SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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 Under Rule 14a-12
CHECKPOINT SYSTEMS, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
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2) Aggregate number of securities to which transaction applies:
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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):
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/ / Fee paid previously with preliminary materials.
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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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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CHECKPOINT SYSTEMS, INC.
PROXY STATEMENT
[GRAPHIC OMITTED]
2004 NOTICE OF ANNUAL MEETING
Table of Contents
Notice of 2004 Annual Meeting of Shareholders
Proxy Statement:
Questions and Answers .................................................... 2
General .................................................................. 5
Summary of Proposals to be Voted on ...................................... 6
Proposals to be Voted On ................................................ 8
Proposal 1 - Election of Directors .................................... 8
Proposal 2 - Approval of the Checkpoint Systems, Inc. 2004 Omnibus
Incentive Compensation Plan ........................................ 11
Proposal 3 - Approval of the Checkpoint Systems, Inc. 423 Employee
Stock Purchase Plan ................................................ 16
Corporate Governance ..................................................... 18
Security Ownership of Principal Shareholders ............................. 23
Security Ownership of Management ......................................... 24
Compensation and Stock Option Committee Report on Executive Compensation . 25
Executive Compensation ................................................... 29
Equity Compensation Plan Information ..................................... 34
Audit Committee Report ................................................... 36
Independent Auditors ..................................................... 37
Stock Performance Graph .................................................. 38
Other Business ........................................................... 39
Appendix A - Audit Committee Charter ..................................... A-1
Appendix B - 2004 Omnibus Incentive Compensation Plan .................... B-1
Appendix C - 423 Employee Stock Purchase Plan ............................ C-1
[GRAPHIC OMITTED] CHECKPOINT SYSTEMS, INC.
101 Wolf Drive
P.O. Box 188
Thorofare, NJ 08086
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Checkpoint Systems, Inc. (Company) will
be held on Thursday, April 29, 2004, at 4:00 p.m., at the Hotel Arts
Barcelona, Carrer de la Marina 19-21, Barcelona 08025, Spain for the following
purposes:
1. To elect four Class I directors for a three-year term;
2. To approve the Checkpoint Systems, Inc. 2004 Omnibus Incentive
Compensation Plan ("2004 Omnibus Incentive Plan");
3. To approve the Checkpoint Systems, Inc. 423 Employee Stock Purchase
Plan (the "423 Plan"); and
4. To transact such other business as may properly come before the
Annual Meeting.
A complete list of Shareholders will be available at the Company's corporate
offices noted above, prior to the meeting. Shareholders owning Company shares
at the close of business on March 17, 2004 are entitled to receive notice of
the Annual Meeting and to vote at the Annual Meeting or any adjournments that
may take place.
You are cordially invited to attend the Annual Meeting in person. If you are
unable to attend in person, the Board of Directors urges you to sign, date,
and return the enclosed proxy card promptly.
The Company's Annual Meeting will be webcast live at 10:00 am (EST). Investors
will have the opportunity to listen to the Annual Meeting live over the
Internet through our website, located at http://www.checkpointsystems.com. To
listen to the live meeting, please go to the web site at least fifteen minutes
early to register, download, and install any necessary audio software. For
those who cannot listen to the live broadcast, a replay will be available
shortly after the meeting and will be available for 30 days.
This webcast is listen only. You will not be able to ask questions or vote
your shares.
This Proxy Statement, the enclosed proxy card, and Checkpoint's 2003 Annual
Report are being mailed to shareholders on or about March 29, 2004.
By Order of the Board of Directors
JOHN R. VAN ZILE
SENIOR VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
MARCH 29, 2004
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QUESTIONS AND ANSWERS
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1. Q: WHEN AND WHERE IS THE 2004 ANNUAL MEETING OF SHAREHOLDERS BEING
HELD?
A. The Annual Meeting of Shareholders of the Company ("Annual
Meeting") will be held on Thursday, April 29, 2004, at 4:00 p.m.,
at the Hotel Arts Barcelona, Carrer de la Marina 19-21, Barcelona
08025, Spain. After careful consideration, Barcelona was chosen as
the site for this year's Annual Meeting to make it easier for
European shareholders to attend and in recognition of the fact
that approximately 50% of the Company's business operations are
conducted in Europe.
The Company's Annual Meeting will be webcast live at 10:00 am
(EST). Investors will have the opportunity to listen to the Annual
Meeting live over the Internet through our website, located at
http://www.checkpointsystems.com. To listen to the live meeting,
please go to the web site at least fifteen minutes early to
register, download, and install any necessary audio software. For
those who cannot listen to the live broadcast, a replay will be
available shortly after the meeting and will be available for 30
days.
This webcast is listen only. You will not be able to ask
questions.
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2. Q: ON WHAT AM I VOTING?
A: You are being asked to vote on the election of four Class I
directors (William S. Antle, III, W. Craig Burns, John E. Davies,
Jr., and R. Keith Elliott).
You are also being asked to vote to approve:
(a) the 2004 Omnibus Incentive Plan;
(b) the 423 Plan; and
(c) any other business properly raised at the Annual Meeting.
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3. Q: WHO IS ENTITLED TO VOTE?
A: Shareholders as of the close of business on March 17, 2004 (the
"Record Date") are entitled to vote at the Annual Meeting.
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4. Q: WHO CAN ATTEND THE ANNUAL MEETING?
A: Any shareholder may attend.
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5. Q: HOW DO I VOTE?
A: You May Vote By Mail.
You do this by signing each proxy card you receive and returning
your proxy card(s) in the enclosed prepaid and addressed envelope.
If you mark your voting instructions on the proxy card your shares
will be voted as you instruct. If you return a signed card but do
not provide voting instructions, your shares will be voted as
recommended by the Board of Directors.
You May Vote in Person at the Meeting.
Ballots will be passed out at the Annual Meeting to anyone who
wants to vote at the Annual Meeting. If you hold your shares in
street name, you must request a legal proxy from your stockbroker,
and bring it with you to the Annual Meeting, in order to vote at
the Annual Meeting.
You May Vote by Telephone.
Shareholders may vote by telephone. To do this, follow the
instructions entitled "Vote by Telephone" that came with this
Proxy Statement. The telephone voting procedure is designed to
verify shareholders through the use of a Control Number that is
provided on each proxy card. If you vote by telephone, you do not
have to mail in your proxy card.
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You May Vote on the Internet.
Shareholders may vote on the Internet. To do this, follow the
instructions entitled "Vote by Internet" that came with your proxy
statement. If you vote by Internet, you do not have to mail in
your proxy card.
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6. Q: CAN I CHANGE MY VOTE?
A: You can revoke your proxy and change your vote at any time before
the polls close at the Annual Meeting. To do this:
o File a written notice of revocation with the Secretary of
Checkpoint;
o Deliver to the Company a duly executed proxy bearing a later
date;
o Vote by telephone or on the Internet at a later date (Your
latest telephone or Internet proxy will be counted and all
earlier votes will be disregarded); or
o Vote in person at the Annual Meeting. If you hold your shares
in street name, you must request a legal proxy from your
stockbroker in order to vote at the Annual Meeting. However,
once the voting on a particular matter is completed at the
Annual Meeting, you will not be able to revoke your proxy or
change your vote as to any matters on which voting has been
completed.
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7. Q. WHAT CONSTITUTES A QUORUM?
A: The Company's By-Laws provide that the presence, in person or by
proxy, of shareholders entitled to cast at least a majority of the
votes which all shareholders are entitled to cast on the
particular proposal shall constitute a quorum for the purpose of
considering such proposal. As of the Record Date, March 17, 2004,
34,982,372 shares of Common Stock were issued and outstanding.
Every shareholder of Common Stock is entitled to one vote for each
share held. Shareholders do not have the right to cumulate their
votes in the election of directors. There is no other class of
voting securities outstanding.
There must be a quorum for the Annual Meeting to be held. If you
submit a properly executed proxy card, even if you abstain from
voting, then you will be considered part of the quorum. A WITHHELD
vote is the same as an abstention. Similarly, if a broker fails to
vote shares with respect to which it has discretionary authority
("broker non-votes"), the shares will still be counted as present
for quorum purposes.
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8. Q: WHAT VOTES ARE REQUIRED TO APPROVE THE PROPOSALS?
Assuming the presence of a quorum, the affirmative vote of a
majority of the votes cast is required to approve any proposal.
For voting purposes, only shares voted FOR the adoption of any
proposal or FOR the election of a director will be counted as
voting in favor, when determining whether a proposal is approved
or a director is elected. As a consequence, abstentions, broker
non-votes and WITHHELD votes will all have the same effect as a
vote against the adoption of a proposal or the election of a
director.
Shares represented by a properly delivered proxy will be voted in
accordance with the instructions marked thereon. Properly
delivered proxies that do not specify how the shares are to be
voted will be voted "FOR" the election, as directors, of the Board
of Directors' nominees, "FOR" the approval of the 2004 Omnibus
Incentive Plan, and "FOR" the approval of 423 Plan. Properly
delivered proxies will be voted "FOR" or "AGAINST" any other
matter that properly comes before the Annual Meeting or any
adjournment thereof, at the discretion of the persons named as
proxyholders.
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9. Q: WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
A: If your shares are held in street name, your brokerage firm, under
certain circumstances, may vote your shares.
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Under the New York Stock Exchange Rules, brokerage firms have
authority to vote customers' unvoted shares on certain "routine"
matters, including the election of directors. "Routine" matters do
not include the approval of the 2004 Omnibus Incentive Plan and
the 423 Plan.
If you do not vote your proxy, your brokerage firm may either:
o Vote your shares on routine matters, or
o Leave your shares unvoted.
When a brokerage firm votes its customers' unvoted shares on
routine matters, these shares are counted for purposes of
establishing a quorum to conduct business at the Annual Meeting. A
brokerage firm cannot vote customers' shares on non-routine
matters.
You may have granted your stockbroker discretionary voting
authority over your account. Your stockbroker may be able to vote
your shares depending upon the terms of the agreement you have
with your stockbroker.
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10. Q: WHAT IF I RECEIVE MORE THAN ONE PROXY CARD?
A: This means that you have various accounts that are registered
differently with the transfer agent and/or with brokerage firms.
Please sign and return all proxy cards to ensure that all your
shares are voted.
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11. Q: WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2005 ANNUAL MEETING DUE?
A: In order for Shareholder proposals to be considered for inclusion
in the Company's proxy materials for the next Annual Meeting of
Shareholders, proposals must be submitted in writing and received
by the Company no later than November 29, 2004.
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12. Q: WHO ARE THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS?
A. PricewaterhouseCoopers LLP were the Company's independent
certified public accountants for the fiscal year 2003. The Audit
Committee will be responsible for selection of the Company's
independent certified public accountants for 2004. A
representative of PricewaterhouseCoopers LLP is expected to be
present at the Annual Meeting and will have the opportunity to
make a statement if he/she desires to do so. The representative is
also expected to be available to respond to appropriate questions
from shareholders.
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GENERAL
These proxy materials are being furnished by the Company in connection with
the solicitation of proxies by the Board of Directors of the Company for use
at the 2004 Annual Meeting of Shareholders and any adjournments thereof.
The Board of Directors approved the following proposals for shareholder
approval at a meeting held on February 18, 2004:
Proposal 1) Election of four Class I Directors to hold office until the 2007
Meeting of Shareholders. The Board has nominated William S. Antle,
III, W. Craig Burns, John E. Davies, Jr., and R. Keith Elliott.
Proposal 2) The Checkpoint Systems, Inc. 2004 Omnibus Incentive Compensation
Plan. This plan provides a flexible system for grants of cash or
stock-based awards to employees, directors and independent
contractors of the Company, using 3,437,956 shares of the
Company's common stock currently available for issuance under the
current stock option and directors deferred compensation plans of
the Company.
Proposal 3) The Checkpoint Systems, Inc. 423 Employee Stock Purchase Plan.
This plan is designed to take advantage of certain tax provisions
in Section 423 of the Internal Revenue Code allowing discounts on
purchases of up to 15% of the purchase price thereby encouraging
stock ownership.
In addition, the Board approved:
o A Deferred Compensation Plan which allows
executives to defer a certain percentage of their
salaries or bonuses in Company stock or other
investments. The plan provides a matching incentive
of up to 25% in Company stock or units which track
the performance of company stock (phantom shares)
to encourage selection of Company stock. Executives
may not withdraw any matching funds until
termination of service or employment.
o A stock ownership and retention program ("Stock
Ownership Program") that requires executives,
officers and directors to acquire and retain
Company stock. The number of shares participants
must maintain range from 10,000 for Directors and
Vice Presidents to 160,000 for the Chief Executive
Officer. Participants will have five years to meet
the stock ownership requirements.
The Board believes that these changes to the Company's compensation plans will
help the Company attract and retain high caliber employees, encourage stock
ownership across a broad spectrum of employees, and help the Company align
employee interests more closely with those of shareholders.
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SUMMARY OF PROPOSALS TO BE VOTED ON
1. ELECTION OF DIRECTORS
Nominees for re-election this year are:
o William S. Antle, III
o W. Craig Burns
o John E. Davies, Jr.
o R. Keith Elliott
Each has consented to serve a three-year term.
UNLESS YOU GIVE CONTRARY INSTRUCTIONS, THE SHARES REPRESENTED BY YOUR
RETURNED EXECUTED PROXY WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES.
THE BOARD RECOMMENDS A VOTE "FOR" THESE NOMINEES
2. PROPOSAL TO APPROVE THE COMPANY'S 2004 OMNIBUS INCENTIVE COMPENSATION
PLAN
The 2004 Omnibus Incentive Compensation Plan (2004 Omnibus Incentive
Plan) is designed to replace the Checkpoint Systems, Inc. 1992 Stock
Option Plan and the Directors' Deferred Compensation Plan. Upon approval
of the 2004 Omnibus Incentive Plan no further awards will be made under
the 1992 Stock Option Plan or under the existing Directors Deferred
Compensation Plan. The Board believes the 2004 Omnibus Incentive Plan
will be an integral part of the Company's compensation strategies and
programs. The Board believes that the 2004 Omnibus Incentive Plan will
help the Company attract and retain high caliber employees, encourage
stock ownership across a broad spectrum of employees, help the Company
align employee interests more closely with those of shareholders.
The 2004 Omnibus Incentive Plan would permit the award of stock options
(non-qualified and incentive stock options), stock appreciation rights,
stock awards (restricted and unrestricted), phantom shares, dividend
equivalent rights and cash awards. Individuals eligible to receive
awards include all world-wide employees, directors and independent
contractors, regardless of whether or not they are subject to U.S. tax
law. The 2004 Omnibus Incentive Plan will be administered by the
Compensation and Stock Option Committee ("Compensation Committee").
Shares under this plan are solely the approximately 3,437,956 shares of
the Company's common stock remaining for grant under the 1992 Stock
Option Plan and the Directors' Deferred Compensation Plan. No additional
shares of the Company's stock are requested for issuance under this
plan. This plan may be amended or terminated by the Board at any time.
An additional summary of the principal features of the 2004 Omnibus
Incentive Plan is provided below but is qualified in its entirety by
reference to the full text of the 2004 Omnibus Incentive Plan that is
attached to this proxy statement as Appendix B.
UNLESS YOU GIVE CONTRARY INSTRUCTIONS, THE SHARES REPRESENTED BY YOUR
RETURNED EXECUTED PROXY WILL BE VOTED "FOR" THE APPROVAL OF THE
COMPANY'S 2004 OMNIBUS INCENTIVE COMPENSATION PLAN.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL 2
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3. PROPOSAL TO APPROVE THE COMPANY'S 423 EMPLOYEE STOCK PURCHASE PLAN
The 423 Employee Stock Purchase Plan (423 Plan) is designed to replace
the Checkpoint Systems, Inc. Employee Stock Purchase Plan. Upon approval
of the 423 Plan no further awards will be made under the currently
existing Employee Stock Purchase Plan. The principal objectives of the
423 Plan are to (1) encourage share ownership across a broad spectrum of
employees, and (2) provide enhanced compensation to participants through
the discount purchase feature.
Each participant (substantially all employees of Checkpoint Systems,
Inc.) may contribute 1% -- 25% of his or her pay, towards the purchase
of shares at a discount not to exceed 15%. During a calendar year, a
participant may not purchase common stock with an aggregate value (as of
the date the option is granted) that exceeds $25,000. Offering periods
will be six months long. There are no specific restrictions on the
resale of shares purchased under the 423 Plan, however, personal income
tax rules may motivate participants to hold purchased shares for at
least two years after the grant of the option and one year after the
purchase. The 423 Plan may be amended or terminated by the Board or the
Committee at any time.
An additional summary of the principal features of the 423 Plan is
provided below but is qualified in its entirety by reference to the full
text of the 423 Plan that is attached to this proxy statement as
Appendix C.
UNLESS YOU GIVE CONTRARY INSTRUCTIONS, THE SHARES REPRESENTED BY YOUR
RETURNED EXECUTED PROXY WILL BE VOTED "FOR" THE APPROVAL OF THE
COMPANY'S 423 EMPLOYEE STOCK PURCHASE PLAN.
THE BOARD RECOMMENDS A VOTE "FOR" PROPOSAL 3
The Board knows of no other business for consideration at the meeting.
If any matters not specifically set forth on the proxy card and in this
Proxy Statement properly come before the Annual Meeting, the persons
named in the enclosed proxy will vote or otherwise act, on your behalf,
in accordance with their reasonable business judgment on such matters.
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PROPOSALS TO BE VOTED ON
PROPOSAL 1. ELECTION OF DIRECTORS
At the Annual Meeting, the Shareholders will elect four Class I directors to
hold office until the 2007 Annual Meeting of Shareholders and until their
respective successors have been 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 four Class I directors will expire at the Annual
Meeting. The terms of the Company's three Class II and three Class III
directors will expire at the Annual Meetings of Shareholders to be held in
2005 and 2006, respectively.
The Board of Directors has nominated William S. Antle, III, W. Craig Burns,
John E. Davies, Jr., and R. Keith Elliott for election at the Meeting as the
Company's Class I directors, all of whom were recommended by the Nominating
and Governance Committee. Messrs. Antle, Burns, Davies and Elliott have
indicated their willingness to continue to serve as directors. If a nominee,
at the time of his or her 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
reasonable business judgment.
The nominees for election as the Class I directors and the directors whose
terms of office will continue after the Annual Meeting, together with certain
information about them, are as follows:
Nominees for Class I Directors to Serve Until 2007
William S. Antle, III
Director Since 2003
Age 59
Mr. Antle previously served as the Chairman, President and Chief Executive
Officer of Oak Industries, Inc., a manufacturer of leading-edge communications
components, from 1989 until its merger with Corning Incorporated in 2000.
Prior to his tenure there, he held senior management positions with Bain and
Company, Inc., an international strategy-consulting firm. He is a graduate of
the United States Naval Academy in Annapolis, Maryland, and holds an MBA from
the Harvard Graduate School of Business. Currently, Mr. Antle sits on the
Boards of John H. Harland, ESCO Technologies, Inc. and Linc.net, Inc.
W. Craig Burns
Director Since 2002
Age 44
Mr. Burns was elected to the Board of Directors on August 15, 2002 and was
appointed Executive Vice President, Chief Financial Officer and Treasurer on
March 20, 2001. Mr. Burns was Vice President, Finance, Chief Financial Officer
and Treasurer from April 2000 to March 2001. Mr. Burns was Vice President,
Corporate Controller and Chief Accounting Officer from December 1997 until
April 2000. He was Director of Tax from February 1996 to December 1997. Prior
to joining the Company, Mr. Burns was a Senior Tax Manager with Coopers &
Lybrand, LLP from June 1989 to February 1996. Mr. Burns is a Certified Public
Accountant.
John E. Davies, Jr.
Director Since 2002
Age 46
Mr. Davies was appointed Executive Vice President, General Manager, Americas
and Asia Pacific on March 24, 2003. He was elected to the Board of Directors
on November 21, 2002 and was appointed Executive Vice President, Sales and
Marketing USA, Americas, Asia Pacific in August 2002. Mr. Davies was Executive
Vice President, Worldwide Operations from March 2002 to August
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2002 and Senior Vice President, Worldwide Operations from March 2001 to March
2002. He was Vice President, Research and Development from August 1998 to
March 2001 and Senior Director, Worldwide Systems Engineering from October
1996 to August 1998. Since joining the Company in October 1992, Mr. Davies
held various engineering positions until October 1996.
R. Keith Elliott
Director Since 2000
Age 62
Mr. Elliott was appointed Lead Director in August 2002. Mr. Elliott served as
Chairman of the Board from May 2002 to August 2002. Mr. Elliott is the retired
Chairman and Chief Executive Officer of Hercules, Inc. From 1991 to April
2000, he served Hercules, Inc. as Senior Vice President and Chief Financial
Officer; Executive Vice President and Chief Financial Officer; President and
Chief Operating Officer; President and Chief Executive Officer; Chairman and
Chief Executive Officer; and Chairman of the Board of Directors. Mr. Elliott
is a member of the Board of Directors of Windsor Tech, Inc., Wilmington Trust
Company, Computer Task Group, and the Institute for Defense Analyses.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES
UNLESS YOU GIVE CONTRARY INSTRUCTIONS, THE SHARES REPRESENTED BY YOUR RETURNED
EXECUTED PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES.
Class II Directors Serving Until 2005
Robert O. Aders
Director Since 2002
Age 76
Mr. Aders is Chairman and Chief Executive Officer of The Advisory Board, Inc.,
an international consulting organization. He is also a member of the Board and
President Emeritus of the Food Marketing Institute where he served as CEO from
its founding in 1976 until 1993. Mr. Aders was Acting Secretary of Labor under
President Ford during 1975 and 1976. From 1957 to 1974 Mr. Aders held a number
of executive positions in the Kroger Co. serving as Chairman of the Board from
1970 to 1974. He is a director of Source-Interlink, Spar Marketing, Inc.,
SureBeam Corporation and Telepanel Systems. Mr. Aders previously served on the
Company's Board from 1994 until 1999. The Advisory Board, Inc. served as a
consultant to the Company from 2000 until October 2002.
David W. Clark, Jr.
Director Since 1982
Age 66
Mr. Clark served as Chairman of the Board from February 1999 to May 2002. Mr.
Clark has been a managing director of Pryor & Clark Company, a company engaged
in investments, since June 1992. Mr. Clark is a director of CompuDyne
Corporation and SS&C Technologies, Inc.
Jack W. Partridge
Director Since 2002
Age 58
Mr. Partridge is President of Partridge & Associates, Inc., a consulting firm
providing strategic planning and other services to retailers and companies
serving the retail industry. He previously served for two years as Vice
Chairman of the Board and Chief Administrative
9
Officer of the Grand Union Company, a food retailer. Prior to joining Grand
Union in 1998, Mr. Partridge was Group Vice President of the Kroger Company,
where he served for 23 years in several executive positions. He has been
actively involved in a number of industry organizations in both the food
retailing and chain drug industries. Mr. Partridge is a member of the Board of
Directors of SPAR Group, Inc. He has also provided leadership for a broad
range of civic, cultural, and community organizations.
Class III Directors Serving Until 2006
Alan R. Hirsig
Director Since 1998
Age 64
Mr. Hirsig is currently a business consultant. Mr. Hirsig was Chief Executive
Officer of ARCO Chemical Company. He had been President and Chief Executive
Officer of ARCO Chemical Company from 1991 until his retirement in July 1998.
Mr. Hirsig is a member of the Board of Directors of Celanese and Aqua America.
He is also a member of the Boards of the Curtis Institute of Music, Bryn Mawr
College, YMCA of Philadelphia and Vicinity, and Rosenbach Museum and Library.
George W. Off
Director Since 2002
Age 57
Mr. Off has been Chairman of the Board, President and Chief Executive Officer
since August 2002. He served as Interim Chief Executive Officer of Checkpoint
from June 2002 to August 2002. Mr. Off is a founder and former Chairman and
Chief Executive Officer of Catalina Marketing Corporation and a 40-year
veteran in the retail marketing industry. During his career, Mr. Off also held
executive positions at Lucky Stores, Inc. and Safeway Stores. He is a member
of the Food Merchandisers' Education Council and also a member of the Board of
Directors of Telephone and Data Systems, Inc., and Eckerd College.
Sally Pearson
Director Since 2002
Age 54
Ms. Pearson is Vice President and General Manager of Merchandise and Retail
for the Metropolitan Museum of Art in New York. Ms. Pearson previously was
President of Liz Claiborne Specialty Stores from 1996 until 1999, served as
Executive Vice President of Merchandising at a division of Limited, Inc. from
1995 until 1996, and Senior Vice President and General Manager of Women's
Apparel at Saks Fifth Avenue from 1993 until 1995. She also held various
management positions with Federated Department Stores over a twenty-four year
period. Ms. Pearson serves on the Advisory Board for Kent State Fashion
Council, Kent State University.
10
PROPOSAL 2. APPROVAL OF THE CHECKPOINT SYSTEMS, INC.
2004 OMNIBUS INCENTIVE COMPENSATION PLAN
Subject to approval by the shareholders, the Board of Directors has adopted
the Checkpoint Systems, Inc. 2004 Omnibus Incentive Compensation Plan (the
"2004 Omnibus Incentive Plan"). The full text of the plan is attached as
Appendix B to this Proxy Statement. The following is a summary of the 2004
Omnibus Incentive Plan's material terms. The summary is not complete and is
qualified in its entirety by reference to the 2004 Omnibus Incentive Plan.
Shareholders are encouraged to read the plan in its entirety. Capitalized
terms not otherwise defined herein have the meanings given to them in the 2004
Omnibus Incentive Plan.
The 2004 Omnibus Incentive Plan is designed to provide flexibility in
compensation awards in order to adequately provide future incentives to those
key individuals whose efforts will contribute to the success and growth of the
Company. Shares available for awards under the 2004 Omnibus Incentive Plan are
solely the 3,437,956 shares currently available under the Company's existing
option plan (the "Stock Option Plan") and the director's deferred compensation
plan. No additional shares are requested for award under the 2004 Omnibus
Incentive Plan.
If the 2004 Omnibus Incentive Plan is approved by shareholders at the Annual
Meeting, no additional awards will be made under the Stock Option Plan.
Purpose
The purpose of the 2004 Omnibus Incentive Plan is to motivate certain
employees, non-employee directors and independent contractors to put forth
maximum efforts toward the growth, profitability, and success of the Company
and its subsidiaries by providing incentives to such employees, non-employee
directors and independent contractors through the award of stock options (non-
qualified and incentive stock options), stock appreciation rights, stock
awards (restricted and unrestricted), phantom shares, dividend equivalent
rights and cash awards. In addition, the 2004 Omnibus Incentive Plan is
intended to provide incentives that will attract and retain highly qualified
individuals as employees and non-employee directors, and to assist in aligning
the interests of such employees and non-employee directors with the interests
of the Company's shareholders.
Shareholder Approval
The 2004 Omnibus Incentive Plan will become effective only if it is approved
by the Company's shareholders. In addition, shareholders will need to approve
any amendment to the 2004 Omnibus Incentive Plan if such amendment is
determined to be material. No repricing of awards is allowed under the 2004
Omnibus Incentive Plan. If required by the regulations under Section 162(m) of
the Internal Revenue Code (Code), shareholders will need to reapprove the
performance goals listed in the 2004 Omnibus Incentive Plan no later than the
first shareholder meeting that occurs in the fifth year following the year in
which the Company's shareholders previously approved such performance goals.
Administration
The Compensation Committee will have the responsibility, at its sole
discretion, to control, operate, manage and administer the 2004 Omnibus
Incentive Plan, including the following authority:
o to determine eligibility for participation in the 2004 Omnibus
Incentive Plan;
11
o to determine eligibility for and the type and size of awards granted
under 2004 Omnibus Incentive Plan;
o to grant awards to, and to enter into award agreements with,
participants;
o to supply any omission, correct any defect, or reconcile any
inconsistency in the 2004 Omnibus Incentive Plan in such manner and
to such extent as it shall deem appropriate in its sole discretion
to carry the same into effect;
o to issue administrative guidelines as an aid to administer the 2004
Omnibus Incentive Plan and make changes in such guidelines as it
from time to time deems proper;
o to make rules for carrying out and administering the 2004 Omnibus
Incentive Plan and make changes to such rules as it from time to
time deems proper;
o to the extent permitted under the 2004 Omnibus Incentive Plan, grant
waivers of plan terms, conditions, restrictions, and limitations;
o to accelerate the vesting of any award when such action or actions
would be in the best interest of the Company;
o to grant awards in replacement of awards previously granted under
the 2004 Omnibus Incentive Plan or any other executive compensation
plan (but subject to certain shareholder approval as described
above); and
o to take any and all other actions it deems necessary or advisable
for the proper operation or administration of the 2004 Omnibus
Incentive Plan.
All determinations and interpretations made by the Committee are binding and
conclusive on all participants and their heirs, successors, and legal
representatives.
Eligibility
Every employee of the Company or its subsidiaries will be eligible to
participate under the 2004 Omnibus Incentive Plan. Participants will be
selected by the Committee at its sole discretion. In addition, independent
contractors and outside directors selected by the Committee may become
participants in the 2004 Omnibus Incentive Plan.
Share Limits
The aggregate number of shares that may be delivered pursuant to all awards
under the 2004 Omnibus Incentive Plan is approximately 3,437,956 shares of
Common Stock. For purposes of qualifying compensation payable under the 2004
Omnibus Incentive Plan as "performance-based compensation" in accordance with
Section 162(m) of the Code, no individual, in any calendar year may be granted
more than 250,000 shares of Common Stock or be paid more than $1,000,000 under
the Plan.
As is customary in incentive plans of this nature, the number and kind of
shares available under the 2004 Omnibus Incentive Plan and the then
outstanding stock-based awards, as well as exercise or purchase prices,
performance targets under selected performance-based awards and share limits,
are subject to adjustment in the event of certain reorganizations, mergers,
combinations, consolidations, recapitalizations, reclassifications, stock
splits, stock dividends, asset sales or other similar events, or extraordinary
dividends or distributions of property to the shareholders.
Types of Awards
The Committee may, at its sole discretion, grant the following type of awards
under the 2004 Omnibus Incentive Plan:
12
o stock options;
o stock appreciation rights;
o stock awards;
o stock units (phantom shares);
o dividend equivalent rights;
o cash awards; and/or
o any other type of award that is not inconsistent with the 2004
Omnibus Incentive Plan.
The Committee, at its sole discretion, will determine all of the terms and
conditions of each award, including but not limited to the following:
o exercise price or purchase price;
o method of exercise;
o vesting;
o expiration term of award;
o effects of termination of participant's employment or service;
o change-in-control vesting and other effects of a change in control;
o qualification of a stock option as an "incentive stock option";
o restrictive covenants;
o transferability;
o tax deferral arrangements;
o tandem or combination awards; and/or
o any other term or condition that is not inconsistent with the 2004
Omnibus Incentive Plan.
The Committee may use the following performance measures (either individually
or in any combination) to set performance goals with respect to the grant or
vesting of an award:
o net sales;
o budget;
o cash flow (including, but not limited to, operating cash flow, free
cash flow or cash flow return on capital);
o earnings (including, but not limited to, net earnings, earnings per
share, or earnings before or after taxes);
o net income;
o pre-tax income before allocation of corporate overhead and bonus;
o division, group or corporate financial goals
o total shareholder return;
o return on shareholders' equity;
o return on assets;
o attainment of strategic and operational initiatives;
o appreciation in and/or maintenance of the price of the Common Stock
or any other publicly traded securities of the Company;
o market share;
13
o profits (including, but not limited to, gross profits, profit
growth, net operating profit or economic profit);
o profit-related return ratios;
o earnings before interest and taxes;
o earnings before interest, taxes, depreciation and amortization;
o economic value-added models;
o comparisons with various stock market indices;
o dividends;
o customer satisfaction;
o increase in number of customers; and/or
o reductions in costs.
Termination of or Changes to the 2004 Omnibus Incentive Plan
The Board of Directors has the authority to amend, suspend, or discontinue the
2004 Omnibus Incentive Plan subject to any shareholder approval that is
required by applicable law or listing agency rules. The Board or the
Compensation Committee may amend outstanding awards in any manner that would
be permitted for a new award, provided that any amendment that is adverse to a
participant requires the participant's consent. Unless terminated earlier by
the Board of Directors, the 2004 Omnibus Incentive Plan will terminate on
February 17, 2014. The applicable provisions of the 2004 Omnibus Incentive
Plan and the Committee's authority will continue with respect to any awards
then outstanding.
Tax Consequences
The federal income tax consequences of the 2004 Omnibus Incentive Plan under
current federal law, which is subject to change, are summarized in the
following discussion of the general tax principles applicable to the 2004
Omnibus Incentive Plan. This summary is not intended to be exhaustive and,
among other considerations, does not describe state, local, or international
tax consequences.
For nonqualified stock options, generally no taxable income is recognized by a
participant, and the Company will not be entitled to any tax deduction, with
respect to the grant of a nonqualified stock option. The Company generally is
entitled to deduct and the optionee will recognize taxable income in an amount
equal to the difference between the option exercise price and the fair market
value of the shares at the time of exercise. Once exercised, the participant
receives short-term or long-term capital gain treatment on any further gain or
loss, depending on the length of time the participant holds the stock prior to
the sale. For incentive stock options, the Company is generally not entitled
to a deduction nor does the participant recognize income either at the time of
grant or exercise or (provided that the participant holds the shares at least
two years after grant and one year after exercise) at any later time. Rather,
the participant receives capital gains or loss treatment on the difference
between his or her basis and the ultimate sales price.
The current federal income tax consequences of other awards authorized under
the 2004 Omnibus Incentive Plan generally follow certain basic patterns: Stock
Appreciation Rights (SARs) are taxed and deductible in substantially the same
manner as non-qualified stock options; restricted stock is taxed as income at
the time the restrictions lapse (although employees may elect earlier taxation
and convert future gains to capital gains) equal to the
14
excess of the fair market value over the price paid; restricted stock units,
bonuses and performance share awards are generally subject to tax at the time
of payment in the form of stock or cash; cash-based awards are generally
subject to tax at the time of payment; and compensation otherwise effectively
deferred is taxed to the individual when paid. In each of the foregoing cases,
the Company will generally have a corresponding deduction at the time the
participant recognizes income.
If the vesting or payment of an award accelerates under the 2004 Omnibus
Incentive Plan in connection with a change in control, the Company may not be
permitted to deduct the portion of the compensation attributable to the
acceleration. Furthermore, if compensation attributable to awards is not
performance-based within the meaning of 162(m) of the Code, the Company may
not be permitted to deduct aggregate compensation to certain executive
officers that is not performance-based, to the extent that it exceeds
$1,000,000 in any tax year.
All members of the Board of Directors are eligible to receive awards under the
2004 Omnibus Incentive Plan and thus have a personal interest in the Plan's
approval.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 2.
UNLESS YOU GIVE CONTRARY INSTRUCTIONS, THE SHARES REPRESENTED BY YOUR RETURNED
EXECUTED PROXY WILL BE VOTED "FOR" APPROVAL OF PROPOSAL 2.
No determination has yet been made as to the amount or terms of any future
awards under the plan if the plan is approved by the Company's shareholders.
Thus, the benefits or amounts to be received by or allocated to: (1) the
executive officer group, (2) the current non-employee director group, or (3)
the non-executive employee group, are not determinable.
15
PROPOSAL 3. APPROVAL OF THE CHECKPOINT SYSTEMS, INC.
423 EMPLOYEE STOCK PURCHASE PLAN
Subject to approval by the shareholders, the Board of Directors has adopted
the Checkpoint Systems, Inc. 423 Employee Stock Purchase Plan (the "423 Plan")
pursuant to which employees of the Company have the opportunity to acquire
shares of Common Stock of the Company. The full text of the 423 Plan is
attached as Appendix C to this Proxy Statement. Shareholders are encouraged to
read the 423 Plan in its entirety. The following is a summary of the 423
Plan's material terms.
Purpose
The purpose of the 423 Plan is to: (1) encourage share ownership across a
broad spectrum of employees, and (2) provide enhanced compensation to
participants through the discount purchase feature. The 423 Plan complies with
the requirements of Section 423 of the Internal Revenue Code.
Reservation of Shares
There are reserved for issuance under the 423 Plan a maximum of 250,000 shares
of Common Stock of the Company. Authorized but unissued shares and treasury
shares may be made available for issuance under the 423 Plan.
Administration
The 423 Plan will be administered, construed and interpreted by the
Compensation Committee or such other persons to whom the Committee may
delegate its functions. Consistent with the terms of the 423 Plan, the
Committee will adopt rules and regulations concerning the operation of the 423
Plan, decide questions of construction and interpretation regarding the 423
Plan and determine an employee's eligibility to participate in the 423 Plan.
Amendment and Termination of the Plan
The Board of Directors may at any time amend, modify, suspend, discontinue or
terminate the 423 Plan. However, any amendment or termination will not
adversely affect any outstanding options.
Eligibility
All employees of the Company and subsidiaries of the Company which adopt the
423 Plan are eligible to participate, except that employees whose customary
employment is for not more than 20 hours per week or 5 months in any calendar
year are not eligible to participate. In addition, employees owning 5% or more
of the total combined voting power or value of all classes of stock of the
Company or a subsidiary shall not be eligible to participate in the 423 Plan.
Operation of the Plan
Eligible employees may participate in the 423 Plan by contributing on an
after-tax basis from 1% to 25% of their base pay (including overtime and
bonuses) to purchase Common Stock of the Company. Each employee will be
entitled to purchase up to the number of full shares as their accumulated
payroll deductions during a six-month period may permit. Any payroll
deductions which are not sufficient to purchase a full share shall be retained
in the participant's account for the next subsequent offering period. During
any calendar year an employee may not purchase Common Stock through the 423
Plan with an aggregate value (determined as of the date each option is
granted) that exceeds $25,000. Options will be
16
granted on the first trading day of the six-month offering period and shares
will be purchased on the last trading day of each offering period on the open
market. The purchase price per share will be equal to or greater than the
lesser of 85% of the fair market value per share of the Common Stock on the
day the options are granted or 85% of the fair market value per share of the
Common Stock on the purchase date.
If an employee terminates his or her employment before the last trading day of
the six-month period, amounts credited to his or her purchase account will be
paid in cash and will not be used to purchase Common Stock of the Company.
Limited Transferability of Options
Options granted under the 423 Plan and the related purchase account are not
assignable or transferable except by will or the laws of descent and
distribution.
Federal Income Tax Consequences
The 423 Plan is intended to be a qualified employee stock purchase plan under
Section 423 of the Internal Revenue Code (the "Code"). It is not, however,
intended to be a tax qualified retirement plan. Employees pay no tax when they
enroll in the 423 Plan, when they purchase shares of Common Stock pursuant to
the 423 Plan or when they receive shares of Common Stock after the applicable
holding period described below.
Employees will have a taxable gain or loss when any shares of Common Stock
purchased through the 423 Plan are sold. If an employee sells shares within
two years after a particular set of options are granted (the "holding
period"), then the difference between the purchase price and market value of
the shares on the purchase date will be taxed as ordinary income. Any
difference between the market value of the shares on the purchase date and the
sale price will be capital gains or losses for income tax purposes. In
addition, if an employee withdraws shares from his or her account that are
still subject to the holding period, the Company will treat such a withdrawal
as a sale of shares for federal income tax reporting purposes. Any dividends
that are paid with respect to shares of Common Stock purchased through the 423
Plan will be taxable as ordinary income.
If an employee sells stock after the holding period described above, then the
difference between the market price on the grant date and the actual purchase
price will be taxed as ordinary income (to the extent of gain) and the balance
of his or her gain, if any, will be capital gain.
THE BOARD RECOMMENDS THAT YOU VOTE "FOR" PROPOSAL 3.
UNLESS YOU GIVE CONTRARY INSTRUCTIONS, THE SHARES REPRESENTED BY YOUR RETURNED
EXECUTED PROXY WILL BE VOTED "FOR" APPROVAL OF PROPOSAL 3.
17
CORPORATE GOVERNANCE
Director Nomination Procedures
Criteria for Board Nomination. The Governance and Nominating Committee
considers the appropriate balance of experience, skills, and characteristics
required of the Board of Directors and seeks to insure that at least a
majority of the directors are independent under the rules of the New York
Stock Exchange, that members of the Company's Audit Committee meet the
financial literacy requirements under the rules of the New York Stock
Exchange, and at least one of them qualifies as an "audit committee financial
expert" under the rules of the Securities and Exchange Commission. Nominees
for director are selected on the basis of their depth and breadth of
experience, wisdom, integrity, ability to make independent analytical
inquiries, understanding of the Company's business, and willingness to devote
adequate time to Board duties.
Board Nomination Process. The process for identifying and evaluating nominees
to the Board of Directors is initiated by identifying a slate of candidates
who meet the criteria for selection as a nominee and have the specific
qualities or skills being sought based on input from members of the Board. The
Governance and Nominating Committee generally considers renomination of
incumbent directors, provided they continue to meet the qualification criteria
adopted by the Board of Directors. New director candidates are evaluated by
the Governance and Nominating Committee by reviewing the candidates'
biographical information and qualification and checking the candidates'
references. Qualified nominees are interviewed by at least one member of the
Committee and the Chairman of the Board. The Committee evaluates which of the
prospective candidates is qualified to serve as a director and whether the
governance and nominating committee should recommend to the Board that the
Board nominate, or elect to fill a vacancy, these final prospective
candidates. Candidates recommended by the Committee are presented to the Board
for selection as nominees to be presented for the approval of the shareholders
or for election to fill a vacancy.
Shareholder Recommendations. The Committee uses a similar process to evaluate
candidates recommended by shareholders. To date, however, the Company has not
received any shareholder's proposal to nominate a director.
To recommend a prospective nominee for the Committee's consideration, please
submit the candidate's name and qualifications to the Chairman of the
Governance and Nominating Committee, Checkpoint Systems, Inc. 101 Wolf Drive,
Thorofare, New Jersey 08086. Submissions must contain: (a) the proposed
nominee's name and qualifications (including five year employment history with
employer names and a description of the employer's business, whether such
individual can read and understand basic financial statements, and board
memberships (if any)) and the reason for such recommendation, (b) the name and
the record address of the shareholder or shareholders proposing such nominee,
(c) the number of shares of stock of the Company which are beneficially owned
by such shareholder or shareholders, and (d) a description of any financial or
other relationship between the shareholder or shareholders and such nominee or
between the nominee and the Company or any of its subsidiaries. The submission
must be accompanied by a written consent of the individual to stand for
election if nominated by the Board and to serve if elected by the
shareholders. Recommendations received by November 28, 2004, will be
considered for nomination at the 2005 Annual Meeting of
18
Shareholders. Recommendations received after November 28, 2004, will be
considered for nomination at the 2006 Annual Meeting of Shareholders.
Board of Directors and Committees
Board Composition. With the exception of W. Craig Burns, John E. Davies, Jr.,
and George W. Off, who serve as officers of the Company, all other directors
have been determined to be independent by the Board of Directors, in
accordance with the listing standards of the New York Stock Exchange. The
Board of Directors of the Company has determined, using the New York Stock
Exchange listing standards currently in effect, that none of the independent
directors has a material relationship with the Company (either directly as a
partner, shareholder or officer of an organization that has a relationship
with the Company. In making such a determination the Board of Directors
applied the standards set forth a Rule 303A.02(b) of The New York Stock
Exchange Listed Company Manual. Each of the Independent Directors meets the
above independence standards.
Board Meetings. The Board held six regular and two special meetings in 2003.
Each director attended 100% of all Board and applicable committee meetings
during 2003, except for one Board member who was unable to take part in one of
the Special Meetings of the Board. The Board of Directors has a policy
requiring attendance at the Annual Meeting of Shareholders. All of the
Company's directors attended the 2003 Annual Meeting of Shareholders.
Non-employee directors regularly meet in executive sessions in which such
directors meet without management participation. Non-employee directors
include all independent directors as well as any other directors who are not
officers of the Company, whether or not "independent" by virtue of a material
relationship with the Company or otherwise.
R. Keith Elliott, as Lead Director, has been selected to preside over such
executive sessions.
Interested parties may communicate directly with the Lead Director or with the
non-employee directors as a group by writing to the Lead Director, Checkpoint
Systems, Inc. 101 Wolf Drive, Thorofare, New Jersey 08086.
Board Committees. The following table sets forth the committees of the Board,
the composition thereof and the number of meetings of each committee held in
2003:
---------------------------------------------------------------------------------------------------------------------------------
Number of
Name of Committee Members of the Committee Meetings in 2003
----------------------------------- -------------------------------------------------------- ------------------------------------
AUDIT COMMITTEE William S. Antle, III 9
David W. Clark, Jr.
R. Keith Elliott*
Alan R. Hirsig
----------------------------------- -------------------------------------------------------- ------------------------------------
COMPENSATION AND STOCK OPTION Robert O. Aders 6
COMMITTEE Alan R. Hirsig*
Jack W. Partridge
Sally Pearson
----------------------------------- -------------------------------------------------------- ------------------------------------
GOVERNANCE AND NOMINATING David W. Clark, Jr. 6
COMMITTEE R. Keith Elliott*
Jack W. Partridge
Sally Pearson
---------------------------------------------------------------------------------------------------------------------------------
______________
* Chairperson for 2003.
19
Audit Committee. The Audit Committee monitors the financial reporting
policies and processes and system of internal controls of the Company. The
Audit Committee monitors the audit process and has sole responsibility for
selecting the Company's independent auditors. The Audit Committee operates
under a charter, a copy of which is attached as Appendix A to this Proxy
Statement and is available on the Company's website at
www.checkpointsystems.com. In addition to being "independent" directors within
the meaning of the New York Stock Exchange listing standards, as currently in
effect, all members of the Audit Committee satisfy the heightened independence
standards under the SEC rules, as currently in effect. The Board of Directors
has determined that Mr. Antle serves on the Audit Committee of Esco
Technologies, Inc. Mr. Clark serves on the audit committee of Compu Dyne Corp.
Mr. Elliott serves on the audit committee of Wilimington Trust Company and
Computer Task Group. Mr. Hirsig serves on the audit committee of Aqua America.
The Board has determined that such simultaneous Audit Committee service would
not impair the ability of such director(s) to effectively serve on the
Company's audit committee.
The Board has determined that Mr. Elliott is an "audit committee financial
expert" as that term is defined in Item 401(h) of Regulation S-K of the
Securities Exchange Act of 1934. Item 401(h) further provides for the
following safe harbor:
"(i) A person who is determined to be an audit committee financial expert
will not be deemed an expert for any purpose, including without
limitation for purposes of section 11 of the Securities Act of 1933
(15 U.S.C. 77k), as a result of being designated or identified as an
audit committee financial expert pursuant to this Item 401.
(ii) The designation or identification of a person as an audit committee
financial expert pursuant to this Item 401 does not impose on such
person any duties, obligations or liability that are greater than
the duties, obligations and liability imposed on such person as a
member of the audit committee and board of directors in the absence
of such designation or identification.
(iii) The designation or identification of a person as an audit committee
financial expert pursuant to this Item 401 does not affect the
duties, obligations or liability of any other member of the audit
committee or board of directors."
Compensation and Stock Option Committee. The Compensation Committee is
responsible for reviewing the performance of the Chief Executive Officer and
acts at various times during the year to approve salaries, benefits and
compensation arrangements for the Company's officers, including the Chief
Executive Officer, and to grant stock options. The compensation paid to
employee directors is approved by all of the Company's independent directors.
Each member of the Compensation and Stock Option Committee is independent as
required by the New York Stock Exchange listing standards. The Compensation
Committee operates under a charter, a copy of which is available on the
Company's website at www.checkpointsystems.com.
Governance and Nominating Committee. The Governance and Nominating Committee
provides counsel to the full Board with respect to: (a) Board organization,
membership and function, (b) Committee structure and membership; and (c)
succession planning for the executive management of the company. In carrying
out its duties, the Committee has also been delegated the responsibility to:
determine criteria for the selection and qualification of the Board members;
recommend for Board approval persons to fill vacancies on the Board which
occur between annual meetings; evaluate, at least annually, each Board
member's
20
"independence" and make recommendations, at least annually, regarding each
Board member's "independence" status consistent with then applicable legal
requirements; make recommendations regarding director orientation and
continuing education; consider the effectiveness of corporate governance
practices and policies followed by the Company and the Board; and conduct at
least annually a performance assessment of the Board. Each member of the
Governance and Nominating Committee is independent as required by the New York
Stock Exchange listing standards. The Governance and Nominating Committee
operates under a charter, a copy of which is available on the Company's
website at www.checkpointsystems.com.
Board Compensation. Directors receive reimbursement of out-of-pocket expenses
for attending Board and Committee Meetings. Employee directors receive no
additional compensation for attending Board and Committee Meetings. Set forth
below is the compensation received in 2003 for non-employee directors. The
Company does not expect this compensation to increase in 2004.
21
Non-Employee Board Compensation
- --------------------------------------------------------------------------------
Type of Compensation Amount of Payment
- -------------------------------------------- -----------------------------------
Annual Retainer - Board Members $25,000
- -------------------------------------------- -----------------------------------
Annual Retainer - Lead Director $ 5,000
- -------------------------------------------- -----------------------------------
Annual Retainer - Committee Chairpersons $ 5,000
- -------------------------------------------- -----------------------------------
Board Attendance Fee (per meeting) $ 1,500
- -------------------------------------------- -----------------------------------
Special Board Meetings $ 1,500
- -------------------------------------------- -----------------------------------
Telephonic Board Meetings $ 750
- -------------------------------------------- -----------------------------------
All Other Committee Meetings $ 1,500
- --------------------------------------------------------------------------------
Option Awards to Non-Employee Directors and Other Compensation. Non-employee
directors are entitled to receive non-qualified stock options to purchase
Checkpoint Common Stock under the Stock Option Plan (1992), but no director
may be awarded options for an aggregate of more than 10% of the shares
available under the Stock Option Plan. Each non-employee director receives,
upon his/her initial election as a director, and annually thereafter, non-
qualified stock options for 10,000 shares.
Under the Company's Directors' Deferred Compensation Plan, non-employee
directors may defer all or a portion of their cash compensation to a deferred
compensation account. Non-employee directors may elect to: 1) receive cash for
all services; 2) defer a percentage of cash compensation, with the deferral
amount invested in a selected stock fund with distribution at retirement; 3)
receive Company shares in lieu of cash; or 4) defer a percentage of cash
compensation and receive 125% value in phantom Company shares, valued on the
last trading day of the calendar quarter in which he or she would have
received a cash payment, with deferred shares distributed upon retirement.
Since the inception of the plan, more than 70% of the compensation due non-
employee directors has been deferred and converted into phantom shares under
the plan.
Upon approval of the 2004 Omnibus Incentive Plan, no further awards will be
made under the current stock option plan. In addition, phantom shares under
the Directors' Deferred Compensation Plan may be awarded under the 2004
Omnibus Incentive Plan.
Shareholder Access to Directors
Generally, shareholders who have questions or concerns regarding the Company
should contact the Investor Relations department at 856-848-1800 Ext. 3370.
Any shareholders, however, who wish to address questions regarding the
business or affairs of the Company directly with the Board of Directors, or
any individual director, should direct his or her questions in writing to any
director or to all directors c/o Checkpoint Systems, Inc., 101 Wolf Drive,
P.O. Box 188, Thorofare, New Jersey 08086.
22
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 5, 2004.
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.
- --------------------------------------------------------------------------------
Name and Address of Amount and Nature of Percent of
Beneficial Ownership Beneficial Owner Common Stock
- -------------------------------------- ------------------------ ----------------
Westport Asset Management, Inc. (1) 2,696,100 7.71%
253 Riverside Avenue
Westport, Connecticut 06880
- -------------------------------------- ------------------------ ----------------
Barclay's Global Investors, NA (1) 1,753,197 5.01%
45 Fremont Street
San Francisco, CA 94105
- -------------------------------------- ------------------------ ----------------
MMI Invesstments, L.P. (2) 1,750,000 5.00%
152 West 57th Street
New York, NY 10019
- --------------------------------------------------------------------------------
______________
(1) As reported on Schedules 13G filed with the Securities and Exchange
Commission ("SEC") on: (i) February 12, 2004 in the case of Westport Asset
Management, Inc., and (ii) February 13, 2004 in the case of Barclay's
Global Investors, NA.
(2) As reported to the Company by MMI Investments L.P. in March 2004.
23
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows the number of shares of Checkpoint Common Stock
owned by each director, the Company's Chief Executive Officer, the four other
most highly compensated executive officers and other executive officers as of
March 17, 2004. Each person named below has sole voting power and sole
investment power with respect to the shares indicated as beneficially owned,
unless otherwise stated.
-----------------------------------------------------------------------------------------------------------------------------------
Name and Address of Amount and Nature of Percent of Phantom
Beneficial Owner Beneficial Ownership (1) Common Stock Stock Units (16)
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
Robert O. Aders (2) 30,000 .07% 700
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
William S. Antle, III (3) 20,000 .06% 2,358
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
W. Craig Burns (4) 271,884 .78% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
David W. Clark, Jr. (5) 80,392 .23% 25,522
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
John E. Davies, Jr. (6) 146,951 .42% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
R. Keith Elliott (7) 23,000 .07% 19,105
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
Alan R. Hirsig (8) 39,300 .11% 26,082
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
George W. Off (9) 195,000 .56% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
Jack W. Partridge (10) 33,000 .09% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
Sally Pearson (11) 20,000 .06% 700
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
Neil D. Austin (12) 40,000 .11% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
Per Levin (13) 48,556 .14% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
Arthur W. Todd (14) 30,000 .09% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
John R. Van Zile 0 .00% 0
----------------------------------- ----------------------------------- ----------------------------- -----------------------------
All Directors and 973,083 2.78% 74,467
Officers as a Group
(14 persons) (15)
-----------------------------------------------------------------------------------------------------------------------------------
____________
(1) Unissued shares subject to options exercisable within 60 days of March 5,
2004 are deemed to be outstanding for the purpose of calculating the
percent of Common Stock beneficially owned.
(2) Includes options to purchase 20,000 shares of Common Stock and 10,000
shares in two trust accounts, for which Mr. Aders has beneficial
interest.
(3) Consists of options to purchase 20,000 shares of Common Stock.
(4) Includes options to purchase 265,834 shares of Common Stock.
(5) Includes options to purchase 39,356 shares of Common Stock.
(6) Includes options to purchase 140,475 shares of Common Stock.
(7) Includes options to purchase 20,000 shares of Common Stock.
(8) Includes options to purchase 30,000 shares of Common Stock.
(9) Consists of options to purchase 195,000 shares of Common Stock.
(10) Includes options to purchase 20,000 shares of Common Stock.
(11) Consists of options to purchase 20,000 shares of Common Stock.
(12) Includes options to purchase 40,000 shares of Common Stock.
(13) Consists of options to purchase 48,556 shares of Common Stock.
(14) Consists of options to purchase 30,000 shares of Common Stock.
(15) See footnotes 4 and 6 above. Total shown includes 9,776 shares held by
the custodian of the ESPP.
(16) Phantom stock units are convertible into Common Stock pursuant to the
deferral provisions of the Deferred Compensation Plan described under
"Option Awards to Non-Employee Directors and Other Compensation." The
units do not have voting rights and are convertible into Common Shares
upon termination of the individual's service as a Director.
24
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 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, as a
result, shareholder value, by aligning the financial interests of the
Company's senior management with those of its shareholders. Annual base
salary, incentive bonuses, and longer term incentive compensation is tied to
the Company's performance in a manner that encourages a sharp and continuing
focus on building revenue growth and long-term profitability, and provides 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. In 2003, the
Compensation Committee hired a nationally-recognized independent
compensation-consulting firm and reviewed various analytical data to insure
that the Company's compensation program for senior executives is competitive
with compensation levels paid to senior management of similar sized companies
with comparable responsibilities.
In the early part of each fiscal year, the Compensation Committee, whom the
Board has affirmatively determined to be comprised of independent directors,
reviews with the Chief Executive Officer and recommends to the Board,
modifications it deems appropriate, and an annual compensation plan for each
of the Company's senior executives. The Board's independent directors vote on
the recommendations in executive session. This compensation plan is based on a
review of industry, peer group, and national surveys of compensation levels,
historical compensation policies of the Company, and the subjective judgments
of the Compensation Committee relating to the past and expected future
contributions, level of experience, leadership abilities, and overall
performance
The Compensation Committee reviews and recommends to the Board the base salary
of the Chief Executive Officer based on a review of appropriate data and the
Compensation and Stock Option Committee's assessment of his past performance
and its expectation as to his future contributions in leading the Company and
its businesses. The Board's independent directors vote on the recommendations
in executive session. For 2003, Mr. Off's compensation was formulated by the
Compensation Committee based on these historic factors and set performance
goals relating to cash flow and debt reduction combined with cost reduction
programs in light of the general economic conditions and markets in which the
Company operates.
Mr. Off has served as Chairman of the Board, President and Chief Executive
Officer since August 2002. Mr. Off's base salary for 2003 was $722,488 with a
targeted bonus percentage of 100%. Mr. Off's 2003 bonus was $762,375. Mr. Off
was also awarded 60,000 options in 2003.
The targeted earnings per share growth plan was achieved for 2003 and the
Company made significant progress in cost reductions and improved cash flow,
resulting in accelerated debt reduction during the year, thereby positioning
the Company for enhanced growth opportunities in future years.
25
Long Term Compensation
In addition to salary, senior management of the Company has the potential to
receive additional compensation from three possible sources: the Company's
2003 Bonus Plan, discretionary management bonuses, and the 1992 Stock Option
Plan. Upon shareholder approval of the Company's 2004 Omnibus Incentive Plan,
equity-based awards and bonus payments will be made under the plan and no
further awards will be made under the Stock Option Plan.
In 2003, the Board of Directors approved the 2003 Corporate Bonus Plan. The
2003 Corporate Bonus Plan provided for a bonus to be paid upon achievement of
personal objectives and a Bonus Pool to be formed when earnings per share
("EPS") increased over a defined target. The Bonus Pool is then apportioned
among four groups of employees: executive 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
over the targeted EPS growth. The specified minimum target for EPS was
attained for the fiscal year 2003 and bonuses were paid.
In order to provide incentives to employees over the longer term, the Company
maintains the Stock Option Plan. At various times during the year, the
Compensation 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 2003 Annual Meeting of Shareholders, the
Compensation Committee has the authority to grant both incentive and non-
qualified 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-qualified options as
set forth in the Stock Option Plan. The maximum number of shares available for
option under the Plan from its inception is 16,000,000 and 3,437,956 remain
available for grant thereunder as of March 5, 2004. The Compensation Committee
believes that the Stock Option Plan has been an important tool in attracting
and retaining employees and directors and encourages them to strive for the
long-term success of the Company. Upon stockholder approval of the 2004
Omnibus Incentive Plan, no additional awards will be made under the Stock
Option Plan, however, options and other awards may be granted by the
Compensation Committee under the 2004 Omnibus Incentive Plan.
In fixing the grants of stock options to the individual senior management
group during 2003, including the executive officers other than the Chief
Executive Officer, the Compensation 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, 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 determined separately by the Compensation 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 Compensation 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. In 2003, the Compensation Committee granted
26
options to purchase 60,000 shares of the Company's Common Stock to the Chief
Executive Officer.
The Compensation Committee believes that its past grants of options and the
Incentive Compensation Plans have successfully focused the Company's senior
management on building profitability and shareholder value.
Under the 1993 Omnibus Budget Reconciliation Act ("OBRA") and Section 162(m)
of the Code, income tax deductions of publicly-traded companies may be limited
to the extent total compensation for certain executive officers exceeds $1
million in any one year, except for compensation payments which qualify as
"performance-based." To qualify as "performance-based," compensation payments
must be based solely upon the achievement of objective performance goals and
made under a plan that is administered by the Compensation Committee. In
addition, the material terms of the plan must be disclosed to and approved by
shareholders and the Compensation Committee must certify that the performance
goals were achieved before payments can be made. The Compensation Committee
has designed certain of the Company's compensation programs to conform with
Section 162(m) of the Code and related regulations so that total compensation
paid to any employee covered by Section 162(m) should not exceed $1 million in
any one year, except for compensation payments which qualify as "performance-
based." However, the Company may pay compensation, which is not deductible in
certain circumstances, when sound management of the Company so requires.
Deferred Compensation Plan
On February 18, 2004, the Board adopted the Checkpoint Systems, Inc. Deferred
Compensation Plan (the "Deferred Compensation Plan"). The purpose of the
Deferred Compensation Plan, which is administered by the Compensation
Committee appointed by the Board to administer the Checkpoint Systems, Inc.
401(k) Employee Savings Plan, is to provide certain eligible employees of the
Company and its subsidiaries the opportunity to defer portions of their
compensation which might not otherwise be deferrable under other Company
plans, including the Company's 401(k) plan. In addition, the Deferred
Compensation Plan is designed to encourage participants to choose Company
stock or phantom shares, therefore aligning the interests of plan participants
with those of the Company's shareholders.
Vice Presidents and above may participate in the Deferred Compensation Plan.
The Compensation Committee may set minimum and maximum amounts allowed for
deferral into the Plan, however, the maximum deferred amount may not exceed
50% of base salary and 100% of annual bonus. Deferral elections are
irrevocable for one year, except in the case of hardship.
The Deferred Compensation Plan is unfunded and rights to payments from this
plan are unsecured claims against the general assets of the Company. The
Deferred Compensation Plan is not intended to qualify under Section 401(a) of
the Code. Participant accounts under this plan are merely hypothetical
bookkeeping accounts which will incur hypothetical gains or losses tracking
the performance of investments chosen by the participant. The tracking
investment choices under this plan include the investment options under the
Company's 401(k) plan and an option which tracks the performance of Company
stock.
Participants may receive a match of up to 25% Company stock or phantom shares
deferral amounts committed to the Company. Company matching amounts are
subject to the same vesting schedule as under the Company's 401(k) plan but
will always be forfeited if
27
distribution of a participant's account occurs prior to termination of
employment. Participants may elect distribution of their account upon
termination of employment or a specific future year (with distribution upon
termination, if earlier) and all distributions will be in the form of a lump
sum payment. At the Compensation Committee's discretion, amounts related to
matching contributions may be distributed in cash or in shares of Company
stock.
Stock Ownership Program
On February 17, 2004 the Compensation Committee adopted the Checkpoint Systems
Inc. Management and Director Stock Ownership Program "Stock Ownership
Program". The Stock Ownership Program sets stock ownership levels for
executive officers and outside directors of the Company which must be achieved
within five years of the adoption of the Program. The ownership levels under
the Stock Ownership Program are as follows: Chief Executive Officer - 160,000
shares; President and Chief Operating Officer - 80,000 shares; Executive Vice
President - 50,000 shares; Senior Vice President - 25,000 shares; Vice
President - 10,000 shares; and non-employee board members - 10,000 shares.
Shares relating to accounts under deferred compensation plans count toward the
required ownership levels. Management must notify any individual who fails to
comply with the Stock Ownership Program. Such individual will have 180 days to
achieve his or her ownership level or, if the individual does not comply
within such time period, he or she will be ineligible for awards under the
2004 Omnibus Incentive Plan until the appropriate ownership level is
satisfied. The Board has discretion to allow a longer compliance period if the
individual demonstrates exigent circumstances.
The foregoing report submitted by:
Robert O. Aders
Alan R. Hirsig, Chairman
Jack W. Partridge
Sally Pearson
The foregoing Report shall not be deemed incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
Compensation Committee Interlocks and Insider Participation
No members of the Compensation Committee, as of the date of this proxy
statement, is or has been an officer or employee of the Company or any of its
subsidiaries.
No executive officer of the Company served as a member of the compensation
committee (or other board committee performing equivalent functions or, in the
absence of any such committee, the entire board of directors) of another
entity, one of whose executive officers served on the Company's Compensation
Committee.
No executive officer of the Company served as a director of another entity,
one of whose executive officers served on the Company's Compensation
Committee.
No executive officer of the Company served as a member of the compensation
committee (or other board committee performing equivalent functions or, in the
absence of any such committee, the entire board of directors) of another
entity, one of whose executive officers served as a director of the Company.
28
EXECUTIVE COMPENSATION
This table below shows for the last three fiscal years compensation
information for the Company's Chief Executive Officer, and the Named Executive
Officers, as required under the rules of the SEC and certain other executive
officers of the Company.
Summary Compensation Table
---------------------------------------------------------------------------------------------
Annual Long Term All Other
Compensation Compensation Compensation
------------------------------ -------------------------------- -------------- --------------
Securities
Salary Bonus Underlying
Name and Principal Position Year ($) ($) (1) Options(#) Other ($)
------------------------------ ------- ----------- ------------ -------------- --------------
George W. Off 2003 772,820 762,375 60,000 0
Chairman of the Board, 2002 372,427 0 420,000 267,592(2)
President and
Chief Executive Officer
------------------------------ ------- ----------- ------------ -------------- --------------
W. Craig Burns 2003 393,245 415,735(3) 60,000 0
Executive Vice President, 2002 377,579 922,254(4) 50,000 0
Chief Financial Officer 2001 275,265 0 100,000 0
and Treasurer
------------------------------ ------- ----------- ------------ -------------- --------------
John E. Davies, Jr. 2003 308,773 433,600 60,000 0
Executive Vice President 2002 270,970 0 25,000 0
Americas and Asia Pacific 2001 232,113 0 15,000 0
------------------------------ ------- ----------- ------------ -------------- --------------
Per H. Levin 2003 315,579 294,010 60,000 62,813(5)
Executive Vice President, 2002 249,427 753,671 20,000 51,322
General Manager of Europe 2001 236,571 348,632 35,000 48,676
------------------------------ ------- ----------- ------------ -------------- --------------
Neil D. Austin(6) 2003 142,086 18,625 7,500 0
(Former) Vice President, 2002 229,375 0 10,000 0
General Counsel and 2001 229,376 0 15,000 0
Secretary
------------------------------ ------- ----------- ------------ -------------- --------------
John R. Van Zile 2003 137,328 83,837 25,000 13,000(7)
Senior Vice President,
General Counsel and
Secretary
------------------------------ ------- ----------- ------------ -------------- --------------
Arthur W. Todd 2003 195,294 63,609 15,000 0
Vice President, Corporate 2002 179,159 0 15,000 0
Controller and Chief 2001 166,385 0 15,000 0
Accounting Officer
---------------------------------------------------------------------------------------------
(1) For Executive Officer's named above, except for Mr. Austin, 50% of the
bonus payment for 2003 was paid in March 2004, and the remaining 50% is
to be paid later in 2004 upon the successful attainment of certain
objectives as determined by the Board.
(2) Consists of a relocation reimbursement of $267,592.
(3) In 2003, Mr. Burns received a special bonus of $350,000 which will vest
and be payable over three years. $116,000 of the special bonus is
included in 2003 bonus award.
(4) Includes $772,254 vested deferred compensation award.
29
(5) Amounts shown in All Other compensation includes pension and housing
allowances related to Mr. Levin in the amount of $43,969 and $18,844
respectively.
(6) Mr. Austin's employment with the Company terminated on July 14, 2003.
Under the terms of Mr. Austin's employment contract he was entitled to
receive severance pay for a period of twelve (12) months together with
continuation of various benefit plan coverage and consulting for a like
period. Mr. Austin also was entitled to receive an incentive payment and
the value of outplacement benefits.
(7) Consists of a relocation reimbursement of $13,000.
30
Stock Option Grants in 2003
The table below shows stock option grants to the individuals listed below in
2003.
Option Grants in Last Fiscal Year
- -----------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted to Price Appreciation
Options Employees Exercise or For Option Term (2)
Granted in Base Price Expiration --------------------------------
Name (#) (1) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---------------------------- ------------------- --------------- ---------------- ---------------- --------------- ----------------
George W. Off 7,639 .8227 $13.0900 05/01/13 $62,886 $159,365
52,361 5.6393 $13.0900 11/01/13 431,048 1,092,360
- ---------------------------- ------------------- --------------- ---------------- ---------------- --------------- ----------------
W. Craig Burns 17,823 1.9195 $13.0900 05/01/13 146,723 371,825
42,177 4.5425 $13.0900 11/01/13 369,604 950,383
- ---------------------------- ------------------- --------------- ---------------- ---------------- --------------- ----------------
John E. Davies, Jr. 7,639 .8227 $13.0900 05/01/13 62,886 159,366
52,361 5.6393 $13.0900 11/01/13 431,048 1,092,360
- ---------------------------- ------------------- --------------- ---------------- ---------------- --------------- ----------------
Per H. Levin 8,739 .9412 $13.0900 05/01/13 71,941 182,314
51,261 5.5208 $13.0900 11/01/13 421,992 1,069,412
- ---------------------------- ------------------- --------------- ---------------- ---------------- --------------- ----------------
Neil D. Austin 5,994 .6402 $13.0900 2/19/13 34,858 88,338
1,556 .1676 $13.0900 8/19/13 9,125 23,125
- ---------------------------- ------------------- --------------- ---------------- ---------------- --------------- ----------------
John R. Van Zile 19,926 2.1460 15.0550 7/28/13 188,660 478,100
5,074 .5465 $15.0550 01/28/14 51,139 131,497
- ---------------------------- ------------------- --------------- ---------------- ---------------- --------------- ----------------
Arthur W. Todd 8,839 .9520 $9.3250 02/19/13 51,836 131,362
6,161 .6635 $9.3250 08/19/13 38,423 99,775
- -----------------------------------------------------------------------------------------------------------------------------------
(1) The top figure, where applicable, reflects an incentive stock option and
the bottom figure reflects a non-qualified stock option. Under the Stock
Option Plan, options granted prior to July 23, 1997 are exercisable
immediately (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 the incentive stock options is ten years and the term for
non-qualified stock options is ten years and six months. In July 1997,
the Compensation and Stock Option Committee declared that all options
issued under the Stock Option Plan 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 one-third per year. Options issued to persons
with a title other than vice president or above are to 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 a 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. The dollar amounts under these
columns use the 5% and 10% rates of appreciation required by the SEC.
This presentation is not intended to forecast possible future
appreciation of the Company's Common Stock.
31
Option Exercises and Fiscal Year-End Option Values
The table below shows stock option exercises and the value of unexercised
stock options held by the individuals listed below.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
---------------------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options Options
Shares Realized At FY-End(#)(2) At FY-End($)(3)
Acquired On Value Exercisable/ Exercisable/
Name Exercise (#) ($)(1) Unexercisable Unexercisable
------------------------------- ----------------------- ------------------ -------------------------- ---------------------------
George W. Off 0 0 195,000/285,000 1,533,413/2,239,425
------------------------------- ----------------------- ------------------ -------------------------- ---------------------------
W. Craig Burns 0 0 249,167/93,333 2,154,356/578,131
------------------------------- ----------------------- ------------------ -------------------------- ---------------------------
John E. Davies, Jr. 0 0 118,072/95,928 962,936/647,287
------------------------------- ----------------------- ------------------ -------------------------- ---------------------------
Per H. Levin 0 0 32,445/82,221 267,556/576,154
------------------------------- ----------------------- ------------------ -------------------------- ---------------------------
Neil D. Austin 11,667 73,090 40,000/0 0/0
---------------------------------------------------------------------------------------------------------------------------------
(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 on the stock price at fiscal
year-end of exercisable but unexercised options; the second number
represents the value of unexercisable options.
Employment Agreements and Change-in-Control Arrangements
Mr. Off has a written Employment Agreement, which expires December 31, 2005,
pursuant to which Mr. Off receives an adjusted base salary of Seven Hundred
Fifty-Seven Thousand Dollars $757,000 per annum. Mr. Off's Agreement provides
that he participate in annual incentive compensation programs, as determined
by the Board of Directors, which would enable Mr. Off to earn incentive
compensation up to a target of one hundred percent (100%) of base salary,
provided specified goals and objectives are achieved. Mr. Off also
participates in the Company's Stock Option Plan, with grants being determined
by the Board of Directors. Mr. Off's Agreement provides that if the Agreement
is not renewed at its expiration date, Mr. Off shall receive an amount equal
to one year's salary in effect at the time and that any stock options (other
than options granted in the preceding nine (9) months prior to the termination
date) shall vest immediately. Mr. Off is also subject to non-competition
provisions, which range from twelve (12) to thirty (30) months from
termination date, depending on various conditions of termination. Mr. Off's
Agreement also provides for payments, under certain conditions, related to
Change-in Control as defined in the agreement or termination of employment by
either the Company, without cause, as defined, or Mr. Off, for good reason, as
defined, during the term of Agreement. The payment under such circumstances is
an amount equal to two hundred fifty percent (250%) of a combination of Mr.
Off's base salary and incentive compensation, as defined in the Agreement. Mr.
Off is entitled to participate in the Company's employee benefit plans while
an employee and for a period of thirty (30) months thereafter under certain
conditions.
Mr. Burns has a written Employment Agreement which expires December 31, 2004.
Under the Agreement, Mr. Burns is bound to a non-competition provision for a
period of twelve
32
(12) months from the date his employment terminates. Mr. Burns' Agreement
provides that should his employment terminate, in certain circumstances, he
would receive severance pay of base salary continuation and various benefits
for twenty-four (24) months. Should a Change-in-Control of the Company take
place, as defined in the Agreement, and the Agreement is terminated or Mr.
Burns terminates his employment for good reason (as defined in the Agreement),
he would receive as Change-in-Control severance benefits base salary
continuation and various benefits for thirty-six (36) months. Mr. Burns will
receive a deferred bonus payment equal to $350,000, of which one-third will be
paid in 2004 and the remaining shall vest and be paid to him in installments
as follows: $116,667 on each of January 1, 2005 and January 1, 2006. In
addition, Mr. Burns agreement reflects an accrued bonus of $772,254 which was
originally awarded in 2002.
Mr. Davies has a written Employment Agreement which expires December 31, 2004.
Mr. Davies is bound to a non-competition provision for a period of twelve (12)
months from the date his employment terminates. Mr. Davies' Agreement provides
that should his employment terminate, in certain circumstances, he would
receive severance pay of base salary continuation and various benefits for
eighteen (18) months. Should a Change-in-Control of the Company take place, as
defined in the Agreement, and the Agreement is terminated or if Mr. Davies
terminates his employment for good reason (as defined in the Agreement), he
would receive as Change-in-Control severance benefits base salary continuation
and various benefits for twenty-seven (27) months.
Mr. Levin has a written Employment Agreement, which expires December 31, 2004.
Mr. Levin is bound to a non-competition provision for a period of twelve (12)
months from the date his employment terminates. Mr. Levin' Agreement provides
that should his employment terminate, in certain circumstances, he would
receive severance pay of base salary continuation and various benefits for
eighteen (18) months. Should a Change-in-Control of the Company take place, as
defined in the Agreement, and the Agreement is terminated or if Mr. Levin
terminates his employment for good reason (as defined in the Agreement), he
would receive as Change-in-Control severance benefits base salary continuation
and various benefits for twenty-seven (27) months. In addition to his base
salary and eligibility to participate in an annual bonus plan, Mr. Levin
receives a housing allowance and a $35,000 annual contribution to a private
pension plan.
Mr. Van Zile has a written Employment Agreement which expires December 31,
2004. Mr. Van Zile is bound to a non-competition provision for a period of
twelve (12) months from the date his employment terminates. Mr. Van Zile's
Agreement provides that should his employment terminate, in certain
circumstances, he would receive as severance pay base salary continuation and
benefit continuation for fifteen (15) months. Should a Change-in-Control of
the Company take place, as defined in the Agreement, and the Agreement is
terminated or Mr. Van Zile terminates his employment he would receive as
severance benefits base salary continuation and various benefits for
twenty-two and one-half (22-1/2) months.
Mr. Todd has a written Employment Agreement which expires December 31, 2004.
Mr. Todd is bound to a non-competition provision for a period of twelve (12)
months from the date his employment terminates. Mr. Todd `s Agreement provides
that should his employment terminate, in certain circumstances, he would
receive as severance pay base salary continuation and benefit continuation for
of twelve (12) months. Should a Change-in-Control of the Company take place,
as defined in the Agreement, and the Agreement is terminated or Mr. Todd
terminates his employment for good he would
33
receive as severance benefits base salary continuation and various benefits
for eighteen (18) months.
Equity Compensation Plan Information
---------------------------------------------------------------------------------------------------------------------------------
Number of Number of
Securities to be Securities Remaining
Issued Upon Weighted-Average Available For
Exercise of Exercise Price of Future Issuance
Plan Category Outstanding Options Outstanding Options Under Option Plan
-------------------------------------- ------------------------------ ------------------------------ ----------------------------
Equity Compensation Plans Approved
by Security Holders 4,063,647 $14.5582 4,226,206
-------------------------------------- ------------------------------ ------------------------------ ----------------------------
Equity Compensation Plans Not
Approved by Security Holders 0 0 0
-------------------------------------- ------------------------------ ------------------------------ ----------------------------
Total 4,063,647 $14.5582 4,226,206
---------------------------------------------------------------------------------------------------------------------------------
The Company's 1992 Stock Option Plan allows the Company to grant either
incentive stock options (ISOs) or non-qualified stock options (NSOs) to
purchase up to 16,000,000 shares of Common Stock after giving effect to the
February 1996 stock split. Under the plan, only employees are eligible to
receive ISOs and both employees and non-employee directors of the Company are
eligible to receive NSOs. Effective with the 2002 Annual Shareholders'
Meeting, each non-employee director is to receive, upon his/her initial
election as a Director, and annually thereafter, non-incentive stock options
for 10,000 shares. NSOs and ISOs for an aggregate of 11,773,794 shares have
been granted under the Stock Option Plan through December 28, 2003. At
December 28, 2003, December 29, 2002 and December 30, 2001, a total of
4,226,206, 218,995 and 1,194,141 shares, respectively, were available for
grant under the plan. If Shareholders approve the 2004 Omnibus Incentive Plan,
no further grants will be made under the Stock Option Plan and the remaining
shares available for grant under the plan will become available for grant
under the 2004 Omnibus Incentive Plan.
All options under the Stock Option Plan expire not more than 10 years (plus
six months in the case of NSOs) from the date of grant. Both ISOs and NSOs
require a purchase price of not less than 100% of the fair market value of the
stock at the date of grant.
The Stock Option Plan is administered by the Compensation Committee of the
Company's Board of Directors. All of the options outstanding at December 28,
2003 were issued pursuant to the Stock Option Plan. Stock options granted
prior to July 1, 1997 were vested upon grant. In July 1997, the Compensation
Committee modified the vesting provisions contained in the Stock Option Plan
so that all options granted on or after July 23, 1997, to persons other than
non-employee directors under the plan, shall vest as set forth below:
ISOs and NSOs issued to all employees whose title is less than Vice President
shall vest as follows:
(i) 34% on or after the first anniversary date of option grant;
(ii) an additional 33% on or after 18 months of the date of option grant;
and
(iii) the remaining 33% on or after the second anniversary date of the
option grant.
34
ISOs and NSOs issued to all employees whose title is Vice President and above
shall vest as follows:
(i) 34% on or after the first anniversary date of option grant;
(ii) an additional 33% on or after the second anniversary date of option
grant; and
(iii) the remaining 33% on or after the third anniversary date of option
grant.
In addition to the Stock Option Plan shown in the table above, the Company
sponsors an Employee Stock Purchase Plan which was approved and amended by the
Shareholders in 2001 and which provides that all shares purchased for employee
participants are purchased on the open market and allocated directly to
participant accounts.
35
AUDIT COMMITTEE REPORT
The Audit Committee assists the Board of Directors in fulfilling its oversight
responsibilities regarding management's conduct of the Company's financial
reporting policies and processes, system of internal controls, the audit
process, and the Company's process for monitoring compliance with laws and
regulations and the code of conduct.
In fulfilling its responsibilities, the Audit Committee has reviewed and
discussed the Company's audited financial statements for the year ended
December 28, 2003 with the Company's management and PwC. The Audit Committee
has also discussed with PwC the matters required to be discussed by Statement
on Auditing Standards No. 61, "Communications with Audit Committees," as
amended. In addition, the Audit Committee has discussed with PwC their
independence, has received and reviewed the written disclosures and letter
provided to the Audit Committee by PwC as required by Independence Standards
Board Standard No. 1, "Independence Discussions with Audit Committees," and
has considered whether the provision of non-audit services provided by the
auditors is compatible with maintaining the auditors' independence.
Based upon the reviews and discussions referred to above, the Audit Committee
has recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
year ended December 28, 2003 to be filed with the Securities and Exchange
Commission.
The foregoing report submitted by:
William S. Antle, III
David W. Clark, Jr.
R. Keith Elliott, Chairman
Alan R. Hirsig
The foregoing Audit Committee Report shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
36
INDEPENDENT AUDITORS
PricewaterhouseCoopers LLP ("PwC"), were the Company's independent certified
public accountants for the fiscal year ended December 31, 2003. The Audit
Committee will be responsible for selection of the Company's independent
certified public accountants for 2004A representative of PwC is expected to be
present at the Meeting and will have the opportunity to make a statement if
he/she desires to do so. The representative is also expected to be available
to respond to appropriate questions from shareholders.
Audit Fees
Aggregate fees for professional services rendered by PwC in connection with
its audit of the Company's consolidated financial statements as of and for the
year ended December 28, 2003 and its limited reviews of the Company's
unaudited condensed consolidated interim financial statements were $1,383,000.
For the year ended December 29, 2002 the amount was $1,251,000.
Audit Related Fees
During the year ended December 28, 2003 and December 29, 2002 PwC rendered
professional services to the Company in connection with certain audits of the
Company's employee benefit programs. The annual fees related to these audits
were $42,000 and $66,000, respectively.
Tax Related Fees
In addition to the fees described above, the Company engaged PwC to perform
various tax compliance services and tax consulting for the Company for the
years ended December 28, 2003 and December 29, 2002. The annual fees related
to these tax related professional services were $927,000 and $887,000,
respectively.
All Other Fees
The Company did not engage PwC for services other than those described above.
Pre-Approval Procedures
The Audit Committee pre-approves all audit and permissible non-audit services
provided by PwC. These services may include audit services, audit-related
services, tax services and other services. The Audit Committee has adopted a
policy for the pre-approval of services provided by PwC. Under the policy,
pre-approval is generally provided for 12 months unless the Audit Committee
specifically provides for a different period, and any pre-approval must be
detailed as to the particular service or category of services and is subject
to a specific budget. In addition, the Audit Committee may also approve
particular services on a case by case basis. For each proposed service, PwC
must provide detailed back-up documentation at the time of approval. The Audit
Committee may delegate pre-approval authority to one or more of its members.
Such member must report any decisions to the Audit Committee at the next
scheduled meeting. The Audit Committee may not delegate to management its
responsibilities to pre-approve services performed by PwC.
37
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company for the period beginning December 27, 1998 and
ending on December 31, 2003, with the cumulative total return on the Center
for Research in Security Prices Index ("CRSP Index") for NYSE/AMEX/NASDAQ
Stock market, and the CRSP Index for NASDAQ Electronic Components and
Accessories, assuming the investment of $100 in the Company's Stock, the CRSP
Index for NYSE/AMEX/NASDAQ Stock market, and the CRSP Index for NASDAQ
Electronic Components and Accessories and the reinvestment of all dividends.
[GRAPHIC OMITTED]
1998 1999 2000 2001 2002 2003
------ ------ ------ ------ ------ ------
Checkpoint Systems, Inc. 100.0 78.1 63.5 114.0 92.6 164.2
NYSE/AMEX/NASDAQ
Stock Market Index 100.0 125.2 112.5 104.2 79.3 103.7
NASDAQ Electronic Components
and Accessories Index 100.0 178.1 148.8 101.5 55.7 102.5
The foregoing Stock Performance Graph shall not be deemed incorporated by
reference by any general statement incorporating by reference this proxy
statement into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference, and shall not
otherwise be deemed filed under such Acts.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and certain persons who own more than 10% of
a registered class of the Company's equity securities, to file with the SEC
initial reports of ownership and reports of changes in ownership of Common
Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
38
SUBMISSION OF PROPOSALS FOR THE 2005 ANNUAL MEETING
Shareholders of the Company are entitled to submit proposals on matters
appropriate for shareholder action consistent with regulations of the SEC and
the Company's By-Laws. Should a shareholder wish to have a proposal considered
for inclusion in the proxy statement for the Company's 2005 Annual Meeting,
the proposal must be received at the Company's offices no later than November
28, 2004.
In connection with the Company's 2005 Annual Meeting, if the shareholders'
notice is not received by the Company on or before February 12, 2005, the
Company (through management proxy holders) may exercise discretionary voting
authority when the proposal is raised at the annual meeting without any
reference to the matter in the proxy statement.
All shareholder proposals and notices should be directed to the Secretary of
the Company at 101 Wolf Drive, Thorofare, New Jersey 08086.
COST OF SOLICITATION
The Company pays for distributing and soliciting proxies and reimburses
brokers, nominees, fiduciaries and other custodian's reasonable fees and
expenses in forwarding proxy materials to shareholders. The Company is not
using an outside proxy solicitation firm this year, but employees of the
Company or its subsidiaries may solicit proxies through mail, telephone or
other means. Employees do not receive additional compensation for soliciting
proxies.
HOUSEHOLDING
The SEC permits companies and intermediaries to satisfy delivery requirements
for proxy statements with respect to two or more shareholders sharing the same
address by delivering a single proxy statement to those shareholders. This
method of delivery, often referred to as "householding," should reduce the
amount of duplicate information that shareholders receive and lower printing
and mailing costs for companies. The Company is not householding materials for
our shareholders in connection with the Annual Meeting, however, the Company
has been informed that certain intermediaries will household proxy materials.
If you wish to have only one annual report and proxy statement delivered to
your address you can:
o Contact us by calling (856) 848-1800 Ext. 3370 or by writing to
Checkpoint Systems, Inc., 101 Wolf Drive, P.O. Box 188, Thorofare,
New Jersey 08086, Attention: Corporate Secretary, to request a
separate copy of the annual report and proxy statement for the
Annual Meeting and for future meetings or you can contact your
broker to make the same request.
o Request delivery of a single copy of annual reports or proxy
statements from your broker if you share the same address as another
shareholder.
39
ANNUAL REPORT ON FORM 10-K
The Company will provide, without charge, a copy of the Company's Annual
Report on Form 10-K as filed with the SEC, on written request. Written request
should be directed to the Secretary of the Company at 101 Wolf Drive,
Thorofare, New Jersey 08086.
The Company's internet website is www.checkpointsystems.com. Investors can
obtain copies of the Company's annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and any amendments to those reports
filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act as soon as reasonably practicable after the Company has filed
such materials with, or furnished them to, the Securities and Exchange
Commission.
The Company has posted its Global Ethnics Policy, Governance Guidelines and
Committee Charters on the Corporate Governance Section of its website at
www.checkpointsystems.com. The Company will post on its website any amendments
to, or waivers from, the Code of Ethics applicable to any of its directors or
executive officers. The foregoing information will also be available in print
upon request.
OTHER BUSINESS
The Board knows of no other business for consideration at the meeting. If any
matters not specifically set forth on the proxy card and in this Proxy
Statement properly come before the Meeting, the persons named in the enclosed
proxy will vote or otherwise act, on your behalf, in accordance with their
reasonable business judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS
John R. Van Zile
Senior Vice President,
General Counsel and Corporate Secretary
40
APPENDIX A
CHECKPOINT SYSTEMS, INC.
AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
EFFECTIVE DATE JULY 27, 2003
AUDIT COMMITTEE CHARTER
1.0 Purpose
The Audit Committee shall represent and assist the Board of Directors with the
oversight of: (a) the integrity of the Company's financial statements and
internal controls, (b) the Company's compliance with legal and regulatory
requirements, (c) the independent auditor's qualifications and independence
and (d) the performance of the Company's internal audit function and the
independent auditor. Except as otherwise required by applicable laws,
regulations or listing standards, all major decisions are considered by the
Board of Directors as a whole.
2.0 Membership
The Audit Committee shall consist of three or more directors all of whom in
the judgment of the Board of Directors shall be independent in accordance with
New York Stock Exchange listing standards. Each member shall in the judgment
of the Board of Directors have the ability to read and understand the
Company's basic financial statements or shall at the time of appointment
undertake training for that purpose. At least one member of the Audit
Committee shall in the judgment of the Board of Directors be an audit
committee financial expert in accordance with the rules and regulations of the
Securities and Exchange Commission and at least one member (who may also serve
as the audit committee financial expert) shall in the judgment of the Board of
Directors have accounting or related financial management expertise in
accordance with New York Stock Exchange listing standards.
3.0 Meetings
The Audit Committee shall meet at least six times each year and at such other
times as it deems necessary to fulfill its responsibilities. The Audit
Committee shall periodically meet separately, in executive session, with
management, the internal auditor and the independent auditor. The Audit
Committee shall report regularly to the Board of Directors with respect to its
activities and make recommendations to the Board of Directors as appropriate.
4.0 Responsibilities
4.1 Select and retain and terminate when appropriate, the independent
auditor, set the independent auditor's compensation, and pre-
approve all audit services to be provided by the independent
auditor.
4.2 Pre-approve all permitted non-audit services to be performed by
the independent auditor and establish policies and procedures for
the engagement of the independent auditor to provide permitted
non-audit services.
4.3 Receive and review: (a) a report by the independent auditor
describing the independent auditor's internal quality-control
procedures and any material issues
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raised by the most recent internal quality-control review, or peer
review, of the independent auditing firm, or by any inquiry or
investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to deal with
any such issues; and (b) other required reports from the
independent auditor.
4.4 At least annually, consider the independence of the independent
auditor, including whether the provision by the independent
auditor of permitted non-audit services is compatible with
independence, and obtain and review a report from the independent
auditor describing all relationships between the auditor and the
Company.
4.5 Review with the independent auditor: (a) the scope and results of
the audit; (b) any problems or difficulties that the auditor
encountered in the course of the audit work, and management's
response; and (c) any questions, comments or suggestions the
auditor may have relating to the internal controls, and accounting
practices and procedures, of the Company or its subsidiaries.
4.6 Review, at least annually, the scope and results of the internal
audit program, including then current and future programs of the
Company's Internal Audit Department, procedures for implementing
accepted recommendations made by the independent auditor, and any
significant matters contained in reports from the Internal Audit
Department.
4.7 Review with the independent auditor, the Company's Internal Audit
Department, and management: (a) the adequacy and effectiveness of
the systems of internal controls (including any significant
deficiencies and significant changes in internal controls reported
to the Audit Committee by the independent auditor or management),
accounting practices, and disclosure controls and procedures (and
management reports thereon), of the Company and its subsidiaries;
and (b) current accounting trends and developments, and take such
action with respect thereto as may be deemed appropriate.
4.8 Review with management and the independent auditor the annual and
quarterly financial statements of the Company, including: (a) the
Company's disclosures under "Management's Discussion and Analysis
of Financial Condition and Results of Operations"; (b) any
material changes in accounting principles or practices used in
preparing the financial statements prior to the filing of a report
on Form 10-K or 10-Q with the Securities and Exchange Commission;
and (c) the items required by Statement of Auditing Standards 61
as in effect at that time in the case of the annual statements and
Statement of Auditing Standards 71 as in effect at that time in
the case of the quarterly statements.
4.9 Recommend to the Board of Directors, based on the review described
in paragraphs 4 and 8 above, whether the financial statements
should be included in the annual report on Form 10-K.
4.10 Review earnings press releases, as well as Company policies with
respect to earnings press releases, financial information and
earnings guidance provided to analysts and rating agencies.
4.11 Discuss Company policies with respect to risk assessment and risk
management, and review contingent liabilities and risks that may
be material to
A-2
the Company and major legislative and regulatory developments
which could materially impact the Company's contingent liabilities
and risks.
4.12 Review: (a) the status of compliance with laws, regulations, and
internal procedures; and (b) the scope and status of systems
designed to promote Company compliance with laws, regulations and
internal procedures, through receiving reports from management,
legal counsel and third parties as determined by the Audit
Committee.
4.13 Establish procedures for the confidential and anonymous receipt,
retention and treatment of complaints regarding the Company's
accounting, internal controls and auditing matters.
4.14 Establish policies for the hiring of employees and former
employees of the independent auditor.
4.15 Obtain the advice and assistance, as appropriate, of independent
counsel and other advisors as necessary to fulfill the
responsibilities of the Audit Committee.
4.16 Conduct an annual performance evaluation of the Audit Committee
and annually evaluate the adequacy of its charter.
5.0 Report
The Audit Committee shall prepare a report each year for inclusion in the
Company's proxy statement relating to the election of directors.
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APPENDIX B
CHECKPOINT SYSTEMS, INC.
2004 OMNIBUS INCENTIVE COMPENSATION PLAN
EFFECTIVE DATE: FEBRUARY 18, 2004
1.0 DEFINITIONS
The following terms shall have the following meanings unless the context
indicates otherwise:
1.1 "Award" shall mean an incentive compensation award granted by the
Committee under the Plan in accordance with Section 9 below.
1.2 "Award Agreement" shall mean a written agreement between the Company and
the Participant that establishes the terms, conditions,
restrictions and/or limitations applicable to an Award in
addition to those established by the Plan and by the Committee's
exercise of its administrative powers.
1.3 "Board" shall mean the Board of Directors of the Company.
1.4 "Cash Award" shall mean the grant by the Committee to a Participant of
an Award of cash in accordance with Section 9 below.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
1.6 "Committee" shall mean (i) the Board or (ii) a committee or subcommittee
of the Board appointed by the Board from among its members. The
Committee may be the Board's Compensation Committee or such
committee that performs the functions generally associated with
those functions performed by the compensation committees of
publicly traded corporations. Unless the Board determines
otherwise, and such determination is reduced to a writing
articulating the reasons for such determination, the Committee
shall be comprised solely of not less than 2 members, each of
whom shall qualify as each of (a), (b) and (c) below:
(a) "Non-Employee Director" within the meaning of Rule 16b-3(b)(3) (or
any successor rule) under the Exchange Act;
(b) an "outside director" within the meaning of Code Section 162(m)
and the Treasury Regulations thereunder; and
(c) an "independent director" as such term is defined or used by the
rules of the exchange or system on which the Company's Common
Stock is listed.
1.7 "Common Stock" shall mean the common stock of the Company.
1.8 "Company" shall mean Checkpoint Systems, Inc., a Pennsylvania
corporation.
1.9 "DER" shall mean a dividend equivalent right where the Participant may
receive an amount, payable in cash or Common Stock or a
combination of both, equal to the dividend actually paid with
respect to 1 share of Common Stock.
1.10 "Effective Date" shall mean the date on which the Plan is adopted by the
Board.
B-1
1.11 "Employee" shall mean an employee of the Company or any Subsidiary as
described in Treasury Regulation Section 1.421-7(h).
1.12 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, including applicable regulations
thereunder.
1.13 "Fair Market Value of a Share of the Common Stock" shall mean:
(a) if the Common Stock is readily tradeable on a national securities
exchange or other market system, the closing price of the
Common Stock on the date of determination (or on the last
preceding trading date if Common Stock was not traded on
such date), or
(b) if the Common Stock is not readily tradeable on a national
securities exchange or other market system:
(i) the book value of a share of Common Stock as of the last day
of the last completed fiscal quarter preceding the date of
determination; or
(ii) any other value as otherwise determined in good faith by the
Board.
1.14 "Independent Contractor" shall mean a person (other than a person who is
an Employee or a Nonemployee Director) or an entity that renders
services to the Company.
1.15 "ISO" shall mean an "incentive stock option" as such term is used in
Code Section 422.
1.16 "Nonemployee Director" shall mean a member of the Board who is not
an Employee.
1.17 "Nonqualified Stock Option" shall mean a Stock Option that does not
qualify as an ISO.
1.18 "Participant" shall mean any Employee, Nonemployee Director or
Independent Contractor to whom an Award has been granted by the
Committee under the Plan.
1.19 "Plan" shall mean the Checkpoint Systems, Inc. 2004 Omnibus Incentive
Compensation Plan.
1.20 "SAR" shall mean the grant by the Committee to a Participant of a stock
appreciation right as described in Section 9 below, payable in
cash or in Common Stock or a combination of both, where the
measure of compensation is based on the difference (if any)
between the Fair Market Value of the Common Stock on the date of
exercise and the exercise price of such SAR.
1.21 "Stock Award" shall mean the grant by the Committee to a Participant of
an Award of Common Stock in accordance with Section 9 below.
1.22 "Stock-Denominated Award" shall mean an Award for which the value of the
compensation of such Award is determined by the number of shares
of Common Stock granted or to be vested pursuant to such Award.
1.23 "Stock Option" shall mean the grant by the Committee to a Participant of
an option to purchase Common Stock in accordance with Section 9
below.
B-2
1.24 "Stock Unit" shall mean the grant by the Committee to a Participant of a
right to receive a share of Common Stock in accordance with
Section 9 below.
1.25 "Subsidiary" shall mean a corporation of which the Company directly or
indirectly owns more than 50 percent of the Voting Stock or any
other business entity in which the Company directly or indirectly
has an ownership interest of more than 50 percent.
1.26 "Treasury Regulation" shall mean the regulations promulgated under the
Code by the United States Department of the Treasury, as amended
from time to time.
1.27 "Vest" shall mean:
(a) with respect to Stock Options and SARs, when the Stock Option or
SAR (or a portion of such Stock Option or SAR) first becomes
exercisable and remains exercisable subject to the terms and
conditions of such Stock Option or SAR, and when the
Participant has an unrestricted right, title and interest to
receive the compensation (if any) attributable to such Stock
Option or SAR (or a portion of such Stock Option or SAR) or
to otherwise enjoy the benefits underlying such Stock Option
or SAR; or
(b) with respect to Awards other than Stock Options and SARs, when the
Participant has:
(i) an unrestricted right, title and interest to receive the
compensation (whether payable in Common Stock, cash or
a combination of both) attributable to an Award (or
a portion of such Award) or to otherwise enjoy the
benefits underlying such Award; and
(ii) a right to transfer an Award subject to no Company-imposed
restrictions or limitations other than restrictions
and/or limitations imposed by Sections 9 and 11
below.
1.28 "Vesting Date" shall mean the date or dates on which an Award Vests.
1.29 "Voting Stock" shall mean the capital stock of any class or classes
having general voting power under ordinary circumstances, in the
absence of contingencies, to elect the directors of a corporation.
2.0 PURPOSE OF PLAN
2.1 Purpose. The purpose of the Plan is to motivate certain Employees,
Nonemployee Directors and Independent Contractors to put forth
maximum efforts toward the growth, profitability, and success of
the Company and Subsidiaries by providing incentives to such
Employees, Nonemployee Directors and Independent Contractors
either through cash payments and/or through the ownership and
performance of the Common Stock. In addition, the Plan is intended
to provide incentives that will attract and retain highly
qualified individuals as Employees and Nonemployee Directors, and
to assist in aligning the interests of such Employees and
Nonemployee Directors with the interests of its shareholder.
3.0 TERM OF PLAN
3.1 Term. The Plan shall be effective as of the Effective Date and shall
terminate on the 10th anniversary of the Effective Date (unless
sooner terminated by the Board under Section 10 below).
B-3
4.0 SHAREHOLDER APPROVAL
4.1 Initial Shareholder Approval. The Plan shall be approved by the
shareholders of the Company at an annual meeting or any special
meeting of the shareholders of the Company within 12 months before
or after the Effective Date, and such approval by the shareholders
of the Company shall be a condition to the right of each
Participant to receive Awards hereunder. Any Award granted under
the Plan prior to the approval by the shareholders of the Company
shall be effective as of the date of grant (unless the Committee
specifies otherwise at the time of grant), but no such Award may
Vest, be paid out, or otherwise be disposed of prior to such
shareholder approval. If the shareholders of the Company fail to
approve the Plan in accordance with this Section 4.1, any Award
granted under the Plan shall be cancelled.
4.2 Plan Amendment. Any amendment to the Plan that is determined to be a
"material amendment" or a "material revision" or a "material
modification" (or word(s) of similar effect) under the rules of
the exchange or system on which the Company's Common Stock is
listed shall be approved by shareholders before such amendment
shall be effective.
4.3 Repricings. Any amendment, revision or other change to an outstanding
Award that is determined to be a "repricing" (or word(s) of
similar effect) under the rules of the exchange or system on which
the Company's Common Stock is listed shall be approved by
shareholders before such amendment, revision or other change shall
be effective.
4.4 Shareholder Reapproval. If required by Treasury Regulation Section
1.162-27(e)(vi) or any successor regulation or rule, the material
terms of performance goals as described in Section 9.3 below shall
be disclosed to and reapproved by the Company's shareholders no
later than the first shareholder meeting that occurs in the 5th
year following the year in which the Company's shareholders
previously approved such performance goals.
5.0 ADMINISTRATION
5.1 Responsibility. The Committee shall have the responsibility, in its sole
discretion, to control, operate, manage and administer the Plan in
accordance with its terms.
5.2 Award Agreement. Each Award granted under the Plan shall be evidenced by
an ward Agreement which shall be signed by the Committee or
designee thereof and the Participant; provided, however, that in
the event of any conflict between a provision of the Plan and any
provision of an Award Agreement, the provision of the Plan shall
prevail.
5.3 Authority of the Committee. The Committee shall have all the
discretionary authority that may be necessary or helpful to enable
it to discharge its responsibilities with respect to the Plan,
including but not limited to the following:
(a) to determine eligibility for participation in the Plan;
(b) to determine eligibility for and the type and size of an Award
granted under the Plan;
(c) to grant Awards to, and to enter into Award Agreements with,
Participants;
B-4
(d) to supply any omission, correct any defect, or reconcile any
inconsisteny in the Plan in such manner and to such extent
as it shall deem appropriate in its sole discretion to
carry the same into effect;
(e) to issue administrative guidelines as an aid to administer the
Plan and make changes in such guidelines as it from time to
time deems proper;
(f) to make rules for carrying out and administering the Plan and make
changes in such rules as it from time to time deems proper;
(g) to the extent permitted under the Plan, grant waivers of Plan
terms, conditions, restrictions, and limitations;
(h) to accelerate the Vesting of any Award when such action or actions
would be in the best interest of the Company;
(i) to grant Awards in replacement of Awards previously granted under
this Plan or any other executive compensation plan of the
Company; and
(j) to take any and all other actions it deems necessary or advisable
for the proper operation or administration of the Plan.
5.4 Action by the Committee. The Committee may act only by a majority of its
members. Any determination of the Committee may be made, without a
meeting, by a writing or writings signed by all of the members of
the Committee. In addition, the Committee may authorize any one or
more of its members to execute and deliver documents on behalf of
the Committee.
5.5 Delegation of Authority. The Committee may delegate to one or more of
its members, or to one or more agents, such administrative duties
as it may deem advisable; provided, however, that any such
delegation shall be in writing. In addition, the Committee, or any
person to whom it has delegated duties under this Section 5.5, may
employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the
Plan. The Committee may employ such legal or other counsel,
consultants and agents as it may deem desirable for the
administration of the Plan and may rely upon any opinion or
computation received from any such counsel, consultant or agent.
Expenses incurred by the Committee in the engagement of such
counsel, consultant or agent shall be paid by the Company, or the
Subsidiary whose employees have benefited from the Plan, as
determined by the Committee.
5.6 Determinations and Interpretations by the Committee. All determinations
and interpretations made by the Committee shall be binding and
conclusive on all Participants and their heirs, successors, and
legal representatives.
5.7 Liability. No member of the Board, no member of the Committee and no
employee of the Company shall be liable for any act or failure to
act hereunder, except in circumstances involving his or her bad
faith, gross negligence or willful misconduct, or for any act or
failure to act hereunder by any other member or employee or by any
agent to whom duties in connection with the administration of the
Plan have been delegated.
5.8 Indemnification. Each person who is or shall have been (a) a member of
the Board, (b) a member of a committee appointed by the Board, or
(c) an officer of the Company (or agent who is an employee of the
Company) to whom authority
B-5
was delegated in accordance with Section 5.5, shall be indemnified
and held harmless by the Company against and from any loss, cost,
liability or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any
claim, action, suit or proceeding to which he or she may be a
party or in which he or she may be involved by reason of any
action taken or failure to act under the Plan and against and from
any and all amounts paid by him or her in settlement thereof, with
the Company's approval, or paid by him or her in satisfaction of
any judgment in any such claim, action, suit or proceeding against
him or her; provided, however, that he or she shall give the
Company an opportunity, at its own expense, to handle and defend
the same before he or she undertakes to handle and defend it on
his or her own behalf, unless such loss, cost, liability or
expense is a result of his or her own willful misconduct or except
as expressly provided by statute.
The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such persons may be entitled under the
Company's certificate of incorporation or bylaws, any contract with the
Company, as a matter of law, or otherwise, or of any power that the Company
may have to indemnify them or hold them harmless.
6.0 ELIGIBILITY AND PARTICIPATION
6.1 Eligibility. All Employees, all Nonemployee Directors and all
Independent Contractors shall be eligible to participate in the
Plan and to receive Awards.
6.2 Participation. Participants shall consist of such Employees, Nonemployee
Directors and Independent Contractors as the Committee in its sole
discretion designates to receive Awards under the Plan.
Designation of a Participant in any year shall not require the
Committee to designate such person or entity to receive an Award
in any other year or, once designated, to receive the same type or
amount of Award as granted to the Participant in any other year.
The Committee shall consider such factors as it deems pertinent in
selecting Participants and in determining the type and amount of
their respective Awards.
7.0 SHARES SUBJECT TO PLAN
7.1 Available Shares. The aggregate number of shares of Common Stock which
shall be available for issuance or payments of Awards under the
Plan during its term shall be the total number of shares, as of
the Effective Date, remaining under the Checkpoint Systems, Inc.
Stock Option Plan (1992) (as amended) and the Checkpoint Systems,
Inc. Directors' Compensation Plan (collectively, the "Prior
Plans"), which is approximately 3,500,000 shares. Such shares of
Common Stock available for issuance under the Plan may be either
authorized but unissued shares, shares of issued stock held in the
Company's treasury, or both, at the discretion of the Company, and
subject to any adjustments made in accordance with Section 7.2
below. Any shares of Common Stock underlying Awards or shares of
Common Stock underlying awards under the Prior Plans that
terminate by expiration, forfeiture, cancellation, payment of
exercise price, payment of withholding tax obligation or otherwise
without the issuance of such shares shall again be available for
issuance or payments of Awards under the Plan. Awards that are
payable only in cash are not subject to this Section 7.1.
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7.2 Adjustment to Shares. If there is any change in the Common Stock of the
Company, through merger, consolidation, reorganization,
recapitalization, stock dividend, stock split, reverse stock
split, split-up, split-off, spin-off, combination of shares,
exchange of shares, dividend in kind or other like change in
capital structure or distribution (other than normal cash
dividends) to shareholders of the Company, an adjustment shall be
made to each outstanding Award so that each such Award shall
thereafter be with respect to or exercisable for such securities,
cash and/or other property as would have been received in respect
of the Common Stock subject to such Award had such Award been
paid, distributed or exercised in full immediately prior to such
change or distribution. Such adjustment shall be made successively
each time any such change shall occur. In addition, in the event
of any such change or distribution, in order to prevent dilution
or enlargement of Participants' rights under the Plan, the
Committee shall have the authority to adjust, in an equitable
manner, the number and kind of shares that may be issued under the
Plan, the number and kind of shares subject to outstanding Awards,
the exercise price applicable to outstanding Stock Options, and
the Fair Market Value of a Share of the Common Stock and other
value determinations applicable to outstanding Awards. Appropriate
adjustments may also be made by the Committee in the terms of any
Awards granted under the Plan to reflect such changes or
distributions and to modify any other terms of outstanding Awards
on an equitable basis, including modifications of performance
goals and changes in the length of performance periods; provided,
however, that with respect to performance-based Awards, such
modifications and/or changes do not disqualify compensation
attributable to such Awards as "performance-based compensation"
under Code Section 162(m). In addition, the Committee is
authorized to make adjustments to the terms and conditions of, and
the criteria included in, Awards in recognition of unusual or
nonrecurring events affecting the Company or the financial
statements of the Company, or in response to changes in applicable
laws, regulations, or accounting principles. Notwithstanding
anything contained in the Plan, any adjustment with respect to an
ISO due to a change or distribution described in this Section 7.2
shall comply with the rules of Code Section 424(a), and in no
event shall any adjustment be made which would render any ISO
granted hereunder other than an incentive stock option for
purposes of Code Section 422.
8.0 LIMITATIONS
8.1 Maximum Shares. No Participant may be granted in any one calendar year
total Stock-Denominated Awards which correspond to more than
250,000 shares of Common Stock (whether such Awards are payable in
Common Stock, cash or a combination of both). For purposes of the
preceding sentence, (i) Awards or portions of Awards that are
cancelled or repriced shall continue to be counted in determining
such maximum and (ii) if any Award is granted with a tandem DER,
such DER shall not be counted toward such maximum.
8.2 Maximum Dollar Amount. No Participant may be granted in any one calendar
year total Awards for which the value of such Awards is measured
in dollars (whether such Awards are payable in Common Stock, cash
or a combination of both) which exceed $1,000,000.
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9.0 AWARDS
9.1 Type of Awards. The Committee may, in its sole discretion, grant the
following Awards to Participants:
o Stock Options
o SARs
o Stock Awards
o Stock Units
o DERs
o Cash Award (i.e. annual or other bonuses)
o any other type of Award that is not inconsistent with the
Plan.
9.2 Award Terms and Conditions. The Committee, in its sole discretion, shall
determine all of the terms and conditions of each Award, including
but not limited to the following:
o exercise price or purchase price
o method of exercise
o Vesting
o expiration term of Award
o effects of termination of Participant's employment or
service
o change-in-control vesting and other effects of a change in
control
o restrictive covenants
o transferability
o tax deferral arrangements
o tandem or combination Awards
o any other term or condition that is not inconsistent with
the Plan.
9.3 Performance Measures. The Committee may use the following performance
measures (either individually or in any combination) to set
performance goals with respect to the grant or Vesting of an
Award:
o net sales;
o budget;
o cash flow (including, but not limited to, operating cash
flow, free cash flow or cash flow return on capital);
o earnings (including, but not limited to, net earnings,
earnings per share, or earnings before or after taxes);
o net income;
o pretax income before allocation of corporate overhead and
bonus;
o division, group or corporate financial goals;
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o total shareholder return;
o return on shareholders' equity;
o return on assets;
o attainment of strategic and operational initiatives;
o appreciation in and/or maintenance of the price of the
Common Stock or any other publicly traded securities of the
Company;
o market share;
o profits (including, but not limited to, gross profits,
profit growth, net operating profit or economic profit);
o profit-related return ratios;
o earnings before interest and taxes;
o earnings before interest, taxes, depreciation and
amortization;
o economic value-added models;
o comparisons with various stock market indices;
o dividends;
o customer satisfaction;
o increase in number of customers; and/or
o reductions in costs.
Performance measures may be stated in absolute terms or relative to comparison
companies or indices.
10.0 AMENDMENT AND TERMINATION
10.1 Termination of Plan. The Board may suspend or terminate the Plan at any
time with or without prior notice; provided, however, that no
action authorized by this Section 10.1 shall reduce the amount of
any outstanding Award or change the terms and conditions thereof
without the Participant's consent.
10.2 Amendment of Plan. The Board may amend the Plan at any time with or
without prior notice; provided, however, that no action authorized
by this Section 10.2 shall reduce the amount of any outstanding
Award or change the terms and conditions thereof without the
Participant's consent.
10.3 Amendment or Cancellation of Award Agreements. The Committee may amend
or modify any Award Agreement at any time; provided, however, that
if such amendment or modification adversely affects the
Participant, such amendment or modification shall be by mutual
agreement between the Committee and the Participant or such other
persons as may then have an interest therein. In addition, and
subject to shareholder approval in accordance with Section 4.3
above, by mutual agreement between the Committee and a Participant
or such other persons as may then have an interest therein, Awards
may be granted to a Participant in substitution and exchange for,
and in cancellation of, any Awards previously granted to such
Participant under the Plan, or any award previously granted to
such Participant under any other present or future plan of the
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Company or any present or future plan of an entity which (i) is
purchased by the Company, (ii) purchases the Company, or (iii)
merges into or with the Company.
11.0 MISCELLANEOUS
11.1 Other Provisions. Awards granted under the Plan may also be subject to
such other provisions (whether or not applicable to the Award
granted to any other Participant) as the Committee determines on
the date of grant to be appropriate, including, without
limitation, for the installment purchase of Common Stock under
Stock Options, to assist the Participant in financing the
acquisition of Common Stock, for the forfeiture of, or
restrictions on resale or other disposition of, Common Stock
acquired under any Stock Option, for the acceleration of Vesting
of Awards in the event of a change in control of the Company, for
the payment of the value of Awards to Participants in the event of
a change in control of the Company, or to comply with federal and
state securities laws, or understandings or conditions as to the
Participant's employment in addition to those specifically
provided for under the Plan.
11.2 Listing of Shares and Related Matters. If at any time the Committee
shall determine that the listing, registration or qualification of
the shares of Common Stock subject to any Award on any securities
exchange or under any applicable law, or the consent or approval
of any governmental regulatory authority, is necessary or
desirable as a condition of, or in connection with, the granting
of an Award or the issuance of shares of Common Stock thereunder,
such Award may not be exercised, distributed or paid out, as the
case may be, in whole or in part, unless such listing,
registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the
Committee.
11.3 No Right, Title, or Interest in Company Assets. Participants shall have
no right, title, or interest whatsoever in or to any investments
which the Company may make to aid it in meeting its obligations
under the Plan. Nothing contained in the Plan, and no action taken
pursuant to its provisions, shall create or be construed to create
a trust of any kind, or a fiduciary relationship between the
Company and any Participant, beneficiary, legal representative or
any other person. To the extent that any person acquires a right
to receive payments from the Company under the Plan, such right
shall be no greater than the right of an unsecured general
creditor of the Company. All payments to be made hereunder shall
be paid from the general funds of the Company and no special or
separate fund shall be established and no segregation of assets
shall be made to assure payment of such amounts except as
expressly set forth in the Plan. The Plan is not intended to be
subject to the Employee Retirement Income Security Act of 1974, as
amended.
11.4 No Right to Continued Employment or Service or to Grants. The
Participant's rights, if any, to continue to serve the Company as
a director, officer, employee, independent contractor or
otherwise, shall not be enlarged or otherwise affected by his or
her designation as a Participant under the Plan, and the Company
or the applicable Subsidiary reserves the right to terminate the
employment of any Employee or the services of any Independent
Contractor at any time. The adoption of the Plan shall not be
deemed to give any Employee, Nonemployee Director, Independent
Contractor or any other individual any right to be selected as a
Participant or to be granted an Award.
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11.5 Awards Subject to Foreign Laws. The Committee may grant Awards to
individual Participants who are subject to the tax laws of nations
other than the United States, and such Awards may have terms and
conditions as determined by the Committee as necessary to comply
with applicable foreign laws. The Committee may take any action
which it deems advisable to obtain approval of such Awards by the
appropriate foreign governmental entity; provided, however, that
no such Awards may be granted pursuant to this Section 11.5 and no
action may be taken which would result in a violation of the
Exchange Act or any other applicable law.
11.6 Governing Law. The Plan, all Awards granted hereunder, and all actions
taken in connection herewith shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania
without reference to principles of conflict of laws, except as
superseded by applicable federal law.
11.7 No Fractional Shares. No fractional shares of Common Stock shall be
issued or delivered pursuant to the Plan or any Award. The
Committee shall determine whether cash, Common Stock, Stock
Options, or other property shall be issued or paid in lieu of
fractional shares or whether such fractional shares or any rights
thereto shall be forfeited or otherwise eliminated.
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APPENDIX C
CHECKPOINT SYSTEMS, INC.
423 EMPLOYEE STOCK PURCHASE PLAN
Effective February 18, 2004
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the
intention of the Company to have the Plan qualify as an "Employee Stock
Purchase Plan" under Section 423 of the Internal Revenue Code of 1986,
as amended. The provisions of the Plan, accordingly, shall be construed
so as to extend and limit participation in a manner consistent with the
requirements of that Section of the Code.
2. Definitions. As used herein, the terms set forth below have the meanings
assigned to them in this Section 2 and shall include the plural as well
as the singular.
Administrator means the brokerage firm or financial institution (if any)
retained to perform administrative services described in Section 10(b).
Board of Directors or Board means the board of directors of Checkpoint
Systems, Inc.
Business Day shall mean a day on which the New York Stock Exchange ("NYSE")
is open for trading.
Brokerage Account means the account in which the Deposited Shares are held.
Code means the Internal Revenue Code of 1986, as amended.
Committee means the committee that administers the Plan and which is
appointed pursuant to Section 10.
Company means Checkpoint Systems, Inc., a Pennsylvania corporation and any
participating Subsidiaries.
Compensation means the Participant's base pay while a Participant in the
Plan, including overtime and bonuses, but excluding stock option awards or
stock grants and other forms of compensation.
Deposited Shares means the Shares that have been purchased for or issued on
behalf of a Participant pursuant to the exercise of Options under the Plan and
which are held for the Participant in a Brokerage Account.
Employee means any individual who is an employee of the Company for tax
purposes whose customary employment with the Company is at least twenty (20)
hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or
by contract, the employment relationship shall be deemed to have terminated on
the 91st day of such leave.
Enrollment Date means the first Business Day of each Offering Period or such
other date as determined by the Committee.
Exercise Date means the last Business Day of each Offering Period.
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Fair Market Value means the closing price for Shares as recorded by the NYSE
as reported in the Wall Street Journal on the relevant valuation date or if no
closing price has been recorded on such date on the preceding day on which a
closing price was recorded; or, if the Shares are no longer listed on the
NYSE, as reported on such other exchange on which the Shares are listed.
Offering Period means each six (6) month period during the effectiveness of
the Plan or such other period designated by the Committee.
Option means an option granted under this Plan that will entitle a
Participant to purchase Shares.
Participant means an Employee who satisfies the requirements of Sections 3
and 5 of the Plan.
Plan means the Checkpoint Systems, Inc. 423 Employee Stock Purchase Plan.
Purchase Account means the account used to purchase Shares through the
exercise of Options under the Plan.
Purchase Date means the last Business Day of each Offering Period, or such
other date as shall be established by the Committee.
Purchase Price means an amount no less than 85% of the Fair Market Value of
a share of Common Stock on the Enrollment Date or on the Exercise Date,
whichever is lower.
Purchased Shares means the full Shares purchased or issued pursuant to the
exercise of Options under the Plan.
Reserves mean the number of shares of Common Stock covered by each option
under the Plan which have not yet been exercised and the number of shares of
Common Stock which have been authorized for issuance under the Plan but not
yet placed under option.
Shares means the common stock of the Company, par value $.01 per share.
Subsidiary means a corporation, domestic or foreign, of which not less than
50% of the voting shares are held by the Company or a Subsidiary, whether or
not such corporation now exists or is hereafter organized or acquired by the
Company or a Subsidiary.
3. Eligibility.
(a) Only Employees of the Company and its subsidiaries which have adopted
the Plan shall be eligible to be granted Options under the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan if (i) immediately after
the grant, such Employee (or any other person whose stock would be attributed
to such Employee pursuant to Section 424(d) of the Code) would own capital
stock of the Company and/or hold outstanding options to purchase stock
possessing five percent (5%) or more of the total combined voting power or
value of all classes of stock of the Company or of any subsidiary of the
Company, or (ii) such option would permit his or her rights to purchase stock
under all employee stock purchase plans (described in Section 423 of the Code)
of the Company and its Subsidiaries to accrue at a rate that exceeds twenty-
five thousand dollars ($25,000) of the Fair Market Value of such stock
(determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
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4. Offering Periods. Shares will be purchased on behalf of Participants in
the Plan every Purchase Date using payroll deductions that have
accumulated during the preceding Offering Period.
5. Participation.
(a) An Employee shall be eligible to participate on the first Enrollment
Date that occurs after such Employee's first day of employment; provided, that
such Employee properly completes and submits an election form by the deadline
prescribed by the Committee. An Employee who does not become a Participant on
the first Enrollment Date on which he or she is eligible may thereafter become
a Participant on any subsequent Enrollment Date by properly completing and
submitting an election form by the deadline prescribed by the Committee.
(b) Payroll deductions for a Participant shall commence on the first
payroll date following the Enrollment Date and shall end on the last payroll
date in the Offering Period to which such authorization is applicable, unless
sooner terminated by the Participant as provided in Section 12 hereof.
6. Payroll Deductions.
(a) A Participant shall elect to have payroll deductions made on each
payday during an Offering Period equal to not less than 1% of the
Participant's Compensation and up to a maximum of 25% (or such greater amount
as the Committee may establish from time to time), of such Participant's
Compensation. The amount of such payroll deductions shall be in whole
percentages (for example, 3%, 12%, 22%). All payroll deductions made by a
Participant shall be credited to his or her Purchase Account. A Participant
may not make any additional payments into his or her Purchase Account.
(b) A Participant may change his or her Elected Percentage or terminate
the election under subsection (a) above by properly completing and submitting
a change in election form in accordance with the procedures prescribed by the
Committee. The change in amount shall be effective as of the beginning of the
next payroll period following the date of filing of the change in election
form, if the documents are properly completed and submitted at least five (5)
Business Days prior to such date and, if not, as of the beginning of the next
succeeding payroll period.
(c) Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant's payroll
deductions may be decreased to zero percent (0%) at any time during an
Offering Period. Payroll deductions shall recommence at the rate provided in
such Participant's election form at the beginning of the first Offering Period
which is scheduled to end in the following calendar year, unless terminated by
the Participant as provided in Section 12 hereof.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
Participant in such Offering Period shall be granted an option to
purchase on each Purchase Date a number of Shares determined by dividing
such Participant's payroll deductions accumulated prior to such Purchase
Date and retained in the Participant's Purchase Account as of the
Purchase Date by the applicable Purchase Price; provided, however, that
such purchase shall be subject to the limitations set forth in Section 3
and 15.
8. Exercise of Option. A Participant's option for the purchase of Shares
shall be exercised automatically on the Exercise Date, and the maximum
number of full Shares
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subject to option shall be purchased for such Participant at the
applicable Purchase Price with the accumulated payroll deductions in his
or her Purchase Account. No fractional Shares shall be purchased; any
payroll deductions accumulated in a Participant's Purchase Account which
are not sufficient to purchase a full Share shall be retained in the
Purchase Account for the subsequent Offering Period, subject to earlier
withdrawal by the Participant as provided in Section 12 hereof. During a
Participant's lifetime, a Participant's option to purchase shares
hereunder is exercisable only by him or her.
9. Approval by Shareholders. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board. If such
shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority
of the Shares of the Company present at the meeting or represented and
entitled to vote thereon.
10. Powers and Duties of Committee. The Plan shall be administered, in
accordance with the provisions hereof, by a duly authorized committee
the members of which shall be appointed by the Board of Directors (the
"Committee"). Subject to the provisions of the Plan and Section 423 of
the Code, the Committee shall have the discretionary authority to
determine the time and frequency of granting Options, the terms and
conditions of the Options and the number of Shares subject to each
Option. The Committee shall also have the discretionary authority to do
everything necessary and appropriate to administer the Plan, including,
without limitation, interpreting the provisions of the Plan (but any
such interpretation shall not be inconsistent with the provisions of
Section 423 of the Code). All actions, decisions and determinations of,
and interpretations by the Committee with respect to the Plan shall be
final and binding upon all Participants and upon their executors,
administrators, personal representatives, heirs and legatees. No member
of the Board of Directors or the Committee shall be liable for any
action, decision, determination or interpretation made in good faith
with respect to the Plan or any Option granted hereunder.
11. Administrator. The Company, Board or the Committee may engage the
services of a brokerage firm or financial institution (the
"Administrator") to perform certain ministerial and procedural duties
under the Plan including, but not limited to, mailing and receiving
notices contemplated under the Plan, determining the number of Purchased
Shares for each Participant, maintaining or causing to be maintained the
Purchase Account and the Brokerage Account, disbursing funds maintained
in the Purchase Account or proceeds from the sale of Shares through the
Brokerage Account, and filing with the appropriate tax authorities
proper tax returns and forms (including information returns) and
providing to each Participant statements as required by law or
regulation.
12. Withdrawal. A Participant may withdraw from the Plan by properly
completing and submitting a withdrawal form to the Committee. Any
payroll deductions credited to the Participant's Purchase Account prior
to the effective date of the Participant's withdrawal from the Plan will
purchase Shares on the next following Purchase Date. No further payroll
deductions for the purchase of Shares will be made during the Offering
Period or subsequent Offering Periods, unless the Participant properly
completes and submits an election form for such subsequent periods. A
Participant's withdrawal from an offering will not have any effect upon
his or her eligibility to
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participate in a succeeding Offering Period or in any similar plan that
may hereafter be adopted by the Company.
13. Termination of Employment. Upon termination of the Participant's
employment prior to the Purchase Date of an Offering Period for any
reason, whether voluntary or involuntary, including retirement or death,
the payroll deductions credited to his or her Purchase Account will be
returned to him or her or, in the case of the Participant's death, to
the person or persons entitled thereto under Section 16, and his or her
Option will be automatically terminated.
14. Interest. No interest shall accrue on the payroll deductions of a
Participant in the Plan.
15. Stock.
(a) The stock subject to Options shall be the common stock of the Company
(the "Shares"), as traded on the NYSE or on such other exchange as the Shares
shall be listed.
(b) Subject to adjustment upon changes in capitalization of the Company as
provided in Section 18 hereof, the maximum number of Shares which shall be
made available for sale under the Plan shall be 250,000 Shares. If, on a given
Exercise Date, the number of Shares with respect to which Options are to be
exercised exceeds the number of Shares then available under the Plan, the
Company shall make a pro rata allocation of the Shares remaining available for
purchase in as uniform a manner as shall be practicable and as it shall
determine to be equitable.
(c) A Participant shall have no interest or voting right in Shares covered
by his or her Option until such Option has been exercised.
16. Designation of Beneficiary. A Participant may designate a beneficiary
who is to receive any Shares and payroll deductions, if any, from the
Participant's accounts under the Plan in the event of such Participant's
death. If the Participant is married and the designated beneficiary is
not the spouse, spousal consent shall be required for such a designation
to be effective. Beneficiary designations shall be made in accordance
with procedures prescribed by the Committee.
17. Assignability of Options. Neither payroll deductions credited to a
Participant's Purchase Account nor any rights with regard to the
exercise of an Option or to receive Shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of in any way
(other than by will, the laws of descent and distribution or as provided
in Section 16 hereof) by the Participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to
withdraw from an Offering Period in accordance with Section 12 hereof.
18. Adjustment of Number of Shares Subject to Options. Subject to any
required action by the stockholders of the Company, the maximum number
of Shares each Participant may purchase per Offering Period, as well as
the price per Share and the number of Shares covered by each Option
under the Plan which has not yet been exercised shall be proportionately
adjusted for any increase or decrease in the number of issued Shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the common stock of the Company, or
any other increase or decrease in the number of Shares effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible
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securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the
Board (or its Committee), whose determination in that respect shall be
final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number
or price of Shares subject to an option. The Options granted pursuant to
the Plan shall not be adjusted in a manner that causes the Options to
fail to qualify as options issued pursuant to an "employee stock
purchase plan" within the meaning of Section 423.
19. Dissolution or Liquidation. In the event of the proposed dissolution or
liquidation of the Company, the Offering Period then in progress shall
be shortened by setting a new Exercise Date (the "New Exercise Date"),
and shall terminate immediately prior to the consummation of such
proposed dissolution or liquidation, unless provided otherwise by the
Board. The New Exercise Date shall be before the date of the Company's
proposed dissolution or liquidation. The Board shall notify each
Participant in writing, at least ten (10) Business Days prior to the New
Exercise Date, that the Exercise Date for the Participant's Option has
been changed to the New Exercise Date and that the Participant's Option
shall be exercised automatically on the New Exercise Date, unless prior
to such date the Participant has withdrawn from the Offering Period as
provided in Section 12 hereof.
20. Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding Option shall
be assumed or an equivalent option substituted by the successor
corporation or a parent or subsidiary of the successor corporation. In
the event that the successor corporation refuses to assume or substitute
for the Option, the Offering Period then in progress shall be shortened
by setting a new Exercise Date (the "New Exercise Date"). The New
Exercise Date shall be before the date of the Company's proposed sale or
merger. The Board shall notify each Participant in writing, at least ten
(10) Business Days prior to the New Exercise Date, that the Exercise
Date for the Participants Option has been changed to the New Exercise
Date and that the Participant's Option shall be exercised automatically
on the New Exercise Date, unless prior to such date the Participant has
withdrawn from the Offering Period as provided in Section 12 hereof.
21. Amendments or Termination of the Plan.
(a) The Board of Directors (or its designated Committee) may at any time
and for any reason amend, modify, suspend, discontinue or terminate the Plan
without notice; provided that no Participant's existing rights in respect of
existing Options are adversely affected thereby; provided, further, upon any
such amendment or modification, all Participants shall continue to have the
same rights and privileges in respect of existing Options. To the extent
necessary to comply with Section 423 of the Code (or any other applicable law,
regulation or stock exchange rule), the Company shall obtain shareholder
approved in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Board (or its Committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during an
Offering Period, establish the exchange ratio applicable to amounts withheld
in a currency other than U.S. dollars, permit payroll
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withholding in excess of the amount designated by a Participant in order to
adjust for delays or mistakes in the Company's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Shares for each Participant properly correspond
with amounts withheld from the Participant's Compensation, and establish such
other limitations or procedures as the Board (or its designated Committee)
determines in its sole discretion advisable which are consistent with the
Plan.
22. No Other Obligations. The receipt of an Option pursuant to the Plan
shall impose no obligation upon the Participant to purchase any Shares
covered by such Option. Nor shall the granting of an Option pursuant to
the Plan constitute an agreement or an understanding, express or
implied, on the part of the Company to employ the Participant for any
specified period.
23. Notices. Any notice which the Company or any Participant may be required
or permitted to give to the other shall be in writing and may be
delivered personally or by mail, postage prepaid, addressed: if to the
Company, to such address as the Company, by notice to such Participant,
may designate in writing from time to time; and, if to the Participant,
at his or her address as shown on the payroll records of the Company.
24. Condition Upon Issuance of Shares.
(a) Shares shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such Shares pursuant
thereto shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the rules and
regulations promulgated thereunder, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
of the aforementioned applicable provisions of law.
25. Term of the Plan. The Plan shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 21.
26. Governing Law. The Plan and all Options granted hereunder shall be
construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania without reference to choice of law
principles and subject in all cases to the Code and the regulations
thereunder.
C-7
EXHIBIT A
CHECKPOINT SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS - April 29, 2004
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of CHECKPOINT SYSTEMS, INC. (the "Company"),
revoking all previous proxies, hereby appoints John R. Van Zile and W. Craig
Burns, and each of them acting individually, as the attorney and proxy of the
undersigned, with full power of substitution, to vote all shares of Common Stock
of the Company which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Company, to be held on
Thursday, April 29, 2004, at 4:00 p.m., at the Hotel Arts Barcelona, Carrer de
la Marina, 19-21, Barcelona, 08025, Spain, and at any adjournment or
postponement thereof, provided that said proxies are authorized and directed to
vote.
(Continued and to be Signed on Reverse Side)
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[X] Please Mark Your Votes As In This Example
4. Election of Class I Directors
[_] FOR all of the nominees for Class I Director listed,
(except as marked to the contrary below)
[_] WITHHOLD AUTHORITY To vote for all nominees
NOMINEES:
William S. Antle, III
W. Craig Burns
John E. Davies, Jr.
R. Keith Elliott
[_] For, except vote withheld from the following nominee:
--------------------------------------------------------------
5. To approve the Checkpoint Systems, Inc. 2004 Omnibus Incentive
Compensation Plan.
[_] For [_] Against [_] Abstain
6. To approve the Checkpoint Systems, Inc. 423 Employee Stock
Purchase Plan.
[_] For [_] Against [_] Abstain
4. To transact such other business as may properly come before the
Meeting.
UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY YOUR RETURNED EXECUTED
PROXY WILL BE VOTED "FOR" THE ELECTION OF THE NOMINEES FOR THE CLASS I
DIRECTORS.
UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY YOUR RETURNED EXECUTED
PROXY WILL BE VOTED "FOR" THE APPROVAL OF THE CHECKPOINT SYSTEMS, INC. 2004
OMNIBUS INCENTIVE COMPENSATION PLAN.
UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY YOUR RETURNED EXECUTED
PROXY WILL BE VOTED "FOR" THE APPROVAL OF THE CHECKPOINT SYSTEM, INC.
423 EMPLOYEE STOCK PURCHASE PLAN.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF CHECKPOINT SYSTEMS, INC.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S) ___________________________ DATE ___________________________
SIGNATURE(S) ___________________________ DATE ___________________________
NOTE: Please sign this Proxy exactly as name(s) appear in the address. When
signing as attorney-in-fact, executor, administrator, trustee or guardian,
please add your title as such. If the shareholder is a corporation, please sign
with full corporate name by duly authorized officer or officers and affix the
corporate seal. Where stock is held in the name of two or more persons, all such
persons should sign.
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