As previously disclosed on a Form 8-K filed with the SEC on May 3, 2012, the Board of Directors of Checkpoint Systems, Inc. (the "Company") appointed George Babich, Jr. as interim Chief Executive Officer ("Interim CEO") of the Company on May 3, 2012.
On May 4, 2012, Mr. Babich signed a letter agreement with the Company describing his compensation arrangements in connection with his service as Interim CEO of the Company. The following provides a summary of Mr. Babich's compensation arrangements with the Company:
Salary - During the term for which he provides services, Mr. Babich will receive a salary at the annual rate of $850,000.
Incentive Compensation - Mr. Babich will be eligible to receive a total of up to 32,000 shares of the Company’s common stock in the aggregate, which will be awarded at the rate of 8,000 shares per calendar quarter and received on the first day of each full calendar quarter of his service as Interim CEO. A pro-rated portion of these shares will be awarded on May 2, 2012 for the period beginning on May 2, 2012 and ending June 30, 2012, with the balance of any remaining shares being awarded on April 1, 2013 if he is serving as Interim CEO on April 1, 2013.
Mr. Babich was also awarded a stock option to acquire 120,000 shares of the Company’s common stock on May 7, 2012. This stock option will become vested with respect to 30,000 shares as of the first day of each full calendar quarter of his service as Interim CEO. For the period beginning on May 7, 2012 and ending June 30, 2012, Mr. Babich became vested in a pro-rated portion of 30,000 shares as of May 7, 2012, based on his service for 60 days in the 91-day second quarter of 2012. For the calendar quarter beginning on April 1, 2013, if Mr. Babich is serving as Interim CEO as of that date, he will be vested in the balance of the 120,000 shares. The stock option will be structured to qualify as a tax-favored incentive stock option to the maximum extent possible under applicable law.
Severance - Should Mr. Babich's services as Interim CEO be terminated for reasons other than “cause” (as defined in the letter agreement) within the first six months of his service as Interim CEO, Mr. Babich will be entitled to receive the base salary otherwise payable through the end of such six-month period along with receiving any additional shares of the Company’s common stock which would have been awarded to him during this period. In addition, Mr. Babich would also become vested in any stock option that would otherwise become vested during this six-month period, with the remaining stock options being forfeited. These severance terms will automatically extend for an additional six-month term, unless the Board provides Mr. Babich with notice at least 30 days in advance of the end the original six-month period. Mr. Babich has expressly waived participation in any generally applicable severance plan or arrangement that might otherwise apply to an interim CEO or to executive officers generally.
The foregoing description of the letter agreement does not purport to be complete and is qualified in its entirety by reference to the letter agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
