<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
American Greetings Corporation
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
American Greetings Corporation
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(a)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
(4) Proposed maximum aggregate value of transaction:
- - --------
*Set forth the amount on which the filing is calculated and state how it was
determined.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
<PAGE>
[LOGO OF AMERICAN GREETINGS APPEARS HERE]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 24, 1994
--------------
The Annual Meeting of Shareholders of American Greetings Corporation (the
"Company") will be held at the Company's World Headquarters, One American
Road, Cleveland, Ohio, on Friday, June 24, 1994, at 2:30 P.M., Cleveland time,
to consider and act upon the following:
(1) Electing three directors;
(2) Approving the Company's Chairman and Chief Executive Officer and
President and Chief Operating Officer Compensation Plans; and
(3) Transacting such other business as may properly come before the
meeting or any adjournments thereof.
The World Headquarters may be entered from the private road off Memphis
Avenue, or from American Road off Tiedeman Road. As you approach either the
private road or American Road, there will be signs directing you to the
meeting place.
Only shareholders of record at the close of business on May 2, 1994, are
entitled to notice of and to vote at the meeting and any adjournments thereof.
JON GROETZINGER, JR.
Secretary
May 13, 1994
YOUR VOTE IS IMPORTANT. PLEASE SIGN AND RETURN YOUR PROXY
PROMPTLY. IF YOU ARE PRESENT AT THE MEETING, YOU MAY WITH-
DRAW YOUR PROXY AND VOTE YOUR SHARES PERSONALLY.
<PAGE>
General
The Board of Directors of American Greetings Corporation (the "Board") has
ordered solicitation of the enclosed proxy in connection with the Annual
Meeting of Shareholders (the "Annual Meeting") to be held on Friday, June 24,
1994, at 2:30 P.M., Cleveland time, to consider and act upon matters
specified in the Notice of Annual Meeting of Shareholders preceding this
Proxy Statement.
The expense of soliciting proxies, including the costs of preparing,
assembling and mailing the Notice, Proxy Statement and Proxy, will be borne by
the Company. Besides solicitation by mail, solicitations may be made by
personal interview, telephone and telegram by officers and other regular
employees of the Company. The Company has also engaged a professional proxy
solicitation firm to aid in the solicitation of proxies, for whose services
the Company will pay a fee of not more than $5,000 plus expenses. Brokerage
houses, banks and other persons holding shares in nominee names have been
requested to forward solicitation materials to the beneficial owners of
shares held of record by such persons. The Company will reimburse such persons
for their reasonable expenses.
Shareholders have cumulative voting rights in the election of directors,
provided that a) any shareholder gives notice in writing to the Chairman,
President, a Senior Vice President or the Secretary of the Company, not less
than 48 hours before the time fixed for the holding of the meeting, that he
or she desires that the voting at such election be cumulative, and b) an
announcement of the giving of such notice is made upon the convening of the
meeting by the Chairman or the Secretary or by or on behalf of the shareholder
giving such notice. If cumulative voting is so invoked, a shareholder may
cumulate votes for the election of a nominee by casting a number of votes
equal to the number of directors to be elected multiplied by the number of
votes to which the shareholder's shares are entitled. The shareholder also
may distribute his or her votes between or among more than one nominee on the
same basis. Unless otherwise indicated by the shareholder, where cumulative
voting is invoked, the persons named in the enclosed proxy will vote, in their
discretion, for one or more of the nominees for whom authority was not
withheld and will cumulate votes so as to elect the maximum number of Board
nominees. If cumulative voting is not invoked at the Annual Meeting with
respect to the election of directors, the proxies will vote the number of
shares on the proxy card for only those Board nominees for whom authority has
not been withheld.
Under Ohio law, unless the writing appointing a proxy otherwise provides, a
shareholder, without affecting any vote previously taken, may revoke his proxy
by a later proxy or by giving notice of revocation in writing or in an open
meeting. However, your presence at the meeting by itself will not operate to
revoke your proxy.
Under Ohio law and the Company's Amended Articles of Incorporation and
Regulations, if a quorum is present at the meeting, the nominees for election
as directors who receive the greatest number of votes cast for the election of
directors at the meeting by the shares present in person or by proxy and
entitled to vote will be elected directors. Proposal 2 must be approved by a
majority of the voting power of the Company's shares present in person or
represented by proxy at the Annual Meeting. The withholding of a vote with
respect to the election of any nominee for director or with respect to
Proposal 2 will have the practical effect of a vote against that nominee or
against Proposal 2. A broker non-vote with respect to any share will not
effect the election of directors or passage of Proposal 2, since the share is
not considered present for voting purposes.
The mailing address of the Company's World Headquarters is One American Road,
Cleveland, Ohio 44144. Copies of this Proxy Statement and forms of proxy will be
first sent or given to shareholders on or about May 13, 1994.
Voting Securities and Record Date
As of May 2, 1994, there are outstanding, exclusive of Treasury shares,
which cannot be voted, 69,768,936 Class A Common Shares ("Class A Shares")
entitled to one vote per share and 4,645,075 Class B Common Shares ("Class B
Shares") entitled to ten votes per share upon all matters presented to the
shareholders. Holders of such shares of record at the close of business on May
2, 1994, are the only shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournments thereof.
1
<PAGE>
Board of Directors
The Board of Directors met seven times during the fiscal year ended
February 28, 1994 ("FY 94"). In addition, the Board of Directors took action
without a meeting on one occasion pursuant to Section 1701.54 of the Ohio
Revised Code and the Regulations of the Company.
The Board of Directors has standing Executive, Audit, Nominating and
Compensation Committees. As of February 28, 1994, the duties of the Stock
Option Committee which existed prior to that date were assumed by the
Compensation Committee.
The Executive Committee has the same power and authority as the Board
between meetings of the Board, except that it may not fill vacancies on the
Board or on Committees of the Board. The Executive Committee met five times
during FY 94. It also took action without a meeting twelve times pursuant to
Section 1701.63(D) of the Ohio Revised Code and the Regulations of the
Company. Members included Irving I. Stone (Chairman of the Committee), Edward
Fruchtenbaum, Albert B. Ratner, Morry Weiss and Morton Wyman, who passed away
on July 10, 1993.
The Audit Committee is composed of directors who are not officers or
employees of the Company.* The Committee has general powers relating to
accounting, auditing and legal compliance matters. It recommends the selection
of and monitors the independence of the Company's independent auditors. It
reviews the audit plan, the results of the audit engagement and the activities
of the Company's internal audit staff. It considers the audit and non-audit
fees of the independent auditors and directs special investigations. It also
reviews and monitors the Company's various legal compliance programs. Members
included Scott S. Cowen (Chairman of the Committee), Harry H. Stone, Jeanette
S. Wagner and Abraham Zaleznik. The Audit Committee met three times during FY
94.
The Nominating Committee is composed of directors who are not officers or
employees of the Company. The Committee makes recommendations to the Board
regarding the size and composition of the Board and qualifications for
membership. It recommends nominees to fill Board vacancies and new positions,
as well as a slate of Board nominees for annual election by the shareholders.
Members included Abraham Zaleznik (Chairman of the Committee), Albert B.
Ratner and Milton A. Wolf. The Committee met two times during FY 94. The
Committee would be pleased to consider written suggestions forwarded by
shareholders to the Secretary of the Company concerning qualified candidates
for election as directors.
Prior to February 28, 1994, the Stock Option Committee was composed of
directors who were not officers or employees of the Company.* The Committee
granted stock options to certain officers and key employees pursuant to the
Company's stock option plans. Members included Harry H. Stone (Chairman of the
Committee), Dr. Herbert H. Jacobs, Jeanette S. Wagner and Morton Wyman until
his death. The Committee took action without a meeting twelve times during FY
94, pursuant to Section 1701.63(D) of the Ohio Revised Code and the
Regulations of the Company.
Prior to and after February 28, 1994, the Compensation Committee was and is
composed of directors who are not officers or employees of the Company. Prior
to such date, the Committee reviewed the compensation packages offered to the
Company's officers generally. As the surviving Committee following its
merger with the Stock Option Committee on February 28, 1994, it retained those
duties. In addition, it was granted the responsibility and authority to
develop and administer the compensation plans for the Chairman and Chief
Executive Officer and the President and Chief Operating Officer, and to
carry on the duties of the former Stock Option Committee. Prior to February
28, 1994, members included Albert B. Ratner (Chairman of the Committee), Scott
S. Cowen and Abraham Zaleznik. As of that date the following members were
added to the Committee: Harry H. Stone (Co-Chairman with Albert B. Ratner),
Dr. Herbert H. Jacobs and Jeanette S. Wagner. The Committee met once during FY
94.
During FY 94 each director attended 75 percent or more of the aggregate of
the meetings of the Board and the respective Committees on which they serve.
*Harry H. Stone is not an officer or employee of the Company, but is the
brother of Irving I. Stone, Founder-Chairman.
2
<PAGE>
Section 16 Compliance
Under Section 16 of the Securities Exchange Act of 1934 ("Act"), the
Company's directors and executive officers are required to report their
initial appointment as directors or executive officers of the Company to the
Securities and Exchange Commission within ten days of their appointment. This
same group, along with holders of more than 10% of the Company's Common
Shares, are required to disclose in a timely fashion changes in their holdings
of Common Shares. To this end, the Company regularly reminds this group of
their reporting obligation and assists them in making the required disclosure
once the Company is notified that a reportable event has occurred. The
Company is required to disclose in this Proxy Statement any failure by members
of these groups to report within these time periods. Dr. Herbert H. Jacobs
failed to file a Form 3 within 10 days after becoming a director of the
Company; the deficiency was corrected by a late filing.
3
<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Company's Board of Directors is comprised of three classes of directors,
each class having a three year term. Class II members are to be elected at the
June 24, 1994 Annual Meeting.
It is proposed that, in accordance with the Company's Regulations, the
number of Class II directors be fixed at four. Currently, there are three
directors in this class.
It is proposed that the shareholders elect the nominees named below, each of
whom is currently a director of the Company. The term of office to be served
by each nominee in Class II, if elected, will be three years, until the 1997
Annual Meeting, or until his successor is duly elected and qualified.
All Class II directors have agreed to stand for reelection.
The following is biographical information as of May 13, 1994, including
business experience during at least the past five years, with respect to each
nominee for election as a director and for the other seven directors whose
terms will continue after the Annual Meeting.
Nominees for Election To Term Expiring in 1997
(Class II)
Albert B. Ratner (66)
Director (1979), Co-Chairman of the Compensation Committee, member of the
Executive and Nominating Committees
Mr. Ratner's principal occupation is Chief Executive Officer, Vice
Chairman and a director of Forest City Enterprises, Inc. (a conglomerate
corporation engaged in real estate development, sales, investment,
construction and lumber wholesale) and an officer of its various
subsidiary companies. (1)
Harry H. Stone (76)
Director (1944), Co-Chairman of the Compensation Committee, member of the
Audit Committee
Mr. Stone's principal occupation is President of The Courtland Group, Inc.
(investments, property, and business development and management). (2)
Abraham Zaleznik (70)
Director (1988), Chairman of the Nominating Committee, member of the Audit
and Compensation Committees
Dr. Zaleznik's principal occupation is Matsushita Professor of Leadership
Emeritus at the Harvard University Graduate School of Business
Administration. Dr. Zaleznik also performs consulting services. He is a
director of Ogden Corporation (various service businesses), Timberland,
Inc. (a manufacturer of shoes and various apparel items), Grossman's Inc.
(home centers), Le Chateau Stores, Ltd. (specialty retailing) and TJX Co.
(specialty retailing).
Vote Required. The nominees who receive the greatest number of votes cast for
the election of directors at the Annual Meeting by the shares present in
person or by proxy and entitled to vote will be elected directors.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ADOPTION OF THIS PROPOSAL.
---
Proxies solicited by the Board of Directors will be so voted unless
shareholders specify to the contrary in their proxies or specifically
withhold their vote for particular nominees.
4
<PAGE>
Continuing Directors with Term Expiring in 1996
(Class I)
Herbert H. Jacobs (71)
Director (1984), member of the Compensation Committee
Dr. Jacobs' principal occupation is the management of his private
investments. He is a real estate developer and a consultant to various
companies, including the Company.
Jeanette Sarkisian Wagner (64)
Director (1990), member of the Audit and Compensation Committees
Mrs. Wagner's principal occupation is President and Chief Executive
Officer of Estee Lauder International, Inc., the largest subsidiary of
Estee Lauder Inc. Mrs. Wagner's career at Estee Lauder has included
marketing and general management assignments domestically and
internationally. As President of Estee Lauder International, Inc., Mrs.
Wagner heads an organization that markets the Aramis, Clinique, Estee
Lauder, Origins and Prescriptives brands, and manages affiliate sales
operations in twenty-eight countries, eight manufacturing plants, and
over fifty distributors and duty-free operations.
Morry Weiss (54)
Director (1971), Chairman and Chief Executive Officer, member of the
Executive Committee
Mr. Weiss' principal occupation is Chairman and Chief Executive Officer
of the Company. He also serves as a director of National City Bank -
Cleveland (bank/financial institution), National City Corporation
(holding company of National City Bank - Cleveland and other banks) and
Syratech Corporation (a holding company for Wallace International, a
distributor of silver and stainless flat-ware and hollowware). He also
serves as a director of Artistic Greetings Incorporated (specialty mail
order).(2)(3)
Continuing Directors with Term Expiring in 1995
(Class III)
Scott S. Cowen (47)
Director (1989), Chairman of the Audit Committee, member of the
Compensation Committee
Dr. Cowen's principal occupation is Dean and Professor, Weatherhead School
of Management at Case Western Reserve University. Dr. Cowen serves as a
director of Premier Industrial Corporation (an industrial distributor of
electronic components, fire fighting equipment and vehicle repair prod-
ucts); FabriCenters of America, Inc. (a specialty store retailer); Forest
City Enterprises, Inc. (a conglomerate corporation engaged in real estate
development, sales, investment, construction and lumber wholesale); LDI
Corporation (computer leasing); and Society National Bank (commercial and
consumer banking services).
Edward Fruchtenbaum (46)
Director (1990), President and Chief Operating Officer, member of the
Executive Committee
Mr. Fruchtenbaum is President and Chief Operating Officer of the Company,
a position he has held since March 1, 1992. From 1986 to January, 1990,
Mr. Fruchtenbaum served as Vice President-Marketing Administration, Group
Vice President-Sales, Marketing and Creative, and Senior Vice President-
Marketing for the Company. From January 1, 1990, until February 29, 1992,
he served as President of the U.S. Greeting Card Division of the Company.
5
<PAGE>
Irving I. Stone (85)
Director (1944), Founder-Chairman, Chairman of the Executive Committee
Mr. Stone's principal occupation is Founder-Chairman of the Company and
Chairman of the Executive Committee. He also serves as a director of
Artistic Greetings Incorporated (specialty mail order) and Liberty Mutual
Insurance Company (a health and life insurance company). He is trustee
emeritus of Realty Refund Trust (a publicly held real estate investment
trust). (2)(3)
Milton A. Wolf (69)
Director (1981), member of the Nominating Committee
Ambassador Wolf served as U.S. Ambassador to Austria and received a Ph.D.
in Economics from Case Western Reserve University. His principal
occupation is President of Milton A. Wolf Investors (private investments)
and Chairman of Zehman-Wolf Management, Inc. (a property management
company). He serves as a director of Huntington Bancshares, Inc. (a bank
holding company) and is a trustee of Town and Country Trust (a publicly
held real estate investment trust).
Director Emeritus
Frank E. Joseph (90)
Director Emeritus (1991); Director (1944-1991)
Mr. Joseph is retired, but serves as an advisor to various corporations
and foundations. Prior to retirement, he was a partner in the law firm of
Jones, Day, Reavis & Pogue.
- - --------------
(1) The Company rents retail store space in various shopping centers from
Forest City Rental Properties Corporation (which is a wholly-owned
subsidiary of Forest City Enterprises, Inc.) and from Albert B.
Ratner's family.
(2) Irving I. Stone and Harry H. Stone are brothers. Irving I. Stone is
the father-in-law of Morry Weiss.
(3) The Company owns an interest of approximately 38% in Artistic
Greetings Incorporated.
6
<PAGE>
Directors' Compensation Messrs. Cowen, Jacobs, Ratner, Wolf and Zaleznik and
Mrs. Wagner each received $27,500 for serving on the Board of Directors during
FY 94. Harry H. Stone received $28,750 as a director and Chairman of the Stock
Option Committee during FY 94. Frank Joseph received $20,000 as Director
Emeritus during FY 94. None of Irving Stone, Morry Weiss, or Edward
Fruchtenbaum received fees for serving on the Company's Board of Directors
during FY 94. In addition, Dr. Jacobs was paid $158,200 during FY 94 for
consulting services. In FY 94, prior to his death, the Company paid Morton
Wyman $15,750 for consulting services, a bonus of $25,000 and $83,335
representing several years' compensation which had been deferred pursuant to
Mr. Wyman's Consulting Agreement with the Company. The Company reimburses
directors for expenses incurred in connection with attendance at Board and
committee meetings.
Executive Officers' Compensation
The following table shows, for each of the last three fiscal years, the
compensation of the Company's Chairman and Chief Executive Officer and its
other four most highly compensated executive officers who were serving as
executive officers at February 28, 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
---------------------------------- ---------------------------------
Awards Payouts
Other ---------------------- ---------
Annual Restricted Securities LTIP All Other
Name and Compen- Stock Underlying Payouts Compen-
Principal Position Year Salary Bonus sation Awards($) Options(#) ($) (1) sation(2)
- - ----------------------- ------ ---------- --------- ---------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Morry Weiss, 1994 $500,000 $470,000 $ 0 $ 0 0 $360,000 $18,521
Chairman and 1993 500,000 470,000 0 0 18,000 0 17,973
Chief Executive Officer 1992 500,000 226,400 0 0 0 0 13,914
Irving I. Stone, 1994 $ 40,000 $250,242 $45,091(3) $ 0 0 $378,000 $ 0
Founder-Chairman 1993 40,000 210,000 44,574(3) 0 18,000 0 0
and 1992 40,000 450,000 44,511(3) 0 0 0 0
Chairman of the
Executive Committee
Edward Fruchtenbaum, 1994 $370,000(4) $168,000 $ 0 $562,500(5) 0 $252,000 $18,521
President and Chief 1993 370,000(4) 168,000 0 240,000(5) 18,000 0 17,973
Operating Officer 1992 370,000(4) 163,240 0 0 0 0 13,914
Erwin Weiss, 1994 $239,583 $ 89,289 $ 0 $ 0 0 $109,424 $18,521
Senior Vice President 1993 193,750 73,238 0 0 10,000 0 17,973
1992 152,750 54,078 0 0 0 0 13,914
Henry Lowenthal, 1994 $211,567 $ 88,858 $ 0 $ 0 0 $126,272 $18,521
Senior Vice President 1993 200,016 84,007 0 0 10,000 0 17,973
1992 189,712 75,164 0 0 0 0 13,914
</TABLE>
- - --------------
(1) Represents partial payout of three year bonus tied to the Company's
performance during FY 92, FY 93 and FY 94. The total three year bonus
(including the partial payment listed above) earned by each of the named
executive officers with respect to this period was as follows: Morry
Weiss - $600,000; Irving Stone - $630,000; Edward Fruchtenbaum -
$420,000; Erwin Weiss - $183,029; and Henry Lowenthal - $210,453.
(2) Reflects the amounts contributed by the Company under the Employees'
Retirement Profit Sharing Plan.
(3) The Company purchases an insurance policy for Irving Stone that carries
a $500,000 death benefit. Mr. Stone's compensation has been increased
to include the premium deduction and the resulting tax effect of that
increase.
7
<PAGE>
(4) Includes $20,000 per year representing forgiveness of a portion of
a loan from the Company to Mr. Fruchtenbaum, as more fully described
below in the section captioned "Certain Relationships and Related
Transactions".
(5) See discussion of restricted stock awards under Mr. Fruchtenbaum's
employment agreement in the Report of the Compensation Committee of
the Board of Directors on Executive Compensation under the heading
"Long-Term Equity-Based Incentive Compensation" on page 12. The value
of all restricted stock held by Mr. Fruchtenbaum at the end of FY 94
was $808,375. The number of shares of restricted stock held by Mr.
Fruchtenbaum at the end of FY 94 was 29,000. Mr. Fruchtenbaum
receives dividends only with respect to the 5,000 restricted Class A
Shares that had vested as of the end of FY 94.
Employment Agreements. The Company has an employment agreement with each
executive officer named in the Summary Compensation Table on page 7 (other
than Messrs. Irving I. Stone and Morry Weiss). Mr. Fruchtenbaum's agreement,
initially dated May 18, 1992, provides for a three year term, which may be
renewed for subsequent three year terms. Mr. Fruchtenbaum receives an annual
base salary of $350,000 and is eligible for the bonus amounts more fully
described in the Report of the Compensation Committee of the Board of
Directors on Executive Compensation under the heading "Executive Bonus Plans"
and restricted stock awards more fully described under the heading of the
Report entitled "Long-Term Equity-Based Incentive Compensation". Mr.
Fruchtenbaum's agreement provides that if he is involuntarily terminated, he
is entitled to his annual base salary at the time of such termination for
three years after such termination.
The agreements with Erwin Weiss and Henry Lowenthal are dated July 1, 1984,
are for indefinite terms and contain certain confidentiality and non-
competition covenants on the part of the employees. Erwin Weiss' agreement
provides for minimum annual compensation of $60,000. Henry Lowenthal's
agreement provides for minimum annual compensation of $106,500. Each of these
agreements provides that if the Company terminates the employee's employment,
the employee will continue to receive his salary at the time of such
termination for not less than three months nor greater than twelve months
after such termination. The number of months that such salary will continue to
be paid is determined on the basis of one-half month for each year of service.
As of the end of FY 94, Erwin Weiss was credited with 17 years of service and
Henry Lowenthal was credited with 23 years of service with the Company.
Deferred Compensation Program. The Company permits officers and senior
management to defer all or a stated amount or percentage of their
compensation. A participant in this program will be paid the deferred
compensation within 30 days after the date on which the earlier of any of the
following events occur, as applicable: (i) expiration of the participant's
deferral period, (ii) the participant's separation from the Company, or (iii)
an unforeseen emergency.
Indemnification. Section 1701.13(E) of the Ohio Revised Code authorizes the
indemnification of directors and officers in the defense of any civil,
criminal, administrative or investigative proceedings and the purchase of
insurance against any liability asserted against them in such capacity. The
Regulations of the Company (Article IV) provide for indemnification in terms
consistent with the statutory authority. The Company maintains insurance
covering certain liabilities of the directors and the elected and appointed
officers of the Company and its subsidiaries.
Option Grants . No options were granted to the executive officers named in the
Summary Compensation Table on page 7 during FY 94. The Company does not have
a stock appreciation rights plan.
8
<PAGE>
Option Exercises and Fiscal Year-End Values. Shown below is information with
respect to exercised and unexercised options to purchase the Company's Class
A and Class B Common Shares granted to the named executive officers in FY 94
and prior years under the Company's various stock option plans approved by
shareholders and subject to applicable law:
<TABLE>
<CAPTION>
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END
OPTION VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options at Options at
Fiscal Fiscal
Year-End (#) Year-End ($)(1)
----------------- -----------------
Shares
Acquired on Value Exercisable (E) Exercisable (E)
Name Exercise(#) Realized($) Unexercisable (U) Unexercisable (U)
- - -------------- ----------- ----------- ----------------- -----------------
<S> <C> <C> <C> <C>
Morry Weiss, 0 0 188,000(E) $3,677,438(E)
Chairman and 358,000(U) $7,199,608(U)
Chief Executive
Officer
Irving I. Stone, 0 0 18,000(E) $ 155,250(E)
Founder-Chairman 18,000(U) $ 155,250(U)
and
Chairman of the
Executive Committee
Edward Fruchtenbaum, 23,522 $356,471 13,090(E) $ 128,750(E)
President and Chief 18,000(U) $ 155,250(U)
Operating Officer
Erwin Weiss, 0 0 25,800(E) $ 362,746(E)
Senior Vice President 13,000(U) $ 116,813(U)
Henry Lowenthal, 2,500 $ 37,500 8,600(E) $ 47,175(E)
Senior Vice President 10,000(U) $ 86,250(U)
- - ----------------
</TABLE>
(1) Represents the difference between the option exercise price and the
closing price of the Company's Class A Common Shares as reported on
the NASDAQ National Market System on February 28, 1994 ($27.875) times
the corresponding number of shares.
Supplemental Executive Retirement Plan. A description of the Company's
Supplemental Executive Retirement Plan can be found in the Report of the
Compensation Committe of the Board of Directors on Executive Compensation under
the heading "Supplemental Executive Retirement Plan". At the end of FY 94, the
named executive officers qualified under the Plan included Morry Weiss, Edward
Fruchtenbaum, Erwin Weiss and Henry Lowenthal. Irving I. Stone was not qualified
under the Plan. The total liability recorded by the Company under this Plan at
the end of FY 94 was $11,279,710. During FY 94, retired officers received
benefits under the Plan aggregating $531,114. Based upon estimates predicated
upon present compensation, at age 65 Morry Weiss will receive $144,540
annually, Edward Fruchtenbaum will receive $73,916 annually, Erwin Weiss will
receive $41,179 annually and Henry Lowenthal will receive $76,600 annually.
9
<PAGE>
Compensation Committee Interlocks and Insider Participation. Albert Ratner was
Chairman of the Compensation Committee prior to its assumption of the duties of
the Stock Option Committee on February 28, 1994. Mr. Ratner now serves as Co-
Chairman of the Compensation Committee with Harry H. Stone who is a former
Executive Vice President of the Company. The Company rents retail store space in
various shopping centers from Forest City Rental Properties Corporation (which
is a wholly-owned subsidiary of Forest City Enterprises, Inc. of which Albert
Ratner is Chief Executive Officer, Vice Chairman and a director) and from
Albert Ratner's family, upon terms comparable to those that would be generally
available from unrelated parties. During FY 94, the Company paid a total of
$828,076 to Forest City Rental Properties Corporation for retail store space.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors ("Committee")
establishes, reviews and administers compensation plans for the Chairman and
Chief Executive Officer and President and Chief Operating Officer. The
Committee consists entirely of directors who are not officers or employees of
the Company and who are not eligible to participate in any of the executive
compensation plans that the Committee reviews. Among other duties, it also
reviews the compensation programs for other executive and non-executive
officers of the Company established and administered by the Chairman and Chief
Executive Officer.
Statement on Philosophy of Executive Compensation.
The Company's compensation philosophy reflects its belief that the
compensation of its executive and non-executive officers should (i)provide a
compensation program that motivates officers to achieve their strategic goals
by tying an officer's compensation to the performance of the Company and
applicable business units, as well as to individual performance, (ii) provide
compensation reasonably comparable to that offered by other leading companies to
their Chief Executive Officers and Chief Operating Officers so as to attract
and retain talented executives, and (iii) align the interests of its executives
with the long-term interests of the Company's shareholders through the award of
stock options and other stock-related programs. Consistent with this philosophy,
the Committee believes that it will be necessary to offer certain executive
officers total annual compensation exceeding $1,000,000. The Committee also
recognizes that "compensation," (as that term is defined in Section 162(m)of
the Internal Revenue Code, as amended) in excess of $1,000,000 per year to an
executive officer is not deductible by the Company unless such compensation is
performance-based compensation, approved by the shareholders of the Company and
thus not "compensation" for purposes of determining compliance with the
limitation on deductibility. The Company's philosophy is to pay its officers
fairly for their efforts, rather than be guided by whether all amounts paid are
tax deductible. The compensation packages offered to the Chairman and Chief
Executive Officer and to the President and Chief Operating Officer,
respectively, are based in large part on the recommendations of the outside
consulting firm hired by the Company in 1991. The consulting firm prepared a
study based on several third party executive compensation surveys conducted at
different times which reviewed the compensation of executives at companies with
revenues similar to the Company's (hereafter, the "Compensation Study"). The
group of companies reflected in the Compensation Study was not necessarily the
same group of peer companies set forth in the Performance Graph on page 14.
Implementation of Philosophy.
The Company's executive compensation plans include base salary, one and
three year cash bonuses, a supplemental executive retirement plan, stock options
and restricted stock, and a retirement profit sharing plan.
10
<PAGE>
Base Salary.
Base salaries are established based upon the responsibilities and
description of a given position and a comparison of compensation levels of
similar positions in comparable companies gathered from compensation surveys and
the recommendations of outside compensation consulting firms. The Company's
base salaries for executives are generally slightly below the median of
companies with comparable revenues. Individual performance reviews are generally
conducted at least annually and are used in conjunction with the salary range
for a given position in determining if any increase in base salary is merited.
Such increases in FY 94 were based on the individual's performance as well as
increases described in third party compensation studies (other than the
Compensation Study referred to above), achievement of the Company's profit
goals and return on invested captital.
Executive Bonus Plans.
One Year Bonus - The Company has a one year bonus plan for officers and
certain key employees. Under the plan, the Board of Directors establishes goals
based on earnings targets set by the Board for the fiscal year as to the
Company as a whole and for each division and subsidiary. These goals are
considered confidential by the Company and are not included in this Report in
order to avoid compromising the Company's competitive position. It is the
Board's belief that such earnings targets are the best measure of the Company's
performance. One or more of the profit goals are then assigned each participant
as a target profit goal, based upon which the participant is assigned a target
bonus. In no instance may a participant's target bonus exceed 48 percent of his
base salary. If the participant's business unit achieves the target goal or
goals, he is paid a cash bonus equal to his target bonus. If the performance is
above the target profit goal by a percentage not more than 10 percent, or below
the target profit goal by a percentage not more than 20 percent, the cash bonus
is increased or decreased by a percentage equal to twice the excess or
shortfall. If the performance is less than 80 percent of the target profit
goal,the Company pays no bonus; if it is greater than 110 percent of the target
profit goal, the bonus remains at 120 percent of the target bonus. In FY 94,
all of the executive officers named in the Summary Compensation Table received
a target bonus. The Chief Executive Officer's bonus was equal to 48 percent of
his annual base salary.
Executive Bonus Plan - The Company also has an executive bonus plan under
which certain officers selected by the Board of Directors, in its discretion,
may receive for each fiscal year a bonus computed by applying against their
basic salaries at the end of such year the percentage by which net profits of
the Company (before income taxes and certain charges) exceed $1,100,000. In FY
94, the Company had net profits of $113,702,000 after the effect of certain
accounting changes. During FY 94, Irving I. Stone was the only participant in
the Plan.
Three Year Bonus - The Company has a three year bonus plan for officers
and certain key employees. Under this plan a special cash bonus ("Special
Bonus") equal to the sum of 100% of the one year unadjusted bonus for three
years ("Base Bonus") is payable if the profit goals established by the Board of
Directors for the three year bonus plan are achieved. If they are achieved in
only two of the three fiscal years, then the Special Bonus to be paid is 60% of
the Base Bonus and if achieved in only one fiscal year, the Company pays no
Special Bonus under the plan. The profit goals established by the Board for the
three year bonus plan covering FY 92, FY 93 and FY 94 were achieved. The profit
goals for FY 95, FY 96 and FY 97 were established by the Board in January, 1994,
and the new plan was actually implemented after the end of FY 94.
Supplemental Executive Retirement Plan.
The Supplemental Executive Retirement Plan provides that a participant in
the Plan who retires at age 65 with twenty (20) years of service with the
Company will receive up to 20 percent of final average compensation annually
for life. Final average compensation is defined as the average of the two
highest years of annual compensation during the officer's employment. Annual
compensation is defined as annual base compensation plus the bonus that would
have been paid under the Executive One Year Bonus Plan if the participant had
achieved 100% of his or her target profit goal. Under the Plan, a lesser amount
will be payable in the event of early retirement. Benefits are not subject to
any deduction
11
<PAGE>
for Social Security or other offset amounts. Benefits under the Plan will be
payable to the officer's beneficiary, in the event of death, until a total of
180 monthly payments have been made to both the officer and beneficiary.
Long-Term, Equity-Based Incentive Compensation.
The Company's long-term equity-based incentive compensation programs
consist of stock options, stock in lieu of cash bonuses and restricted stock,
tying executive compensation directly to shareholder return. An executive
benefits if the price of the Company's shares increases. In addition, since the
right to exercise options and rights in restricted stock vest over a four and
five year period, respectively, the program creates an incentive for an
executive to remain with the Company.
Under the stock option plan officers and key employees of the Company and
its subsidiaries are awarded stock options by the Compensation Committee of the
Board (and, prior to February 28, 1994, by the Stock Option Committee) to
purchase Class A or Class B Shares of the Company. The options are granted at
100 percent of fair market value at the close of business on the last business
day preceding the date of grant and generally expire not later than ten years
(or ten years and three months in the case of certain options for Class B Shares
granted to Morry Weiss) from the date of grant. In general, each option may be
exercised to the extent of 25 percent of the number of shares covered thereby
one year after the date of grant and in a like number after each of the ensuing
three anniversary dates. Options granted to Morry Weiss on January 25, 1988, are
exercisable to the extent of ten percent of the number of shares covered thereby
one year after the date of grant and in a like number after each of the ensuing
nine anniversary dates. The number of share options granted depends upon the
level of the position and has generally been consistent with the number of
options previously granted with respect to the position. The Company has no
policy regarding annual option grants but instead grants options upon (i) the
creation of a new stock option plan; (ii) the hiring of a new key manager; or
(iii) the promotion of an existing key manager. The 1993 grant of options was in
connection with the creation of the Company's 1992 Stock Option Plan.
Restricted stock grants have been awarded to the President and Chief
Operating Officer to retain him, incentivize his long-term performance and
further align his equity interests with those of other shareholders. The number
of annually granted shares is consistent with the Compensation Study. Mr.
Fruchtenbaum's restricted stock grants are more fully described in the section
of this Proxy Statement captioned "Proposal 2 - Approval of CEO/COO Compensation
Plans" under the heading "COO Restricted Stock Plan" on page 18. Mr.
Fruchtenbaum's employment agreement is more fully discussed in the section of
this Proxy Statement captioned "Employment Agreements" on page 8.
Employees' Retirement Profit Sharing Plan.
Under the Employees' Retirement Profit Sharing Plan in FY 94, the Company
contributed to a profit sharing trust eight percent of net profits (before
income taxes and certain income and expenses) of the Company and participating
subsidiaries. While the directors may authorize additional contributions, no
additional contribution was authorized for FY 94. The contribution is allocated
to the accounts of the participants upon the basis of their credited
compensation. Mr. Irving I. Stone is no longer participating under this Plan. It
is impossible to estimate the annual benefits that any participant may be
entitled to receive under the Plan upon retirement since the amount of such
benefits will depend upon a number of factors including, among other things,
future net profits, the future credited compensation of the participants and
the future net income of the trust fund. In addition, the Plan allows employees
to have contributions made on their behalf through reduction in their salaries
as permitted under Section 401(k) of the Internal Revenue Code. In FY 94, the
Company matched 25% of the first six percent of compensation deferred by an
employee (subject to IRS limitations), since the Company achieved at least 80%
of its profit goal. The Plan provides for a Company stock fund, which is
invested in Common Shares of the Company, a common stock fund and a fixed
income fund for the investment of all contributions under the Plan.
12
<PAGE>
Chief Executive Officer Compensation.
Morry Weiss has served as Chairman and Chief Executive Officer of the
Company since March 1, 1992. His compensation plan includes a base salary, one
and three year bonuses, stock options and additional annual incentive
compensation consisting of $230,000 in cash or the Company's Class A or Class B
Common Shares, at Mr. Weiss' election, awarded at the end of each fiscal year in
which the Company achieves its annual goal, as approved by the Board near the
start of each fiscal year. The Company's total annual profit goal for FY 94 was
achieved. Except as discussed in connection with Proposal No. 2 on page 18 of
this Proxy Statement, the program has not changed since it was established by
the Board in 1992, based on the Compensation Study. It can be reviewed every
three years.
In fixing his base salary and target bonus levels, as well as in
determining the number of stock options granted to Mr. Weiss, the Committee and
the Board reviewed the performance of both the Company and Mr. Weiss, as well as
the Compensation Study. Based on the Compensation Study, Mr. Weiss' total
compensation in 1992 (the first full year which implemented the Compensation
Study recommendations) was below the median compensation of CEOs in the
Compensation Study.
Mr. Weiss received a base salary of $500,000 plus bonuses of $830,000 in
FY 94. The Committee concluded that Mr. Weiss' outstanding performance warranted
his FY 94 compensation. The Company's FY 94 performance was record-setting,
despite a sluggish economy. Total revenue, pre-tax income, net income and
earnings per share were all at historic highs. Before the cumulative effect of
accounting changes, total revenue was up 5.5 percent over the prior year, pre-
tax income increased 15.6 percent, net income was up 16.6 percent and earnings
per share stood at $1.77, up from $1.55 a year ago.
Summary.
The Committee will continue to review the Company's executive compensation
programs to assure that such programs are consistent with the objective of
increasing shareholder value.
Albert B. Ratner (Co-Chairman) Harry H. Stone (Co-Chairman)
Scott S. Cowen
Dr. Herbert H. Jacobs
Jeanette S. Wagner
Abraham Zaleznik
Shareholder Return Performance Presentation
The following line graph compares the yearly percentage change of the
cumulative total shareholder return on the Company's Class A Shares against the
cumulative total return of the S&P 500 Composite Index and the S&P Miscellaneous
Index for the five fiscal years ending February 28, 1994. The Company believes
that it cannot reasonably identify a published index or a peer group of
companies that are in a similar line of business. However, the S&P Miscellaneous
Index is a published index comprised of companies in lines of business that are
not readily identified with other published indices, that includes American
Greetings.
Shareholder returns assume $100 was invested in each of the Company's Class
A Shares, the S&P 500 Composite Index, and the S&P Miscellaneous Index at
February 28, 1989, and that all dividends were reinvested.
13
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
AMONG AMERICAN GREETINGS CORPORATION, THE S&P 500 INDEX
AND THE S&P MISCELLANEOUS INDEX
(PERFORMANCE GRAPH APPEARS HERE AND IS ALSO BEING FILED SEPARATELY UNDER COVER
OF FORM S-E.)
<TABLE>
<CAPTION>
Measurement period AMERICAN S&P S&P
(Fiscal Year Covered) GREETINGS 500 MISC
- - --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
02/28/89 $ 100 $ 100 $ 100
FYE 02/28/90 $ 150 $ 119 $ 126
FYE 02/28/91 $ 186 $ 136 $ 140
FYE 02/29/92 $ 213 $ 158 $ 160
FYE 02/28/93 $ 246 $ 175 $ 192
FYE 02/28/94 $ 297 $ 190 $ 207
</TABLE>
(Fiscal years ended February 28/29)
AMERICAN GREETINGS CORP. S&P 500 S&P MISCELLANEOUS
Certain Relationships and Related Transactions
On March 1, 1990, the Company made a ten year loan of $200,000 to
Edward Fruchtenbaum, President and Chief Operating Officer of the Company,
under a Loan Agreement and Promissory Note, at ten percent (10%) simple interest
per annum based on the principal balance on March 1 during each year of the ten
year term. The Company agreed to forgive $20,000 of principal at the end of each
fiscal year during such term, beginning February 28, 1991. The Company also
agreed to forgive the entire remaining principal balance, plus accrued interest,
if and when Mr. Fruchtenbaum dies, becomes totally disabled, is terminated
either by the Company or as a result of a change in control of the Company, or
retires or terminates his employment as mutually agreed by the Company and Mr.
Fruchtenbaum. If he terminates his employment without the Company's consent, Mr.
Fruchtenbaum has promised to repay the then current principal balance, plus
accrued interest as of the beginning of the applicable fiscal year. The prin-
cipal balance as of March 1, 1994, was $120,000.
The Company has a consulting arrangement with Dr. Herbert H. Jacobs who
serves on the Company's Board of Directors. Dr. Jacobs performs consulting
services for the Company on a project-by-project basis, and invoices the Company
for his fees on a per diem basis. Dr. Jacob's consulting arrangement does not
provide for a fixed term of engagement.
14
<PAGE>
Security Ownership of Management
At the close of business on February 28, 1994, the non-employee directors,
the executive officers named in the Summary Compensation Table and the
directors and officers as a group beneficially owned and had sole voting and
dispositive power (except as otherwise indicated) of the Common Shares of the
Company as set forth in the following table:
<TABLE>
<CAPTION>
Percent
Amount and Nature of Class
Name Title of Class of Beneficial Ownership Outstanding
- - ---------------------- --------------- -------------------------- ------------
<S> <C> <C> <C>
Non-Employee Directors
Scott S. Cowen Class A Common 800 **
Class B Common - -
Herbert H. Jacobs Class A Common 200 **
Class B Common - -
Albert B. Ratner Class A Common 20,040 0.03
Class B Common - -
Harry H. Stone Class A Common 962 **
Class B Common 40,604 (1) 0.89
Jeanette S. Wagner Class A Common - -
Class B Common - -
Milton A. Wolf Class A Common 6,800 0.01
Class B Common - -
Abraham B. Zaleznik Class A Common 400 **
Class B Common - -
Director Emeritus
Frank E. Joseph Class A Common 82,320 0.12
Class B Common 40,500 0.89
Executive Officers
Irving I. Stone* Class A Common - -
Class B Common 2,003,964 (1)(2)(3) 43.82
Morry Weiss* Class A Common - (4) -
Class B Common 600,000 (1)(2)(4)(5) 13.12
Ed Fruchtenbaum* Class A Common 1,000 (2) **
Class B Common - (2) -
Erwin Weiss Class A Common - (2) -
Class B Common 5,124 (2) 0.11
Henry Lowenthal Class A Common 21,296 (2) 0.03
Class B Common 9,898 (2) 0.22
All directors and Class A Common 146,280 (2)(4) 0.21
officers as a group Class B Common 2,709,713 (2)(3)(4)(5)(6) 59.26
(34 persons including
the above)
</TABLE>
* Also serves as a director of the Company
** less than 0.01% of class outstanding
15
<PAGE>
- - -----------
(1) These shares are subject to a Shareholders' Agreement dated November 19,
1984, which provides that shareholders who are parties thereto will
offer Class B Shares to the other signatory shareholders and then to the
Company before transferring Class B Shares outside of a group consisting
of certain family members, family trusts, charities and the Company. The
Shareholders' Agreement terminates on December 31, 2014, unless
extended.
(2) Excludes the following shares for the following individuals, who under
Rule 13d-3 of the Securities Exchange Act are deemed to be the
beneficial owners of those shares by having the right to acquire
ownership thereof within 60 days pursuant to outstanding stock options:
<TABLE>
<S> <C> <C> <C>
Irving I. Stone Class B Shares 18,000 (0.39%)
Morry Weiss Class B Shares 188,000 (4.11%)
Edward Fruchtenbaum Class A Shares 4,090 **
Class B Shares 9,000 (0.20%)
Erwin Weiss Class A Shares 15,800 **
Class B Shares 10,000 (0.22%)
Henry Lowenthal Class A Shares 2,010 **
Class B Shares 6,590 (0.14%)
All Directors and Class A Shares 130,586 (0.19%)
officers as a group Class B Shares 285,590 (6.25%)
</TABLE>
(3) Excludes 200,000 Class B Shares (4.37%) held by the Irving I. Stone
Support Foundation.
(4) Excludes the following shares which under Rule 13d-3 of the Securities
Exchange Act are deemed to be beneficially owned: 647 Class A Common
Shares (less than 0.01%) and 18,871 Class B Shares (0.41%) held for the
benefit of certain officers, including 639 Class A Shares (less than
0.01%) and 16,735 Class B Shares (0.37%) held for the benefit of Morry
Weiss, as participants in the American Greetings Corporation Employees'
Retirement Profit Sharing Plan and Trust. Each officer has voting power
with respect to the shares allocated to his or her account, but such
officers do not have the dispositive power or right to acquire ownership
of those shares within 60 days.
(5) Excludes 170,140 Class B Shares (3.72%) owned by Mr. Weiss' wife and
children. Mrs. Weiss and the children are parties to the Shareholders'
Agreement. Mr. Weiss disclaims beneficial ownership of these shares.
(6) Certain of these shares are subject to the Shareholders' Agreement
discussed in note 1 above.
16
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table presents certain information regarding shareholders who
are known to the Company to be beneficial owners of more than 5% of any class
of the Company's voting securities as of the close of business on May 2, 1994.
<TABLE>
<CAPTION>
Percent
Amount and Nature of Class
Name Title of Class of Beneficial Ownership Outstanding
- - ----------------------- -------------- ----------------------- -----------
<S> <C> <C> <C>
Irving I. Stone Class A Common - -
One American Road Class B Common 2,003,964 (1)(2)(3) 43.14
Cleveland, Ohio
Morry Weiss Class A Common - (4) -
One American Road Class B Common 608,803 (1)(2)(4)(5) 13.11
Cleveland, Ohio
American Greetings Class A Common 307,619 (6) 0.44
Corporation Employees' Class B Common 1,140,844 (6) 24.56
Retirement Profit Sharing
Plan & Trust
National City Bank, Trustee
1900 East 9th Street
Cleveland, Ohio
</TABLE>
- - -----------
(1) See footnote (2) to the table under "Security Ownership of Management".
(2) These shares are subject to a Shareholders' Agreement. See footnote (1)
to the table under "Security Ownership of Management" above. As a party
to the Shareholders' Agreement and a Trustee under Irving I. Stone's
revocable trust, Morry Weiss' wife, Judith S. Weiss, may be deemed to be
a beneficial owner of more than five percent of the Class B Shares.
Similarly, as parties to the Shareholders' Agreement, Harry H. Stone and
each of Mr. Weiss' children (Gary, Jeffrey, Zev and Elie) may be deemed
to be a beneficial owner of more than five percent of the Class B
Shares.
(3) See footnote (3) to the table under "Security Ownership of Management".
(4) See footnote (4) to the table under "Security Ownership of Management".
(5) See footnote (5) to the table under "Security Ownership of Management".
(6) The American Greetings Corporation Employees' Retirement Profit Sharing
Plan and Trust currently holds these shares for the benefit of the Plan
participants who have elected to invest in Company Stock. These
participants have voting power over the shares allocated to their
account. The Administrative Committee of the Plan has the power to vote
any shares not voted by the participants. The Administrative Committee
has dispositive power over plan shares. Plan shares are held in custody
by the Plan Trustee, National City Bank - Cleveland.
17
<PAGE>
PROPOSAL NO. 2
APPROVAL OF CEO/COO COMPENSATION PLANS
Generally.
The Company's Chairman and Chief Executive Officer ("CEO") and President and
Chief Operating Officer ("COO") are the only individuals eligible to
participate in the compensation plans described below (together, the "CEO/COO
Compensation Plans"), which are intended to reward these individuals based on
the Company's performance. In order for the Company to be able to deduct for
tax purposes all amounts payable to each individual under the CEO/COO
Compensation Plans in excess of $1,000,000 (the "Compensation Cap"), the
Company's shareholders must approve the terms of these Plans. If the proposal
is not approved by the shareholders, the Company will lose the tax deduction
on such excess amounts that the Company expects to pay these individuals. The
terms of both the CEO/COO Annual Bonus Plan and the CEO/COO Three Year Bonus
Plan are identical to the One Year Bonus Plan and Three Year Bonus Plan
described on page 11 of this Proxy Statement under the heading "Executive
Bonus Plans" in the Report of the Compensation Committee of the Board of
Directors on Executive Compensation. The COO Restricted Stock Plan described
below is available to only the COO.
CEO/COO Annual Bonus Plan. Under this Plan, the CEO and COO each receive a
bonus ("Target Bonus") equal to 40% of their respective base salaries (which,
for FY 95 are $500,000 and $350,000, respectively) in the event that the
Company achieves the target consolidated pretax profit goal for the applicable
fiscal year. In the case of the CEO, the target bonus shall also include an
additional $230,000 payable in cash or the Company's Class A or Class B Common
Shares, at the CEO's election. If the Company's performance is above the pre-
tax profit goal by a percentage of not more than 10 percent, or below the
target profit goal by a percentage of not more than 20 percent, the bonus is
increased or decreased by a percentage equal to twice the excess or shortfall.
If the performance is less than 80 percent of the target profit goal, no bonus
is paid; if it is greater than 110 percent of the target profit goal, the
bonus remains at 120 percent of the target bonus. The maximum effective bonus
percentage is 48%.
CEO/COO Three Year Bonus Plan. Under this Plan, the CEO and COO each
receive 100% of the Target Bonus described above(without percentage
adjustment) for each of three fiscal years, the first set of three fiscal
years consisting of FY 95, FY 96 and FY 97, if the Company achieves the target
consolidated pre-tax profit goal for this plan as established by the Board of
Directors for each of the three years. If the profit goals under the CEO/COO
Three Year Bonus Plan are met in only two of the three years, the CEO and COO
each receive 60% of their respective Target Bonuses for this Plan (without
percentage adjustment). If the profit goal is met in only one year, no Three
Year Bonus is paid.
COO Restricted Stock Plan. Under this Plan, the COO was granted 5,000 of
the Company's Class A Shares on February 28, 1993, and an additional 10,000 of
the Company's Class A Shares on June 1, 1993. These two grants (collectively,
the "1993 Grant") became 9,000 and 20,000 shares respectively, as a result of
the Company's September 10, 1993 2-for-1 stock split. (One thousand shares of
the 5,000 share grant vested prior to the stock split.) The 1993 Grant vests
pursuant to the terms of the COO's employment agreement with the Company based
on the Company's achievement of its profit goals. Dividends and voting rights
attach only to vested shares.
On February 29, 1996, and on each third anniversary (February 28th or 29th)
thereafter during the term of the COO's employment agreement with the Company,
the Company will grant the COO a block of 30,000 Class A or Class B shares,
which block will vest ratably (on an annualized basis) over a period of five
years (each grant, a "Three Year Grant"). Full vesting of each Three Year
Grant is dependent on whether the Company achieves its consolidated pre-tax
profit goal. For each year of the Three Year Grant period that the Company
fails to achieve its pre-tax profit goal (which is the same profit goal used
to calculate the Annual Bonus), 4,000 of the shares granted under the Three
Year Grant will lapse and therefore be unavailable to the COO.
The closing price of the Company's Class A Shares on the NASDAQ National
Market System on May 2, 1994, was $29.125 per share; there is no separate
public trading market for the Company's Class B Shares.
18
<PAGE>
The profit goals and bonus calculation formulae relating to the CEO/COO
Compensation Plans are determined by the Compensation Committee of the
Company's Board of Directors, which may modify these Plans or establish and
administer new plans in its discretion without further shareholder approval.
The benefits that would have been payable if the CEO/COO Compensation Plans
had been in effect for FY 94 are illustrated by the following table:
NEW PLAN BENEFITS
CEO/COO Compensation Plans
<TABLE>
<CAPTION>
Annual Additional Three-Year Restricted
Name and Position Bonus Plan Annual Bonus Bonus Plan Stock Plan
- - ----------------------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Morry Weiss
Chief Executive Officer $240,000 $230,000 $ 600,000 N/A
Edward Fruchtenbaum
President and Chief Operating Officer $168,000 0 $ 420,000 $562,400
-------- -------- --------- --------
Above Executive Group $408,000 $230,000 $1,020,000 $562,400
</TABLE>
No non-executive director or non-executive officer or other employee of the
Company is eligible to participate in these Plans.
Unless instructed to abstain or to vote against Proposal 2, the persons named
in the accompanying form of proxy will vote the shares represented by properly
executed and delivered proxies in favor of Proposal 2. The affirmative vote of
a majority of the voting power of the shares present in person or by proxy at
the Annual Meeting (excluding abstentions) in connection with Proposal 2 is
required for adoption.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR THE ADOPTION OF PROPOSAL 2
---
19
<PAGE>
Shareholder Proposals
Shareholders may submit proposals on matters appropriate for shareholder
action, consistent with regulations of the Securities and Exchange Commission.
If a shareholder intends to present a proposal at next year's Annual Meeting, it
must be received by the Secretary of the Company (at One American Road,
Cleveland, Ohio 44144) no later than January 14, 1995, in order to be included
in the Company's Proxy Statement and form of proxy relating to that meeting.
Auditors
The firm of Ernst & Young and its predecessors have been the independent
auditors of the Company since its incorporation in 1944. The Company
contemplates no change. Representatives of Ernst & Young will be present at the
Annual Meeting and will have the opportunity to make a statement if they want to
do so. They will also be available to respond to appropriate questions.
Other Business
The management knows of no other matters to be acted upon at the meeting, but
if any such matters properly come before the meeting, it is intended that the
persons voting the proxies will vote them according to their best judgment.
By Order of the Board of Directors
JON GROETZINGER, JR.
Secretary
PLEASE EXECUTE AND RETURN THE
ENCLOSED PROXY PROMPTLY WHETHER
OR NOT YOU EXPECT TO ATTEND THE
ANNUAL MEETING OF SHAREHOLDERS.
20
<PAGE>
[LOGO OF AMERICAN GREETINGS APPEARS HERE]
American Greetings Corporation
One American Road
Cleveland, Ohio
44144
[LOGO OF RECYCLED PAPER APPEARS HERE]
<PAGE>
AMERICAN GREETINGS CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for the June 24, 1994 Annual Meeting.
P CLASS A
R
O The undersigned hereby constitutes and appoints Irving I. Stone and
X Morry Weiss, and each of them, his or her true and lawful agents and proxies
Y with full power of substitution in each, to represent the undersigned at the
Annual Meeting of Shareholders of American Greetings Corporation to be held
at the Company's World Headquarters located at One American Road, Cleveland,
Ohio, at 2:30 p.m., Cleveland time, on Friday, June 24, 1994, and at any
adjournments thereof, on all matters coming before said meeting.
Election of Directors, Nominees:
Albert B. Ratner, Harry H. Stone and Abraham Zaleznik, to
a three year term expiring on the date of the 1997 Annual
Meeting or until their respective successors are duly elected
and qualified.
(change of address)
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
(If you have a written change in the above space,
please mark the corresponding box on the reverse
side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxies cannot vote your
shares unless you sign and return this card.
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
AMERICAN GREETINGS CORPORATION
Proxy Solicited on Behalf of the Board of Directors of
the Company for the June 24, 1994 Annual Meeting.
P CLASS B
R
O The undersigned hereby constitutes and appoints Irving I. Stone and
X Morry Weiss, and each of them, his or her true and lawful agents and proxies
Y with full power of substitution in each, to represent the undersigned at the
Annual Meeting of Shareholders of American Greetings Corporation to be held
at the Company's World Headquarters located at One American Road, Cleveland,
Ohio, at 2:30 p.m., Cleveland time, on Friday, June 24, 1994, and at any
adjournments thereof, on all matters coming before said meeting.
Election of Directors, Nominees:
Albert B. Ratner, Harry H. Stone and Abraham Zaleznik, to
a three year term expiring on the date of the 1997 Annual
Meeting or until their respective successors are duly elected
and qualified.
(change of address)
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
(If you have a written change in the above space,
please mark the corresponding box on the reverse
side of this card.)
You are encouraged to specify your choices by marking the appropriate boxes, SEE
REVERSE SIDE, but you need not mark any boxes if you wish to vote in accordance
with the Board of Directors' recommendations. The Proxies cannot vote your
shares unless you sign and return this card.
-----------
SEE REVERSE
SIDE
-----------
<PAGE>
[X] Please mark your
votes as in this SHARES IN YOUR NAME REINVESTMENT SHARES
example.
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of [ ] [ ] [ ]
Directors CEO/COO
Compensaton
Plans
For, except vote withheld from the following nominee(s):
- - ---------------------------------------------------
Change [ ]
of
Address
Attend [ ]
Meeting
SIGNATURE(S) DATE
---------------------------------------------------- ----------
SIGNATURE(S) DATE
---------------------------------------------------- ----------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
TO: NATIONAL CITY BANK, TRUSTEE UNDER THE AMERICAN GREETINGS CORPORATION
EMPLOYEES' RETIREMENT PROFIT SHARING PLAN
Pursuant to Section 6.11 of the American Greetings Corporation Employees'
Retirement Profit Sharing Plan, the undersigned, as a participant in the Company
Stock Fund of the Plan, having received the notice and accompanying Proxy
Statement for the meeting of shareholders referred to below, hereby directs the
Trustee to vote (in person or by proxy) all Common Shares (including Fractional
Shares) of American Greetings Corporation credited to the undersigned's account
under the Plan on the record date for the Annual Meeting of Shareholders of
American Greetings Corporation to be held on June 24, 1994, at 2:30 p.m.,
Cleveland time and at any adjournment thereof, on the following matters and upon
such other business as may properly come before the meeting.
The Trustee is directed to vote as specified below or, if no specification is
made, FOR the Election of Directors below, FOR Proposal 2 below, and to vote in
accordance with its discretion on such other matters that may properly come
before the meeting, or any adjournments.
1. ELECTION OF DIRECTORS
Nominees: Albert B. Ratner, Harry H. Stone and Abraham Zaleznik to a three
year term expiring on the date of the 1997 Annual Meeting, or until
their respective successors are duly elected and qualified.
[ ] FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY to vote for all nominees
[ ] FOR, except vote withheld for the following nominee(s):
- - --------------------------------------------------------------------------------
The Board of Directors Recommends That You Vote "FOR" The Above Proposal.
2. Approving the Company's CEO/COO Compensation Plans.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
- - --------------------------------------------------------------------------------
The Board of Directors Recommends That You Vote "FOR" The Above Proposal.
(Continued and to be signed on other side)
(Continued from other side)
In its discretion, the Trustee is authorized to vote upon such other business
as may properly come before the meeting.
Please sign exactly as your name appears below. If you sign this card and return
it without marking your vote above, the shares allocated to your account will be
voted FOR Proposals 1 and 2 above, and in accordance with the discretion of the
Trustee on other matters. If this card is not returned to the Trustee or if you
do not sign this card, the Trustee will vote the shares allocated to your
account in accordance with the directions of the Administrative Committee under
the Plan. These confidential voting instructions will be seen only by authorized
personnel of the Trustee.
................................... ,1994
.........................................
.........................................
.........................................
Please sign above exactly as your name
appears on this card.
