<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY [AS PERMITTED BY RULE C-5(D)(2)]
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
AMERICAN GREETINGS CORPORATION
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / 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:
<PAGE> 2
AMERICAN GREETINGS [LOGO]
AMERICAN GREETINGS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 28, 1996
___________
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 28, 1996, at 2:30 P.M., Cleveland time,
to consider and act upon the following:
(1) Electing three directors;
(2) Approving the 1996 Employee Stock Option Plan; 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 3, 1996,
are entitled to notice of and to vote at the meeting and any adjournments
thereof.
JON GROETZINGER, JR.
Secretary
May 17, 1996
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> 3
PROXY STATEMENT
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 28,
1996, 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. 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 two or more nominees 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 nominees proposed
by the Board. 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 or her 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 the abstention of a vote
with respect to Proposal 2 will have the practical effect of a vote against
that nominee or against Proposal 2, respectively. If a quorum exists, 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 17, 1996.
VOTING SECURITIES AND RECORD DATE
As of May 3, 1996, there are outstanding, exclusive of Treasury shares
which cannot be voted, 70,335,564 Class A Common Shares ("Class A Shares")
entitled to one vote per share and 4,552,528 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
3, 1996, are the only shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournments thereof.
1
<PAGE> 4
BOARD OF DIRECTORS
We are greatly saddened to report that Frank E. Joseph, Director
Emeritus, passed away on June 28, 1995. Frank had served on the Board with
distinction from 1944 to 1991. We will miss his wise counsel and companionship
and wish his wife Martha and family our sincerest condolences.
The Board of Directors met five times during the fiscal year ended
February 29, 1996 ("FY 96"). In addition, the Board of Directors took action
without a meeting on two occasions 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.
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 ten times
during FY 96. It also took action without a meeting fourteen 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 and Morry Weiss.
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 96.
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,
Harry H. Stone and Milton A. Wolf. The Committee did not meet during FY 96. 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.
The Compensation Committee is composed of directors who are not officers
or employees of the Company. The Committee reviews the compensation packages
offered to the Company's officers generally and develops and administers the
compensation plans for the Chairman and Chief Executive Officer and the
President and Chief Operating Officer. The Committee also grants stock options
to officers and certain key employees pursuant to the Company's stock option
plans. Members included Albert B. Ratner (Chairman of the Committee), Scott S.
Cowen, Herbert H. Jacobs, Jeanette S. Wagner and Abraham Zaleznik. The Committee
met once during FY 96 and took action without a meeting twelve times during FY
96 pursuant to Section 1701.63(D) of the Ohio Revised Code and the Regulations
of the Company.
During FY 96 each director attended 75 percent or more of the aggregate
of the meetings of the Board and the respective Committees on which he or she
serves.
* Harry H. Stone is not an officer or employee of the Company, but is the
brother of Irving I. Stone, Founder-Chairman.
2
<PAGE> 5
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 ("SEC") within ten days of their appointment. This same
group, along with holders of more than 10% of the Company's Common Shares, is
required to disclose in a timely fashion any transactions in the Company's
Common Shares. To this end, the Company periodically reminds this group of their
reporting obligation and assists each of 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 make timely Section 16 reports.
The February 29, 1996 grant of the Company's Class A Shares to Edward
Fruchtenbaum under his employment agreement (as more fully described in the
section of this Proxy Statement captioned "COO Restricted Stock Plan") was not
reported on a timely basis on Form 4, but was reported about a month later on a
Form 5.
3
<PAGE> 6
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 I members are to be
elected at the June 28, 1996 Annual Meeting.
It is proposed that, in accordance with the Company's Regulations, the
number of Class I directors be fixed at four.
It is proposed that the shareholders elect the three nominees named
below, each of whom is currently a director of the Company, leaving one vacancy
in Class I. The term of office to be served by each nominee in Class I, if
elected, will be three years, until the 1999 Annual Meeting, or until his or her
successor is duly elected and qualified.
All Class I directors have agreed to stand for re-election.
The following is biographical information as of May 17, 1996, 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 1999
(Class I)
Herbert H. Jacobs (73)
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 (66)
Director (1990), member of the Audit and Compensation Committees
Mrs. Wagner's principal occupation is President 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 thirty-two countries,
and over 50 distributors and duty-free operations. She also serves as a
director of Stride Rite Corporation (manufacturer of footwear).
Morry Weiss (56)
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, a position he has held for more than five years. 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), Syratech Corporation (holding
company for Wallace International, distributor of silver and stainless
flatware and hollowware) and is a member of the advisory board of Primus
Venture Partners (equity investor in companies requiring growth
capital). He also serves as a director of Artistic Greetings
Incorporated (specialty mail order). (1)(2)
4
<PAGE> 7
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.
CONTINUING DIRECTORS WITH TERM EXPIRING IN 1997
(Class II)
Albert B. Ratner (68)
Director (1979), Chairman of the Compensation Committee, member of the
Executive and Nominating Committees
Mr. Ratner's principal occupation is Co-Chairman of the Board 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.
(3)
Harry H. Stone (78)
Director (1944), member of the Audit and Nominating Committees
Mr. Stone's principal occupation is President of The Courtland Group,
Inc. (investments, property, and business development and management).
(1)
Abraham Zaleznik (72)
Director (1988), Chairman of the Nominating Committee, member of the
Audit and Compensation Committees
Dr. Zaleznik is Matsushita Professor of Leadership Emeritus at the
Harvard University Graduate School of Business Administration. Dr.
Zaleznik performs consulting services and is a director of Ogden
Corporation (various service businesses), Timberland, Inc. (a
manufacturer of shoes and various apparel items), Le Chateau Stores,
Ltd. (specialty retailing) and TJX Co. (specialty retailing).
5
<PAGE> 8
CONTINUING DIRECTORS WITH TERM EXPIRING IN 1998
(Class III)
Scott S. Cowen (49)
Director (1989), Chairman of the Audit Committee, member of the
Compensation Committee
Dr. Cowen's principal occupation is Dean and Albert J. Weatherhead, III
Professor of Management, 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 products),
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 (48)
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. Mr. Fruchtenbaum serves as a director of
MacDonald & Company Investments, Inc. (investment services).
Irving I. Stone (87)
Director (1944), Founder-Chairman, Chairman of the Executive Committee
Mr. Stone's principal occupation is Founder-Chairman of the Company, a
position he has held for more than five years, 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). (1) (2)
Milton A. Wolf (71)
Director (1981), member of the Nominating Committee
Dr. Wolf served as U.S. Ambassador to Austria and has 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). Dr. Wolf is a trustee of Town and Country Trust (a
publicly-held real estate investment trust).
_________________
(1) Irving I. Stone and Harry H. Stone are brothers. Irving
I. Stone is the father-in-law of Morry Weiss.
(2) The Company owns an interest of approximately 38% in
Artistic Greetings Incorporated.
(3) The Company rents retail store space in various
shopping malls from Forest City Rental Properties Corporation
(which is a wholly-owned subsidiary of Forest City Enterprises,
Inc.) and from Albert B. Ratner's family.
6
<PAGE> 9
DIRECTORS' COMPENSATION Messrs. Cowen, Jacobs, Ratner, Wolf, Zaleznik, Harry
H. Stone and Mrs. Wagner each received $30,000 for serving on the Board of
Directors during FY 96. Prior to his death on June 28, 1995, Frank Joseph
received $10,000 as Director Emeritus during FY 96. No fees were paid to Irving
Stone, Morry Weiss or Edward Fruchtenbaum for serving on the Company's Board of
Directors during FY 96. In addition, Dr. Jacobs was paid $338,521 during FY 96
for consulting services, including substantial time spent in the acquisitions
of S.A. Greetings and the John Sands group. Dr. Jacobs also received $288,000
from the Company in FY 96 in exchange for Dr. Jacob's assignment to the Company
of certain patent rights. The Company reimburses directors for expenses
incurred in connection with attendance at Board and committee meetings.
EXECUTIVE OFFICERS' COMPENSATION
The following table shows for each of the last three fiscal years the
compensation of the Company's Chairman and Chief Executive Officer and its other
four most highly compensated executive officers who were serving as executive
officers at February 29, 1996 (hereafter, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------- --------------------------------
AWARDS PAYOUTS
---------- ---------
RESTRICTED LTIP ALL OTHER
NAME AND STOCK PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS($) ($) (2) SATION(3)
- ----------------------- ---- --------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Morry Weiss, 1996 $550,000 $192,280 $ 0 0 $208,505(4)
Chairman and 1995 500,000 470,000(1) 0 $240,000 170,750(4)
Chief Executive Officer 1994 500,000 470,000(1) 0 360,000 18,521
Edward Fruchtenbaum, 1996 $422,500(5) $140,714 $711,750(6) 0 $ 17,690
President and Chief 1995 370,000(5) 168,000 0 $168,000 20,560
Operating Officer 1994 370,000(5) 168,000 562,500(6) 252,000 18,521
Erwin Weiss, 1996 $255,572 $ 78,528 $ 0 0 $ 19,207
Senior Vice President 1995 252,979 73,012 0 $ 73,605 22,037
1994 239,583 89,289 0 109,424 18,521
William Mason, 1996 $251,583(7) $ 94,372 $ 0 0 $ 18,730
Senior Vice President 1995 249,057(7) 87,541 0 $ 76,537 21,283
1994 229,188(7)(8) 78,196 0 104,960 18,521
Henry Lowenthal, 1996 $227,276 $ 69,524 $ 0 0 $ 18,776
Senior Vice President 1995 221,387 88,858 $ 84,181 21,547
1994 211,567 84,007 126,272 18,521
</TABLE>
________________
(1) Includes $230,000 of annual incentive compensation described more fully
below in the section captioned "Chief Executive Officer Compensation".
(2) Represents payout of three year bonus tied to the Company's performance
during FY 92, FY 93 and FY 94.
(3) Reflects amounts contributed by the Company under the Retirement Profit
Sharing and Savings Plan as well as the Executive Deferred Compensation
Plan.
(4) Includes premiums of $185,000 in FY96 and $145,000 in FY95 paid by the
Company for an insurance policy for Morry and Judith Weiss. The owners
of and beneficiaries under this policy are Mr. and Mrs. Weiss' children.
7
<PAGE> 10
(5) 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 of this Proxy Statement captioned "Certain Relationships
and Related Transactions".
(6) 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". The value of all
restricted stock held by Mr. Fruchtenbaum at the end of FY 96 was
$1,505,675. The number of shares of restricted stock held by Mr.
Fruchtenbaum at the end of FY 96 was 55,000. Mr. Fruchtenbaum receives
dividends only with respect to the 17,000 restricted Class A Shares that
had vested as of the end of FY 96.
(7) Includes special $25,000 annual payment made pursuant to an employment
arrangement with the Company. This amount is considered base pay for
purposes of determining the Company's contribution to Mr. Mason's
account in the Retirement and Profit Sharing and Savings Plan and for
purposes of his Supplemental Executive Retirement Plan account, but is
not considered base pay for purposes of determining the One Year Bonus
and Three Year Bonus discussed in the section of this Proxy Statement
captioned "Executive Bonus Plans".
(8) Includes the retroactive effect (to June 1, 1993) of Mr. Mason's April
1994 merit increase.
EMPLOYMENT AGREEMENTS. The Company has an employment agreement with each Named
Executive Officer (other than Morry Weiss). Mr. Fruchtenbaum's agreement,
initially dated May 18, 1992, as thereafter amended, provides for a three
year term which is renewed on a rolling basis for subsequent three year terms.
In FY 96, Mr. Fruchtenbaum received an annual base salary of $402,500 and was
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, William Mason and Henry Lowenthal,
each 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.
William Mason's agreement provides for minimum annual compensation of $68,682.
Henry Lowenthal's agreement provides for minimum annual compensation of
$106,500. Each of these agreements provides that if the Company terminates the
employee, 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 96, Erwin Weiss was credited with 19 years of service, William
Mason was credited with 26 years of service and Henry Lowenthal was credited
with 25 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 in
accordance with one of the various options outlined in the plan documentation.
RESTORATION BENEFIT. In addition, for FY 96 the Company contributed a
restoration benefit under a program to restore retirement benefits lost due to
the limitations of Internal Revenue Code Sections 401(a)(17), 401(k)(3) and
415.
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. Article
IV of the Regulations of the Company provides 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.
8
<PAGE> 11
OPTION GRANTS. No options were granted to the Named Executive Officers during
FY 96. The Company does not have a stock appreciation rights plan.
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 prior
years under the Company's various stock option plans approved by shareholders
and subject to applicable law:
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END
OPTION VALUES
<TABLE>
<CAPTION>
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 0 376,000(E) $7,166,858(E)
Chairman and 170,000(U) $3,437,179(U)
Chief Executive
Officer
Edward Fruchtenbaum, 13,090 147,721 18,000(E) $ 146,250(E)
President and Chief 0(U) $ 0(U)
Operating Officer
Erwin Weiss, 0 0 38,800(E) $ 460,159(E)
Senior Vice President 0(U) $ 0(U)
William Mason, 0 0 23,000(E) $ 191,563(E)
Senior Vice President 0(U) $ 0(U)
Henry Lowenthal, 0 0 18,600(E) $ 124,125(E)
Senior Vice President 0(U) 0(U)
<FN>
(1) Represents the difference between the option exercise price and
the closing price of the Company's Class A Common Shares as reported for
NASDAQ National Market Securities on February 29, 1996 ($27.375)
multiplied by the corresponding number of shares.
</TABLE>
9
<PAGE> 12
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. A description of the Company's
Supplemental Executive Retirement Plan can be found in the Report of the
Compensation Committee of the Board of Directors on Executive Compensation under
the heading "Supplemental Executive Retirement Plan". At the end of FY 96, all
of the Named Executive Officers were qualified under the Plan. The total
liability recorded by the Company under this Plan at the end of FY 96 was
$14,099,710. During FY 96, retired officers received benefits under the Plan
aggregating $692,843. Based upon estimates predicated upon present compen-
sation, at age 65 Morry Weiss will receive $131,342 annually, Edward
Fruchtenbaum will receive $75,183 annually, Erwin Weiss will receive $41,164
annually, William Mason will receive $46,933 annually and Henry Lowenthal will
receive $69,897 annually.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Albert Ratner
serves as Chairman of the Compensation Committee. The Company rents retail
store space in various shopping malls from Forest City Management, Inc. (which
is a wholly-owned subsidiary of Forest City Enterprises, Inc., of which Albert
Ratner is Co-Chairman of the Board and a director) and from Albert Ratner's
family, upon terms comparable to those that would be generally available from
unrelated parties. During FY 96, the Company and its subsidiaries paid a total
of $1,046,134 to Forest City Management, Inc. and Albert Ratner's family 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 officers' 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 officers
with the long-term interests of the Company's shareholders through the award of
stock options and other stock-related programs. The Company's philosophy is to
pay its officers fairly, which may include offering certain executive officers
total annual compensation exceeding $1,000,000. The compensation packages
offered to the Chairman and Chief Executive Officer and to the President and
Chief Operating Officer, respectively, are based in part on the recommendations
of an outside consulting firm, and in part on factors that are not easily
measured, such as leadership and strategic foresight.
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 and savings plan.
10
<PAGE> 13
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 an increase in base salary
is merited. Such increases in FY 96 were based on the individual's performance
as well as increases described in third party compensation studies, achievement
of the Company's profit goals and return on invested capital.
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 not more than 10 percent, or below the target
profit goal by 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 96, William Mason was
the only Named Executive Officer to receive all of the target bonus for which
he was eligible. The Chief Executive Officer's bonus was equal to approximately
35 percent of his annual base salary.
Executive Bonus Plan - The Company 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
96, the Company had net profits of $115,135,000. During FY 96, Irving I. Stone
was the only participant in the plan and waived his entitlement to all but
$210,000 of the amount that he earned under 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 for FY 95, FY 96 and FY 97 were
established by the Board in January 1994, and the current plan was implemented
at the start of FY 95. FY 96 profit goals were not achieved and therefore a
Special Bonus equal to only 60% of the Base Bonus may be payable if profit
goals are achieved in FY 97. If such profit goals are not achieved in FY 97, no
Special Bonus will be paid under the three year bonus plan.
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 One
11
<PAGE> 14
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 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,
thereby tying officer compensation directly to shareholder return. An officer
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 period of
years, the programs create an incentive for an executive to remain with the
Company.
Under the Employee Stock Option Plans officers and key employees of the
Company and its subsidiaries are awarded stock options by the 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 granted options upon (i) the creation of a new stock option plan;
(ii) the hiring of a new key manager; and (iii) the promotion of an existing
key manager.
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.
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, in part, on the Company's achievement of its profit goals.
Dividends and voting rights attach only to vested shares.
On February 29, 1996, the Company granted, 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, all or part of which block will vest
ratably (on an annualized basis) over a period of six 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 in each 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 One
Year Bonus), 4,000 of the shares granted under the Three Year Grant will lapse
and therefore never vest with respect to the COO. The Company did not meet its
pre-tax profit goal for FY 96 and, therefore, 4,000 Shares lapsed and became
unavailable to the COO.
Mr. Fruchtenbaum's employment agreement is more fully discussed in the
section of this Proxy Statement captioned "Employment Agreements" on page 8.
12
<PAGE> 15
RETIREMENT PROFIT SHARING AND SAVINGS PLAN.
Under the Retirement Profit Sharing and Savings Plan in FY 96, 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 96. The
contribution is allocated to the accounts of the participants upon the basis of
their credited compensation. 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 96, the Company matched twenty-five percent of
the first six percent of compensation deferred by an employee (subject to IRS
limitations), since the Company achieved at least eighty percent of its profit
goal. For the investment of all contributions under the plan, an employee may
choose a Company Stock fund, which is invested in Common Shares of the Company
and/or the following mututal funds: Vanguard Money Market Reserves Prime
Portfolio, Vanguard/Wellington Fund, Vanguard Index Trust-500 Portfolio,
Vanguard/Primecap Fund, Vanguard/Wellesley Fund, Vanguard/Windsor II Fund,
Vanguard International Growth Portfolio, and Vanguard Bond Index/IC Fund.
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 profit goal, as approved by the Board
near the start of each fiscal year. The Company's annual profit goal for FY 96
was not achieved and therefore Mr. Weiss received none of the $230,000. Mr.
Weiss' plan has remained generally the same since it was established by the
Board in 1992. The Compensation Committee and Board annually review the plan.
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 a compensation study. Based on a 1992 compensation study, Mr. Weiss' 1992
compensation was below the median compensation of CEOs in the study.
Mr. Weiss received a base salary of $550,000 plus bonus of $192,280 in
FY 96. The Committee determined not to increase Mr. Weiss' base salary for FY
97. They have provided for a split-dollar life insurance program for Mr. Weiss
and his family.
IMPACT OF SECTION 162 OF THE INTERNAL REVENUE CODE.
The Revenue Reconciliation Act of 1993 amended Section 162 of the
Internal Revenue Code to eliminate the deductibility of certain compensation
over $1,000,000 paid to the chief executive officer and other named executive
officers. In 1994, the Company's shareholders approved compensation plans for
the Company's Chairman and Chief Executive Officer and President and Chief
Operating Officer that allow the Company to deduct for tax purposes amounts in
excess of $1,000,000 that are performance-based and that are payable to each
individual under those plans.
13
<PAGE> 16
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 (Chairman)
Scott S. Cowen
Herbert H. Jacobs
Jeanette S. Wagner
Abraham Zaleznik
SHAREHOLDER RETURN PERFORMANCE PRESENTATION
The line graph on the following page 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 29, 1996.
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 the Company.
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, 1991, and that all dividends were reinvested.
14
<PAGE> 17
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN*
AMONG AMERICAN GREETINGS CORPORATION, THE S&P 500 INDEX
AND THE S&P MISCELLANEOUS INDEX
[GRAPHIC]
<TABLE>
<CAPTION>
AMERICAN
(Fiscal years ended GREETINGS S&P
February 28/29) CORP. S&P 500 MISCELLANEOUS
<S> <C> <C> <C>
2/91 $100 $100 $100
2/92 $115 $115 $116
2/93 $132 $128 $137
2/94 $156 $139 $148
2/95 $168 $149 $158
2/96 $160 $201 $191
</TABLE>
* $100 invested on 2/28/91 in stock or index - including reinvestment of
dividends. Fiscal years ended February 28/29.
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 principal balance as of March 1, 1996, was $80,000.
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 and expenses on a per diem basis. Dr. Jacob's consulting
arrangement does not provide for a fixed term of engagement.
15
<PAGE> 18
SECURITY OWNERSHIP OF MANAGEMENT
At the close of business on February 29, 1996, the non-employee
directors, the Named Executive Officers 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 200 #
Class B Common - -
Milton A. Wolf Class A Common 6,800 #
Class B Common - -
Abraham B. Zaleznik Class A Common 400 #
Class B Common - -
EXECUTIVE OFFICERS
Morry Weiss* Class A Common 380 (4) #
Class B Common 616,501 (1)(2)(4)(5) 13.52
Ed Fruchtenbaum* Class A Common 24,278 (2) 0.3
Class B Common - (2) -
Erwin Weiss Class A Common - (2) -
Class B Common 5,124 (2) 0.11
William R. Mason Class A Common - (2) -
Class B Common 1,060 (2) #
Henry Lowenthal Class A Common 15,384 (2) 0.2
Class B Common - (2) -
All directors and officers Class A Common 130,440 (2)(4) 0.19
as a group (19 persons Class B Common 2,697,619 (2)(3)(4)(5)(6) 59.16
including the above)
<FN>
* Also serves as a director of the Company
# less than 0.01% of class outstanding
</TABLE>
16
<PAGE> 19
__________________
(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>
<CAPTION>
Name Title of Class Amount Percent of Outstanding
- ------------------- -------------- ---------- ----------------------
<S> <C> <C> <C>
Morry Weiss Class B Shares 376,000 (8.25%)
Edward Fruchtenbaum Class A Shares - -
Class B Shares 18,000 (0.39%)
Erwin Weiss Class A Shares 18,800 (0.03%)
Class B Shares 20,000 (0.44%)
William R. Mason Class A Shares 3,000 #
Class B Shares 20,000 (0.44%)
Henry Lowenthal Class A Shares 2,010 #
Class B Shares 16,590 (0.36%)
All Directors and Class A Shares 55,810 (0.08%)
officers as a group Class B Shares 565,590 (12.40%)
</TABLE>
(3) Excludes 200,000 Class B Shares (4.39%) 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: 148 Class
A Shares [less than 0.01%] and 8,989 Class B Shares [0.20%] held for
the benefit of certain officers (including 135 Class A Shares [less
than 0.01%] and 8,149 Class B Shares [0.18%] held for the benefit of
Morry Weiss) as participants in the Company Stock Fund of the American
Greetings Retirement Profit Sharing and Savings Plan. 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 146,625 Class B Shares (3.22%) 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.
17
<PAGE> 20
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 3,
1996.
<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 2,022,146 (1)(2)(3) 44.41
Cleveland, Ohio
American Greetings Class A Common 56,119 (6) #
Retirement Profit Sharing Class B Common 1,140,350 (6) 25.04
and Savings Plan
Vanguard Fiduciary Trust Company
Vanguard Financial Center
300 Vanguard Boulevard
Malvern, Pennsylvania
Morry Weiss Class A Common 445 (4) #
One American Road Class B Common 616,501 (1)(2)(4)(5) 13.54
Cleveland, Ohio
Cooke & Bieler, Inc. Class A Common 4,839,950 6.88
1700 Market Street Class B Common - -
Philadelphia, Pennsylvania
Loomis Sayles & Company Class A Common 3,648,600 5.18
One Financial Center Class B Common - -
Boston, Massachusetts
<FN>
* less than 0.01% of class outstanding
</TABLE>
_________________
(1) 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.
(2) See footnote (2) to the table under "Security Ownership of Management".
(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 Retirement Profit Sharing and Savings Plan
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 accounts. The Admin-
istrative 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, Vanguard Fiduciary Trust Company - Malvern, PA.
18
<PAGE> 21
PROPOSAL 2
APPROVAL OF 1996 EMPLOYEE STOCK OPTION PLAN
On February 26, 1996, the Board of Directors adopted, subject to
shareholder ratification and approval at the June 28, 1996 Annual Meeting, the
1996 Employee Stock Option Plan (the "1996 Plan"). Under the 1996 Plan,
options may be granted to key employees of the Company and its subsidiaries,
including officers and officers who are directors, to purchase Class A Common
Shares and/or Class B Common Shares of the Company. Subject to adjustment as
described below, the maximum number of Class A Common Shares authorized to be
issued under the 1996 Plan is 950,000 shares, and the maximum number of Class B
Common Shares is 200,000 shares. The Class A Common Shares to be offered under
the 1996 Plan may be either treasury or authorized but unissued shares or a
combination of the foregoing. The Class B Common Shares may be treasury shares.
At May 3, 1996, options for 812,400 Class A Common Shares and 161,000 Class B
Common Shares had, subject to shareholder ratification and approval of the 1996
Plan, been granted under the 1996 Plan as follows: Named Executive Officers,
66,000 Class B Common Shares; all Executive Officers as a group (including all
Named Executive Officers), 161,000 Class B Common Shares; all others, 812,400
Class A Common Shares.
SUMMARY OF 1996 PLAN.
The full text of the 1996 Plan is set forth in Exhibit A to this Proxy
Statement. The following summary of provisions of the 1996 Plan is qualified in
its entirety by reference to Exhibit A.
PURPOSE.
The purpose of the Plan is to attract and retain superior personnel by
affording officers and selected key employees of the Company and its
subsidiaries the opportunity to share in future appreciation in the share value
of the Company's stock, thereby creating an inventive for outstanding
performance that may maximize shareholders' return on investment over the long
term.
ADMINISTRATION.
The 1996 Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"). Subject to the limitations in the 1996
Plan, the Committee has the authority to determine and designate the officers
and key employees to whom options are to be granted, the number and class of
shares to be optioned, the option price, the type of options, the option
period, the terms of payment of the option price, and the other terms and
conditions of each option.
PARTICIPATION.
At May 10, 1996, there are approximately 999 employees who are
participating in the 1996 Plan. It is not possible to predict the number or
identity of future optionees in the 1996 Plan or, except as set forth in the
1996 Plan, to describe the provisions that may be included in specific option
agreements.
OPTION PRICE, PAYMENT.
The option price may not be less than the price of the Class A Common
Shares quoted by the National Association of Securities Dealers at the close of
business on the date preceding that on which the option is granted. The option
price is payable in either cash or, in whole or in part, Class A and/or Class B
Common Shares valued at the price of Class A Common Shares quoted by the
National Association of Securities Dealers as of the close of business on the
date of exercise, to the extent permitted by all applicable laws and
regulations. However, the Board of Directors may prohibit such exercise if at
such time it determines that the application of any Financial Accounting
Standards Board rule affecting the tender of shares would be detrimental to the
best interest of the Company. The 1996 Plan also provides for the grant of
additional options, referred to as "reload options". Under the terms of options
that include a reload feature, those optionees who tender Company shares held
for at least six (6) months as payment of the purchase price for optioned
shares will receive new options equal to the number of the shares tendered at
the then-current market price. No separate consideration is paid for the reload
19
<PAGE> 22
option itself. All options granted under the 1996 Plan (subject to shareholder
ratification and approval at the June 28, 1996 Annual Meeting) include a reload
option feature. Reload options may not be exercised after the date of
expiration of the underlying options.
FEDERAL INCOME TAX CONSEQUENCES.
The grant of an option under the 1996 Plan is not a taxable event to an
optionee for federal income tax purposes. The exercise of an option under the
1996 Plan generally will result in ordinary taxable income to an optionee and a
deduction to the Company equal to the excess of the fair market value over the
option price at exercise.
OPTION PERIOD.
Options granted under the 1996 Plan will expire no later than ten years
after the date of grant. Shares not purchased under options that expire prior
to exercise shall again be available for purposes of the 1996 Plan.
ADJUSTMENTS.
The 1996 Plan provides for adjustments in the option price and in the
number and kinds of shares or other securities covered by outstanding options
as the Board of Directors may determine is equitably required to prevent
dilution or enlargement of the rights of optionees that would otherwise result
from any stock dividend, stock split, combination of shares, recapitalization
or other change in the capital structure of the Company, or any merger,
consolidation, separation, reorganization or partial or complete liquidation or
any other corporate transaction or event having a similar effect.
TRANSFER.
No option granted under the 1996 Plan will be transferable, except as
may be provided in the individual optionee's stock option agreement with the
Company.
VOTE REQUIRED.
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.
---
_______________________________________
CAUTIONARY STATEMENT
CERTAIN STATEMENTS CONTAINED IN THE PRESIDENT'S LETTER, THE PROXY STATEMENT,
AND THE ANNUAL REPORT TO SHAREHOLDERS ARE FORWARD-LOOKING. MANY FACTORS COULD
CAUSE ACTUAL RESULTS TO DIFFER FROM THESE STATEMENTS, INCLUDING LOSS OF MARKET
SHARE THROUGH COMPETITION, INTRODUCTION OF COMPETING PRODUCTS BY OTHER FIRMS,
RETAILERS' BANKRUPTCIES, THE LEVEL OF RETAIL INDUSTRY SALES, COMPETITIVE TERMS
OF SALE OFFERED TO CUSTOMERS TO EXPAND OR MAINTAIN BUSINESS, LACK OF ACCEP-
TANCE OF NEW PRODUCTS BY CONSUMERS OR RETAILERS AND INTEREST RATE AND FOREIGN
EXCHANGE FLUCTUATIONS. SUCH FACTORS ARE DISCUSSED IN THE COMPANY'S FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION.
_______________________________________
20
<PAGE> 23
SHAREHOLDER PROPOSALS.
Shareholders may submit proposals on matters appropriate for
shareholder action, consistent with regulations of the SEC. 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 17, 1997, 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.
21
<PAGE> 24
AMERICAN GREETINGS CORPORATION
1996 EMPLOYEE STOCK OPTION PLAN
NAME AND GENERAL PURPOSE OF PLAN. The name of the plan is the American
Greetings Corporation 1996 Employee Stock Option Plan ("Plan"). The purpose of
the Plan is to attract and retain superior personnel by affording officers and
selected key employees of American Greetings Corporation and its subsidiaries
(the "Company") the opportunity to share in future appreciation in the share
value of the Company's stock, thereby creating an incentive for outstanding
performance that may maximize shareholders' return on investment over the
long term.
1. OPTIONS ISSUABLE UNDER PLAN. The total number of shares that may be issued
under options granted pursuant to this Plan shall not exceed 950,000 Class A
Common Shares, par value $1 per share, and 200,000 Class B Common Shares, par
value $1 per share, except to the extent of adjustments authorized in paragraph
5 of this Plan. Such Class A Common Shares may be treasury shares or author-
ized but unissued shares or a combination of the foregoing. Such Class B Common
Shares may be treasury shares. To the extent that a stock option expires or is
otherwise terminated, cancelled or surrendered without being exercised, the
shares of stock underlying such stock option shall again be available for
issuance in connection with future grants under the Plan.
2. ELIGIBILITY. The Compensation Committee of the Company's Board of Directors
("Compensation Committee") may, from time to time and upon such terms and
conditions as it may determine, grant options ("Options") to buy Company Class
A and/or Class B Common Shares to officers (including officers who are
members of the Company's Board of Directors) and other key employees of the
Company and any of its subsidiaries ("Optionees"), and may fix the number of
shares to be covered by each Option. Additional Options may be granted to the
same person, whether or not the Option or Options previously granted to such
person remain unexercised.
3. DURATION. No Option shall run for more than ten (10) years from the date
granted.
4. GRANT PRICES. The grant price of an Option shall not be less than the price
of the Class A Common Shares quoted by the National Association of Securities
Dealers (NASD) at the close of business on the last business day preceding that
day on which the Option is granted. The grant price shall be payable in either
cash or, in whole or in part, Class A and/or Class B Common Shares of the
Company valued (in the case of both Class A and Class B Common Shares) at the
price for Class A Common Shares quoted by NASD at the close of business on the
date of exercise, to the extent permitted by all applicable laws and
regulations. However, the Compensation Committee may prohibit such exercise if
at such time it determines that the application of any Financial Accounting
Standard Board rule affecting the tender of shares would be detrimental to the
best interests of the Company.
5. ADJUSTMENTS. The Compensation Committee may make or provide for such
adjustments in the grant price of an Option and in the number or kind of shares
or other securities covered by outstanding Options as the Compensation
Committee, in its sole discretion exercised in good faith, may determine is
equitably required to prevent dilution or enlargement of the rights of
Optionees that would otherwise result from (a) any stock dividend, stock split,
combination of shares, recapitalization or other change in the capital
structure of the Company, (b) any merger, consolidation, separation,
reorganization or partial or complete liquididation, or (c) any other corporate
transaction or event having an effect similar to any of the foregoing.
Moreover, in the event of any such transaction or event, the Compensation
Committee, in its discretion, may provide in substitution for any and all
outstanding Options under the Plan, such alternate consideration as it, in good
faith, may determine is equitable in the circumstances.
6. EXERCISE. Optionees may exercise their Options upon receipt by the Company
of such forms as the Company may require in advance of exercise and the
required payment. A stock certificate may be issued as soon as practical after
exercise and payment. Each Option may be exercisable in installments of shares.
The Compensation Committee may accelerate the period of time to exercise any
installments of an Option then outstanding. Unless otherwise provided in an
Optionee's stock option agreement, an Option is exercisable during an
Optionee's lifetime only by the Optionee, except that in case of
A-1
<PAGE> 25
incompetence or disability of an Optionee, an Option may be exercised on behalf
of the Optionee by the Optionee's guardian or legal representative. Any Option
may provide for deferred payment of the option price. If, following an Option
exercise, the Optionee sells shares underlying the Option, the Optionee will
receive the amount by which the sale price exceeds the grant price for such
shares, after deducting applicable taxes and brokerage fees, but not interest
that might otherwise be paid on an advance of monies to the Optionee between
the exercise and settlement dates. The sale price for both Class A and Class B
Common Shares shall be the price of Class A Common Shares as quoted by NASD as
of the close of business on the date of exercise.
7. STOCK OPTION AGREEMENT; CANCELLATION. Optionees shall be required to enter
into a stock option agreement with the Company. The stock option agreement
shall contain such terms and conditions not inconsistent with the Plan as may
be approved by the Compensation Committee. Any stock option agreement
evidencing a granted Option may, with the concurrence of the affected Optionee,
be amended by the Compensation Committee, provided the terms of each such
amendment are not inconsistent with the Plan. The Compensation Committee may,
with the concurrence of the affected Optionee, cancel any Option granted under
the Plan.
8. TRANSFERABILITY. No Option shall be transferable by the Optionee unless
otherwise provided in the Optionee's stock option agreement.
9. RELOAD OPTIONS. On the date of grant of any Option, the Compensation
Committee may provide for the automatic grant to the Optionee of additional
Options ("Reload Options") upon the exercise of Options through the delivery of
any class of Common Shares held by the Optionee for at least six months;
provided, however, that, subject to adjustments under paragraph 5, (i) Reload
Options may be granted only with respect to the same number (but not
necessarily the same class) of Common Shares as were surrendered to exercise
the Options, (ii) the grant price of the Reload Options shall be the price of
the Company's Class A Common Shares as quoted by NASD as of the close of
business on the date of exercise of the Options (iii), Reload Options may not
be exercised after the date on which the Options in respect of which such
Reload Options were granted, expire, are cancelled or terminate, and (iv) the
provisions contained in this sentence may not be amended more than once every
six months, other than to comport with changes in the Internal Revenue Code of
1986, as amended, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), securities laws and rules thereunder.
10. ADMINISTRATION. The Plan shall be administered by the Compensation
Committee, which shall consist of not less than three Directors who are
disinterested persons. The Compensation Committee shall be empowered by the
Board to exercise all authority otherwise possessed by the Board with respect
to the Company's stock option plans, including without limitation,
interpretation of the Plan. The Board may also appoint one or more of its
Directors as alternate members of the Compensation Committee. A majority of the
Compensation Committee shall constitute a quorum, and the action of a majority
of the members (including alternate members) of the Compensation Committee
present at the meeting at which a quorum is present, or the unanimous written
action of the Compensation Committee, shall be considered the action of the
Compensation Committee.
11. RESTRICTIONS ON ISSUANCE. The Company's ability to issue Class B Common
Shares is restricted by certain provisions of its Articles of Incorporation,
Section 1(c) (21) of Schedule D of the by-laws of NASD and certain interpretive
letters addressed to the Company by NASD.
A-2
<PAGE> 26
12. PLAN AMENDMENT; TERMINATION. This Plan (and any prior stock option plan of
the Company) may be terminated or amended from time to time by the Company's
Board of Directors, but no such amendment shall increase the aggregate number
of Class A Common Shares or Class B Common Shares that may be issued under this
Plan (except for adjustments authorized under paragraph 5 and comparable
provisions in prior stock option plans) or change the designation in paragraph
2 of the class of employees eligible to receive Options, or cause Rule 16b-3 of
the Securities Exchange Act of 1934 (or any successor rule to the same effect)
to cease to be applicable to this Plan without further approval by the
shareholders of the Company.
A-3
<PAGE> 27
[LOGO]
American Greetings Corporation
One American Road
Cleveland, Ohio
44144
[RECYCLED LOGO]
<PAGE> 28
AMERICAN GREETINGS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CLASS A THE COMPANY FOR THE JUNE 28, 1996, ANNUAL MEETING.
P
R
O The undersigned hereby constitutes and appoints Irving I. Stone and Morry
X Weiss, and each of them, his or her true and lawful agents and proxies with
Y 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 28, 1996, and at any
adjournments thereof, on all matters coming before said meeting.
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS, Nominees: (change of address)
<S> <C>
Herbert H. Jacobs, Jeanette Sarkisian Wagner and _________________________________________
Morry Weiss, to a three year term expiring on the date of _________________________________________
the 1999 Annual Meeting or until their respective successors _________________________________________
are duly elected and qualifed. _________________________________________
(If you have a written change in the above
space, please mark the corresponding box
on the reverse side of this card.)
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE. IF YOU SIGN AND RETURN THIS PROXY CARD, BUT DO NOT MARK ANY
BOXES ON THE OTHER SIDE, THE PROXIES WILL CAST YOUR 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
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of / / / / / /
Directors 1996 Employee
Stock Option
Plan
For, except vote withheld from the
following nominee(s):
____________________________________
CHANGE / /
OF
ADDRESS
ATTEND / /
MEETING
</TABLE>
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> 29
AMERICAN GREETINGS CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CLASS B THE COMPANY FOR THE JUNE 28, 1996, ANNUAL MEETING.
P
R
O The undersigned hereby constitutes and appoints Irving I. Stone and Morry
X Weiss, and each of them, his or her true and lawful agents and proxies with
Y 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 28, 1996, and at any
adjournments thereof, on all matters coming before said meeting.
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS, Nominees: (change of address)
<S> <C>
Herbert H. Jacobs, Jeanette Sarkisian Wagner and _________________________________________
Morry Weiss, to a three year term expiring on the date of _________________________________________
the 1999 Annual Meeting or until their respective successors _________________________________________
are duly elected and qualifed. _________________________________________
(If you have a written change in the above
space, please mark the corresponding box
on the reverse side of this card.)
</TABLE>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE. IF YOU SIGN AND RETURN THIS PROXY CARD, BUT DO NOT MARK ANY
BOXES ON THE OTHER SIDE, THE PROXIES WILL CAST YOUR 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
/X/ PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of / / / / 2. Approval of / / / / / /
Directors 1996 Employee
Stock Option
Plan
For, except vote withheld from the
following nominee(s):
____________________________________
CHANGE / /
OF
ADDRESS
ATTEND / /
MEETING
</TABLE>
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.
