UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 8, 2006
CSS Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-2661 13-920657
(State or other jurisdiction (Commission (IRS Employee
of incorporation) File Number) Identification No.)
1845 Walnut Street, Philadelphia, PA 19103
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (215) 569-9900
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On May 8, 2006, the Human Resources Committee of the Board of Directors (the
"Committee") of CSS Industries, Inc. (the "Company") approved the criteria on
which annual incentive compensation may be paid to the Company's executive
officers for the fiscal year ending March 31, 2007. Three of the individuals
designated by the Company as "executive officers" for purposes of Section 16 of
the Exchange Act each serve as the President of a Company subsidiary (each, a
"Subsidiary President"). The Committee also determined that the following
executive officers of the Company will not be eligible to receive annual
incentive compensation for the Company's fiscal year ending March 31, 2007: Jack
Farber, who serves as Chairman of the Board of Directors of the Company; David
J.M. Erskine, who currently serves as President and Chief Executive Officer of
the Company and who will retire as an executive officer, employee and director
of the Company effective June 30, 2006, as previously reported in the Company's
Form 8-K filed April 7, 2006; and Frank Macero, Jr., who currently serves as
President of the Company's Paper Magic Group, Inc. subsidiary and who has
indicated his intention to retire during the Company's 2007 fiscal year.
For the fiscal year ending March 31, 2007, incentive compensation will be paid
to each executive officer, excluding the Subsidiary Presidents (for whom
incentive compensation is described elsewhere in this Form 8-K) and Messrs.
Farber and Erskine, if the Company's earnings per share ("EPS") equals or
exceeds a minimum level established by the Committee. If the minimum level is
achieved or exceeded, the amount of incentive compensation paid to an executive
will be based upon the level of EPS achieved by the Company and the executive's
individual performance. A base amount, which is determined by the level of EPS
actually achieved by the Company, will be utilized to calculate an executive's
incentive compensation. An executive's base amount is equal to a percentage of
his or her annual base salary, ranging from 50% to 100% if the target level of
EPS is achieved, depending upon the executive's position. If the Company
achieves EPS in excess of the target level, the base amount for each executive
will be higher than the base amount associated with the target level, based upon
the amount by which the achieved level of EPS exceeds the target. Conversely, if
the achieved level of EPS is less than the target level but not less than the
minimum level, each executive's base amount will be lower than the base amount
corresponding to the target level, depending on the extent to which the achieved
level of EPS is less than the target level. No incentive compensation will be
paid if EPS does not equal or exceed the minimum level.
If the minimum level of EPS is achieved or exceeded, each executive officer,
excluding the Subsidiary Presidents and Messrs. Farber and Erskine, will
automatically receive 50% of his or her base amount, constituting the Company
performance component of incentive compensation. The remaining amount of the
executive's incentive compensation will be payable based upon each executive's
achievement of certain individual performance goals. Generally up to 50% of an
executive's base amount may be paid based on individual performance, and a
higher amount may be paid if the individual performance goals are exceeded. The
Committee will determine the extent to which such individual performance goals
have been attained.
For the fiscal year ending March 31, 2007, each Subsidiary President, excluding
Mr. Macero, is eligible to receive incentive compensation calculated using a
base amount equal to 80% of the Subsidiary President's annual base salary.
Incentive compensation is divided into two parts: (a) a part entirely contingent
upon the achievement by the Subsidiary President's operating company of at least
a minimum level of net operating income ("NOI"), and (b) a part entirely
contingent upon the achievement by the Company of at least a minimum level of
EPS. If a minimum level for a part is not achieved, no incentive compensation
for that part will be paid. If the target levels of NOI and EPS are both
achieved, then 72.5% of the base amount will be attributable to NOI, and 27.5%
of the base amount will be attributable to EPS. If the actual levels of NOI or
EPS are higher or lower than the applicable target levels, then the base amount
(and, therefore, the amount that may be paid) for each part will vary depending
upon the extent of the actual levels. Further, the actual amount paid, if any,
with respect to the part attributable to NOI will be based in part upon the
Subsidiary President's achievement of certain individual performance goals.
On May 12, 2006, Christopher J. Munyan and the Company entered into a letter
agreement pertaining to Mr. Munyan's employment with the Company as President
and Chief Executive Officer effective July 1, 2006. The letter agreement
provides for (i) a base salary of $450,000 per annum, with consideration for an
increase in such base salary in connection with an annual performance review;
(ii) participation in the Company's annual bonus program with a target bonus
opportunity of 100% of Mr. Munyan's then-current base salary for the fiscal year
ending March 31, 2007; and (iii) reimbursement of expenses incurred by Mr.
Munyan in relocating his principal residence to the Philadelphia, Pennsylvania
area, in accordance with Company policy. The letter agreement also provides for
the grant of a stock option to acquire 100,000 shares of the Company's common
stock, subject to the provisions of the Company's 2004 Equity Compensation Plan,
with the effective date of such grant being May 12, 2006. In addition, the
letter agreement provides that the Company will pay a severance benefit to Mr.
Munyan if the Company terminates his employment other than for cause at any time
prior to July 1, 2009, subject to certain conditions set forth in the letter
agreement. If applicable, the severance benefit would be equal to the greater of
(a) one year of Mr. Munyan's then-current annual base salary (less applicable
tax withholdings and payroll deductions) or (b) an amount equal to Mr. Munyan's
then-current annual base salary (less applicable tax withholdings and payroll
deductions) for the period from the effective date of such termination to July
1, 2009, such amount reduced by and to the extent of any earnings and other
compensation received by Mr. Munyan or accrued for his benefit for his services
(whether as an employee or as an independent contractor) during the period
commencing on the day following the one year anniversary of his termination. If
applicable, the severance benefits would be payable in installments.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CSS Industries, Inc.
(Registrant)
By: /s/ William G. Kiesling
------------------------------------
William G. Kiesling
Vice President and General Counsel
Date: May 12, 2006