SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHECKPOINT SYSTEMS, INC.
- -----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined:
- -----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------
(5) Total Fee paid:
- --------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid: .....................................
(2) Form Schedule or Registration Statement No:..................
(3) Filing Party:................................................
(4) Date Filed:..................................................
[LOGO]
101 WOLF DRIVE
P.O. BOX 188
THOROFARE, NJ 08086
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 22, 1998
------------------------------
The Annual Meeting of Shareholders (the "Meeting") of Checkpoint Systems,
Inc. (the "Company") will be held on Wednesday, April 22, 1998, at 10:00 a.m.,
local time, at the Company's corporate headquarters located at 101 Wolf Drive,
Thorofare, New Jersey 08086, for the following purposes:
1. To elect two Class I directors to hold office until the 2001 Annual
Meeting of Shareholders and until their successors are duly elected and
qualified;
2. To transact such other business as may properly come before the
Meeting.
You are cordially invited to attend the Meeting in person. The Board of
Directors has fixed the close of business on March 13, 1998 as the record date
for the Meeting. Only Shareholders of record at that date are entitled to notice
of and to vote at the Meeting and any adjournment or postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached proxy statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to sign, date and return the enclosed proxy promptly. Should you
decide to attend the Meeting in person, you may revoke your proxy at that time.
NEIL D. AUSTIN
Secretary
March 23, 1998
CHECKPOINT SYSTEMS, INC.
101 WOLF DRIVE
P.O. BOX 188
THOROFARE, NJ 08086
------------------------------
PROXY STATEMENT
------------------------------
GENERAL
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Checkpoint Systems, Inc. (the "Company")
for use at the Company's Annual Meeting of Shareholders (the "Meeting") which
will be held on the date, at the time and place and for the purposes set forth
in the foregoing notice, and any adjournment or postponement thereof. This proxy
statement, the foregoing notice, the enclosed proxy and the Company's 1997
Annual Report, are first being sent to shareholders of the Company (the
"Shareholders") on or about March 23, 1998.
The Board of Directors does not presently intend to bring any matter before
the Meeting except as specifically indicated in the notice and does not know of
anyone else who intends to do so. If any other matters properly come before the
Meeting, however, the persons named in the enclosed proxy, or their duly
constituted substitutes acting at the Meeting, will be authorized to vote or
otherwise act thereon in accordance with their judgment on such matters. If the
enclosed proxy is properly executed and returned prior to voting at the Meeting,
the shares represented thereby will be voted in accordance with the instructions
marked thereon. In the absence of instructions, the shares will be voted "FOR"
the nominees of the Board of Directors in the election of the Class I directors.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later date,
or by attending the Meeting and voting in person. However, revocation of a proxy
shall not affect any vote taken prior to such revocation.
VOTING SECURITIES AND SECURITY OWNERSHIP
VOTING SECURITIES
At the close of business on March 13, 1998, the record date fixed for the
determination of Shareholders entitled to notice of and to vote at the Meeting,
there were outstanding 33,174,384 shares of the Company's Common Stock, $.10 par
value per share (the "Common Stock") outstanding, each entitled to one vote.
There is no other class of voting securities outstanding. The presence at the
Meeting, in person or by proxy, of at least a majority of the votes that all
Shareholders are entitled to cast shall constitute a quorum for purposes of
conducting business. Shares which are present, or represented by a proxy, will
be counted for quorum purposes regardless of whether the holder of the shares or
proxy fails to vote on a matter ("Abstentions") or
whether a broker with discretionary authority fails to exercise its
discretionary authority to vote shares with respect to the matter ("Broker
Non-Votes"). The affirmative vote of a majority of the votes which all
shareholders present are entitled to cast at the Annual Meeting of Shareholders
is required to take action. For voting purposes, only shares voted for the
adoption of a proposal or the election of directors, and neither Abstentions nor
Broker Non-Votes, will be counted as voting in favor in determining whether a
proposal is approved or a director is elected. As a consequence, Abstentions and
Broker Non-Votes will have the same effect as votes against adoption of a
proposal or the election of a director. In the election of the Class I
directors, Shareholders entitled to vote do not have cumulative voting rights.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table sets forth certain information respecting the holdings
of the parties who were known to the Company to be the beneficial owners of more
than 5% of the outstanding Common Stock of the Company as of March 13, 1998. The
parties named below have sole voting power and sole investment power with
respect to the shares indicated as beneficially owned, except where otherwise
indicated.
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------------------------ -------------------- ------------
Crabbe Huson Group, Inc.(1) 1,963,500 5.78%
121 SW Morrison, Suite 1400
Portland, Oregon 97204
Westport Asset Management, Inc.(1) 1,708,600 5.05%
253 Riverside Avenue
Westport, Connecticut 06880
Merrill Lynch & Co., Inc.(1) 1,703,800 5.0%
250 Vesey Street
World Financial Center N. Tower
New York, NY 10281
- ------------------
(1) As reported on Schedules 13G filed with the Securities and Exchange
Commission ("SEC") on: (i) February 2, 1998 in the case of Crabbe Huson
Group, Inc.; (ii) February 19, 1998 in the case of Westport Asset
Management, Inc.; and (iii) January 16, 1998 in the case of Merrill Lynch &
Co., Inc.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information respecting the Common
Stock of the Company beneficially owned by each director and nominee for
director, the Chief Executive Officer and the four other most highly compensated
executive officers of the Company other than the Chief Executive Officer, and by
the group consisting of such persons and the other executive officers as of
March 2, 1998. Each of the persons named below has sole voting power and sole
investment power with respect to the shares indicated as beneficially owned,
unless otherwise stated.
2
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK(1)
- ------------------- -------------------- ---------------
Robert O. Aders 19,356(2) .06
Dr. Roger D. Blackwell 103,566(3) .31
Richard J. Censits 49,000 .15
David W. Clark, Jr. 134,306(4) .40
Dr. Elisa Margaona 4,519(5) .01
Raymond R. Martino 34,519(6) .01
Jermain B. Porter 45,356(7) .14
Albert E. Wolf 1,208,800(8) 3.65
Kevin P. Dowd 425,266(9) 1.28
Steven G. Selfridge 267,774(10) .81
William J. Reilly, Jr. 164,231(11) .50
Michael E. Smith 140,169(12) .42
All Directors and Officers as a Group 3,134,167(13) 9.45
(17 persons)
- ------------------
(1) Unissued shares subject to options exercisable within 60 days of March 2,
1998 are deemed to be outstanding for the purpose of calculating the
percent of Common Stock beneficially owned.
(2) Includes 9,356 shares subject to currently exercisable options to purchase
the Company's Common Stock and 10,000 shares purchased on behalf of Mr.
Aders as sole trustee under the Robert O. Aders IRA IMA Rollover account.
Excludes 2,015 shares owned by Mr. Aders wife as to which Mr. Aders
disclaims beneficial ownership. All options reported herein and in the
footnotes below are currently exercisable to purchase the Company's Common
Stock (the "Options").
(3) Includes 93,356 Options and 200 shares purchased on behalf of Dr. Blackwell
as sole trustee under the Roger D. Blackwell Pension Plan.
(4) Includes 69,356 Options.
(5) Consists of 4,519 Options.
(6) Includes 14,519 Options.
(7) Includes 33,356 Options.
(8) Includes 459,356 Options; 116,306 shares held in trust for Mr. Wolf in
accordance with the Will of his late father, as to which Mr. Wolf is both a
Trustee and income beneficiary and has sole voting power; and 99,688 shares
in held trust for Mr. Wolf's children as to which Mr. Wolf's children are
principal beneficiaries and Mr. Wolf is income beneficiary. Amount shown
excludes 338,800 shares owned by Mr. Wolf's wife, for which Mr. Wolf
disclaims beneficial ownership.
(9) Includes 400,000 Options and 25,266 shares owned by Mr. Dowd, 5,266 shares
of which are held by the custodian of the Company's Employees' Stock
Purchase Plan ("ESPP").
(10) Includes 245,000 Options; 60 shares (30 shares each) which are held by each
of Mr. Selfridge's two minor children, under the NJ Unif Tran Min Act; and
22,714 shares owned by Mr. Selfridge, 2,714 shares of which are held by the
custodian of the ESPP.
(11) Includes 155,000 Options and 9,231 shares owned by Mr. Reilly, 4,831 shares
of which are held by the custodian of the ESPP.
(12) Includes 135,000 Options and 5,169 shares held by the custodian of the
ESPP.
(13) See footnotes 1-12 above. Total shown includes 20,541 shares held by the
custodian of the ESPP.
3
ELECTION OF DIRECTORS
IDENTIFICATION OF THE DIRECTORS TO BE ELECTED
At the Meeting, the Shareholders will elect two Class I directors to hold
office until the 2001 Annual Meeting of Shareholders and until their respective
successors have been duly elected and qualified. The Company's Board of
Directors is divided into three classes serving staggered three-year terms, the
term of one class of directors expiring in each year. The term of the Company's
three Class I directors, Roger D. Blackwell, Richard J. Censits and Jermain B.
Porter will expire at the Meeting. Pursuant to the Company's Amended and
Restated By-Laws, a Director reaching age 70 is no longer qualified to stand for
re-election; therefore, Mr. Porter will not stand for re-election. No successor
is being named at this time.
The Board of Directors has nominated Roger D. Blackwell and Richard J.
Censits for election at the Meeting as the Company's Class I directors and
Messrs. Blackwell and Censits have indicated their willingness to continue to
serve as directors. If a nominee, at the time of his election, is unable or
unwilling to serve, and as a result a substitute nominee is designated, the
persons named in the enclosed proxy or their substitutes will have discretionary
authority to vote or to refrain from voting for the substitute nominee in
accordance with their judgment. Unless contrary instructions are given, the
shares represented by the enclosed proxy will be voted "FOR" the election of
Messrs. Blackwell and Censits. The Board of Directors recommends a vote "FOR"
the election of these nominees
The nominees for election as the Class I directors and the directors whose
terms of office will continue after the Meeting, together with certain
information about them, are as follows:
DIRECTOR TERM
NAME AGE SINCE EXPIRES POSITIONS WITH THE COMPANY
- ---- --- -------- ------- --------------------------
Robert O. Aders 71 1994 1999 Director
Roger D. Blackwell 58 1990 1998 Director(1)(2)
Richard J. Censits 60 1985 1998 Director(1)(3)
David W. Clark, Jr. 60 1982 1999 Director(1)(3)
Kevin P. Dowd 49 1995 2000 President, Chief Executive
Officer and Director
Elisa Margaona 68 1996 1999 Director
Raymond R. Martino 60 1996 2000 Director(2)
Albert E. Wolf 68 1969 2000 Chairman of the Board
and Director(3)
- ------------------
(1) Member of the Company's Audit Committee.
(2) Member of the Company's Compensation and Stock Option Committee.
(3) Member of the Company's Executive Committee.
4
PRINCIPAL OCCUPATIONS AND DIRECTORSHIPS HELD BY EACH NOMINEE FOR DIRECTOR AND
THE DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE MEETING
Mr. Aders has been Chairman of The Advisory Board, Inc., an international
consulting organization since 1992. He is also President Emeritus and a member
of the Board of Directors of Food Marketing Institute ("FMI"), where he served
as Chief Executive Officer from the founding of FMI in 1976 until his retirement
in 1993. Mr. Aders served as Acting Secretary of Labor during the Ford
Administration, prior to which he was Chairman of the Board of The Kroger Co.
Mr. Aders is a director of Telepanel Systems, Inc. and ICC Technologies, Inc.
For more than the past five years, Dr. Blackwell has been a professor of
marketing at Ohio State University and President of Roger Blackwell Associates,
Inc., a consulting firm and a member of the Board of Directors of Max & Erma's,
Restaurants, Inc. In February, 1992, Dr. Blackwell became a member of the Board
of Directors of Worthington Foods, Inc. Dr. Blackwell joined the Board of
Directors of Intimate Brands, Inc. in 1995. In 1996, Dr. Blackwell became a
director of Abercrombie & Fitch, Airnet Systems; and Applied Industrial
Technologies. Dr. Blackwell also serves as a Trustee of Flex-Funds.
Mr. Censits is currently a business consultant. Mr. Censits was Chief
Executive Officer and a member of the Board of Directors of MedQuist, Inc.
(formerly Summit Health Group, Inc.) from 1987 until 1995, and Chairman from
1992 to 1995. Mr. Censits is currently a director of MedQuist, Inc. MedQuist
provides electronic transcription information services to the health care
industry nationwide. Mr. Censits was a director of EnergyNorth, Inc. from 1993
until February 1998, and is a Trustee of the University of Pennsylvania.
Mr. Clark has been a managing director of Pryor & Clark, a company engaged
in investments, since June, 1992. He served as President and Chief Operating
Officer of Corcap, Inc. ("Corcap"), a company engaged in the manufacture of
elastomer materials and components, from July, 1988 through June, 1992. From
October, 1985 to July, 1988, Mr. Clark was the President and Chief Operating
Officer of Lydall, Inc. ("Lydall"), a diversified manufacturing concern which
manufactures industrial materials and components. Mr. Clark is a director of
Acme United Corp., Corcap, CompuDyne Corporation and SS&C Technologies, Inc.
Mr. Dowd has been President of the Company since August 1993, and was named
Chief Executive Officer and a Director of the Company in January 1995. Mr. Dowd
was also Chief Operating Officer from August 1993 to April 1997. Mr. Dowd was
Executive Vice President of the Company from May 1992 to August 1993. Mr. Dowd
was Executive Vice President -- Marketing, Sales and Service from April, 1989 to
May, 1992 and Vice President of Sales from August 1988 to April, 1989. Mr. Dowd
is a director of MAB Paints, Inc., C&D Technologies, Inc., and a board member of
Holy Redeemer Health System, Inc. a not for profit organization.
Dr. Margaona has been President and Chief Executive Officer of the
Institute of Higher Studies and Research since 1982, President of MARESA since
1981 and President of the Certification Program for Retailing Managers since
1993. Dr. Margaona was founding President and Chief Executive Officer of ANTAD,
National Retailers Association of Mexico from 1983 to 1990 and a director from
1990 to 1994; founding President of ALAS, Latin American Association of
Supermarkets from 1986 to 1990; and an advisor to Food Marketing Institute
International Advisory Board from 1993 to 1995. Dr. Margaona was appointed World
Area Chair of the
5
International Council of Psychologists in 1996 and a board member of Catalina
Marketing de Mexico in the same year.
Mr. Martino has been Vice Chairman of and a consultant to Symbol
Technologies, Inc. since October, 1994 and President from 1983 until October
1994.
Mr. Wolf has been Chairman of the Board since April, 1986 and Chairman of
the Executive Committee since October, 1994. Mr. Wolf served as Chief Executive
Officer of the Company from April, 1972 to December, 1994, President of the
Company from July, 1977 to April, 1986 and from July, 1991 through August, 1993,
and a director of the Company since July, 1969. Mr. Wolf is a director of
Lydall, Inc.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 4 regular and 2 special meetings during the
past fiscal year. Each director attended at least 75% of the total number of
meetings of the Board of Directors and of the committees of the Board on which
he/she served.
The Board of Directors has an Audit Committee, a Compensation and Stock
Option Committee and an Executive Committee. Messrs. Blackwell, Censits and
Clark constitute the members of the Audit Committee; Messrs. Blackwell, Martino
and Porter constituted the members of the Compensation and Stock Option
Committee; and Messrs. Wolf, Censits and Clark constitute the members of the
Executive Committee. The Audit Committee met twice during the last fiscal year
with the Company's independent public accountants to discuss the scope and
results of the annual audit and questions of accounting and tax policy. The
Compensation and Stock Option Committee acted at various times during the last
fiscal year to approve salaries and benefits and compensation arrangements for
the Company's officers and to grant stock options. The Executive Committee, met
four times during the year to consider strategic financing alternatives,
acquisitions and long-range goals of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation and Stock Option Committee (the "Committee")
consisted of Messrs. Blackwell, Martino and Porter. None of the members of the
Committee is or, during the last fiscal year was, an officer or employee of the
Company or any of its subsidiaries.
6
EXECUTIVE COMPENSATION
CASH, BONUS AND DEFERRED COMPENSATION
The following table sets forth the total annual and long-term compensation
paid by the Company for services in all capacities rendered during the fiscal
years ended December 28, 1997, December 29, 1996 and December 31, 1995 to the
Chief Executive Officer and the four most highly compensated executive officers
other than the Chief Executive Officer (the "Named Officers"):
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION AWARDS
----------------------- -------------
SALARY BONUS STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) (3)
- --------------------------- ---- ------- ------- -------------
Kevin P. Dowd 1997 387,787 0 200,000
President, Chief Executive 1996 374,980 0 50,000
Officer and Director 1995 331,770 150,000 200,000
Albert E. Wolf 1997 324,000 0 0
Chairman of the Board 1996 314,300 0 0
1995 314,300 0 0
Steven G. Selfridge 1997 244,939 0 100,000
Executive Vice President and 1996 237,028 0 30,000
Chief Operating Officer 1995 201,287 90,000 210,000
William J. Reilly, Jr. 1997 233,392 0 100,000
Executive Vice President 1996 217,801 0 30,000
1995 200,937 90,000 150,000
Michael E. Smith 1997 221,101 0 100,000
Executive Vice President 1996 213,916 0 30,000
1995 184,494 90,000 150,000
- ------------------
(1) Amounts shown in the "Salary" column include payments to the Named Officers
under the Company's Executive Supplemental Plan, a plan adopted in 1991 for
those of its highly compensated officers who are excluded by Internal
Revenue Service regulations from participating in the Company's 401(k)
savings plans. Payments under the Executive Supplemental Plan were made to
or for the benefit of the Named Officers as follows: Mr. Dowd: 1997 --
$33,988; 1996 -- $33,322; 1995 -- $30,293; Mr. Selfridge: 1997 -- $22,994;
1996 -- $22,544; 1995 -- $19,347; Mr. Reilly: 1997 -- $20,615; 1996 --
$19,690; 1995 -- $18,175; Mr. Smith: 1997 -- $19,569; 1996 -- $19,185; 1995
-- $17,165. Amounts shown also reflect the Company's matching contribution
under the Checkpoint Systems, Inc. Employee Stock Purchase Plan for each of
the Named Officers for each year shown (other than Mr. Wolf) in the amount
of $1,079 for 1997 and $884 for the years 1996 and 1995. Beginning in 1995
Mr. Wolf ceased participating in the Executive Supplemental Plan and the
Employee Stock Purchase Plan.
(2) Bonus amounts were paid pursuant to the Company's Profit Incentive Plan,
described under the caption "Compensation and Stock Option Committee Report
on Executive Compensation."
(3) Options reflected in the "Awards/Stock Options" column reflect grants of
options to purchase the Company's Common Stock under the Company's Stock
Option Plan (1992) and its predecessor plans, described under the caption
"Compensation and Stock Option Committee Report on Executive Compensation."
7
The Company does not grant SARs or restricted stock to officers.
The aggregate value of personal benefits received by each executive officer
named in the foregoing table during the last fiscal year did not exceed the
lesser of $50,000 or 10% of the annual salary and bonus reported for the Named
Officer in the "Salary" and "Bonus" columns of the Summary Compensation Table
above and thus is not required to be disclosed.
STOCK OPTION AWARDS
Set forth below is further information with respect to grants of stock
options made during the fiscal year ended December 28, 1997 under the Checkpoint
Systems, Inc. Stock Option Plan (1992) to the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- -------------------------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS/SAR'S APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (2)(3)
OPTIONS/SAR'S EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- -------------- ------------- ----------- ---------- --------- ---------
Kevin P. Dowd 4,597 0.2919 21.75 01/14/07 62,880 159,350
45,403 2.8835 21.75 07/14/07 660,436 1,697,810
19,353 1.2291 15.50 07/25/07 198,747 509,791
130,647 8.2972 15.50 12/25/07 1,341,685 3,441,466
Steven G. Selfridge 4,597 0.2919 21.75 01/14/07 62,880 159,350
20,403 1.2958 21.75 07/14/07 296,784 762,954
19,353 1.2291 15.50 07/25/07 198,747 509,791
55,647 3.5349 15.50 12/25/07 571,469 1,465,837
William J. Reilly, Jr. 4,597 0.2919 21.75 01/14/07 62,880 159,350
20,403 1.2958 21.75 07/14/07 296,784 762,954
19,353 1.2291 15.50 07/25/07 198,747 509,791
55,647 3.5349 15.50 12/25/07 571,469 1,465,837
Michael E. Smith 4,597 0.2919 21.75 01/14/07 62,880 159,350
20,403 1.2958 21.75 07/14/07 296,784 762,954
19,353 1.2291 15.50 07/25/07 198,747 509,791
55,647 3.5349 15.50 12/25/07 571,469 1,465,837
- ------------------
(1) This table reflects options granted to the Named Officers listed above to
purchase the Company's Common Stock. For each of the named officers granted
options, the top figure reflects an incentive stock option ("ISO") and the
bottom figure(s) reflect a grant which is not an ISO ("NSO"). Under the
Checkpoint Systems, Inc. Stock Option Plan (1992) (the "Stock Option Plan"),
options granted prior to July 23, 1997 are immediately exercisable (subject
to a six-month holding requirement in the case of management subject to
Section 16 of the Securities Exchange Act of 1934), the term of such options
is generally ten years (in the case of an ISO), and ten years and six months
(in the case of an NSO). In July 1997 the Compensation and Stock Option
Committee declared that all options issued under the Company's Stock Option
Plan 1992 on or after July 23, 1997 to persons with the title of vice
president or above were to vest over a period of three years at a rate of
33% per year. Options issued to persons with a title other than vice
8
president or above shall vest over a period of two years at a rate of 34%
upon the first anniversary of the grant, 33% upon 18 months after the
anniversary date; and 33% upon the second anniversary date.
(2) Represents gain that would be realized assuming the options were held until
expiration and the stock price increased at compounded rates of 5% and 10%
from the base price per share.
(3) The dollar amounts under these columns use the 5% and 10% rates of
appreciation required by the Securities and Exchange Commission. This
presentation is not intended to forecast possible future appreciation of the
Company's Common Stock.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Set forth below is information with respect to options exercised and
unexercised as of the fiscal year ended December 28, 1997 for each of the Named
Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY END OPTION VALUES
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES ACQUIRED ON UNEXERCISED IN-THE-MONEY
EXERCISE OR WITH OPTIONS/SAR'S AT OPTIONS/SAR'S
RESPECT TO WHICH FY-END (#)(2) AT FY-END ($)(3)
OPTION GRANTS ------------------- --------------------
EXERCISED VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- ------------------ ------- ------------------- --------------------
Kevin P. Dowd 20,000 119,374 400,000/150,000 1,856,250/84,375
Steven G. Selfidge 20,000 21,250 245,000/ 75,000 621,250/42,188
William J. Reilly, Jr. 0 0 155,000/ 75,000 430,000/42,188
Michael E. Smith 0 0 135,000/ 75,000 312,000/42,188
- ------------------
(1) Represents the difference between the fair market value of the shares at the
date of exercise and the exercise price multiplied by the number of shares
acquired.
(2) The first number represents the number of exercisable but unexercised
options; the second number represents the number of unexercisable options.
(3) The first number represents the value based upon the stock price at fiscal
year-end of exercisable but unexercised options; the second number
represents the value of unexercisable options.
COMPENSATION OF DIRECTORS
In 1997, directors who were not employees of the Company received a $1,000
retainer each fiscal quarter, $2,000 for each regularly scheduled Meeting of the
Board of Directors' attended. Members of the Executive Committee receive $1,000
for each Executive Committee meeting they attend. Directors who are employees of
the Company do not receive any additional compensation for their service as
directors.
Each non-employee director may not receive an Option or Options under the
Stock Option Plan (1992) for an aggregate of more than 10% of the Option or
Options under the Stock Option Plan. Effective with the 1997 Shareholders'
Meeting each non-employee director shall receive, upon his initial election as a
director, and upon his subsequent reelection as a director, non-incentive stock
options for 10,000 shares.
9
Effective January 1, 1995, the Company entered into an agreement with Mr.
Wolf. As compensation, Mr. Wolf will receive $530,014 per year for five years,
of which $255,014 will be deferred annually. In addition, the Company will pay
the sum of $125,000 in five equal installments of $25,000 each commencing
January 1, 1995 to Mr. Wolf for his agreement not to compete.
The Company entered into a consulting agreement on November 1, 1994 with
The Advisory Board, Inc. a company owned by Robert O. Aders, a member of the
Board of Directors. The Agreement, which expired on March 1, 1998 provided for a
payment of $20,000 per quarter during the contract period. The Company paid
$80,000 to The Advisory Board, Inc. for the year 1997.
In July, 1997, the Company renewed for an additional term of two years the
original Employment Agreements entered into on July 1, 1995, (each an
"Agreement") with Messrs. Reilly, Selfridge and Smith. The Company entered into
an Employment Agreement on July 1, 1995, with Mr. Dowd, who is also a Director
of the Company. Mr. Dowd's Agreement is for a period of three years. Each
Agreement provides that upon termination of employment in certain circumstances
the executive would be entitled to severance pay of not less than twelve months
of base salary and not more than eighteen months of base salary plus health
insurance benefits during such period. A change-in-control of the Company (as
defined in the Agreement) or a change in the responsibilities or duties of the
executive could result in severance payments to the executive under the
Agreement. Each Agreement provides for a two year non-compete period by the
executive commencing upon the date of termination of employment from the
Company.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors has
furnished the following report on executive compensation:
GENERAL
Under the supervision of the Compensation and Stock Option Committee of the
Board of Directors, the Company has developed and implemented compensation
policies, plans and programs which seek to enhance the profitability of the
Company, and thus shareholder value, by aligning the financial interests of the
Company's senior management with those of its shareholders. In furtherance of
these goals, and because the Committee believes that it is appropriate that
senior management have a greater portion of their compensation at risk than
other employees, annual cash base salaries of senior management are generally
set somewhat below what the Committee (based on a review of various analytical
data secured from outside consultants) believes to be salary levels paid to
senior management of similar sized companies with comparable responsibilities.
Annual base salary and longer term incentive compensation provide an important
incentive in attracting and retaining corporate officers and other key employees
and motivating them to perform to the full extent of their abilities in the best
long-term interests of the shareholders. Both types of compensation are variable
and are closely tied to the Company's performance in a manner that encourages a
sharp and continuing focus on building revenue growth, long term profitability
and shareholder value.
In the early part of each fiscal year, the Committee reviews with the Chief
Executive Officer and approves, with any modifications it deems appropriate, an
annual compensation plan for each
10
of the Company's senior executives (other than the Chief Executive Officer).
This salary plan is developed by the Company's human resources staff based on a
review of industry, peer group and national surveys of compensation levels,
historical compensation policies of the Company, and, to a large extent,
subjective judgments of the Committee relating to the past and expected future
contributions, level of experience, leadership abilities and overall
performance. In addition, the Committee is advised, from time to time upon
request, by independent compensation consultants concerning compensation
competitiveness.
The Committee also reviews and fixes the base salary of the Chief Executive
Officer based on a review of similar data and the Committee's subjective
assessment of his past performance and its expectation as to his future
contributions in leading the Company and its businesses. For 1997, Mr. Dowd's
compensation was formulated by the Committee based on these factors and that
continued advancements in technology and market penetration would be required in
1997 for the long-term benefit of the Company. Mr. Dowd's salary and incentive
program was approved by unanimous vote of the Board of Directors (with Mr. Dowd
abstaining). Mr. Dowd's base salary for the fiscal year 1997 was set at
$343,000. Mr. Dowd was given the right to participate in the 1997 Bonus Plan
(see below). Mr. Dowd's targeted percentage was 160% and adjusted based on
earning per share growth. Mr. Dowd did not receive a payment under the 1997
Bonus Plan for the fiscal year 1997.
Effective January 1, 1995, the Company entered into an agreement with A.E.
Wolf, former Chief Executive Officer and current Chairman of the Board of
Directors. Pursuant to the agreement, Mr. Wolf is to receive $530,014 annually
for five years, of which $255,014 will be deferred annually. In addition, the
Company will pay the sum of $125,000 in five equal installments of $25,000 each
to Mr. Wolf for his agreement not to compete. Mr. Wolf did not participate in
the 1997 Bonus Plan, discretionary bonus plan or the Stock Option Plan.
LONG TERM COMPENSATION
In addition to salary, senior management of the Company has the potential
to receive additional compensation from one of three possible sources: the
Company's 1997 Bonus Plan, discretionary management bonuses and the Stock Option
Plan.
For 1997 the Board of Directors approved the 1997 Bonus Plan. The 1997
Bonus Plan provides for a Bonus Pool to be formed when earnings per share
("EPS") increases over a defined target. The Bonus Pool is then apportioned
among four (4) groups of employees; corporate officers; vice presidents, middle
management and front line employees. Each group has a targeted bonus percentage
assigned which is adjusted, depending on the percentage increase or decrease
over the targeted EPS growth. Other than for Messrs. Dowd, Selfridge, Reilly and
Smith, whose bonuses are determined solely on the basis of financial performance
of the Company, all participants will have a percentage of their bonuses
determined by individual performance. No Bonus Pool will be formed unless 1997
EPS attains a specified level. The specified minimum target for EPS was not
attained for the fiscal year 1997 and therefore no bonuses were paid. No
discretionary bonuses were paid for the fiscal year 1997.
In order to provide incentives to employees over the longer term, the
Company maintains the Stock Option Plan (1992) ("Stock Option Plan"). At various
times during the year, the Committee grants options to purchase the Company's
Common Stock under the Stock Option Plan. Under the Stock Option Plan, as most
recently approved by the Shareholders at the 1997 Annual Meeting of
11
Shareholders, the Committee has the authority to grant both incentive and
non-incentive options to purchase the Company's Common Stock at an exercise
price of at least 100% of the fair market value on the date of grant. All
employees of the Company and its affiliates are eligible to receive awards of
options thereunder; non-employee directors may only receive non-incentive
options as set forth in the Stock Option Plan. The maximum number of shares
available for option under the Plan from its inception is 12,000,000; 2,217,814
remain available for grant thereunder as of March 13, 1998. The Committee
believes that the Stock Option Plan has been well-received by employees and
directors as a way to attract and retain quality management and encourage them
to strive for the long-term success of the Company.
Stock option awards under the Stock Option Plan typically are granted
annually, although several grants were made in 1997. In fixing the grants of
stock options to the individual senior management group during 1997, including
the Named Officers other than the Chief Executive Officer, the Committee
reviewed with the Chief Executive Officer the recommended individual awards,
taking into account such facts and subjective issues such as the respective
scope of accountability, strategic and operational goals, performance
requirements and anticipated contributions of each of the senior management
group and information on previous awards under the Stock Option Plan. Any awards
to the Chief Executive Officer are fixed separately by the Committee and are
based, among other things, upon a subjective review of competitive compensation
data from several surveys, data from selected peer companies, information
regarding his total compensation and historical information regarding his
long-term compensation awards as well as the Committee's subjective evaluation
of his past and expected future contributions to the Company's achievement of
long-term performance goals, including revenue and earnings growth.
The Committee believes that its past grants of options and the Profit
Incentive Plan have successfully focused the Company's senior management on
building profitability and shareholder value.
The foregoing report submitted by:
Roger D. Blackwell
Raymond R. Martino
Jermain B. Porter
12
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicts the following plot points:
STOCK PERFORMANCE GRAPH
----------------------------------------
1992 1993 1994 1995 1996 1997
----------------------------------------
Checkpoint Company 100.0 66.2 114.7 219.9 283.8 189.8
NYSE/AMEX/NASDAQ
Stock Market Index 100.0 110.5 110.4 150.8 185.1 231.0
NYSE/AMEX/NASDAQ
Electronic Components
and Accessories Index 100.0 135.0 150.9 237.4 367.5 388.5
Assumes $100 invested on December 24, 1992 in Checkpoint Systems, Inc.
Common Stock, the Center for Research in Security Prices Index ("CRSP Index")
for NYSE/AMEX/NASDAQ Stock Market, and the CRSP Index for NYSE/AMEX/NASDAQ
Electronic Components and Accessories.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. ("Coopers"), the Company's independent certified
public accountants for the fiscal year 1997, have been selected to continue for
the fiscal year 1998. A representative of Coopers is expected to be present at
the Meeting and will have the opportunity to make a statement if he desires to
do so. The representative is also expected to be available to respond to
appropriate questions.
13
SHAREHOLDER PROPOSALS
In order for Shareholder proposals to be considered for inclusion in the
Company's proxy materials for the next Annual Meeting of Shareholders, such
proposals must be received by the Company no later than November 26, 1998.
COST OF SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of the Board of
Directors' proxies for the Meeting, including the cost of preparing, assembling
and mailing proxy materials, the handling and tabulation of proxies received and
charges of brokerage houses and other institutions, nominees and fiduciaries
incurred in forwarding such materials to beneficial owners. In addition to the
mailing of the proxy material, such solicitation may be made in person or by
telephone or telegraph by directors, officers or regular employees of the
Company who will not be specifically compensated therefor, or by a professional
proxy solicitation organization engaged by the Company.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE, WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUEST SHOULD BE
DIRECTED TO NEIL D. AUSTIN, SECRETARY, AT THE ADDRESS OF THE COMPANY APPEARING
ON THE FIRST PAGE OF THIS PROXY STATEMENT.
14