Employment Agreement Between Josef A. Mandelbaum And Ag Interactive, Inc.

Exhibit 10(xxxviii)

Effective February 4, 2000

Josef A. Mandelbaum 4285 University Parkway

Cleveland, Ohio 44118

Dear Josef:

This letter agreement (the " Agreement" ) sets forth the terms and conditions on which you have agreed to serve as the President and Chief Executive Officer of AmericanGreetings.com, Inc. (the " Company" ): 1. EMPLOYMENT.

(a) POSITION. The Company employs you as its acting President and Chief Executive Officer to perform such duties for the Company or its subsidiaries as the Board of Directors (the " Board" ) of the Company may from time to time assign, all upon the terms and conditions set forth in this Agreement. You will report to the Board or such other senior executive of the Company as determined by the Board. You accept such employment and agree to devote your full working time and attention to your duties for the Company and its subsidiaries, subject to the Company' s policies as in effect from time to time, and applicable law.

(b) BOARD SEAT. The Company agrees that during your service as President and Chief Executive Officer (subject to appropriate shareholder action), you shall be a member of the Board.

2. COMPENSATION. During your employment with the Company, it shall pay you the following compensation:

(a) an annual base salary (the " Base Salary' ) of $240,236 payable consistent with the Company' s payroll practices, provided, however, the Board may, from time to time in its sole discretion, change your Base Salary;

(b) an annual bonus, the target for which is 35% of your Base Salary. Your actual bonus, if any, for the then current year will be paid to you according to the annual management incentive payout schedule established by the Board for the then current year, subject to achievement of the criteria provided therein; and


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american greetings.com ullet three american road, cleveland, ohio, 44144-2301 ullet phone: 216-889-5000 ullet fax: 216-889-5904


(c) additional incentive compensation, if any, in accordance with any incentive compensation plan established from time to time by the Board.

All amounts payable under this Agreement will be subject to applicable withholding, which the Company may deduct from such amounts.

3. EQUITY. Subject to your agreement to the terms and conditions hereof and thereof, the Company shall, has granted you stock options to purchase 300,000 shares of the Company' s Class A Common Stock, at an exercise price of $7.50, subject to the standard terms and conditions under the Company' s option plan and stock option agreement, except as specifically set forth herein. You understand that no options, including vested options, may be exercised prior to the consummation of a Trigger Event (as defined below). You further understand that neither the Company nor any of its affiliates is under any obligation to effect a Trigger Event. Vesting of these shares shall be on the following vesting schedule, which, subject to the preceding sentence, is twenty percent (20%) on February 4, 2000 and twenty-percent (20%) per year on each October 20th beginning with October 20, 2000 and ending October 20, 2003 deemed to commence vesting as of October 20, 1999. The Company will promptly grant you options to purchase additional shares of its Class A Common Stock (subject to the standard terms and conditions under the Company' s option plan and stock option agreement, except as specifically modified herein) as necessary so that the total number of shares for which you have been granted options is at least equal to the number of shares for which options have been granted to any officer of equal or higher rank within the Company and at least twice the number of shares for which options have been granted to any other employee of the Company. The stock options provided for in this paragraph are not intended to qualify as incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder. In the event that there is a " Change of Control" then, in such event and notwithstanding any shorter vesting provision contained in your option agreement, the stock options provided for in this paragraph shall fully vest. As used in this Agreement, the term " Change of Control" shall mean the consummation of:

(a) a merger involving the Company or a transfer of the Company' s stock by the Company' s stockholders pursuant to which, in either case, the stockholders of the Company immediately prior to the transaction do not continue to hold more than a fifty percent (50%) percent equity or voting interest in the successor entity (which may be the Company) other than a transaction involving only one or more Related Companies; or

(b) the sale of all or substantially all of the Company' s assets, other than a transaction involving only one or more Related Companies;

(c) any other transaction, as a result of which, the Company' s stockholder immediately prior to the transaction do not continue to hold(or, as a result of which, they give up, by contract or otherwise) the unilateral right to elect at least a majority of the Board.

As used in this Agreement, the term " merger partner" shall mean the other party to the merger in the case of a Change of Control pursuant to clause (a) of the definition


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american greetings.com ullet three american road, cleveland, ohio, 44144-2301 ullet phone: 216-889-5000 ullet fax: 216-889-5904


thereof or the acquirer of the assets in the case of a sale of all or substantially all of the Company' s assets. As used in this Agreement, a " Trigger Event" is (i) a Change of Control or (ii) a primary underwritten initial public offering of equity securities of the Company registered under the Securities Act of 1933 on Form S-1 (or a successor form).

As used in this Agreement, a " Related Company" is American Greetings Corporation or any direct or indirect wholly owned subsidiaries of American Greetings Corporation. As a condition to the exercise of the stock options provided for in this section, the Company may require you to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required. Your vested stock options may only be exercised in compliance with applicable securities laws, and your stock options and any shares issued upon exercise thereof may be restricted and/or legended consistent with such requirements as determined by the Company. In no event shall the Company have any obligation to register any of its securities under the Securities Act of 1933 or otherwise. If the Company completes an initial public offering of its stock, however, it intends to register shares issuable upon the exercise of stock options on Form S-8, if the Company is then eligible to do so.

4. EXPENSES. The Company shall reimburse you for all ordinary expenses you necessarily and reasonably incur in connection with your duties (including travel, lodging, meal, and entertainment expenses), against presentation of proper receipts or other proof of expenditure, and subject to reasonable guidelines or limitations adopted by the Company and shall reimburse you for your reasonable and actual legal expenses in connection with the negotiation of this Agreement. 5. BENEFITS. During your employment with the Company, you shall be entitled to health, life, disability and accident insurance, vacation and paid leave, executive automobile program, in each case consistent with that currently provided to you, and entitled to participate in any and all employee benefits maintained by the Company for its executives or employees generally, including, if and to the extent maintained by the Company for its executives or employees generally, the following: profit sharing plan, bonus plan, stock option, or other benefit plan, retirement plan, insurance plans or medical expense plans, and executive automobile program (including lease payments and maintenance expenses); provided, however, that any participation by you in stock option, stock purchase and bonus plans will be in the sole discretion of the Board except as otherwise expressly provided in this Agreement or required by the terms of such plans.

6. CERTAIN REIMBURSEMENTS. To the maximum extent permitted by applicable law and the Company' s Certificate of Incorporation and Bylaws, the Company agrees to indemnify, defend, and hold you harmless from and against any and all demands, actions, claims, suits, liabilities, losses, damages, fees and expenses relating to


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american greetings.com ullet three american road, cleveland, ohio, 44144-2301 ullet phone: 216-889-5000 ullet fax: 216-889-5904


any acts or omissions to act in the course or scope of the duties you performed or perform on behalf of the Company or its subsidiaries while employed by it or them or serving on its Board or the board of a subsidiary and to provide indemnification and Directors and Officers liability insurance to you at least to the same extent that it provides such indemnification and insurance to the Officers and Directors of the Company. The provisions of the foregoing sentence shall survive the termination of your employment with the Company.

7. TERMINATION OF EMPLOYMENT. Your employment with the Company under this Agreement commenced on or prior to the date hereof and shall end on the earliest date on which any of the following events may occur:

(a) your death, disability (determined as provided in the applicable disability plan adopted by the Company, or, if none, as determined by the Board) or resignation from the employ of the Company;

(b) the termination of your employment with the Company for Cause, as defined below, with notice given by the Company as provided hereinbelow;

(c) the termination of your employment with the Company without Cause, as defined below, with notice given by the Company as provided hereinbelow; or

(d) the termination of your employment with the Company by you due to a Failure by Company to Maintain Employment Conditions, with notice, given by you as provided hereinbelow. 8. CAUSE. As used in this Agreement, the term " Cause" shall mean any of the following: (a) your willful theft or embezzlement of funds or other property of the Company or its affiliates; (b) a material breach by you of this Agreement;

(c) a material breach by you of any other written agreement between you and the Company or its affiliates;

(d) your conduct of a criminal nature;

(e) your fraudulent conduct in connection with the business affairs of the Company or its affiliates, regardless of whether that conduct is designed to personally enrich you or defraud the Company or others.

The existence of Cause shall be conclusively determined by the Board.

9. FAILURE BY COMPANY TO MAINTAIN EMPLOYMENT CONDITIONS.

As used in this Agreement, the term " Failure by Company to Maintain Employment Conditions" shall mean any of the following:

(a) the assignment to you of duties materially inconsistent with your then-current level of authority or responsibilities, or any other action by the Company which results in a material diminution in your position, compensation, authority, duties or responsibilities;


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american greetings.com ullet three american road, cleveland, ohio, 44144-2301 ullet phone: 216-889-5000 ullet fax: 216-889-5904


(b) a material failure by the Company to comply with the provisions of this Agreement or any other written agreement between you and the Company, including any failure to pay compensation and benefits;

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