THIRD AMENDMENT TO
EMPLOYMENT AGREEMENT
This FIRST AMENDMENT TO THE EMPLOYMENT AGREEMENT is made as of
the 17th day of July, 2001 by and between CHECKPOINT SYSTEMS, INC.
("CSI") and WILLIAM J. REILLY, JR. ("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
twenty-four (24) months thereafter consisting of the payment of one hundred
percent (100%) of Executive's monthly Base Salary 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 fifty percent (250%) 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 twenty four (24) months (or thirty (30) 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 twenty-four (24)
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: __________________ ____________________
William J. Reilly, Jr.