THIRD AMENDMENT TO
EMPLOYMENT AGREEMENT
This THIRD AMENDMENT TO THE EMPLOYMENT AGREEMENT is made as of the
17th day of July, 2001 by and between CHECKPOINT SYSTEMS, INC. ("CSI") and
MICHAEL E. SMITH ("Executive").
WHEREAS, CSI and Executive are parties to an Employment Agreement
dated July 1, 1995, as amended on July 1, 1997 and March 25, 1999
("Agreement"); and
WHEREAS, CSI has determined it is in its best interests to modify the
Agreement by amending the term of employment, as well as the term of the
Covenant Against Competition, so as to enable the officers of CSI to
negotiate a specific transaction ("Transaction"), as defined herein;
WHEREAS, CSI wishes to provide additional compensation to Executive as
an incentive to agree to the extension of the term and expansion of the
scope of the Covenant Against Competition, as well as to encourage
Executive to facilitate the success of the Transaction;
NOW, THEREFORE, in consideration of the premises and mutual promises
and covenants contained herein, and intending to be bound hereby, the
parties agree as follows:
1. Section 1. Employment and Term is hereby amended so that the
expiration date of the term shall be extended until December 31, 2001.
2. A new Section 5 shall be added as follows and the current Section 5
shall be renumbered as Section 6, and each subsequent section shall be
renumbered sequentially: In the event of a "Change in Control" as defined
in subsection 6.C.(a)(vii) of the Agreement, or in the event of the
occurrence of a Transaction as compensation for the extension of the term
and scope of the Covenant Against Competition of the Agreement by
Executive, which action is intended to facilitate the aforesaid Change of
Control or Transaction, he shall be entitled to receive a Payment (as
defined in the Agreement) or fee ("Success Fee") in an amount equal to (a)
two hundred thousand dollars ($200,000.00) in the event that the
Transaction Value (as defined below) is equal to or less than Two Hundred
Ninety Six Million Dollars ($296,000,000.00); or (b) if the Transaction
Value exceeds Two Hundred Ninety Six Million Dollars ($296,000,000.00), .5%
of the Transaction Value up to Four Hundred Thirty Five Million Dollars
($435,000,000.00), plus .663% of the Transaction Value in excess of Four
Hundred Thirty Five Million Dollars ($435,000,000.00). The aforesaid
Success Fee shall be payable with respect to any Transaction, in cash, upon
consummation of such Transaction. No fee payable to any other financial
advisor in connection with the Transaction shall reduce or otherwise affect
any fee payable to the Executive.
"Transaction Value" means the aggregate amount of consideration received by
CSI and/or its stockholders (treating any shares issuable upon exercise of
options, warrants, or other rights of conversion as outstanding) in any
Transaction, plus, without duplication, the value of any securities, cash,
or other assets distributed to stockholders of CSI. If more than one
Transaction is consummated, a Success Fee shall be payable with respect to
each such Transaction, in cash, upon consummation thereof, and the amount
of the Success Fee in respect of such Transaction after the first shall be
equal to the Success Fee that would have been payable having a Transaction
Value equal to the aggregate Transaction Value of such Transactions, plus
all Transactions previously consummated, less the aggregate amount of all
Success Fees previously paid.
A Success Fee shall be due and payable as provided herein if an agreement
or letter of intent has been entered into during the Term of the Agreement,
even if the Transaction contemplated therein is consummated subsequent to
the Term.
For purposes of this Agreement, a Transaction shall be deemed to have been
consummated upon the earliest of any of the following events to occur: (a)
the acquisition by another person of at least a majority of the outstanding
common stock of, or voting power in CSI calculated on a fully-diluted
basis; (b) a merger or consolidation of CSI with another person (other than
a wholly owned subsidiary of CSI, which merger or consolidation results in
a shareholder of CSI having the same interest in CSI as prior to
consummation of such merger or consolidation); (c) the acquisition by
another person of assets of CSI representing at least a majority of CSI's
book value; (d) the acquisition by CSI of at least a majority of its
outstanding equity securities; (e) the consummation of any recapitalization
of CSI; (f) the receipt by stockholders of CSI of any cash, securities, or
other assets to be distributed in any spin-off, split-off, or other
extraordinary dividend; or (g) another person or group of persons obtaining
the ability to elect a majority of the directors of CSI standing for
election, whether or not such election is possible (by reason of
classification of directors), at the next annual meeting of CSI's
stockholders and whether or not such election occurs.
Executive shall be entitled to the Success Fee set forth above in the event
that at any time prior to the expiration of six (6) months after the
termination of the Term of Employment, a Transaction is consummated.
If the consideration or other value received in any Transaction is paid in
whole or in part in the form of securities or other property or assets, the
value of such securities or other property or assets, for purposes of
calculating the Success Fee, shall be the fair market value thereof, on the
day prior to the consummation of the Transaction; provided, however, that
if any such securities consist of securities with an existing public
trading market, the value thereof shall be determined by the last sales
prior for such securities on the last trading day thereof prior to such
consummation; provided further, that if such securities do not consist of
securities with an existing public trading market, or if the parties are
unable to agree on a fair market value for such securities or other
property or assets, the parties shall submit such issue to a panel of three
arbitrators located in Philadelphia, Pennsylvania (with one arbitrator
being chosen by each party hereto and the third being jointly chosen by the
parties hereto) for determination in accordance with the rules of the
American Arbitration Association, which determination shall be binding upon
each of the parties hereto.
The Board of Directors of CSI ("Board") reserves the right to direct and
control the process involved in negotiating and consummating a Transaction
including, but not limited to engaging consultants, advisors and investment
bankers and providing them with guidelines as to the type of Transaction to
be considered. Executive acknowledges that the Board has excluded from
consideration any Transaction that could result in a conflict of interest
between management and the Board or shareholders of CSI.
Executive acknowledges that the Board has the right to terminate
discussions or negotiations relating to a Transaction at any time that the
Board, in its sole discretion, determines that such Transaction is not in
the best interests of the shareholders of CSI or could result in a conflict
of interest between management and the Board or shareholders of CSI.
3. Subsection 7.B. (as hereby renumbered) shall be deleted in its entirety
and restated as follows:
B. Executive agrees not to compete in any manner whatsoever, as an
employee, shareholder, director, creditor, joint venturer, consultant, or
otherwise, with CSI, or any currently existing or hereinafter created
subsidiary, joint venture, or business line of CSI, at any time during the
Term of this Agreement, and for a period of five (5) years following the
date of termination of employment in any geographic area worldwide in which
CSI is doing business. The foregoing restriction shall not apply to
competition with an immaterial line of business of CSI which shall be
defined as a line of business with gross sales of less than one percent
(1%) of the total sales of CSI. Executive further agrees that at any time
during the term of this Agreement and for a period of five (5) years
following the date of termination, he shall not solicit any employee of CSI
to leave his or her employment.
4. The first full paragraph of Subsection 6.C. (as hereby renumbered) shall
be deleted in its entirety and restated as follows:
C. If Executive is terminated by CSI during the Term hereof, for reasons
other than those provided in Subsections 6.A. or 6.B. above, and provided
that Executive is not in violation of the provisions of Section 7 hereof,
Executive shall be entitled to receive severance pay for a period of thirty
(30) months thereafter consisting of the payment of one hundred percent
(100%) of Executive's monthly Base Salary payable within thirty (30) days
of the date of termination, as well as any Bonus payments that are accrued
and payable through the date of such termination, and continuation of
health insurance benefits, life and disability insurance benefits and
payments in lieu of 401(K) benefits (in the same manner such payments are
made as of the date of this Agreement) contemporaneously with the severance
pay. If the Executive's employment with CSI terminates during the Term and
after a Change in Control or Potential Change in Control (as those terms
are hereinafter defined),the Executive shall be entitled to receive, in
lieu of the foregoing, the Change in Control Severance Benefits (as that
term is hereinafter defined). However, the Executive shall not be entitled
to receive the Change in Control Severance Benefits if he voluntarily
leaves the employ of CSI, other than his voluntary leaving after any of the
following events occur:
5. Section 6.C.(b)(ii) (as hereby renumbered) shall be deleted in its
entirety and restated as follows:
(ii) a lump sum payment in an amount equal to two hundred ninety-nine
percent (299%) of the Executive's highest Base Salary in effect during the
Term, which lump sum payment will be made within thirty (30) days after the
date the Executive's employment is terminated.
6. Section 6.C.(b) (iii) (as hereby renumbered) shall be deleted in its
entirety and restated as follows:
(iii) the continuation of the Executive's health insurance benefits, life
and disability insurance benefits and payments in lieu of 401(K) benefits
(in the same manner such payments are made as of the date of this
Agreement) for a period of thirty (30) months (or thirty-six (36) months as
the case may be) after the date the Executive's employment is terminated.
The Executive shall continue to make such contributions with respect to
such continued benefits as are required of the Executive prior to the
termination of his employment; and
7. The first full paragraph of Section 6.E. (as hereby renumbered) shall be
deleted in its entirety and restated as follows:
In the event that the parties are unable to agree upon an extension or new
agreement, and Executive leaves the employ of CSI, Executive shall be
entitled to receive severance pay for a pay for period of thirty (30)
months consisting of the payment of one hundred percent (100%) of
Executive's monthly Base Salary at the end of the term payable within
thirty (30) days of the date of termination, and continuation of health
insurance benefits, life and disability insurance benefits and 401(K)
benefits contemporaneous with the severance pay.
8. In all other respects, not inconsistent with this Amendment, the
Agreement is hereby ratified and confirmed.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed on the date first above written.
ATTEST: CHECKPOINT SYSTEMS, INC.
________________ _____________________________
By:
WITNESS: _______________ ___________________________
Michael E. Smith