CSS INDUSTRIES INC (Form: 10-Q, Received: 02/05/2009 17:17:31)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2008


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-2661

CSS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Delaware		13-1920657

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1845 Walnut Street, Philadelphia, PA		19103

(Address of principal executive offices)		(Zip Code)

(215) 569-9900

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):


Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) o Yes þ No

As of February 2, 2009, there were 9,605,331 shares of common stock outstanding which excludes shares which may still be issued upon exercise of stock options or upon vesting of restricted stock unit grants.

CSS INDUSTRIES, INC. AND SUBSIDIARIES

INDEX


	PAGE NO.
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Consolidated Statements of Operations and Comprehensive Income — Three and nine months ended December 31, 2008 and 2007		3

Condensed Consolidated Balance Sheets — December 31, 2008 and March 31, 2008		4

Consolidated Statements of Cash Flows — Nine months ended December 31, 2008 and 2007		5

Notes to Consolidated Financial Statements		6-14

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15-19

Item 3. Quantitative and Qualitative Disclosures About Market Risk		19

Item 4. Controls and Procedures		19

PART II — OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		20

Item6. Exhibits		21

Signatures		22

Exhibit 10.2
Exhibit 10.3
Exhibit 10.4
Exhibit 10.5
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)


	Three Months Ended						Nine Months Ended
	December 31,						December 31,
(In thousands, except per share data)	2008			2007			2008			2007

SALES	$	197,122		$	222,170		$	425,930		$	441,854


COSTS AND EXPENSES
Cost of sales		147,967			160,788			315,134			320,990
Selling, general and administrative expenses		23,104			25,545			74,218			71,493
Restructuring (income) expense, net		(574	)		105			(275	)		(2	)
Interest expense, net		1,093			810			2,293			720
Other expense (income), net		225			(51	)		195			(452	)


		171,815			187,197			391,565			392,749


INCOME BEFORE INCOME TAXES		25,307			34,973			34,365			49,105

INCOME TAX EXPENSE		8,895			12,119			11,945			17,143


NET INCOME	$	16,412		$	22,854		$	22,420		$	31,962


NET INCOME PER COMMON SHARE
Basic	$	1.69		$	2.12		$	2.24		$	2.95

Diluted	$	1.68		$	2.07		$	2.22		$	2.88


WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		9,734			10,759			10,010			10,833

Diluted		9,796			11,036			10,120			11,115


CASH DIVIDENDS PER SHARE OF COMMON STOCK	$	.15		$	.14		$	.45		$	.42


COMPREHENSIVE INCOME
Net income	$	16,412		$	22,854		$	22,420		$	31,962
Foreign currency translation adjustment		—			1			2			2

Comprehensive income	$	16,412		$	22,855		$	22,422		$	31,964

See notes to consolidated financial statements.

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)


	December 31,		March 31,
(In thousands)	2008		2008
ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	5,492	$	28,109
Accounts receivable, net		145,513		39,144
Inventories		96,303		105,532
Deferred income taxes		5,457		7,276
Assets held for sale		1,363		3,590
Other current assets		12,732		16,242


Total current assets		266,860		199,893


PROPERTY, PLANT AND EQUIPMENT, NET		53,557		50,632


OTHER ASSETS
Goodwill		49,258		48,361
Intangible assets, net		45,011		42,454
Other		4,023		3,701


Total other assets		98,292		94,516


Total assets	$	418,709	$	345,041


LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Notes payable	$	67,400	$	—
Current portion of long-term debt		10,417		10,246
Accrued customer programs		13,061		9,438
Other current liabilities		54,060		44,209


Total current liabilities		144,938		63,893


LONG-TERM DEBT, NET OF CURRENT PORTION		—		10,192


LONG-TERM OBLIGATIONS		4,974		6,121


DEFERRED INCOME TAXES		3,304		2,482


STOCKHOLDERS’ EQUITY		265,493		262,353


Total liabilities and stockholders’ equity	$	418,709	$	345,041

See notes to consolidated financial statements.

CSS INDUSTRIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Nine Months Ended
	December 31,
(In thousands)	2008			2007
Cash flows from operating activities:
Net income	$	22,420		$	31,962

Adjustments to reconcile net income to net cash used for operating activities:
Depreciation and amortization		10,101			9,855
Provision for doubtful accounts		206			20
Deferred tax provision		2,641			1,389
Gain on sale of assets		(771	)		(22	)
Compensation expense related to stock options		2,006			2,110
Changes in assets and liabilities, net of effects from purchase of a business:
Increase in accounts receivable		(105,465	)		(114,239	)
Decrease in inventory		12,751			3,449
Decrease in other assets		3,794			1,707
Increase in other liabilities		14,832			33,770


Total adjustments		(59,905	)		(61,961	)


Net cash used for operating activities		(37,485	)		(29,999	)


Cash flows from investing activities:
Purchase of a business		(10,599	)		(68,000	)
Final payment of purchase price for a business previously acquired		(2,700	)		—
Purchase of property, plant and equipment		(10,731	)		(4,039	)
Proceeds from sale of assets		3,062			80


Net cash used for investing activities		(20,968	)		(71,959	)


Cash flows from financing activities:
Payments on long-term obligations		(10,198	)		(10,088	)
Borrowings on notes payable		489,290			178,400
Repayments on notes payable		(421,890	)		(128,400	)
Payment of financing transaction costs		(621	)		(103	)
Dividends paid		(4,498	)		(4,537	)
Purchase of treasury stock		(16,687	)		(10,762	)
Proceeds from exercise of stock options		433			3,589
Tax benefit realized for stock options exercised		5			658


Net cash provided by financing activities		35,834			28,757


Effect of exchange rate changes on cash		2			2

Net decrease in cash and cash equivalents		(22,617	)		(73,199	)

Cash and cash equivalents at beginning of period		28,109			100,091

Cash and cash equivalents at end of period	$	5,492		$	26,892

See notes to consolidated financial statements.

CSS INDUSTRIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2008
(Unaudited)

(1)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation -

CSS Industries, Inc. (collectively with its subsidiaries, “CSS” or the “Company”) has prepared the consolidated financial statements included herein pursuant to the rules and regulations of the Securities and Exchange Commission. The Company has condensed or omitted certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States pursuant to such rules and regulations. In the opinion of management, the statements include all adjustments (which include normal recurring adjustments) required for a fair presentation of financial position, results of operations and cash flows for the interim periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008. The results of operations for the interim periods are not necessarily indicative of the results for the full year.

Principles of Consolidation -

The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.

Nature of Business -

CSS is a consumer products company primarily engaged in the design, manufacture, procurement, distribution and sale of seasonal and all occasion products, principally to mass market retailers. These products include gift wrap, gift bags, gift boxes, boxed greeting cards, gift tags, decorative tissue paper, decorations, classroom exchange Valentines, decorative ribbons and bows, floral accessories, Halloween masks, costumes, make-up and novelties, Easter egg dyes and novelties, craft and educational products, memory books, stationery, journals, notecards, infant and wedding photo albums and scrapbooks, and other gift items that commemorate life’s celebrations. The seasonal nature of CSS’ business has historically resulted in lower sales levels and operating losses in the first and fourth quarters and comparatively higher sales levels and operating profits in the second and third quarters of the Company’s fiscal year, which ends March 31, thereby causing significant fluctuations in the quarterly results of operations of the Company.

Foreign Currency Translation and Transactions -

Translation adjustments are charged or credited to a separate component of stockholders’ equity. Gains and losses on foreign currency transactions are not material and are included in other expense (income), net in the consolidated statements of operations.

Use of Estimates -

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Judgments and assessments of uncertainties are required in applying the Company’s accounting policies in many areas. Such estimates pertain to the valuation of inventory and accounts receivable, the assessment of the recoverability of goodwill and other intangible assets, income tax accounting, the valuation of share-based awards and resolution of litigation and other proceedings. Actual results could differ from these estimates.

Goodwill -

Goodwill is subject to an assessment for impairment using a two-step fair value-based test, the first step of which must be performed at least annually, or more frequently if events or circumstances indicate that goodwill might be impaired. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. For each of the reporting units, the estimated fair value is determined utilizing a multiple of earnings before interest, income taxes, depreciation and amortization. If the carrying amount of the reporting unit exceeds its fair value, the second step is performed. The second step compares the carrying amount of the goodwill to the implied fair value of the goodwill. If the implied fair value of goodwill is less than the carrying amount of the goodwill, an impairment loss would be recorded.

Inventories -

The Company records inventory when title is transferred, which occurs upon receipt or prior to receipt dependent on supplier shipping terms. The Company adjusts unsaleable and slow-moving inventory to its estimated net realizable value. Substantially all of the Company’s inventories are stated at the lower of first-in, first-out (FIFO) cost or market. The remaining portion of the inventory is valued at the lower of last-in, first-out (LIFO) cost or market. Inventories consisted of the following (in thousands):


	December 31,		March 31,
	2008		2008

Raw material	$	14,550	$	22,836
Work-in-process		20,457		29,827
Finished goods		61,296		52,869

	$	96,303	$	105,532

Assets Held for Sale -

Assets held for sale in the amount of $1,363,000 as of December 31, 2008 represents a former manufacturing facility which the Company is in the process of selling. The Company expects to sell this facility within the next 12 months for an amount greater than the current carrying value. The Company ceased depreciating this facility at the time it was classified as held for sale. Assets held for sale in the amount of $3,590,000 as of March 31, 2008 also included a former manufacturing facility and a distribution facility which the Company sold in the third quarter of fiscal 2009 resulting in a pre-tax gain of approximately $766,000, which is included in restructuring (income) expense, net in the accompanying consolidated statement of operations.

Revenue Recognition -

The Company recognizes revenue from product sales when the goods are shipped, title and risk of loss have been transferred to the customer and collection is reasonably assured. Provisions for returns, allowances, rebates to customers and other adjustments are provided in the same period that the related sales are recorded.

Net Income Per Common Share -

The following table sets forth the computation of basic and diluted net income per common share for the three and nine months ended December 31, 2008 and 2007 (in thousands, except per share data):


	Three Months Ended				Nine Months Ended
	December 31,				December 31,
	2008		2007		2008		2007
Numerator:
Net income	$	16,412	$	22,854	$	22,420	$	31,962


Denominator:
Weighted average shares outstanding for basic income per common share		9,734		10,759		10,010		10,833
Effect of dilutive stock options		62		277		110		282

Adjusted weighted average shares outstanding for diluted income per common share		9,796		11,036		10,120		11,115


Basic net income per common share	$	1.69	$	2.12	$	2.24	$	2.95

Diluted net income per common share	$	1.68	$	2.07	$	2.22	$	2.88

Statements of Cash Flows -

For purposes of the consolidated statements of cash flows, the Company considers all holdings of highly liquid debt instruments with a maturity at time of purchase of three months or less to be cash equivalents.

(2)

STOCK-BASED COMPENSATION:

2004 Equity Compensation Plan

Under the terms of the 2004 Equity Compensation Plan (“2004 Plan”), the Human Resources Committee (“Committee”) of the Board of Directors may grant incentive stock options, non-qualified stock options, restricted stock grants, stock appreciation rights, stock bonuses and other awards to officers and other employees. Grants under the 2004 Plan may be made through August 3, 2014. The term of each grant is at the discretion of the Committee, but in no event greater than ten years from the date of grant. The Committee has discretion to determine the date or dates on which granted options become exercisable. All options outstanding as of December 31, 2008 become exercisable at the rate of 25% per year commencing one year after the date of grant. Performance-vested restricted stock units (“RSUs”) vest on the third anniversary of the date on which the award was granted, provided that certain performance metrics have been met during the performance period, and time-vested RSUs vest at the rate of 50% of the shares underlying the grant on each of the third and fourth anniversaries of the date on which the award was granted. At December 31, 2008, there were 1,149,575 shares available for grant under the 2004 Plan.

2006 Stock Option Plan for Non-Employee Directors

Under the terms of the CSS Industries, Inc. 2006 Stock Option Plan for Non-Employee Directors (“2006 Plan”), non-qualified stock options to purchase up to 200,000 shares of common stock are available for grant to non-employee directors at exercise prices of not less than fair market value of the underlying common stock on the date of grant. Under the 2006 Plan, options to purchase 4,000 shares of the Company’s common stock will be granted automatically to each non-employee director on the last day that the Company’s common stock is traded in each November until 2010. Each option will expire five years after the date the option is granted and commencing one year after the date of grant, options begin vesting and are exercisable at the rate of 25% per year. At December 31, 2008, there were 132,000 shares available for grant under the 2006 Plan.

The fair value of each stock option granted was estimated on the date of grant using the Black-Scholes option pricing model with the following average assumptions:


	For the Nine Months
	Ended December 31,
	2008			2007
Expected dividend yield at time of grant		2.47	%		1.56	%
Expected stock price volatility		37	%		29	%
Risk-free interest rate		3.04	%		4.61	%
Expected life of option (in years)		4.4			4.3

Expected volatilities are based on historical volatility of the Company’s common stock. The expected life of the option is estimated using historical data pertaining to option exercises and employee terminations. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant.

The weighted average fair value of stock options granted during the nine months ended December 31, 2008 and 2007 was $7.08 and $9.76, respectively. The weighted average fair value of restricted stock units granted during the nine months ended December 31, 2008 was $27.28.

As of December 31, 2008, there was $3,386,000 of total unrecognized compensation cost related to non-vested stock option awards granted under the Company’s equity incentive plans which is expected to be recognized over a weighted average period of 2.1 years. As of December 31, 2008, there was $685,000 of total unrecognized compensation cost related to non-vested RSUs granted under the Company’s equity incentive plans which is expected to be recognized over a weighted average period of three years.

Compensation cost related to stock options and RSUs recognized in operating results (included in selling, general and administrative expenses) was $616,000 and $711,000 in the quarters ended December 31, 2008 and 2007, respectively, and was $2,006,000 and $2,110,000 for the nine months ended December 31, 2008 and 2007, respectively.

(3)

DERIVATIVE FINANCIAL INSTRUMENTS:

The Company enters into foreign currency forward contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged transactions. As of December 31, 2008, the notional amount of open foreign currency forward contracts was $7,864,000 and the related unrealized gain was $1,312,000. There were no open foreign currency forward contracts as of March 31, 2008.

(4)

BUSINESS ACQUISITIONS:

On August 5, 2008, a subsidiary of the Company completed the acquisition of substantially all of the business and assets of Hampshire Paper Corp. (“Hampshire Paper”) for approximately $10,250,000 in cash. During the third quarter of fiscal 2009, the Company received cash of approximately $574,000 in satisfaction of a post closing adjustment to the purchase price. Hampshire Paper is a manufacturer and supplier of waxed tissue, paper, foil, and foil decorative packaging to the wholesale floral and horticultural industries. A portion of the purchase price is being held in escrow for certain indemnification obligations. The acquisition was accounted for as a purchase and the excess of cost over fair market value of the net tangible and identifiable intangible assets acquired of $897,000 was recorded as goodwill in the accompanying condensed consolidated balance sheet. For tax purposes, goodwill resulting from this acquisition is deductible.

On December 3, 2007, the Company completed the acquisition of substantially all of the business and assets of C.R. Gibson, Inc. (“C.R. Gibson”), through a newly-formed subsidiary, C.R. Gibson, LLC, for approximately $73,847,000 in cash, including transaction costs of approximately $200,000. In the first quarter of fiscal 2009, $2,700,000 of the purchase price was paid as settlement of an obligation assumed as contemplated in the Asset Purchase Agreement. C.R. Gibson, headquartered in Nashville, Tennessee, is a designer, marketer and distributor of memory books, stationery, journals, notecards, infant and wedding photo albums and scrapbooks, and other gift items that commemorate life’s celebrations. As of December 31, 2008, a portion of the purchase price is being held in escrow for certain indemnification obligations. The acquisition was accounted for as a purchase and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $17,409,000 was recorded as goodwill in the accompanying condensed consolidated balance sheet. For tax purposes, goodwill resulting from this acquisition is deductible.

(5)

BUSINESS RESTRUCTURING:

On January 4, 2008, the Company announced a restructuring plan to close the Company’s Elysburg, Pennsylvania production facilities and its Troy, Pennsylvania distribution facility. This restructuring was undertaken as the Company has increasingly shifted from domestically manufactured to foreign sourced boxed greeting cards and gift tags. Under the restructuring plan, both facilities were closed as of March 31, 2008. As part of the restructuring plan, the Company recorded a restructuring reserve of $628,000, including severance related to 75 employees. Also, in connection with the restructuring plan, the Company recorded an impairment of property, plant and equipment at the affected facilities of $1,222,000, which was included in restructuring expenses in the fourth quarter of fiscal 2008. During the quarter ended December 31, 2008, the Company sold two facilities associated with this restructuring program and recognized a gain of $766,000 related to this sale of assets. During the quarter and nine months ended December 31, 2008, the Company made payments of $348,000 and $654,000, respectively, primarily for costs related to severance. The Company increased the restructuring reserve by $385,000 during the nine months ended December 31, 2008 primarily related to the ratable recognition of retention bonuses for employees providing service until their termination. As of December 31, 2008, the remaining liability of $50,000 was classified as a current liability in the accompanying consolidated balance sheet and will be paid through the first quarter of fiscal 2010. The Company expects to incur additional period expenses related to this restructuring program of approximately $240,000 during the remainder of fiscal 2009 and fiscal 2010.

Selected information relating to the aforementioned restructuring follows (in thousands):


	Termination			Other
	Costs			Costs			Total

Restructuring reserve as of March 31, 2008	$	309		$	10		$	319
Cash paid — fiscal 2009		(654	)		—			(654	)
Charges to expense — fiscal 2009		395			(10	)		385

Restructuring reserve as of December 31, 2008	$	50		$	—		$	50

(6)

GOODWILL AND INTANGIBLES:

The Company performs the required annual impairment test of the carrying amount of goodwill and indefinite-lived intangible assets in the fourth quarter of its fiscal year. As a result of the decrease in the Company’s market capitalization in the third quarter of fiscal 2009, the Company performed an impairment test in the third quarter. Based on this test, the Company concluded that there was no impairment. The Company will continue to monitor compliance with Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” and will perform the required annual test in the fourth quarter.

The change in the carrying amount of goodwill for the nine months ended December 31, 2008 is as follows (in thousands):


Balance as of March 31, 2008	$	48,361
Acquisition of Hampshire Paper		897

Balance as of December 31, 2008	$	49,258

The Company recorded intangible assets with the acquisition of the Hampshire Paper business and finalization of the purchase price. Such intangible assets recorded as of December 31, 2008 include trademarks that are not subject to amortization in the amount of $500,000. Additionally, the Company recorded $2,500,000 relating to customer lists which are being amortized over 14 years, $300,000 relating to trademarks that are being amortized over a weighted-average period of ten years and $60,000 relating to patents that are being amortized over ten years.

Included in intangible assets, net in the accompanying condensed consolidated balance sheets are the following acquired intangible assets (in thousands):


	December 31,		March 31,
	2008		2008

Tradenames	$	23,790	$	23,790
Trademarks, net		1,057		—
Customer relationships, net		19,961		18,480
Non-compete, net		146		184
Patent, net		57		—

	$	45,011	$	42,454

Amortization expense related to intangible assets was $386,000 and $117,000 for the quarters ended December 31, 2008 and 2007, respectively, and was $1,077,000 and $147,000 for the nine months ended December 31, 2008 and 2007, respectively. Based on the current composition of intangibles, amortization expense for the remainder of fiscal 2009 and each of the succeeding four years is projected to be as follows (in thousands):


Fiscal 2009	$	381
Fiscal 2010		1,525
Fiscal 2011		1,525
Fiscal 2012		1,508
Fiscal 2013		1,475

Total	$	6,414

(7)

SHORT TERM CREDIT FACILITIES:

On November 21, 2008, the Company replaced its $50,000,000 revolving credit facility, which was due to expire on April 23, 2009, with a new $110,000,000 revolving credit facility with four banks. This facility expires on November 20, 2011. The loan agreement contains provisions to increase or reduce the interest pricing spread based on a measure of the Company’s leverage. At the Company’s option, interest on the facility currently accrues at the greater of (1) the prime rate (2) the federal funds open rate plus .5%, or (3) LIBOR plus 1.25%. The revolving credit facility provides for commitment fees of .3% per annum on the daily average of the unused commitment, subject to adjustment based on a measure of the Company’s leverage. The loan agreement also contains covenants, the most restrictive of which pertain to the ratio of operating cash flow to fixed charges, the ratio of debt to operating cash flow and limitations on capital expenditures.

On November 21, 2008, the Company also entered into an amendment to decrease its existing $100,000,000 accounts receivable securitization facility to $75,000,000. The funding limit under this facility is $75,000,000 during peak seasonal periods and $25,000,000 during off-peak seasonal periods. This facility is accounted for as a financing transaction on the Company’s consolidated balance sheet, expires on July 25, 2009 and is subject to annual renewal.

(8)

COMMITMENTS AND CONTINGENCIES:

CSS and its subsidiaries are involved in ordinary, routine legal proceedings that are not considered by management to be material. In the opinion of Company counsel and management, the ultimate liabilities resulting from such legal proceedings will not materially affect the consolidated financial position of the Company or its results of operations or cash flows.

(9)

ACCOUNTING PRONOUNCEMENTS:

In October 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position Financial Accounting Standard No. 157-3, “Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active” (“FSP FAS 157-3”), which clarifies application of SFAS No. 157 in a market that is not active. FSP FAS 157-3 was effective upon issuance, including prior periods for which financial statements have not been issued. The adoption of FSP FAS 157-3 had no impact on the Company’s financial position or results of operations.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies, within the accounting literature established by the FASB, the sources and hierarchy of the accounting principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS No. 162 is effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The Company does not believe that the adoption of SFAS No. 162 will have a significant effect on its financial position or results of operations.

In April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3, “Determination of the Useful Life of Intangible Assets.” FSP No. 142-3 amends the factors an entity should consider in developing renewal or extension assumptions used in determining the useful life of recognized intangible assets under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” This new guidance applies prospectively to intangible assets that are acquired individually or with a group of other assets in business combinations and asset acquisitions. FSP No. 142-3 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. Early adoption is prohibited. The Company does not believe that the adoption of FSP No. 142-3 will have a significant effect on its financial position or results of operations.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities.” SFAS No. 161 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company will adopt SFAS No. 161 beginning in the fourth quarter of fiscal 2009. The Company does not believe that the adoption of SFAS No. 161 will have a significant effect on its financial position or results of operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”), which replaces SFAS No. 141. The statement retains the purchase method of accounting for acquisitions, but requires a number of changes, including changes in the way assets and liabilities are recognized in the purchase accounting. It also changes the recognition of assets acquired and liabilities assumed arising from contingencies, requires the capitalization of in-process research and development at fair value, and requires the expensing of acquisition-related costs as incurred. SFAS No. 141R is effective for fiscal year beginning after December 15, 2008 (fiscal 2010 for the Company) and will apply prospectively to business combinations completed on or after April 1, 2009.

In March 2007, the FASB ratified Emerging Issues Task Force Issue No. 06-10 “Accounting for Collateral Assignment Split-Dollar Life Insurance Agreements” (EITF 06-10). EITF 06-10 provides guidance for determining a liability for the postretirement benefit obligation as well as recognition and measurement of the associated asset on the basis of the terms of the collateral assignment agreement. EITF 06-10 is effective for fiscal years beginning after December 15, 2007. As previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008, the Company adopted EITF 06-10 on April 1, 2008 through a cumulative effect of an accounting change which resulted in a reduction to equity of $566,000. The Company does not expect that EITF 06-10 will have a significant impact on future results.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” SFAS No. 159 permits companies to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing companies with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Company adopted SFAS No. 159 on April 1, 2008 and it did not have an effect on its consolidated financial position or results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosure about such fair value measurements. In February 2008, the FASB issued SFAS No. 157-2, “Effective Date of FASB Statement No. 157,” which amends SFAS No. 157 by delaying its effective date by one year (until April 1, 2009 for the Company) for non-financial assets and non-financial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company adopted SFAS No. 157 for financial assets and liabilities on April 1, 2008. There was no impact to the Company’s consolidated financial statements upon adoption of SFAS No. 157. See Note 10 for further discussion of the adoption of this Statement. The Company is currently evaluating the impact of adopting the provisions of SFAS No. 157 for non-financial assets and non-financial liabilities.

(10)

FAIR VALUE MEASUREMENTS:

The Company adopted the provisions of SFAS No. 157 on April 1, 2008. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers or sellers in the principle or most advantageous market for the asset or liability that are independent of the reporting entity, knowledgeable and able and willing to transact for the asset or liability. There was no impact to the Company’s condensed consolidated financial statements upon adoption of SFAS No. 157.

In accordance with SFAS No. 157, the Company has categorized its financial assets and liabilities, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial assets and liabilities fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

The Company’s recurring assets and liabilities recorded on the condensed consolidated balance sheet are categorized based on the inputs to the valuation techniques as follows:

Level 1 — Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that the Company has the ability to access.

Level 2 — Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Examples of Level 2 inputs include quoted prices for identical or similar assets or liabilities in non-active markets and pricing models whose inputs are observable for substantially the full term of the asset or liability.

Level 3 — Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

The following table presents the Company’s fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis in its condensed consolidated balance sheet as of December 31, 2008.


			Quoted Prices
			In Active		Significant
			Markets for		Other		Significant
			Identical		Observable		Unobservable
	December 31,		Assets		Inputs		Inputs
(in thousands)	2008		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities	$	691	$	691	$	—	$	—
Cash surrender value of life insurance policies		839		—		839		—
Foreign exchange contracts		20		—		20		—

Total assets	$	1,550	$	691	$	859	$	—

Liabilities
Deferred compensation plans	$	691	$	691	$	—	$	—

Total liabilities	$	691	$	691	$	—	$	—

CSS INDUSTRIES, INC. AND SUBSIDIARIES

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

STRATEGIC OVERVIEW

Approximately 70% of the Company’s sales are attributable to seasonal (Christmas, Valentine’s Day, Easter and Halloween) products, with the remainder attributable to everyday products. Seasonal products are sold primarily to mass market retailers, and the Company has relatively high market shares in many of these categories. Most of these markets have shown little or no growth in recent years, and the Company continues to confront significant price pressure as its competitors source certain products from overseas and its customers increase direct sourcing from overseas factories. Increasing customer concentration has augmented their bargaining power, which has also contributed to price pressure. In the Company’s current fiscal year, the Company experienced lower sales in its gift wrap, gift tissue and gift bag lines. In addition, many of our mass market customers reduced purchases for Christmas 2008 due to poor sales of seasonal products at store level in the prior calendar year. Both seasonal and all occasion sales declines were further exacerbated as the current economic downturn deepened in the fall of calendar 2008.

The Company has taken several measures to respond to sales volume, cost and price pressures. The Company believes it has strengthened its core Christmas product offerings for the upcoming 2009 Christmas selling season with new and innovative designs and licenses. In addition, we are pursuing new product initiatives related to seasonal, craft and everyday products, including new licensed and non-licensed product offerings. CSS continually invests in product and packaging design and product knowledge to assure it can continue to provide unique added value to its customers. In addition, CSS maintains an office and showroom in Hong Kong to be able to provide alternatively sourced products at competitive prices. CSS continually evaluates the efficiency and productivity in its North American production and distribution facilities and of its back office operations to maintain its competitiveness domestically. In the last five fiscal years, the Company has closed five manufacturing plants and five warehouses totaling 1,209,000 square feet. Additionally, in fiscal 2007 the Company combined the management and back office support for its Memphis, Tennessee based Cleo gift wrap operation into its Berwick Offray ribbon and bow subsidiary. This action enhanced administrative efficiencies and provided incremental penetration of gift packaging products into broader everyday channels of distribution.

The Company’s everyday craft, trim-a-package, stationery and memory product lines have higher inherent growth potential due to higher market growth rates. Further, the Company’s everyday craft, trim-a-package, stationery and floral product lines have higher inherent growth potential due to CSS’ relatively low current market share. The Company continues to pursue sales growth in these and other areas.

Historically, growth at CSS has come through acquisitions. Management anticipates that it will continue to utilize acquisitions to stimulate further growth.

On December 3, 2007, the Company completed the acquisition of substantially all of the business and assets of C.R. Gibson, which is a designer, marketer and distributor of memory books, stationery, journals and notecards, infant and wedding photo albums and scrapbooks, and other gift items that commemorate life’s celebrations. In consideration, the Company paid approximately $73,847,000 in cash, including transaction costs of approximately $200,000. A portion of the purchase price is being held in escrow for certain indemnification obligations. The acquisition was accounted for as a purchase and the excess of cost over the fair market value of the net tangible and identifiable intangible assets acquired of $17,409,000 was recorded as goodwill in the accompanying condensed consolidated balance sheet.

LITIGATION

CRITICAL ACCOUNTING POLICIES

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The significant accounting policies of the Company are described in the notes to the consolidated financial statements included in the Annual Report on Form 10-K for the fiscal year ended March 31, 2008. Judgments and estimates of uncertainties are required in applying the Company’s accounting policies in many areas. Following are some of the areas requiring significant judgments and estimates: revenue; cash flow and valuation assumptions in performing asset impairment tests of long-lived assets and goodwill; valuation reserves for inventory and accounts receivable; income tax accounting; the valuation of share-based awards and resolution of litigation and other proceedings. There have been no material changes to the critical accounting policies affecting the application of those accounting policies as noted in the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008.

RESULTS OF OPERATIONS

Seasonality

The seasonal nature of CSS’ business has historically resulted in lower sales levels and operating losses in the first and fourth quarters and comparatively higher sales levels and operating profits in the second and third quarters of the Company’s fiscal year, which ends March 31, thereby causing significant fluctuations in the quarterly results of operations of the Company.

Nine Months Ended December 31, 2008 Compared to Nine Months Ended December 31, 2007

Sales for the nine months ended December 31, 2008 decreased 4% to $425,930,000 from $441,854,000 in 2007 primarily due to reduced sales of Christmas gift wrap, gift tissue and gift bags. In addition, the current poor economic environment has resulted in reduced buying patterns, product returns and order cancellations of both the Company’s seasonal and all occasion products. Partially offsetting the sales decline were sales of acquired businesses, primarily C.R. Gibson, which was acquired on December 3, 2007.

Cost of sales, as a percentage of sales, was 74% in 2008 and 73% in 2007 as higher margin sales of C.R Gibson in the current year were substantially offset by higher material costs and plant inefficiencies compared to the same period in the prior year.

Selling, general and administrative (“SG&A”) expenses increased $2,725,000, or 4%, over the prior year period. The increase was primarily due to incremental costs of C.R. Gibson, partially offset by lower incentive compensation and employee benefit expenses.

Restructuring income of $275,000 in 2008 was favorable compared to restructuring income of $2,000 in 2007 due to the gain on the sale of a manufacturing facility and a distribution facility in fiscal 2009 which were part of the restructuring program related to the closure of three Pennsylvania-based facilities announced in January 2008, partially offset by restructuring expenses incurred during fiscal 2009 related to this same program.

Interest expense, net was $2,293,000 in 2008 and $720,000 in 2007. The increase in interest expense was substantially due to increased borrowings during the nine months ended December 31, 2008 compared to the same period in the prior year, primarily as a result of cash utilized to purchase C.R. Gibson on December 3, 2007 and Hampshire Paper on August 5, 2008, and repurchases of the Company’s common stock, net of cash generated from operations.

Income taxes, as a percentage of income before taxes, were 35% in 2008 and 2007.

Net income for the nine months ended December 31, 2008 was $22,420,000, or $2.22 per diluted share compared to $31,962,000, or $2.88 per diluted share in 2007. The reduction in net income was primarily the result of reduced sales volume, higher material costs, plant inefficiencies and higher interest expense, net of income contributed by acquired businesses. The decline in diluted earnings per share of 23% for the nine months ended December 31, 2008 was more favorable than the decline in net income due to the repurchase of stock during fiscal 2009.

Three Months Ended December 31, 2008 Compared to Three Months Ended December 31, 2007

Sales for the three months ended December 31, 2008 decreased 11% to $197,122,000 from $222,170,000 in 2007 primarily due to reduced sales of Christmas gift wrap, gift tissue and gift bags. In addition, the current poor economic environment has resulted in reduced buying patterns, product returns and order cancellations of both the Company’s seasonal and all occasion products. Partially offsetting the sales decline were sales of acquired businesses, primarily C.R. Gibson, which was acquired on December 3, 2007.

Cost of sales, as a percentage of sales, was 75% in 2008 and 72% in 2007. The increase in cost of sales was primarily due to higher material costs and plant inefficiencies compared to the same quarter in the prior year.

SG&A expenses decreased $2,441,000, or 10%, over the prior year period. The decrease was primarily due to lower incentive compensation and employee benefit expenses, partially offset by incremental costs of C.R. Gibson.

Restructuring income of $574,000 in 2008 was favorable compared to restructuring expense of $105,000 in 2007 due to the gain on the sale of a manufacturing facility and a distribution facility in the third quarter of fiscal 2009 which were part of the restructuring program related to the closure of three Pennsylvania-based facilities announced in January 2008, partially offset by restructuring expenses incurred during fiscal 2009 related to this same program.

Interest expense, net of $1,093,000 in 2008 increased over interest expense, net of $810,000 in 2007 due to higher borrowing levels during the quarter compared to the same quarter in the prior year, primarily as a result of cash utilized to purchase C.R. Gibson on December 3, 2007 and Hampshire Paper on August 5, 2008, and repurchases of the Company’s common stock, net of cash generated from operations.

Income taxes, as a percentage of income before taxes, were 35% in 2008 and 2007.

Net income for the three months ended December 31, 2008 was $16,412,000, or $1.68 per diluted share, compared to $22,854,000, or $2.07 per diluted share in 2007. The reduction in net income was primarily the result of reduced sales volume, higher material costs, plant inefficiencies and higher interest expense, net of income contributed by acquired businesses. The decline in diluted earnings per share of 19% for the quarter ended December 31, 2008 was more favorable than the decline in net income due to the repurchase of stock during fiscal 2009.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2008, the Company had working capital of $121,922,000 and stockholders’ equity of $265,493,000. The increase in accounts receivable from March 31, 2008 primarily reflected seasonal billings of current year Halloween and Christmas accounts receivables, net of current year collections. The decrease in inventories reflects the normal seasonal shipments during the fiscal 2009 shipping season. The decrease in assets held for sale was attributable to the sale of a manufacturing facility and a distribution facility in the third quarter of fiscal 2009. The increase in property, plant and equipment, net was primarily due to costs incurred for the enterprise resource planning system integration project announced in October 2007. The increase in goodwill and intangibles, net was due to the acquisition of the Hampshire Paper business as more fully described in Note 4. The increase in other current liabilities was primarily due to higher accounts payable and increased accruals for income taxes, sales commissions and royalties, partially offset by lower accrued employee benefits. The increase in stockholders’ equity was primarily attributable to year-to-date net income, partially offset by treasury share repurchases and payments of cash dividends.

The Company relies primarily on cash generated from its operations and seasonal borrowings to meet its liquidity requirements. Historically, a significant portion of the Company’s revenues have been seasonal with approximately 80% of sales recognized in the second and third quarters. As payment for sales of Christmas related products is usually not received until just before or just after the holiday selling season in accordance with general industry practice, short-term borrowing needs increase throughout the second and third quarters, peaking prior to Christmas and dropping thereafter. As further described in Note 7, seasonal financing requirements are met under a $110,000,000 revolving credit facility with four banks and an accounts receivable securitization facility with an issuer of receivables-backed commercial paper. This facility has a funding limit of $75,000,000 during peak seasonal periods and $25,000,000 during off-peak seasonal periods. In addition, the Company has outstanding $10,000,000 of 4.48% senior notes due in December 2009. These financing facilities are available to fund the Company’s seasonal borrowing needs and to provide the Company with sources of capital for general corporate purposes, including acquisitions as permitted under the revolving credit facility. At December 31, 2008, there was $10,000,000 of borrowings outstanding related to the senior notes and $67,400,000 outstanding under the Company’s short-term credit facilities. In addition, the Company has less than $500,000 of capital leases outstanding. Based on its current operating plan, the Company believes its sources of available capital are adequate to meet its future cash needs for at least the next 12 months.

As of December 31, 2008, the Company’s letter of credit commitments are as follows (in thousands):


	Less than 1		1-3		4-5		After 5
	Year		Years		Years		Years		Total
Letters of credit	$	4,523		—		—		—	$	4,523

The Company has a reimbursement obligation with respect to stand-by letters of credit that guarantee the funding of workers compensation claims and guarantee the funding of obligations to certain vendors. The Company has no financial guarantees with any third parties or related parties other than its subsidiaries.

As of December 31, 2008, the Company is committed to purchase approximately $1,200,000 of certain paper raw material products from a vendor over a one year term. The Company believes the minimum product purchases under this agreement are well within the Company’s annual product requirements.

In the ordinary course of business, the Company enters into arrangements with vendors to purchase merchandise in advance of expected delivery. These purchase orders do not contain any significant termination payments or other penalties if cancelled.

LABOR RELATIONS

With the exception of the bargaining units at the gift wrap facilities in Memphis, Tennessee and the ribbon manufacturing facilities in Hagerstown, Maryland, which totaled approximately 700 employees as of December 31, 2008, CSS employees are not represented by labor unions. Because of the seasonal nature of certain of its businesses, the number of production employees fluctuates during the year. The collective bargaining agreement with the labor union representing Cleo’s production and maintenance employees at the Cleo gift wrap plant and warehouses in Memphis, Tennessee remains in effect until December 31, 2010. The collective bargaining agreement with the labor union representing the Hagerstown-based production and maintenance employees remains in effect until December 31, 2009.

ACCOUNTING PRONOUNCEMENTS

See Note 9 to the Condensed Consolidated Financial Statements for information concerning recent accounting pronouncements and the impact of those standards.

FORWARD-LOOKING STATEMENTS

This report includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, including, among others, statements relating to expected future costs of the Company’s restructuring plan involving the closure of its facilities in Elysburg, Pennsylvania and Troy, Pennsylvania; continued use of acquisitions to stimulate further growth; the expected future impact of legal proceedings and changes in accounting principles; and the anticipated effects of measures taken by the Company to respond to cost and price pressures. Forward-looking statements are based on the beliefs of the Company’s management as well as assumptions made by and information currently available to the Company’s management as to future events and financial performance with respect to the Company’s operations. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to update any forward-looking statements to reflect the events or circumstances arising after the date as of which they were made. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including without limitation, general market and economic conditions; increased competition; increased operating costs, including labor-related and energy costs and costs relating to the imposition or retrospective application of duties on imported products; currency risks and other risks associated with international markets; risks associated with acquisitions, including acquisition integration costs and the risk that the Company may not be able to integrate and derive the expected benefits from such acquisitions; risks associated with the restructuring plan to close the Company’s facilities in Elysburg, Pennsylvania and Troy, Pennsylvania, including the risk that the restructuring related savings may be less than and/or costs may exceed the presently expected amounts and the risk that the closures will adversely affect the Company’s ability to fulfill its customers orders on time; risks associated with the Company’s enterprise resource planning systems standardization project, including the risk that the cost of the project will exceed expectations, the risk that the expected benefits of the project will not be realized and the risk that implementation of the project will interfere with and adversely affect the Company’s operations and financial performance; the risk that customers may become insolvent, may delay payments or may impose deductions or penalties on amounts owed to the Company; costs of compliance with governmental regulations and government investigations; liability associated with non-compliance with governmental regulations, including regulations pertaining to the environment, Federal and state employment laws, and import and export controls and customs laws; and other factors described more fully in the Company’s annual report on Form 10-K for the fiscal year ended March 31, 2008 and elsewhere in the Company’s filings with the Securities and Exchange Commission. As a result of these factors, readers are cautioned not to place undue reliance on any forward-looking statements included herein or that may be made elsewhere from time to time by, or on behalf of, the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to the impact of interest rate changes and manages this exposure through the use of variable-rate and fixed-rate debt. The Company is also exposed to foreign currency fluctuations which it manages by entering into foreign currency forward contracts to hedge the majority of firmly committed transactions and related receivables that are denominated in a foreign currency. The Company does not enter into contracts for trading purposes and does not use leveraged instruments. The market risks associated with debt obligations and other significant instruments as of December 31, 2008 have not materially changed from March 31, 2008 (see Item 7A of the Company’s Annual Report on Form 10-K for the fiscal year ended March 31, 2008).

ITEM 4. CONTROLS AND PROCEDURES

(a)		Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, the Company’s management, with the participation of the Company’s President and Chief Executive Officer and Vice President — Finance and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures in accordance with Rule 13a-15 of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, the President and Chief Executive Officer and Vice President — Finance and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed by the Company in reports that it files under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

(b)		Changes in Internal Controls . There was no change in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) as promulgated by the Securities and Exchange Commission under the Exchange Act) during the third quarter of fiscal year 2009 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

CSS INDUSTRIES, INC. AND SUBSIDIARIES

PART II — OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

On November 21, 2008, CSS issued 6,000 shares of its common stock ($.10 par value) to a member of the Board of Directors of CSS, upon such director’s exercise of stock options previously granted to such director pursuant to CSS’ 1995 Stock Option Plan for Non-Employee Directors (the “1995 Plan”). The aggregate purchase price for these 6,000 shares of CSS common stock was $118,260, which was paid in cash.

On November 30, 2008, CSS issued options to purchase 24,000 shares of its common stock ($.10 par value) to the non-employee members of the Board of Directors of CSS pursuant to CSS’ 2006 Stock Option Plan for Non-Employee Directors (the “2006 Plan”). The 2006 Plan provides for the automatic issuance of an option to purchase 4,000 shares of CSS common stock to each non-employee director of CSS on the last trading day of November of each year from 2006 to 2010. In accordance with the automatic grant provisions of the 2006 Plan, each of the options granted on November 30, 2008: (i) has an exercise price of $22.80 per share, the closing price for shares of CSS common stock on the date of the grant; (ii) becomes exercisable in four equal installments, commencing on the first anniversary of the date of grant and annually thereafter; and (iii) expires five years after the date of grant. No consideration is required to be paid to the Company in connection with the issuance of options under the 2006 Plan, and none was received.

The options granted pursuant to the 1995 Plan and the 2006 Plan were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and the shares of CSS common stock issued upon exercise of the aforementioned options issued under the 1995 Plan were not registered under the Securities Act. CSS believes that the issuance of the options, and the issuance of the aforementioned shares of CSS common stock in connection with the exercise of options, was exempt from registration under (a) Section 4(2) of the Securities Act as transactions not involving any public offering and such securities having been acquired for investment and not with a view to distribution, or (b) Rule 701 under the Securities Act as transactions made pursuant to a written compensatory benefit plan or pursuant to a written contract relating to compensation. All recipients had adequate access to information about CSS. CSS did not engage an underwriter in connection with the foregoing stock option grants and stock issuances.

Share Repurchase Program

A total of 321,400 shares were repurchased at an average price of $22.52 in the third quarter of fiscal 2009. As of December 31, 2008, there remained an outstanding authorization to repurchase 313,000 shares of outstanding CSS common stock as represented in the table below.


							Maximum
					Total Number of		Number of Shares
	Total Number				Shares Purchased as		that May Yet Be
	of Shares		Average Price		Part of Publicly		Purchased Under
	Purchased ⁽¹⁾		Paid Per Share		Announced Program ⁽²⁾		the Program ⁽²⁾

October 1 through October 31, 2008		152,000	$	22.85		152,000		482,400
November 1 through November 30, 2008		77,400		21.90		77,400		405,000
December 1 through December 31, 2008		92,000		21.53		92,000		313,000

Total Third Quarter		321,400	$	22.52		321,400		313,000


(1)		All share repurchases were effected in open-market transactions and in accordance with the safe harbor provisions of Rule 10b-18 of the Exchange Act.

(2)		On May 29, 2008, the Company announced that its Board of Directors had authorized the repurchase of up to 500,000 shares of the Company’s common stock (the “Repurchase Program”). As of October 23, 2008, the Company had repurchased the available shares remaining under the Repurchase Program and on that date the Company announced that its Board of Directors had authorized the repurchase of up to an additional 500,000 shares of the Company’s common stock. As of December 31, 2008, the Company repurchased an aggregate of 687,000 shares pursuant to these Repurchase Programs. An expiration date has not been established for the Repurchase Program.

Item 6. Exhibits


Exhibit 10.1		Second Amended and Restated Loan Agreement dated November 21, 2008 among CSS Industries, Inc., the lenders party thereto and PNC Bank, National Association, as Administrative agent for the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 21, 2008).

Exhibit 10.2		Sixth Amendment to Receivables Purchase Agreement dated November 21, 2008.

Exhibit 10.3		Amendment dated December 26, 2008 to Employment Agreement between CSS Industries, Inc. and Christopher J. Munyan.

Exhibit 10.4		CSS Industries, Inc. Severance Pay Plan for Senior Management and Summary Plan Description (Amended and Restated as of December 29, 2008).

Exhibit 10.5		Nonqualified Supplemental Executive Retirement Plan Covering Officer-Employees of CSS Industries, Inc. and its Subsidiaries (Amended and Restated, Effective as of January 1, 2009).

Exhibit 31.1		Certification of the Chief Executive Officer of CSS Industries, Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

Exhibit 31.2		Certification of the Chief Financial Officer of CSS Industries, Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

Exhibit 32.1		Certification of the Chief Executive Officer of CSS Industries, Inc. required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U. S. C. Section 1350.

Exhibit 32.2		Certification of the Chief Financial Officer of CSS Industries, Inc. required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U. S. C. Section 1350.

SIGNATURES

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 thereunto duly authorized.


	CSS INDUSTRIES, INC. (Registrant)
Date: February 5, 2009	By:	/s/ Christopher J. Munyan
		Christopher J. Munyan
		President and Chief Executive Officer (principal executive officer)

Date: February 5, 2009	By:	/s/ Clifford E. Pietrafitta
		Clifford E. Pietrafitta
		Vice President — Finance and Chief Financial Officer (principal financial and accounting officer)

EXHIBIT INDEX


Exhibit
Number		Description

Exhibit 10.2		Sixth Amendment to Receivables Purchase Agreement dated November 21, 2008.

Exhibit 10.3		Amendment dated December 26, 2008 to Employment Agreement between CSS Industries, Inc. and Christopher J. Munyan.

Exhibit 10.4		CSS Industries, Inc. Severance Pay Plan for Senior Management and Summary Plan Description (Amended and Restated as of December 29, 2008).

Exhibit 10.5		Nonqualified Supplemental Executive Retirement Plan Covering Officer-Employees of CSS Industries, Inc. and its Subsidiaries (Amended and Restated, Effective as of January 1, 2009).

Exhibit 31.1		Certification of the Chief Executive Officer of CSS Industries, Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

Exhibit 31.2		Certification of the Chief Financial Officer of CSS Industries, Inc. required by Rule 13a-14(a) under the Securities Exchange Act of 1934.

Exhibit 32.1		Certification of the Chief Executive Officer of CSS Industries, Inc. required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U. S. C. Section 1350.

Exhibit 32.2		Certification of the Chief Financial Officer of CSS Industries, Inc. required by Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U. S. C. Section 1350.

EXECUTION COPY

Exhibit 10.2

SIXTH AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT

This SIXTH AMENDMENT (this “ Amendment ”), dated as of November 21, 2008, is among CSS FUNDING LLC, a Delaware limited liability company, as seller (the “ Seller ”), CSS INDUSTRIES, INC., a Delaware corporation (“ CSS ”), as initial servicer (in such capacity, together with its successors and permitted assigns in such capacity, the “ Servicer ”), the Sub-Servicers party hereto, MARKET STREET FUNDING LLC (f/k/a Market Street Funding Corporation), a Delaware limited liability company (together with its successors and permitted assigns, the “ Issuer ”), and PNC BANK, NATIONAL ASSOCIATION, a national banking association (“ PNC ”), as administrator (in such capacity, together with its successors and assigns in such capacity, the “ Administrator ”).

RECITALS

1. The Seller, the Servicer, the Issuer and the Administrator are parties to the Receivables Purchase Agreement, dated as of April 30, 2001 (as amended, supplemented or otherwise modified from time to time, the “ Agreement ”).

2. The Seller, the Servicer, the Issuer and the Administrator desire to amend the Agreement as hereinafter set forth.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION 1. Amendment to the Agreement .

1.1 The definition of “Purchase Limit” set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows:

“Purchase Limit” means (a) $75,000,000 for the period from July 27 of each year from 2008 through January 31 of each such following year and (b) for the period from February 1 of each year from 2009 through July 26 of each such year, $25,000,000, in each case as such amount may be reduced pursuant to Section 1.1(b) of the Agreement (it being understood that for the period from July 27, 2008 through November 20, 2008, the amount set forth in clause (a) above was $100,000,000). References to the unused portion of the Purchase Limit shall mean, at any time, the Purchase Limit minus the then outstanding Capital.

SECTION 2. Conditions to Effectiveness .

This Amendment shall become effective as of November 21, 2008, provided that the Facility Termination Date or a Termination Event or Unmatured Termination Event has not occurred and subject to the condition precedent that the Administrator shall have received the following, each duly executed and dated as of the date hereof (or such other date satisfactory to the Administrator), in form and substance satisfactory to the Administrator:

(a) counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the parties hereto; and

(b) such other documents and instruments as the Administrator may reasonably request.

SECTION 3. Representations and Warranties; Covenants .

Each of the Seller, the Servicer and each Sub-Servicer, as applicable, hereby represents and warrants to the Issuer and the Administrator as follows:

(a) Representations and Warranties . The representations and warranties contained in Exhibit III of the Agreement are true and correct as of the date hereof (unless stated to relate solely to an earlier date, in which case such representations or warranties were true and correct as of such earlier date).

(b) Enforceability . The execution and delivery by each of the Seller, the Servicer and each Sub-Servicer of this Amendment, and the performance of each of its obligations under this Amendment and the Agreement, as amended hereby, are within each of its organizational powers and have been duly authorized by all necessary action on each of its parts. This Amendment and the Agreement, as amended hereby, are each of the Seller’s, the Servicer’s and each Sub-Servicer’s valid and legally binding obligations, enforceable in accordance with its terms.

(c) No Default . Immediately after giving effect to this Amendment and the transactions contemplated hereby, no Termination Event or Unmatured Termination Event exists or shall exist.

SECTION 4. Effect of Amendment; Ratification . Except as specifically amended hereby, the Agreement is hereby ratified and confirmed in all respects, and all of its provisions shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement (or in any other Transaction Document) to “the Receivables Purchase Agreement”, “this Agreement”, “hereof”, “herein”, or words of similar effect, in each case referring to the Agreement, shall be deemed to be references to the Agreement as amended hereby. This Amendment shall not be deemed to expressly or impliedly waive, amend, or supplement any provision of the Agreement other than as specifically set forth herein.

SECTION 5. Counterparts . This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

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SECTION 6. Governing Law . This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New York without regard to any otherwise applicable conflicts of law principles (other than Sections 5-1401 and 5-1402 of the New York General Obligations Laws).

SECTION 7. Section Headings . The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or interpretation of this Amendment or the Agreement or any provision hereof or thereof.

SECTION 8. Successors and Assigns . This Amendment shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns.

[SIGNATURE PAGES TO FOLLOW]

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IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.


		CSS FUNDING LLC

		By:

				Name:

				Title:


		CSS INDUSTRIES, INC.

		By:

				Name:

				Title:


		BERWICK OFFRAY LLC (f/k/a Berwick Industries LLC), as a Subservicer

		By:

				Name:

				Title:


		CLEO INC, as a Subservicer

		By:

				Name:

				Title:


		LION RIBBON COMPANY, INC., as a Subservicer

		By:

				Name:

				Title:


		PAPER MAGIC GROUP, INC. (f/k/a The Paper Magic Group, Inc.), as a Subservicer

		By:

				Name:

				Title:


		MARKET STREET FUNDING LLC

		By:

				Name:

				Title:


		PNC BANK, NATIONAL ASSOCIATION, as Administrator

		By:

				Name:

				Title:

Exhibit 10.3

AMENDMENT TO EMPLOYMENT AGREEMENT

This AMENDMENT TO EMPLOYMENT AGREEMENT (the “Amendment”), dated as of December 26, 2008, amends that certain employment agreement, dated May 12, 2006 and as amended as of September 5, 2008 (the “Employment Agreement”), between CSS Industries, Inc., a Delaware corporation (“CSS”), and Christopher J. Munyan (“Executive”).

WHEREAS, CSS and the Executive desire to amend the Employment Agreement so that it complies with the requirements of section 409A of the Internal Revenue Code of 1986, as amended;

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto, intending to be legally bound, agree as follows:

1. Amendment and Restatement of the Last Sentence of the Second Paragraph of Section 4. The parties acknowledge and agree that the last sentence of the second paragraph of Section 4 of the Employment Agreement shall be deleted in its entirety and replaced with the following:

If you are eligible to receive the foregoing payment, such amount will be paid to you in equal installments, with such installments being paid on the then-applicable paydays for CSS executives over the designated period, commencing within sixty (60) days following your termination date, unless delay is required as described in Section 10(b) herein.

2. Miscellaneous . Except as expressly modified hereby, the Employment Agreement remains in full force and effect. Upon the execution and delivery hereof, the Employment Agreement shall thereupon be deemed to be amended as hereinabove set forth, and this Amendment and the Employment Agreement shall henceforth be read, taken and construed as one and the same instrument. This Amendment may be executed in counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to the other party.

IN WITNESS WHEREOF, this Amendment has been executed by CSS and by the Executive as of the date first above written.


	CSS INDUSTRIES, INC. (“CSS”)
	By:	/s/ Jack Farber
		Jack Farber
		Chairman of the Board of Directors

	/s/ Christopher J. Munyan
	Christopher J. Munyan (“Executive”)

Exhibit 10.4

Revised: 12/29/2008

CSS INDUSTRIES, INC.
SEVERANCE PAY PLAN
FOR SENIOR MANAGEMENT
AND
SUMMARY PLAN DESCRIPTION

Amended and Restated Effective December 29, 2008

INTRODUCTION

The purpose of the CSS Industries, Inc. Severance Pay Plan for Senior Management (the “Plan”) is to provide payments on a discretionary basis to certain key employees of CSS Industries, Inc. (“CSS”) and its subsidiaries whose employment is terminated for a reason covered by the Plan. This document is designed to serve as both the Plan document and the summary plan description for the Plan. The legal rights and obligations of any person having an interest in the Plan are determined solely by the provisions of the Plan.

The Plan is intended to alleviate some of the financial hardship that eligible employees may experience when their employment is terminated. In essence, benefits under the Plan are intended to be supplemental unemployment benefits. The benefits under the Plan are not intended as deferred compensation and no individual shall have a vested right in such benefits.

CSS, as the Plan sponsor, has the sole discretion to determine whether an employee may be considered eligible for benefits under the Plan. All actions taken by CSS shall be in its role as the sponsor of the Plan, and not as a fiduciary. Nothing in the Plan will be construed to give any employee the right to receive severance payments or to continue in the employment of CSS and any of its subsidiaries. The Plan is unfunded, has no trustee, and is administered by the Plan Administrator. The Plan is intended to be an “employee welfare benefit plan” within the meaning of section 3(1) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and 29 C.F.R. § 2510.3-2(b) and is to be administered as a “top hat” welfare plan exempt from the substantive requirements of ERISA. Please review the section entitled “Amendment and Termination of the Plan” regarding CSS’ reservation of future rights.

The Plan was originally effective as of October 9, 2006 with respect to terminations occurring on or after October 9, 2006. The Plan is amended and restated effective as of December 29, 2008, in order to comply with the requirements of Section 409A of the Code and the final regulations promulgated thereunder, and applies with respect to terminations occurring on or after December 29, 2008. The Plan, in the form set forth herein, supersedes all prior severance pay plans, policies, agreements or practices, whether formal or informal, written or unwritten, of CSS and its subsidiaries under which CSS or any of its subsidiaries provided severance benefits prior to the effective date of this Plan, with the exception of any individual employment contract that contains a severance pay provision that provides severance in excess of the amount an employee would be eligible to receive under this Plan. The Plan will continue until terminated as provided herein.

GENERAL INFORMATION

1.		Plan Name: CSS Industries, Inc. Severance Pay Plan for Senior Management

2.		Plan Number: 506


3.	Plan Sponsor:	CSS Industries, Inc.
		1845 Walnut Street, Suite 800
		Philadelphia, PA 19103

Employer Identification Number: 13-1920657

Type of Plan: Welfare Benefit – Severance Pay Plan


6.	Plan Administrator:	Severance Plan Administrative Committee
		CSS Industries, Inc.
		1845 Walnut Street, Suite 800
		Philadelphia, PA 19103

Agent for Service of Legal Process: The Plan Administrator at the address above.

Sources of Contributions: The Plan is unfunded and CSS and the Participating Subsidiaries pay the cost of coverage from their assets.

Type of Administration: The Plan is administered by the Plan Administrator with benefits provided in accordance with the provisions of this Plan document.

10.

Recordkeeping: The Plan and its records are kept on a fiscal year basis, April 1 through March 31.

11.

Participating Subsidiaries: The subsidiaries and affiliates of CSS that participate in the Plan are identified in the attached Exhibit B .

DEFINITIONS

Cause : Except to the extent otherwise specified by CSS, a finding by the Employer that you have: (i) violated your Employer’s Code of Ethics Policy; (ii) violated the CSS Anti-Harassment Policy; (iii) violated your Employer’s Drug-Free Workplace Act Policy; (iv) committed insubordination; (v) abused other employees; (vi) engaged in theft; (vii) engaged in dishonesty; (viii) engaged in actions of a criminal nature; (ix) willfully neglected job responsibilities; (x) violated any other CSS or Employer policy; (xi) demonstrated significantly deficient job performance that is a willful failure by you to improve your performance despite communication(s) by your Employer regarding the performance improvement required by the otherwise eligible employees; (xii) committed other act(s) detrimental to your Employer, its parent or subsidiaries, its employees, and/or its customers; or (xiii) engage in or become concerned with, either on your own behalf or on behalf of any other person, firm, or corporation, any business or activity which is the same, similar to, or competitive with that conducted by, engaged in, or developed for later implementation by the Employer.

Code : Internal Revenue Code of 1986, as amended.

Committee : The Human Resources Committee of the Board of Directors of CSS.

Comparable Job : A job with no decrease in total annual compensation (base salary plus target bonus, if applicable), and which would require the affected individual to report to a principal business location that is less than 50 miles from the affected individual’s current principal business location. The Plan Administrator will have the sole discretion to determine whether a job is a Comparable Job for purposes of the Plan.

CSS : CSS Industries, Inc.

Employer : CSS and any Subsidiary.

Employment Termination Date : The date on which your employment relationship with the Employer is involuntarily terminated by the Employer.

Plan Administrator : The Severance Plan Administrative Committee as designated by CSS to administer the Plan in accordance with its terms, or its delegate.

Release : The release and discharge of the Employer and all affiliated persons and entities from any and all claims, demands and causes of action relating to your employment with the Employer, other than as to any vested benefits to which you may be entitled under any Employer benefit plan, which will be in such form as may be proscribed by the Employer, acting as plan sponsor and as a fiduciary, from time to time and with such modifications as the Employer deems appropriate for your individual situation.

Senior Management Employee : For purposes of this Plan, (A) any employee of CSS who either (i) has the officer title of President, Vice President, Treasurer or Secretary with such entity, or (ii) serves as the Managing Director of CSS Pacific Rim Limited; and (B) any employee of Cleo Inc, Berwick Offray LLC, C.R. Gibson, LLC or Paper Magic Group, Inc. who either (i) has the officer title of President of such entity or (ii) has the officer title of Vice President with, and directly reports to the President of, such entity (but excludes any such individual who directly reports to the President of such entity on an interim basis as a result of a vacancy in an officer level position reporting directly to such President).

Severance Pay : The severance benefits that will be offered to you if you incur a termination of employment with the Employer for a reason set forth in the Plan.

Subsidiary : Any subsidiary of CSS that is designated by the Committee as a participating employer in the Plan and is listed on the attached Exhibit B .

COVERAGE

You will be eligible to participate in this Plan if you are a Senior Management Employee at the time of your termination of employment. You will not be eligible to participate in this Plan if you are not a Senior Management Employee at the time of your termination of employment and you are covered by an employment agreement or other agreement that provides severance benefits on account of an involuntary termination of employment that is greater than the amount that would be payable to you under the Plan.

ELIGIBILITY

A. When You Are Eligible

You are eligible for Severance Pay if (i) your employment with your Employer has been terminated by the Employer for any reason other than on account of Cause, your death or you become disabled and you are not otherwise ineligible for severance pay as set forth in section B. below; and (ii) you sign and do not revoke the Employer’s standard Release.

The foregoing in no way limits the right of the Employer to (i) terminate your employment and (ii) provide severance under other circumstances, in each case, as determined by the Employer in its sole and absolute discretion.

B. When You Are Not Eligible

You are not eligible for Severance Pay in any of the following circumstances:

	1.		You voluntary resign, including retirement, for any reason or no reason.

	2.		You are discharged involuntarily for violation of Employer rules, or for Cause, or the Employer discovers following your Employment Termination Date that you engaged in conduct that constitutes Cause during or after your employment with the Employer.

	3.		You are terminated by your Employer after you are offered a Comparable Job and you refuse to accept the Comparable Job.

	4.		You are covered by an individual employment agreement or other agreement that provides severance in excess of the amount you would be eligible to receive under the Plan.

	5.		Prior to or on your last day of scheduled employment, you die or prior to notification of an Employment Termination Date, you experience a physical or mental condition entitling you to any sick pay, disability or workers compensation.

Notwithstanding any provision of the Plan to the contrary, the Committee, in its sole discretion and acting on behalf of the Employer as the Plan sponsor and not as a fiduciary, reserves the right (a) to determine whether an employee satisfies the eligibility requirements for Severance Pay, (b) to award Severance Pay to a terminated employee not otherwise eligible, (c) to deny benefits to an employee otherwise eligible under the terms of the Plan, (d) to award benefits to any terminated employee in a greater or lesser amount than provided for in the Plan, and/or (e) to pay out benefits in a manner or on a schedule other than provided for in the Plan.

PLAN BENEFITS

Severance Pay

If you are selected to receive Severance Pay under the Plan, as determined by the Committee, the benefit for which you may be eligible may be based upon your years of service, compensation, or any other factors determined to be relevant by the Committee. For example, your past contributions to the Employer’s business, the conditions in the employment market, and other equitable considerations may be relevant factors. However, the Committee may provide a fixed level or schedule of benefits in connection with any special termination program designated by the Committee; provided, that such program shall not provide less benefits than that provided under this Plan. In the absence of any other determination, if your employment is terminated for a reason described above under “When you are Eligible,” your Severance Pay will be equal to your weekly base pay for the period determined in accordance with the chart set forth on the attached Exhibit A .

Years of service for purposes of the chart in Exhibit A shall be full calendar years measured from your employment commencement date with your Employer (and each anniversary thereof). For purposes of determining your total number of calendar years, you will be provided with credit for all of your years of service with any Employer that participates in this Plan. Therefore, if you transfer between Employers, your service with all such Employers will be counted. For purposes of determining your employment commencement date, the date you first worked for an Employer will be used. If you worked for an entity whose business or assets have been acquired by an Employer, your service with such entity prior to the acquisition will only be counted if determined by the Employer. No partial years of service will be counted. Therefore, if your total years of service includes a period of months that is less than 12, your total years of service will be rounded down to the nearest whole year.

Weekly base pay is your weekly rate of wages or salary in effect on your Employment Termination Date, excluding all extra pay, including, but not limited to, incentive bonuses, overtime pay, commissions, car allowances or other allowances, Employer contributions to the Employer’s 401(k) plan and other deferred compensation arrangements and other Employer paid benefits.

Severance Pay will be paid from the general assets of the Employer and will be paid to you in equal installments according to your Employer’s normal payroll schedule over a period of time that is equivalent to the severance period determined in accordance with the chart set forth on the attached Exhibit A , commencing within sixty (60) days after your Employment Termination Date, unless delay is required as described below. Your entitlement to Severance Pay under this Plan is expressly conditioned on your execution and non-revocation of the Release. If you do not execute the Release or you revoke the Release you will not be entitled to Severance Pay under this Plan. Severance Pay will be subject to all applicable federal, state and local tax withholding requirements.

All fringe benefits, including health and welfare, pension, life insurance, vacation and personal days, will cease on your Employment Termination Date, regardless of whether Severance Pay is made after that date.

If you receive Severance Pay under this Plan and elect health care continuation coverage under the Consolidated Omnibus Reconciliation Act (“COBRA”) following termination of your employment, the Employer will pay for a portion of the monthly COBRA premium, on the same basis as the Employer pays for a portion of such coverage for active employees, for the severance period; provided, that in order to receive such continued coverage, you must pay to your Employer, at the same time that premium payments are due for the month, an amount equal to the full monthly premium payments required for such monthly coverage and your Employer will reimburse to you the amount of such monthly premium, less the amount that you would have been required to pay for such coverage if you were employed by your Employer at such time (the “Health Payment”), within ten (10) days following the due date of such premiums. In addition, unless delay is required as described below, on each date on which the monthly Health Payment is paid to you, your Employer will pay to you an additional amount equal to the federal, state and local income and payroll taxes that you incur on each monthly Health Payment (the “Health Gross-Up Payment”). Your entitlement to the Health Payment and Health Gross-Up Payment will continue until the earlier to occur of (i) the end of the severance period, (ii) you cease to receive Severance Pay, or (iii) you do not pay the full monthly premium for COBRA coverage.

If you die before you have received Severance Pay to which you are entitled under the Plan, your Severance Pay will be paid to your estate within sixty (60) days from the date of your death.

When Benefits End

Severance Pay and any other benefits will be discontinued immediately if:

	1.		The Employer determines that you engaged in any of the actions defined above as “Cause,” even if such determination is made following your Employment Termination Date.

	2.		You breach any term of your Release, post-employment agreement, or other agreement relating to your employment.

CLAIMS PROCEDURE

Any request or claim for Severance Pay shall be deemed to be filed when a written request is made by the claimant or the claimant’s authorized representative which is reasonably calculated to bring the claim to the attention of the Plan Administrator.

The Plan Administrator, or its designee, shall advise the claimant or such claimant’s representative, in writing or in electronic form, of its decision within ninety (90) days of receipt of the claim for Severance Pay, unless special circumstances require an extension of such ninety (90)-day period for not more than an additional ninety (90) days. Where such extension is necessary, the claimant shall be given written notice of the delay before the expiration of the initial ninety (90)-day period, which notice shall set forth the reasons for the delay and the date the Plan Administrator expects to render its decision. If the extension is necessary because the claimant has failed to submit the information necessary to decide the claim, the Plan Administrator’s period for responding to such claim shall be tolled until the date the claimant responds to the request for additional information. The response shall:

	1.		be in writing or in electronic form,

	2.		be written in a manner calculated to be understood by the claimant, and

	3.		in the case of an adverse benefit determination:

	a.		set forth the specific reason(s) for the denial of benefits;

	b.		contain specific references to Plan provisions on which the denial is based;

	c.		describe any additional material and information, if any, necessary for the claim for benefits to be perfected, and an explanation of why such material or information is necessary; and

	d.		describe the Plan’s review procedures and the time limits applicable to such procedures, and include a statement of the claimant’s right to bring a civil action under section 502(a) of the ERISA following an adverse benefit determination on review.

If the claimant fails to appeal the Plan Administrator’s adverse benefit determination, in writing, within sixty (60) days after its receipt by the claimant, the Plan Administrator’s determination shall become final and conclusive.

If the claimant appeals the Plan Administrator’s adverse benefit determination in a timely fashion, the Plan Administrator shall reexamine all issues relevant to the original denial of benefits. Any such claimant or his or her duly authorized representative may review any relevant documents and records, free of charge, including documents and records that were relied upon in making the benefit determination, documents submitted, considered or generated in the course of making the benefit determination (even if such documents were not relied upon in making the benefit determination), and documents that demonstrate compliance, in making the benefit determination, with the Plan’s required administrative processes and safeguards. In addition, the claimant or his duly authorized representative may submit, in writing, any documents, records, comments or other information relating to such claim for benefits. In the course of the review, the Plan Administrator shall take into account all comments, documents, records and other information submitted by the claimant or his duly authorized representative relating to such claim, regardless of whether it was submitted or considered as part of the initial benefit determination.

The Plan Administrator shall advise the claimant or such claimant’s representative, in writing or in electronic form, of its decision within sixty (60) days of receipt of the written appeal, unless special circumstances require an extension of such sixty (60)-day period for not more than an additional sixty (60) days. Where such extension is necessary, the claimant shall be given written notice of the delay before the expiration of the initial sixty (60)-day period, which notice shall set forth the reasons for the delay and the date the Plan Administrator expects to render its decision. In the event of an adverse benefit determination on appeal, the Plan Administrator shall advise the claimant, in a manner calculated to be understood by the claimant of:

	1.		the specific reason(s) for the adverse benefit determination;

	2.		the specific Plan provisions on which the decision was based;

	3.		the claimant’s right to receive, upon request and free of charge, and reasonable access to, copies of all documents, records and other information relevant to such claim; and

	4.		a statement describing any voluntary appeals procedures offered by the Plan, the claimant’s right to obtain information about such procedures, and a statement of the claimant’s right to bring an action under section 502(a) of ERISA.

No person may bring an action for any alleged wrongful denial of Plan benefits in a court of law unless the claims procedures set forth above are exhausted and a final determination is made by the Plan Administrator. If you or other interested person challenges a decision of the Plan Administrator, a review by the court of law will be limited to the facts, evidence and issues presented to the Plan Administrator during the claims procedure set forth above. Facts and evidence that become known to you or other interested person after having exhausted the claims procedure must be brought to the attention of the Plan Administrator for reconsideration of the claims determination. Issues not raised with the Plan Administrator will be deemed waived.

PLAN ADMINISTRATION

The Severance Plan Administrative Committee will be the Plan Administrator of the Plan and the named fiduciary of the Plan for purposes of ERISA. The Severance Plan Administrative Committee shall consist of one or more persons appointed by CSS. The Severance Plan Administrative Committee may, however, delegate to any person, committee or entity any of its power or duties under the Plan.

The Plan Administrator will be the sole judge of the application and interpretation of the Plan, and will have the discretionary authority to construe the provisions of the Plan, to resolve disputed issues of fact, and to make determinations regarding eligibility for benefits (other than determinations under “Eligibility” that are reserved for Employers). The decisions of the Plan Administrator and the Committee in all matters relating to the Plan that are within the scope of its authority (including, but not limited to, eligibility for benefits, Plan interpretations, and disputed issues of fact) will be final and binding on all parties.

SECTION 409A

Notwithstanding the other provisions hereof, this Plan is intended to comply with the requirements of section 409A of the Code, to the extent applicable, and this Plan shall be interpreted to avoid any penalty sanctions under section 409A of the Code. Accordingly, all provisions herein, or incorporated by reference, shall be construed and interpreted to comply with section 409A of the Code and, if necessary, any such provision shall be deemed amended to comply with section 409A of the Code and regulations thereunder. If any payment or benefit cannot be provided or made at the time specified herein without incurring sanctions under section 409A of the Code, then such benefit or payment shall be provided in full at the earliest time thereafter when such sanctions will not be imposed. All payments to be made upon a termination of employment under this Plan may only be made upon a “separation from service” under section 409A of the Code. For purposes of section 409A of the Code, each payment made under this Plan shall be treated as a separate payment and all installment payments shall be treated as a separate payment. In no event may you, directly or indirectly, designate the calendar year of payment.

To the maximum extent permitted under section 409A of the Code, the cash severance payments payable under this Plan are intended to comply with the “short-term deferral exception” under Treas. Reg. §1.409A-1(b)(4), and any remaining amount is intended to comply with the “separation pay exception” under Treas. Reg. §1.409A-1(b)(9)(iii); provided, however, any amount payable to you during the six (6) month period following you Employment Termination Date that does not qualify within either of the foregoing exceptions and is deemed as deferred compensation subject to the requirements of section 409A of the Code, then such amount shall hereinafter be referred to as the “Excess Amount.” If at the time of your Employment Termination Date, your Employer’s (or any entity required to be aggregated with the Employer under section 409A of the Code) stock is publicly-traded on an established securities market or otherwise and you are a “specified employee” (as defined in section 409A of the Code and determined in the sole discretion of the Employer (or any successor thereto) in accordance with the Employer’s (or any successor thereto) “specified employee” determination policy), then the Employer shall postpone the commencement of the payment of the portion of the Excess Amount that is payable within the six (6) month period following your Employment Termination Date with the Employer (or any successor thereto) for six (6) months following your Employment Termination Date. The delayed Excess Amount shall be paid in a lump sum to you within thirty (30) days following the date that is six (6) months following your Employment Termination Date (or any successor thereto) and any installments payable to you after such six (6) month period shall continue in accordance with their original schedule. If you die during such six (6) month period and prior to the payment of the portion of the Excess Amount that is required to be delayed on account of section 409A of the Code, such Excess Amount shall be paid to the personal representative of your estate within sixty (60) days after your death.

The payment by the Employer of a portion of the applicable COBRA premium during the severance period is intended to qualify for the exception for deferred compensation as a medical benefit provided in accordance with the requirements of Treas. Reg. §1.409A-1(b)(9)(v)(B).

AMENDMENT AND TERMINATION OF THE PLAN

CSS reserves the right to amend or terminate the Plan, in whole or in part, at any time and for any reason. An amendment to the Plan may not discontinue or change any payments to a terminated employee who commenced receiving Severance Pay under the Plan prior to the effective date of the amendment of the Plan. If the Plan is terminated, no further benefits will be payable under the Plan to any employee who has not commenced receiving Severance Pay prior to the effective date of such termination.

NONALIENATION OF BENEFITS

You do not have the power to transfer, assign, anticipate, mortgage or otherwise encumber any rights or any amounts payable under this Plan; nor will any such rights or amounts payable under this Plan be subject to seizure, attachment, execution, garnishment or other legal or equitable process, or for the payment of any debts, judgments, alimony, or separate maintenance, or be transferable by operation of law in the event of bankruptcy, insolvency, or otherwise. In the event you attempt to assign, transfer or dispose of such right, or if an attempt is made to subject such right to such process, such assignment, transfer or disposition will be null and void.

ERISA RIGHTS STATEMENT

As a participant in the Plan, you are entitled to certain rights and protections under ERISA. ERISA provides that all Plan participants will be entitled to:

Receive Information about the Plan and Benefits

•		Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as worksites, all documents governing the Plan, including a copy of the latest annual report (Form 5500 Series) filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.

•		Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of the Plan, including copies of the latest annual report (Form 5500 Series) and updated summary plan description. The Plan Administrator may make a reasonable charge for the copies.

Prudent Actions by Plan Fiduciaries

In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of employees and other Plan participants and beneficiaries. No one, including your Employer, or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a welfare benefit or exercising your rights under ERISA.

Enforcing Your Rights

If your claim for a benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan and you do not receive them within thirty (30) days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that the Plan fiduciaries misuse the Plan’s money or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.

Assistance with Your Questions

If you have any questions about the Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in the telephone directory or the Division of Technical Assistance and Inquires, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue NW, Washington, D.C. 20210 (web address: www.dol.gov/dol/pwba ). You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publication hotline of the Employee Benefits Security Administration.

EXHIBIT “A”

SEVERANCE PAY FORMULA

1. CSS’ President and Chief Executive Officer; CSS’ Officers Reporting to CSS’ President (excluding any individual who directly reports to CSS’ President on an interim basis as a result of a vacancy in an officer level position reporting directly to CSS’ President); and Presidents of Cleo Inc, Berwick Offray LLC, C.R. Gibson, LLC and Paper Magic Group, Inc.:


Years of Continuous Service		Number of Weeks of Severance Pay

0 up to 2 years		26
Over 2 years up to 5 years		39
Over 5 years		52 (The maximum allowance)

2. All other Senior Management Employees:


Years of Continuous Service		Number of Weeks of Severance Pay

0 up to 2 years		12
Over 2 years up to 5 years		26
Over 5 years up to 10 years		39
Over 10 years		52 (The maximum allowance)

EXHIBIT “B”

PARTICIPATING EMPLOYERS

Cleo Inc
Berwick Offray LLC
Paper Magic Group, Inc.
C.R. Gibson, LLC

Exhibit 10.5

NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
COVERING OFFICER-EMPLOYEES OF
CSS INDUSTRIES, INC. AND ITS AFFILIATES

(Amended and Restated, Effective as of January 1, 2009)

TABLE OF CONTENTS


	Page

ARTICLE I HISTORY AND PURPOSE OF THE PLAN		1

Section 1.01 History		1

Section 1.02 Purpose		1

Section 1.03 Employer Contributions Covered by the Plan		1

Section 1.04 Definitions		1

ARTICLE II DEFINITIONS		2

Section 2.01 “Account(s)”		2

Section 2.02 “Beneficiary”		2

Section 2.03 “Beneficiary Designation Agreement”		2

Section 2.04 “Board”		2

Section 2.05 “Code”		2

Section 2.06 “Committee”		2

Section 2.07 “Compensation”		2

Section 2.08 “CSS”		2

Section 2.09 “Discretionary Contribution”		2

Section 2.10 “Discretionary Contribution Account”		2

Section 2.11 “Effective Date”		2

Section 2.12 “Eligible Employee”		3

Section 2.13 “Employee”		3

Section 2.14 “Employer”		3

Section 2.15 “Employer Contribution”		3

Section 2.16 “Employer Contribution Account”		3

Section 2.17 “ERISA”		3

Section 2.18 “Investment Funds”		3

Section 2.19 “Participant”		3

Section 2.20 “Plan”		3

Section 2.21 “Plan Year”		4

Section 2.22 “Prior CSS Contribution Account”		4

Section 2.23 “Prior CSS Contributions”		4

Section 2.24 “Prior Grandfathered CSS Contribution Account”		4

Section 2.25 “Prior Grandfathered CSS Contributions”		4

Section 2.26 “Prior CSS Plan”		4

TABLE OF CONTENTS


	Page

Section 2.27 “Prior Subsidiary Contribution Account”		4

Section 2.28 “Prior Subsidiary Contributions”		4

Section 2.29 “Prior Grandfathered Subsidiary Contribution Account”		4

Section 2.30 “Prior Grandfathered Subsidiary Contributions”		4

Section 2.31 “Prior Subsidiary Plan”		4

Section 2.32 “Qualified Plan”		5

Section 2.33 “Qualified Plan Contribution”		5

Section 2.34 “Qualified Plan Contribution Percentage”		5

Section 2.35 “Release”		5

Section 2.36 “Separation Date”		5

Section 2.37 “Separation From Service”		5

Section 2.38 “Specified Employee”		5

Section 2.39 “Subsidiary”		5

ARTICLE III ADMINISTRATION OF THE PLAN AND DISCRETION		6

Section 3.01 Committee Authority		6

Section 3.02 Compensation and Expenses		6

Section 3.03 Indemnification		6

Section 3.04 Decisions of the Committee		6

ARTICLE IV PARTICIPATION		6

Section 4.01 Eligibility to Participate		6

Section 4.02 Procedure for and Effect of Admission		7

Section 4.03 Change in Status		7

ARTICLE V CONTRIBUTIONS		7

Section 5.01 Employer Contributions		7

Section 5.02 Discretionary Contributions		7

Section 5.03 Timing of Employer Contributions and Discretionary Contributions		8

ARTICLE VI ACCOUNTS		8

Section 6.01 Accounts		8

Section 6.02 Earnings (or Losses) on Accounts		8

Section 6.03 Investment Funds		8

Section 6.04 Change in Investment Funds		8

Section 6.05 Valuation of Account(s)		9

TABLE OF CONTENTS


	Page

Section 6.06 Statement of Accounts		9

ARTICLE VII VESTING		9

Section 7.01 Vesting of Employer Contributions		9

Section 7.02 Vesting of Discretionary Contributions		9

Section 7.03 Vesting of Prior CSS Contributions and Prior Subsidiary Contributions		9

Section 7.04 Vesting of Prior Grandfathered CSS Contributions and Prior Grandfathered Subsidiary Contributions		9

ARTICLE VIII DISTRIBUTIONS		10

Section 8.01 Distribution from Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account and Prior Subsidiary Account for Participants Who Are Not Deemed Specified Employees		10

Section 8.02 Distribution for Participants from Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account and Prior Subsidiary Account Who Are Deemed Specified Employees		10

Section 8.03 Distribution for Participants from Prior Grandfathered CSS Contribution Account and Prior Grandfathered Subsidiary Contribution Account		10

Section 8.04 Other Distribution Forms or Time		10

ARTICLE IX MISCELLANEOUS		11

Section 9.01 Amendment and Termination		11

Section 9.02 Claims Procedures		11

Section 9.03 Designation of Beneficiary		12

Section 9.04 Limitation of Participant’s Right		12

Section 9.05 No Limitation on Employer Actions		12

Section 9.06 Obligations to Employer		13

Section 9.07 Nonalienation of Benefits		13

Section 9.08 Protective Provisions		13

Section 9.09 Withholding Taxes		13

Section 9.10 Unfunded Status of Plan		13

Section 9.11 Trust Fund		13

Section 9.12 Severability		14

Section 9.13 Successors		14

iii

TABLE OF CONTENTS


	Page

Section 9.14 Governing Law		14

Section 9.15 Headings		14

Section 9.16 Gender, Singular and Plural		14

Section 9.17 Notice		14

Section 9.18 Incapacity		14

Section 9.19 Section 409A		14

EXHIBIT A ELIGIBLE EMPLOYEES		A-1

EXHIBIT B PRIOR PLANS		B-1

NONQUALIFIED SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
COVERING OFFICER-EMPLOYEES OF
CSS INDUSTRIES, INC. AND ITS SUBSIDIARIES

ARTICLE I

HISTORY AND PURPOSE OF THE PLAN

Section 1.01 History . CSS previously adopted the Prior CSS Plan. In addition, certain Subsidiaries of CSS previously adopted the Prior Subsidiary Plans. CSS has determined to merge the Prior Subsidiary Plans with and into the Prior CSS Plan, effective as of January 1, 2009, so that CSS sponsors one plan for itself and its participating Subsidiaries. The Prior CSS Plan will be the surviving plan. In addition, CSS has determined to amend and restate the surviving Prior CSS Plan, as merged with the Prior Subsidiary Plans, to incorporate the requirements of section 409A of the Code and its corresponding regulations with respect to that portion of each Participant’s Account that is subject to the requirements of section 409A of the Code, as well as to make certain design changes that will be reflected in the surviving CSS Plan. This Plan document shall reflect the terms and conditions of the surviving Prior CSS Plan, as amended and restated, effective as of January 1, 2009. This Plan document covers any Participant who was entitled to receive a benefit from the Prior CSS Plan or a Prior Subsidiary Plan as of December 31, 2008, but did not receive payment of his benefit under such plans as of such date, as well as any individual who becomes a Participant in the Plan on or after January 1, 2009. Benefit payments commencing prior to January 1, 2009 are governed by the terms of the Prior CSS Plan or Prior Subsidiary Plans as they existed prior to January 1, 2009 and are either grandfathered from the requirements of section 409A of the Code or payable pursuant to a fixed scheduled as required by, and in compliance with, section 409A of the Code, with payments made between January 1, 2005 and December 31, 2008 that are subject to the requirements of section 409A of the Code, such plans have been operated in accordance with the transition relief established by the Treasury Department and Internal Revenue Service pursuant to section 409A of the Code.

Section 1.02 Purpose . The purpose of the Plan, as amended and restated effective as of the Effective Date, is to recognize the services provided by certain key employees and officers of CSS and its Subsidiaries. The Plan is intended to make additional retirement benefits and increased financial security available to the Participant’s on a tax-favored basis by providing additional Employer contributions that cannot be made under the Qualified Plans of CSS and its Subsidiaries due to certain restrictions applicable under the Code. CSS intends that the Plan shall at all times be maintained on an unfunded basis for federal income tax purposes under the Code and administered as a non-qualified “top-hat” plan exempt from the substantive requirements of ERISA. CSS also intends that the Plan shall be maintained and operated in accordance with the requirements of section 409A of the Code and its corresponding regulations, with respect to amounts subject to such requirements.

Section 1.03 Employer Contributions Covered by the Plan . The Plan covers amounts credited to Accounts on behalf of Participants that have not been fully distributed to Participants prior to January 1, 2009.

Section 1.04 Definitions . All capitalized terms in this Article I shall have the meanings ascribed to them in Article II below.

ARTICLE II

DEFINITIONS

For the purpose of this Plan, the following terms shall have the meanings indicated, unless the context clearly indicates otherwise:

Section 2.01 “ Account(s) ” means the Employer Contribution Account, the Discretionary Contribution Account, the Prior CSS Contribution Account, the Prior Subsidiary Contribution Account, the Prior Grandfathered CSS Contribution Account and the Prior Grandfathered Subsidiary Contribution Account, as applicable, maintained for a Participant pursuant to Article VI.

Section 2.02 “ Beneficiary ” means the person or persons designated as such in accordance with Section 9.03.

Section 2.03 “ Beneficiary Designation Agreement ” means the agreement that the Participant completes to designate his Beneficiary.

Section 2.04 “ Board ” means the Board of Directors of CSS.

Section 2.05 “ Code ” means the Internal Revenue Code of 1986, as amended from time to time (or a successor law of comparable intent).

Section 2.06 “ Committee ” means the Human Resources Committee of the Board or its delegate, or such other committee appointed by the Board to administer the Plan.

Section 2.07 “ Compensation ” means, for each Participant, compensation as defined by the Qualified Plan to which such Participant participates and for which the Participant’s Qualified Plan Contribution under such Qualified Plan is based, without regard to the compensation limitation under section 401(a)(17)(A) of the Code, as adjusted in accordance with section 401(a)(17)(B) of the Code.

Section 2.08 “ CSS ” means CSS Industries, Inc.

Section 2.09 “ Discretionary Contribution ” means an amount credited to a Participant’s Discretionary Contribution Account in accordance with Section 5.02.

Section 2.10 “ Discretionary Contribution Account ” means the Account maintained for a Participant to which Discretionary Contributions are credited pursuant to Section 5.02 for each Plan Year on and after the Effective Date.

Section 2.11 “ Effective Date ” means January 1, 2009, the effective date of this amendment and restatement of the Plan.

Section 2.12 “ Eligible Employee ” means an Employee who is a member of a group of “key management or other highly compensated employees” of the Employer within the meaning of sections 201, 301 and 401 of ERISA, and who is designated by the Committee, based on recommendations from the respective Employer, as eligible to participate in the Plan. Exhibit A lists those Employees who are Eligible Employees as of the Effective Date and will be updated by the Committee to reflect those Employees who become Eligible Employees after the Effective Date. The Committee may prospectively determine that an Eligible Employee is no longer eligible to participate.

Section 2.13 “ Employee ” means any individual employed by the Employer on a full-time basis as an employee.

Section 2.14 “ Employer ” means CSS and any Subsidiary which is authorized by the Board to adopt the Plan as a participating employer and cover its Eligible Employees and whose designation as such has become effective upon acceptance of such status by the Subsidiary. A Subsidiary may revoke its acceptance as a participating employer in the Plan at any time, but until such acceptance has been revoked, all of the provisions of the Plan and amendments thereto shall apply to the Eligible Employees of the Subsidiary. In the event the designation is revoked by a Subsidiary, the Plan shall be deemed terminated only with respect to such Subsidiary. The duties and responsibilities of the “Employer” as they relate to a particular Participant shall be satisfied by the Employer in the manner determined by CSS in accordance with the terms of the Plan.

Section 2.15 “ Employer Contribution ” means an amount credited to a Participant’s Employer Contribution Account in accordance with Section 5.01.

Section 2.16 “ Employer Contribution Account ” means the Account maintained for a Participant to which Employer Contributions are credited pursuant to Section 5.01 for each Plan Year on and after the Effective Date.

Section 2.17 “ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended from time to time (or a successor law of comparable intent).

Section 2.18 “ Investment Funds ” means the deemed investment options designated by the Committee. Each Participant shall designate the Investment Funds pursuant to which deemed earnings (losses) shall be credited to the Participant’s Account(s) in accordance with Article VI.

Section 2.19 “ Participant ” means each Eligible Employee who is designated as participating in the Plan by the Committee or its designee and is participating in the Plan in accordance with the provisions of Article IV. In the event of the death or incompetency of a Participant, the term shall mean his Beneficiary, personal representative or guardian, as applicable. An individual shall remain a Participant until that individual has received full distribution of any amount credited to the Participant’s Account(s) under the Plan.

Section 2.20 “ Plan ” means this Nonqualified Supplemental Executive Retirement Plan Covering Officer-Employees of CSS Industries, Inc. and Its Affiliates, as may be amended from time to time.

Section 2.21 “ Plan Year ” means the twelve month period beginning on each January 1 and ending on the following December 31.

Section 2.22 “ Prior CSS Contribution Account ” means the Account maintained for a Participant to which were credited Prior CSS Contributions under the Prior CSS Plan.

Section 2.23 “ Prior CSS Contributions ” means any CSS contributions, plus deemed earnings (and losses), credited pursuant to the Prior CSS Plan to a Participant’s account under such plan that were not earned and vested as of December 31, 2004, and are now subject to this Plan.

Section 2.24 “ Prior Grandfathered CSS Contribution Account ” means the Account maintained for a Participant to which were credited Prior Grandfathered CSS Contributions under the Prior CSS Plan.

Section 2.25 “ Prior Grandfathered CSS Contributions ” means any CSS contributions, plus deemed earnings (and losses), credited pursuant to the Prior CSS Plan to a Participant’s account under such plan that were earned and vested as of December 31, 2004, and are now subject to this Plan.

Section 2.26 “ Prior CSS Plan ” means the Non-qualified Supplemental Executive Retirement Plan covering Officers-Employees of CSS Industries, Inc. adopted pursuant to the prior Policy Memorandum, as amended from time to time, and for which Prior CSS Contributions and Prior Grandfathered CSS Contributions were made prior to the Effective Date.

Section 2.27 “ Prior Subsidiary Contribution Account ” means the Account maintained for a Participant to which were credited Prior Subsidiary Contributions under the Prior Subsidiary Plan.

Section 2.28 “ Prior Subsidiary Contributions ” means any Subsidiary contributions, plus deemed earnings (and losses), credited pursuant to a Prior Subsidiary Plan to a Participant’s account under such plan that were not earned and vested as of December 31, 2004, and are now subject to this Plan.

Section 2.29 “ Prior Grandfathered Subsidiary Contribution Account ” means the Account maintained for a Participant to which were credited Prior Grandfathered Subsidiary Contributions under the Prior Subsidiary Plan.

Section 2.30 “ Prior Grandfathered Subsidiary Contributions ” means any CSS contributions, plus deemed earnings (and losses), credited pursuant to a Prior Subsidiary Plan to a Participant’s account under such plan that were earned and vested as of December 31, 2004, and are now subject to this Plan.

Section 2.31 “ Prior Subsidiary Plan ” means each nonqualified deferred compensation plan maintained by a Subsidiary pursuant to a Policy Memorandum, as amended from time to time, that is listed on the attached Exhibit B and for which Prior Subsidiary Contributions and Prior Grandfathered Subsidiary Contributions were made prior to the Effective Date.

Section 2.32 “ Qualified Plan ” means the qualified plan maintained by an Employer that is intended to meet the requirements of section 401(k) of the Code and provides for discretionary Employer contributions.

Section 2.33 “ Qualified Plan Contribution ” means the Employer’s discretionary contribution to a Qualified Plan that is based solely on a percentage of the Participant’s eligible compensation for purposes of the Qualified Plan and is not intended as either a matching contribution or a qualified non-elective contribution under such Qualified Plan. For each Plan Year, the Qualified Plan Contribution shall be equal to the percentage then used in deriving the dollar amount approved by the Employer’s Board of Directors as the Employer’s Qualified Plan Contribution to the Qualified Plan for such Plan Year.

Section 2.34 “ Qualified Plan Contribution Percentage ” means the percentage of the Qualified Plan Contribution made by the Employer to the Qualified Plan for the Plan Year.

Section 2.35 “ Release ” means the release and discharge of the Employer and all affiliated persons and entities from any and all claims, demands and causes of action relating to the Participant’s employment with the Employer, other than as to any vested benefits to which the Participant may be entitled under any Employer benefit plan, which will be in such form as may be proscribed by the Employer, acting as plan sponsor and as a fiduciary, from time to time and with such modifications as the Employer deems appropriate for a Participant’s individual situation.

Section 2.36 “ Separation Date ” means the date on which a Participant incurs a Separation From Service.

Section 2.37 “ Separation From Service ” means a Participant’s separation from service with the Employer within the meaning of section 409A of the Code and the regulations issued thereunder.

Section 2.38 “ Specified Employee ” means any Participant who, at any time during the twelve month period ending on the identification date (as determined by CSS or its delegate), is a specified employee under section 409A of the Code, as determined by CSS (or its delegate). The determination of “specified employees,” including the number and identity of persons considered “specified employees” and identification date, shall be made by CSS (or its delegate) in accordance with the provisions of sections 416(i) and 409A of the Code and the regulations issued thereunder.

Section 2.39 “ Subsidiary ” means any directly or indirectly affiliated subsidiary corporation of CSS.

ARTICLE III

ADMINISTRATION OF THE PLAN AND DISCRETION

Section 3.01 Committee Authority . The Committee shall have full power and authority to interpret the Plan, to prescribe, amend and rescind any rules, forms and procedures as it deems necessary or appropriate for the proper administration of the Plan and to make any other determinations, including factual determinations, and to take any other such actions as it deems necessary or advisable in carrying out its duties under the Plan. All actions taken by the Committee arising out of, or in connection with, the administration of the Plan or any rules adopted thereunder, shall, in each case, lie within its sole discretion, and shall be final, conclusive and binding upon the Employers, the Employees, the Participants, the Beneficiaries and all other persons and entities having an interest therein.

Section 3.02 Compensation and Expenses . Members of the Committee shall serve without compensation for their services unless otherwise determined by CSS. All expenses of administering the Plan shall be paid by the Employer.

Section 3.03 Indemnification . CSS shall indemnify and hold harmless each member of the Committee from any and all claims, losses, damages, expenses (including counsel fees) and liability (including any amounts paid in settlement of any claim or any other matter with the consent of CSS) arising from any act or omission of such member, except when the same is due to gross negligence or willful misconduct.

Section 3.04 Decisions of the Committee . Any decisions, actions or interpretations to be made under the Plan by the Committee acting on behalf of an Employer shall be made in its sole discretion, not as a fiduciary and need not be uniformly applied to similarly situated individuals and shall be final, binding and conclusive on all persons interested in the Plan. As a condition of participating in the Plan, each Participant expressly acknowledges, through his participation in the Plan, that all decisions and determinations of the Committee shall be final and binding on the Participant, his Beneficiaries and any other person having or claiming an interest on behalf of a Participant under the Plan.

ARTICLE IV

PARTICIPATION

Section 4.01 Eligibility to Participate . The rights of a Participant whose participation in the Plan commenced prior to the Effective Date and who is entitled to receive a benefit under the Prior CSS Plan and/or Prior Subsidiary Plan on December 31, 2008, but did not receive payment of his benefit prior to the Effective Date, shall be a Participant in the Plan as of the Effective Date and such Participant’s benefit shall be governed by the terms of the Plan as set forth herein. Each other Employee shall become an Eligible Employee and therefore a Participant on the date the Committee determines such Employee shall be an Eligible Employee for purposes of the Plan; provided, however, that the effective date on which such Employee shall become an Eligible Employee shall be the first Plan Year that follows the date on which the individual is designated as an Eligible Employee for purposes of the Plan.

Section 4.02 Procedure for and Effect of Admission . Each Eligible Employee who becomes eligible for admission to participation in the Plan shall be notified by the Committee as soon as administratively practicable following the date the Committee has determined that the Employee shall become an Eligible Employee but, in any event, prior to the Plan Year in which such individual may first participate in the Plan. By becoming a Participant, each Eligible Employee shall for all purposes be deemed conclusively to have assented to the terms of the Plan and to all amendments thereto.

Section 4.03 Change in Status . A Participant who ceases to be employed as an Eligible Employee (whether or not he is still employed in another capacity by the Employer or a non-participating Subsidiary) shall no longer be eligible to participate in the Plan as an active Participant for purposes of eligibility to receive Employer Contributions and Discretionary Contributions until he again becomes an Eligible Employee, at which time he will again become an active Participant for purposes of eligibility to receive Employer Contributions and Discretionary Contributions, commencing with the first Plan Year that follows the date on which he again becomes an Eligible Employee.

Section 4.04 Employer Contributions . Each Plan Year in which an Employer makes a Qualified Plan Contribution to a Qualified Plan on behalf of a Participant, CSS shall credit to such Participant’s Employer Contribution Account an amount that is equal to the product of (x) and (y), where “(x)” is the sum of (i) Qualified Plan Contribution Percentage and (ii) the lesser of (A) the Qualified Plan Contribution Percentage or (B) the greater of (I) 6.2% or (II) the old-age insurance portion of the employer OASDI tax rate in effect at the beginning of the Plan Year pursuant to section 3111(a) of the Code; and “(y)” is the difference between (a) such Participant’s total Compensation for such Plan Year and (b) the compensation limit under section 401(a)(17)(A) of the Code (for 2009, the limit is $245,000), as adjusted in accordance with section 401(a)(17)(B) of the Code. Notwithstanding the immediately preceding sentence, if the Participant’s Compensation for any Plan Year is equal to or less than the compensation limit under section 401(a)(17)(A) of the Code, as adjusted in accordance with section 401(a)(17)(B) of the Code, for such Plan Year, no Employer Contribution shall be made to the Participant’s Employer Contribution Account for such Plan Year. For the avoidance of doubt, the amount, if any, that will be contributed to the Participant’s Employer Contribution Account for a Plan Year pursuant to this Section will be solely dependent on the Qualified Plan for which Participant participates in for the relevant Plan Year. If no Qualified Plan Contribution is made to the Qualified Plan in which the Participant participates during the Plan Year, the Participant shall not be eligible to receive an Employer Contribution under this Plan for the Plan Year.

Section 4.05 Discretionary Contributions . After the end of each Plan Year, CSS may credit, in its sole discretion, to each Participant’s Discretionary Contribution Account who CSS has determined to credit a Discretionary Contribution an amount that will be based on a percentage of such Participant’s Compensation that exceeds the contribution limitation (subject to applicable COLA) imposed by section 401(a)(17) of the Code. An amount credited to a Participant’s Discretionary Contribution Account pursuant to this Section 5.02 is purely discretionary and is in the sole discretion of the Committee and is independent of any Employer Contribution, if any, credited to a Participant pursuant to Section 5.01. If a Discretionary Contribution will be credited for a Plan Year, the Committee shall determine, in its sole discretion, which Participants shall be eligible for such Discretionary Contribution and the relevant percentage for such Participant, which percentages need not be uniform among Participants.

Section 4.06 Timing of Employer Contributions and Discretionary Contributions . Employer Contributions shall be credited to the Participant’s Employer Contribution Account at the same time as Qualified Plan Contributions are credited to the Participant’s account under the Qualified Plan. Discretionary Contributions shall be credited to the Participant’s Discretionary Contribution Account at the time determined by the Committee in its sole discretion.

ARTICLE V

ACCOUNTS

Section 5.01 Accounts . CSS shall establish and maintain on behalf of each Employer separate Accounts with respect to each Participant. A Participant’s Account(s) shall consist of one or more of the following subaccounts: Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account, Prior Subsidiary Contribution Account, Prior Grandfathered CSS Contribution Account and Prior Grandfathered Subsidiary Contribution Account. The Participant’s Account(s) shall be reduced by the amount of any payments made by the Employer to the Participant or the Participant’s Beneficiary pursuant to this Plan.

Section 5.02 Earnings (or Losses) on Accounts . A Participant’s Account(s) shall be credited with all deemed earnings (or losses) generated by the Investment Funds elected by the Participant from time to time. Participants may allocate the amounts credited to their Account(s) among the Investment Funds available under the Plan only in whole percentages. The deemed rate of return, positive or negative, credited under each Investment Fund is based upon the actual investment performance of the corresponding investment portfolios that the Committee may designate from time to time, and shall equal the total return of each such Investment Fund net of asset based charges, including, without limitation, money management fees and fund expenses. The Committee may, on a prospective basis, add to or delete any of the Investment Funds.

Section 5.03 Investment Funds . Notwithstanding that the rates of return credited to Participants’ Account(s) are based upon the actual performance of the corresponding Investment Funds as the Committee may designate, neither CSS nor any other Employer shall be obligated to actually invest any amounts credited under this Plan in such Investment Funds or any other Investment Funds.

Section 5.04 Change in Investment Funds . A Participant may change the Investment Funds in which the amounts credited to his Account(s) are deemed to be allocated with whatever frequency is determined by the Committee. Each such change may include (a) reallocation of the amounts credited to the Participant’s existing Account(s) in whole percentages, and/or (b) change in investment allocation of amounts to be credited to the Participant’s Account(s) in the future, as the Participant may elect.

Section 5.05 Valuation of Account(s) . The value of a Participant’s Accounts as of any date shall equal the amounts theretofore credited to such Account(s), including any earnings (positive or negative) deemed to be earned on each such Account(s) in accordance with Section 6.02, through the day preceding such date, less the amounts theretofore deducted from such Accounts.

Section 5.06 Statement of Accounts . The Committee shall provide to each Participant, not less frequently than annually, a statement in such form as the Committee deems desirable setting forth the balance standing to the credit of each Participant in each Account.

ARTICLE VI

VESTING

Section 6.01 Vesting of Employer Contributions . A Participant shall become vested in the Employer Contributions credited to his Employer Contribution Account for a Plan Year at the same time he becomes vested in the Qualified Plan Contributions made to the Qualified Plan on his behalf for such Plan Year.

Section 6.02 Vesting of Discretionary Contributions . A Participant shall be fully vested in the Discretionary Contributions credited to his Discretionary Contribution Account for a Plan Year.

Section 6.03 Vesting of Prior CSS Contributions and Prior Subsidiary Contributions . A Participant shall become vested in the Prior CSS Contributions and the Prior Subsidiary Contributions credited to his Prior CSS Contribution Account and Prior Subsidiary Contribution Account for periods prior to the Effective Date at the time(s) such amounts would have become vested under the terms of the Prior CSS Plan and Prior Subsidiary Plan, as applicable, immediately prior to the Effective Date.

Section 6.04 Vesting of Prior Grandfathered CSS Contributions and Prior Grandfathered Subsidiary Contributions . A Participant is fully vested in the Prior CSS Grandfathered Contributions and the Prior Grandfathered Subsidiary Contributions credited to his Prior Grandfathered CSS Contribution Account and Prior Grandfathered Subsidiary Contribution Account.

ARTICLE VII

DISTRIBUTIONS

Section 7.01 Distribution from Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account and Prior Subsidiary Account for Participants Who Are Not Deemed Specified Employees . Any Participant who is not a Specified Employee at the time of his Separation From Service shall receive a single sum distribution of the entire value of the vested amounts credited to his Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account, and Prior Subsidiary Contribution Account, as applicable, under the Plan within sixty (60) days following the Participant’s Separation Date. A distribution paid pursuant to this Section 8.01 shall be paid by the Participant’s Employer and shall be made entirely in cash.

Section 7.02 Distribution for Participants from Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account and Prior Subsidiary Account Who Are Deemed Specified Employees . Any Participant who is a Specified Employee at the time of his Separation From Service shall receive a single sum distribution of the entire value of the vested amounts credited to his Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account, and Prior Subsidiary Contribution Account, as applicable, under the Plan within sixty (60) days following the first day of the seventh month of the Participant’s Separation Date. Notwithstanding the immediately preceding sentence, if a Participant has a Separation From Service on account of his death or dies prior to the date the distribution would otherwise be made in accordance with the immediately preceding sentence, the Participant’s Beneficiary shall receive a single sum distribution of the entire value of the vested amount credited to the Participant’s Employer Contribution Account, Discretionary Contribution Account, Prior CSS Contribution Account, and Prior Subsidiary Contribution Account under the Plan within sixty (60) days following the date of the Participant’s death. A distribution paid pursuant to this Section 8.02 shall be paid by the Participant’s Employer and shall be made entirely in cash.

Section 7.03 Distribution for Participants from Prior Grandfathered CSS Contribution Account and Prior Grandfathered Subsidiary Contribution Account . Any Participant who is entitled to receive a distribution of the amounts credited to his Prior Grandfathered CSS Contribution Account and Prior Grandfathered Subsidiary Contribution Account, as applicable, under the Plan shall receive such distribution at the time(s) and in the form(s) as permitted under the Prior CSS Plan and Prior Subsidiary Plan, as applicable; provided, however, that if the Participant elects to receive his benefit in the form of a lump sum, such Participant must execute, and not revoke, the Release. A distribution paid pursuant to this Section 8.03 shall be paid by the Participant’s Employer and shall be made entirely in cash.

Section 7.04 Other Distribution Forms or Time . Except as provided in Section 8.03, no other form(s) and/or time(s) of distribution are permitted under this Plan.

ARTICLE VIII

MISCELLANEOUS

Section 8.01 Amendment and Termination . The Plan may be amended, suspended, discontinued or terminated at any time by the Committee; provided, however, that no such amendment, suspension, discontinuance or termination shall reduce or in any manner adversely affect the rights of any Participant with respect to benefits that are payable or may become payable under the Plan based upon the balance of the Participant’s Account(s) as of the effective date of such amendment, suspension, discontinuance or termination. Notwithstanding the foregoing, the Committee may make all technical, administrative, regulatory and compliance amendments to the Plan that the Committee deems necessary and appropriate so that the Plan meets the requirements of section 409A of the Code and its corresponding regulations.

Section 8.02 Claims Procedures .

(a) Claim . A person who believes that he is being denied a benefit to which he is entitled under the Plan (hereinafter referred to as a “ Claimant ”) may file a written request for such benefit with the Committee, setting forth the claim.

(b) Claim Decision . Upon receipt of a claim, the Committee shall advise the Claimant that a reply shall be forthcoming within 90 days and shall, in fact, deliver such reply within such period. The Committee may, however, extend the reply period for an additional 90 days for reasonable cause. If the claim is denied in whole or in part, the Claimant shall be provided a written opinion, using language calculated to be understood by the Claimant, setting forth:

(i) The specific reason or reasons for such denial;

(ii) The specific reference to pertinent provisions of this Plan on which such denial is based;

(iii) A description of any additional material or information necessary for the Claimant to perfect his claim and an explanation why such material or such information is necessary;

(iv) Appropriate information as to the steps to be taken if the Claimant wishes to submit the claim for review, including the time limits for requesting a review under subsection (c) and for review under subsection (d) hereof; and

(v) The Claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review.

(c) Request for Review . Within 60 days after the receipt by the Claimant of the written opinion described above, the Claimant may request in writing that the Committee review the determination of the Committee. The Claimant or his duly authorized representative may, but need not, review the pertinent documents and submit issues and comments in writing for consideration by the Committee. If the Claimant does not request a review of the initial determination within such 60-day period, the Claimant shall be barred and stopped from challenging the determination.

(d) Review of Decision . Within 60 days after the Committee’s receipt of a request for review, it shall review the initial determination. After considering all materials presented by the Claimant, the Committee shall render a written opinion, written in a manner calculated to be understood by the Claimant, setting forth (i) the specific reason or reasons for the decision, (ii) the specific references to the pertinent provisions of this Plan on which the decision is based, (iii) a statement that the Claimant is entitled to receive upon request and free of charge, access to and copies of all documents and other information relevant to the claim, and (iv) the Claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse benefit determination on review. If special circumstances require that the 60 day time period be extended, the Committee shall so notify the Claimant and shall render the decision as soon as possible, but no later than 120 days after receipt of the request for review.

Section 8.03 Designation of Beneficiary . In the Beneficiary Designation Agreement, each Participant may designate a Beneficiary or Beneficiaries to receive any payments that may be made following the Participant’s death. Such designation may be changed or canceled by the Participant at any time without the consent of any such Beneficiary. Any such designation, change or cancellation must be made in the Beneficiary Designation Agreement, which may be subsequently changed, and shall not be effective until received by the Committee, or its designee. If no Beneficiary has been named in the Beneficiary Designation Agreement, or the designated Beneficiary or Beneficiaries shall have predeceased the Participant, the Beneficiary shall be the Participant’s designated Beneficiary under the Qualified Plan in which the Participant last actively participated, and if no Beneficiary has been designated under such Qualified Plan, the Beneficiary shall be the Participant’s estate. If a Participant designates more than one Beneficiary, the interests of such Beneficiaries shall be paid in equal shares, unless the Participant has specifically designated otherwise.

Section 8.04 Limitation of Participant’s Right . Nothing in this Plan shall be construed as conferring upon any Participant any right to continue in the employment of the Employer, nor shall it interfere with the rights of the Employer to terminate the employment of any Participant and/or to take any personnel action affecting any Participant without regard to the effect that such action may have upon such Participant as a recipient or prospective recipient of benefits under the Plan. Any amounts payable hereunder shall not be deemed salary or other compensation to a Participant for the purposes of computing benefits to which the Participant may be entitled under any qualified retirement arrangement established by the Employer for the benefit of its employees.

Section 8.05 No Limitation on Employer Actions . Nothing contained in the Plan shall be construed to prevent the Employer from taking any action that is deemed by it to be appropriate or in its best interest. No Participant, Beneficiary, or other person shall have any claim against the Employer as a result of such action.

Section 8.06 Obligations to Employer . To the extent permitted under section 409A of the Code, if the Committee acting on the Employer’s behalf determines that any Participant has outstanding any debt, obligation, or other liability representing an amount owing to or guaranteed by the Employer, that Participant’s benefits shall be calculated in accordance with all other applicable provisions of this Plan, then reduced by the amount of such debt, obligation, or other liability prior to payment of benefits to the Participant pursuant to Article VIII above.

Section 8.07 Nonalienation of Benefits . Except as expressly provided herein, no Participant or Beneficiary shall have the power or right to transfer (otherwise than by the laws of descent and distribution), alienate, or otherwise encumber the Participant’s interest under the Plan. The Employer’s obligations under this Plan are not assignable or transferable except to (a) any corporation or partnership that acquires all or substantially all of the Employer’s assets or (b) any corporation or partnership into which the Employer may be merged or consolidated. The provisions of the Plan shall inure to the benefit of each Participant and the Participant’s Beneficiaries, heirs, executors, administrators or successors in interest.

Section 8.08 Protective Provisions . Each Participant shall cooperate with the Employer by furnishing any and all information requested by the Employer in order to facilitate the payment of benefits hereunder, and taking such other relevant action as may be requested by the Employer. If a Participant refuses to cooperate, the Employer shall have no further obligation to the Participant under the Plan, other than payment to such Participant of the then current vested balance of the Participant’s Account in accordance with the Plan.

Section 8.09 Withholding Taxes . The Employer may make such provisions and take such actions as it may deem necessary or appropriate for the withholding of any taxes that the Employer is required to withhold by any law or regulation of any governmental authority, whether Federal, state or local, to withhold in connection with any benefits under the Plan, including, but not limited to, the withholding of appropriate sums from any amount otherwise payable to the Participant (or his Beneficiary). Each Participant (or his Beneficiary), however, shall be responsible for the payment of all individual tax liabilities relating to any such benefits.

Section 8.10 Unfunded Status of Plan . The Plan is intended to constitute an “unfunded” plan of deferred compensation for Participants. Benefits payable hereunder shall be payable out of the general assets of the Employer, and no segregation of any assets whatsoever for such benefits shall be made. Notwithstanding any segregation of assets or transfer to a grantor trust, with respect to any payments not yet made to a Participant, nothing contained herein shall give any such Participant any rights to assets that are greater than those of a general creditor of the Employer.

Section 8.11 Trust Fund . The Employer shall be responsible for the payment of all benefits provided under the Plan. At its discretion, the Employer may establish one or more trusts, with such trustees as the Board may approve, for the purpose of assisting in the payment of such benefits. Although such a trust shall be irrevocable, its assets shall be held for payment to all of the Employer’s general creditors in the event of insolvency. To the extent any benefits provided under the Plan are paid from any such trust, the Employer shall have no further obligation to pay them. If not paid from the trust, such benefits shall remain the obligation of the Employer.

Section 8.12 Severability . If any provision of this Plan is held unenforceable, the remainder of the Plan shall continue in full force and effect without regard to such unenforceable provision and shall be applied as though the unenforceable provision were not contained in the Plan.

Section 8.13 Successors . The provisions of this Plan shall bind and inure to the benefit of the Employer and its successors and assigns. The term successors as used herein shall include any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise acquire all or substantially all of the business and assets of the Employer, and successors of any such corporation or other business entity.

Section 8.14 Governing Law . The Plan shall be construed in accordance with and governed by the laws of the Commonwealth of Pennsylvania, without reference to the principles of conflict of laws.

Section 8.15 Headings . Headings are inserted in this Plan for convenience of reference only and are to be ignored in the construction of the provisions of the Plan.

Section 8.16 Gender, Singular and Plural . All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, or neuter, as the identity of the person or persons may require. As the context may require, the singular may read as the plural and the plural as the singular.

Section 8.17 Notice . Any notice required or permitted under the Plan shall be sufficient if in writing and hand delivered or sent by registered or certified mail. Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification. Mailed notice to the Committee shall be directed to CSS’ address. Mailed notice to a Participant or Beneficiary shall be directed to the individual’s last known address in the Employer’s records.

Section 8.18 Incapacity . In the event that any amount becomes payable under the Plan to a person who, in the sole judgment of the Committee, is considered by reason of physical or mental condition to be unable to give a valid receipt therefore, the Committee may direct that such payment be made to any person found by the Committee, in its sole judgment, to have assumed the care of such person. Any payment made pursuant to such determination shall constitute a full release and discharge of the Committee and the Employer.

Section 8.19 Section 409A . The Plan is intended to comply with the applicable requirements of section 409A of the Code and its corresponding regulations and related guidance with respect to all amounts subject to such requirements, and shall be maintained in accordance with such requirements with respect to those amounts that are subject to such requirements. Notwithstanding anything in the Plan to the contrary, distributions from the Plan with respect to amounts subject to the requirements of section 409A of the Code may only be made in a manner, and upon an event, permitted by section 409A of the Code. To the extent that any provision of the Plan would cause a conflict with the requirements of section 409A of the Code, or would cause the administration of the Plan to fail to satisfy the requirements of Section 409A of the Code, such provision shall be deemed null and void to the extent permitted by applicable law. In no event shall a Participant, directly or indirectly, designate the calendar year of payment.

EXHIBIT A

ELIGIBLE EMPLOYEES

CSS Industies, Inc.

Jack Farber
Christopher Munyan
Clifford Pietrafitta
John Nucero
Steven Cohen
William Kiesling
Lois Karpinski
Denise Andahazy
Keith Foley

Berwick Offray LLC

Scott Shea
Bruce Kerr
Chris Antonopoulos
Russell Hager
Barry Sokol
Denis Pesante
Lee Boy
Julie Pajic
Steven Lerman
Marla O’Dell
Carey Edwards

Paper Magic Group, Inc.

Paul Quick
William Brock
Ken VanArtsdalen
John S. Wentworth
Edward Robertson
Robert Kilbourne
Donald Post
Joseph O’Brien

C.R. Gibson LLC

Donald French
George Panagiotis
Randy Rock
Steve Wash

A-1

EXHIBIT B

PRIOR PLANS

Policy Memorandum, dated January 25, 1994, from Jack Farber to the file, relating to the establishment of the SERP, as amended by Amendment 1998-1, effective October 1, 1998, and by Amendment 2006-1, effective as of March 31, 2005.

B-1

Exhibit 31.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Christopher J. Munyan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CSS Industries, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2009


/s/ Christopher J. Munyan

Christopher J. Munyan,
President and Chief Executive Officer
(principal executive officer)

Exhibit 31.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Clifford E. Pietrafitta, certify that:

1. I have reviewed this quarterly report on Form 10-Q of CSS Industries, Inc.;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2009


/s/ Clifford E. Pietrafitta

Clifford E. Pietrafitta
Vice President – Finance and Chief Financial Officer
(principal financial officer)

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of CSS Industries, Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher J. Munyan, President and Chief Executive Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Christopher J. Munyan

Christopher J. Munyan
President and Chief Executive Officer
(principal executive officer)

February 5, 2009

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of CSS Industries, Inc. (the “Company”) on Form 10-Q for the period ended December 31, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Clifford E. Pietrafitta, Vice President – Finance and Chief Financial Officer, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


/s/ Clifford E. Pietrafitta

Clifford E. Pietrafitta
Vice President – Finance and Chief Financial Officer
(principal financial officer)

February 5, 2009

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