2005

 

 

	 	 	 
	 

	 

	 	 
	 

	 	 

AMERICAN GREETINGS

KEY MANAGEMENT

ANNUAL INCENTIVE PLAN

During Fiscal Year 2005, American Greetings must focus its efforts on growing
revenue, improving profit margins and optimizing our assets.

To address these challenges, we must concentrate our efforts on achieving our
2005 business goals and reward performance that contributes to the Company’s
success. And, we need to continue to create value for our shareholders. An
important part of value creation is our ability to grow earnings and demonstrate
to investors that we will continue to be a strong business. As a member of the
American Greetings management team, you play an important role in meeting these
goals. You have the potential to have an impact on our success. As a result, you
have a financial stake in our ability to achieve these goals.

This brochure provides an overview of the Key Management Annual Incentive Plan
— a valuable component of your total compensation package. In addition, your
Fiscal Year 2005 Annual Incentive Plan Statement — located in the back pocket
of this brochure — provides details about the Plan goals and targets for your
position within your business unit. It also gives a detailed example of the
incentive calculation. Together, these documents provide the information you
need to understand the Plan so you can maximize your annual incentive.

 

 

 

	 	 	 
	 

	 
	 	 

	 	 	 
	TABLE OF CONTENTS
	 	 
	 
	 	 
	Eligibility
	 	1
	 
	 	 
	How the Plan Works
	 	2
	 
	 	 
	Your Individual Target Incentive
	 	2
	 
	 	 
	Business Unit Performance
	 	3
	 
	 	 
	Corporate Performance
	 	5
	 
	 	 
	How Awards Are Calculated
	 	6
	 
	 	 
	Individual Performance
	 	7
	 
	 	 
	Questions
	 	8

 

 

	 	 	 	 	 
	AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	 
	1
	 

n Eligibility

You are eligible to participate in the Annual Incentive Plan if you are a Key
Manager or Officer in one of the following business units:

	 	 	 	 	 	 
	 	 
	 
	 	Business Units...

	 	 	Includes Key Managers And Officers in...	 
	 	 
	 
	 	 
	 	 	 	 
	 	Corporate Consolidated

	 	 	Departments that support the entire
organization (typically located at World
Headquarters) such as Finance, Legal, Human
Resources, ISD, etc.	 
	 	 
	 	 	 	 
	 	 
	 
	 	North American

Greeting Card

Division (NAGCD)

	 	 	The entire business unit	 
	 	 
	 
	 	Carlton Retail

	 	 	Carlton Cards Retail (U.S.) and
Carlton Cards Retail (Canada)	 
	 	 
	 
	 	AGI Schutz

Celebrate It! Group

   DesignWare

   Learning Horizons

Gift Wrap & Specialty

GuildHouse

Magnivision

Plus Mark

Carlton Mexico

John Sands Group

S.A. Greetings

UK Greetings Ltd.

	 	 	The entire business unit	 
	 	 
	 

 

If you participate in another Company-sponsored annual incentive plan, you are
not eligible to participate in the Key Management Annual Incentive Plan.

Key Managers include individuals in Key Manager 1 and Key Manager 2 positions.
Officers include Corporate-level Executive Directors, Vice Presidents, Senior
Vice Presidents, President & Chief Operating Officer, Chief Executive Officer,
Chairman of the Board and any other position(s) that may be designated.

If you are hired during the plan year — defined as the American Greetings
fiscal year ending February 28, 2005 — and are eligible to participate in the
Key Management Annual Incentive Plan, you will receive a prorated incentive
payout based on the period of time you participated in the Plan. If you are
promoted or you move from one business unit to another during the year, your
individual target incentive, base earnings, business unit earnings goal and
corresponding performance multiplier may change. If any of these do change,
your incentive will be calculated based on the targets, base earnings, plan
provisions and actual earnings performance for each business unit you
participated in on a prorated basis and rounded to the nearest full month.

 

	 	 	 
	 	AMERICAN
GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	2
	 

If you voluntarily or involuntarily leave American Greetings before the
completion of the plan year, you will forfeit your Key Management Annual
Incentive Plan award for that year. If your employment ends during the plan year
because you elect to retire after age 60, take a leave of absence, suffer a
permanent disability or die, your incentive payout will be prorated to the
nearest full month based on the actual period you participated in the Plan
during the year.

n HOW THE PLAN WORKS

The Key Management Annual Incentive Plan is designed to focus on those
performance factors that will enable American Greetings to be successful. Two of
the keys to our success are our earnings and stock performance. Earnings
performance and value creation will ensure we remain a major competitor in our
industry. The Key Management Annual Incentive Plan will measure each business
unit’s earnings performance and our corporate earnings per share performance and
will reward you for your performance when defined goals and objectives are
achieved.

The actual incentive you receive will be based on your individual target
incentive, your business unit’s achievement of its earnings goal, corporate
earnings per share performance and your individual performance.

Let’s take a look at the components of the Plan and how it works.

YOUR INDIVIDUAL TARGET INCENTIVE

At the beginning of each fiscal year, an individual target incentive will be
established for you based on your position. The target is a percentage of your
base earnings. Your individual target incentive is shown on your Fiscal Year
2005 Annual Incentive Plan Statement.

For example, assume you are a Key Manager 1 with base earnings of $60,000. Your
target incentive under the Plan is 10%, or $6,000 ($60,000 x 10%).

Your individual target is the incentive you will earn when both the business
unit and the Corporation achieve their goals. This means that your incentive
opportunity based on business unit performance is 50% of the target or $3,000
and your incentive opportunity based on the Corporation’s performance is 50% of
the target or $3,000 — for a total individual target opportunity of 10% or
$6,000.

If your business unit’s performance is above or below goal, the amount
calculated for the business unit component will be increased or decreased. The
resulting amount is used as the basis for calculating your corporate incentive
opportunity based on corporate earnings per share performance.

DEFINING BASE EARNINGS

Your base earnings are referred to throughout this brochure and are defined as
your base salary earnings during the fiscal year. Base earnings exclude health
and welfare benefits, bonus and incentive payments, overtime and other indirect
compensation. Base earnings for Plan participants outside the U.S. may be
defined differently and may vary by country.

 

 

	 	 	 	 	 
	AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	 
	3
	 

BUSINESS UNIT PERFORMANCE

At the beginning of each fiscal year, the American Greetings Board of Directors
approves the corporate earnings goal for the fiscal year. This goal provides the
context from which each business unit sets its earnings goal.

Your business unit’s actual earnings will be measured at the end of the fiscal
year. Actual earnings results will be expressed as a percentage of the earnings
goal. If your business unit’s results exceed or fall below the earnings goal,
Plan payouts will be adjusted:

	n	Below Target Performance. If your business unit’s earnings results do not
meet a minimum level of performance — the performance threshold — no
payouts will be made to participants in your unit. Actual performance
between threshold and goal will result in a reduced payout.
	 
	n	Target Performance. When business unit results meet the earnings goal, you
are eligible to receive 100% of the business unit incentive.
	 
	n	Above Target Performance. When business unit results exceed the earnings
goal, you are eligible to receive up to 200% of the business unit
incentive. This provides a significant opportunity for increased financial
rewards.

EARNINGS GOALS FOR BUSINESS UNITS

The Board of Directors approves the earnings goal for the Corporation at the
beginning of each year. Business unit earnings goals are based on the growth
opportunities and challenges of each business unit. These goals support our
business objectives. For example, some business units have high growth
opportunities and low operating costs. As a result, their earnings goal may be
higher than other business units. other units may have lower earnings goals.

Business unit earnings goals may change from year to year based on each unit’s
performance challenges.

PERFORMANCE BELOW THRESHOLD

If your business unit’s actual earnings result falls below the earnings
performance threshold for the fiscal year, no incentive payouts will be made.
This plan feature is key to our performance-based compensation philosophy
— ensuring that our incentive pay reflects the performance of our business
units.

If your business unit has met or exceeded the performance threshold level of
earnings, and actual performance is above or below goal, a business unit
performance multiplier will be used to calculate your incentive.

 

	 	 	 
	 	AMERICAN
GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	4
	 

BUSINESS UNIT PERFORMANCE MULTIPLIER

At the beginning of the fiscal year, each business unit is given a performance
multiplier. This multiplier is used to calculate the incentive when performance
is above or below goal, after the performance threshold has been achieved. The
business unit performance multiplier supports our compensation philosophy of
linking compensation to performance that contributes to our business objectives.

The business unit performance multiplier — shown on your Fiscal Year 2005
Annual Incentive Plan Statement —incrementally increases your individual target
incentive opportunity for business unit performance above goal. It also
incrementally decreases your target incentive opportunity for business unit
performance below goal. The increments are based on the percentage that actual
earnings results are above or below the earnings goal. Of course, the
performance threshold must be achieved for any incentive to be earned.

HOW THE MULTIPLIER IS USED

Once each business unit’s fiscal year earnings performance has been measured,
the performance multiplier will be applied based on the actual performance
achieved, and will be used to help calculate your incentive opportunity.

For example, assume your business unit is given a performance multiplier of 4 at
the beginning of the year, and the unit’s final fiscal year-end earnings result
is 110% of the earnings goal.

The business unit performance multiplier adjusts
your individual incentive opportunity based on your business unit’s performance:

       

	 	 	 	 	 	 	 
	100%

	 	+ ( 4	X	10% )	= 	140%
	Earnings Goal 

	 	Business Unit

Performance

Multiplier
	 	Earnings

Above Goal
	 	Business Unit

Incentive

Opportunity
	 
	 	 	 	 	 	 
	YOUR PERFORMANCE MULTIPLIER

	 
	 	 	 	 	 	 
	It’s important to note that performance multipliers vary by business unit.
Details about your performance multiplier are shown on your Fiscal Year 2005
Annual Incentive Plan Statement.

The illustration on page 5 shows the potential business unit incentive
opportunity for a participant under the Plan. This illustration assumes a
business unit performance multiplier of 4 and a performance threshold of 90% of
goal.

In this example, if actual earnings results are 90% of goal, the business unit
incentive opportunity will be 60% [100% — (4 x 10%)]. Therefore, the business
unit incentive opportunity for this individual will be 60% of his or her target
business unit incentive.

However, if actual earnings results are 110% of goal, the business unit
incentive opportunity will be 140% [100% + (4 x 10%)].

 

 

	 	 	 	 	 
	AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	 
	5
	 

	% OF BUSINESS            BUSINESS UNIT PAYOUT
UNIT INCENTIVE            MAXIMUM (200%)
——  —
200%
180%
140%
100%
60%
NO
PAYOUT
BELOW
THRESHOLD
0%
% OF BUSINESS UNIT
EARNINGS GOAL ACHIEVED 80% 90% 100% 110% 120% 125%
(Threshold) (Above Goal)

Please note: The factors used are for illustrative purposes only. Your actual
threshold performance level and business unit performance multiplier are shown
on your Fiscal Year 2005 Annual Incentive Plan Statement.

CORPORATE PERFORMANCE

At the beginning of each fiscal year, the American Greetings Board of Directors
will approve a corporate earnings per share goal for the year. Corporate
earnings per share will be measured at the end of the year. You are eligible for
additional incentive earnings based on the Corporation’s actual performance
compared to this goal. Any such earnings are calculated as a multiple of your
incentive opportunity calculated under the business unit component of this plan.

	n	If the actual corporate earnings per share performance is less than 90% of
the goal, a corporate performance multiplier of 1 will be applied to your
business unit incentive opportunity (i.e., there are no additional earnings
under the corporate performance component).

	n	If the actual corporate earnings per share performance is at least 90% of
the goal — but not greater than 100% of the goal — a corporate
performance multiplier of at least 1, but no more than 2, will be applied
to your business unit incentive opportunity. The multiplier will be
determined using this calculation: 1 + [100% — (4 x % below goal)].
	 
	   	For example, if your business unit incentive opportunity is $3,000, and actual
corporate earnings performance is 95% of goal, your total incentive opportunity
will be:

	 	 	 	 	 
	Business Unit Incentive Opportunity =
	 	$	3,000	 
	 
	 	 	 	 
	Corporate Performance Multiplier
[1+ (100% — (4 X 5%))] =
	 	 	X 1.8	 
	Total Incentive Opportunity =
	 	$	5,400	 

	n	If the corporate earnings per share goal is reached or exceeded, a
corporate performance multiplier of 2 will be applied to your business unit
incentive opportunity. Based on the prior example, your total incentive
opportunity will be $6,000 ($3,000 x 2).

CORPORATE EARNINGS PER SHARE

It’s critical that managers understand the importance of our earnings per share
performance and how it leads to increased shareholder value. By delivering
earnings per share at or above our fiscal year 2005 goal, we will build
investor, shareholder and associate confidence.

Earnings per share is determined as income net of all interest and taxes divided
by the total number of shares outstanding, as calculated on a fully diluted
basis.

 

 

	 	 	 
	 	AMERICAN
GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	6
	 

HOW AWARDS ARE CALCULATED

At the end of American Greetings fiscal year, your business unit’s actual
earnings results will be measured and your incentive opportunity will be
calculated. If American Greetings achieves at least 90% of our corporate
earnings

per share goal, your business unit incentive opportunity will be
increased. Your actual incentive will then be determined based on your
individual performance.

The following examples show how an actual incentive opportunity is calculated
under different performance scenarios. It assumes a business unit multiplier of
4.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	Performance Compared to Goal
	 	 	 	BUSINESS UNIT:	 	 	90% OF GOAL	 	 	95% OF GOAL	 	 	100% OF GOAL	 	110% OF GOAL	 
	 	 	 	CORPORATE:	 	 	85% OF GOAL	 	 	90% OF GOAL	 	 	100% OF GOAL	 	105% OF GOAL	 
	 	 
	 
	 	ASSUMPTION:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Base Earnings

	 	 	 	 	$	60,000	 	 	 	$	60,000	 	 	 	$	60,000	 	 	$	60,000	 	 
	 	Individual Target Incentive

	 	 	 	 	 	x 10	%	 	 	 	x 10	%	 	 	 	x 10	%	 	 	x 10	%	 
	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Individual Target Incentive Opportunity

	 	 	 	 	$	 6,000	 	 	 	$	6,000	 	 	 	$	6,000	 	 	$	6,000	 	 
	 	(Individual Target Business Unit

Opportunity = $3,000)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	(Individual Target Corporate

Opportunity = $3,000)
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 
	 	CALCULATION:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Business Unit Opportunity

	 	 	 	 	$	 3,000	 	 	 	$	3,000	 	 	 	$	3,000	 	 	$	3,000	 	 
	 	Adjusted for business unit earnings performance

	 		 	 	 	x 60	%	 	 	 	x 80	%	 	 	 	x 100	%	 	 	x 140	%	 
	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	[100% +/- (4 x % above or below goal)]
        =
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Business Unit Incentive Opportunity
	 	 	 	 	$	1,800	 	 	 	$	2,400	 	 	 	$	3,000	 	 	$	4,200	 	 
	 	Corporate Opportunity
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	        X
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	Corporate Performance Multiplier
	 	 	 	 	 	X 1.0	 	 	 	 	X 1.6	 	 	 	 	X 2.0	 	 	 	X 2.0	 	 
	 	

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	1 + [100% — (4 x % below goal)] 
        =
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	TOTAL INCENTIVE OPPORTUNITY

	 	 	 	 	$	 1,800	 	 	 	$	3,840	 	 	 	$	6,000	 	 	$	8,400	 	 
	 	 
	 

       Actual Payout Adjusted Based

           on Individual Performance

 

 

	 	 	 	 	 
	AMERICAN GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	 
	7
	 

INDIVIDUAL PERFORMANCE

At the end of the fiscal year, managers will assess each participant’s
performance compared to other participants within their business unit. As part
of the performance management process, managers will determine the degree to
which the participants achieved their goals and job expectations defined at the
start of the fiscal year. Using this assessment, managers will rank participants
based on their relative performance and will adjust final Key Management Annual
Incentive Plan incentive payouts. A certain percentage of participants will have
their incentive increased while other participants will have their incentive
reduced. However, most participants will receive 100% of their incentive payout.

The following schedule shows how final incentive awards will be adjusted based
on individual performance within business units.

This adjustment supports our compensation philosophy of providing greater reward
opportunities for associates who deliver higher levels of performance, enabling
American Greetings to be successful. Paying for performance helps to reduce a
sense of “entitlement” — that is, the expectation that when American Greetings
does well, we will all be rewarded well, regardless of our own individual
performance. Instead, the Plan provides a method for recognizing individuals
based on relative contributions to American Greetings success.

	PERFORMANCE            TARGET PERCENTAGE            WILL            PERCENTAGE
RATING            OF PARTICIPANTS            RECEIVE            OF INCENTIVE
Exceeds Expectations 30% 115%

	Meets Expectations 60% PERFORMANCE 100%
ADJUSTMENT

	Improvement Expected/ 10% 0 TO 50%
Performance Below Peer Level

 

 

	 	 	 
	 	AMERICAN
GREETINGS KEY MANAGEMENT ANNUAL INCENTIVE PLAN
	 
	8
	 

       

	 	 	 
	SUMMARY: THREE PERFORMANCE ADJUSTMENTS

	 
	 	 
	Your actual incentive payout under the Key Management Annual Incentive Plan will be adjusted based on performance in three areas:

	 
	 	 
	n

	 	Business Unit Performance Multiplier
	

	 	If your business unit’s performance is above or below its earnings goal, a
business unit performance multiplier will be used to calculate your
adjusted incentive opportunity.
	 
	 	 
	n

	 	Corporate Performance Multiplier
	

	 	If corporate earnings per share performance reaches or exceeds 90% of the
goal, a corporate performance multiplier will be applied to your business
unit incentive opportunity.
	 
	 	 
	n

	 	Individual Performance
	

	 	As part of the performance management process, managers assess performance
and determine performance ratings. Once your incentive opportunity is
calculated, your incentive may be adjusted — up or down — based on your
performance rating.

n INCENTIVE PAYOUT

Incentive payouts earned in fiscal year 2005 will be distributed to participants
within 60 days after the end of the fiscal year. Incentive payouts are subject
to normal tax withholding at a standardized rate and will be deposited to a bank
account of your choice.

CALCULATING PAYOUTS

For computation purposes, financial goals and actual performance results are
rounded to the nearest $1,000. The percent of the financial goal achieved and
the percent of target incentive earned is rounded to the nearest one-tenth of
one percent. The actual incentive payout is rounded to the nearest dollar.

n QUESTIONS

If you have questions about the Key Management Annual Incentive Plan and how it
works, please contact your manager. Your manager will work with you to ensure
you understand the Plan so you can maximize your annual incentive.

 

 

       

       

       

       

       

Nothing in this brochure should be construed to create or imply any contract of
employment between an employee and American Greetings and its subsidiaries. No
employee, former employee or any beneficiary shall have any right to payments
under the American Greetings Key Management Annual Incentive Plan, except as
specifically provided in the Plan.

American Greetings reserves the right to make changes to the Plan without prior
notice to any of the Plan’s participants. The Chief Executive Officer and
Chairman are the only people who have the authority to alter or amend this Plan
as is relates to any one participant. Any such alteration or amendment must be
done in writing. No participant should rely on an alteration, amendment or
modification to this Plan unless it is made in writing and is signed by the CEO
or the Chairman.

For purposes of illustrating how the Plan works, hypothetical associates, target
incentives, performance outcomes and incentive payments have been used in this
brochure. The actual incentive, if any, will be based on the actual performance
of American Greetings, its business units, and your individual performance.

This brochure and its contents are considered to be confidential and
proprietary, and are for the sole use of current American Greetings employees.

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