UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
(Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
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|_| Preliminary Proxy Statement |_| Confidential, for Use of the
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Checkpoint Systems, Inc.
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(Name of Registrant as Specified in Charter
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NOTICE OF 2005
ANNUAL SHAREHOLDERS' MEETING
AND
PROXY STATEMENT
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TABLE OF CONTENTS
NOTICE OF 2005 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..................................................... 7
Proposal 1 - Election of Directors................................... 7
Corporate Governance......................................................... 10
Security Ownership of Principal Shareholders................................. 15
Security Ownership of Management............................................. 16
Compensation and Stock Option Committee Report on Executive Compensation..... 18
Executive Compensation....................................................... 22
Audit Committee Report....................................................... 28
Independent Auditors......................................................... 29
Stock Performance Graph...................................................... 30
Other Business............................................................... 33
[GRAPHIC OMITTED: CHECKPOINT SYSTEMS, INC.
Checkpoint logo] 101 Wolf Drive
Thorofare, NJ 08086
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Checkpoint Systems, Inc. (the "Company")
will be held on Wednesday, June 8, 2005, at 9:00 a.m., at The Union League of
Philadelphia, 140 South Broad Street, Philadelphia, Pennsylvania for the
following purposes:
1. To elect three Class II directors for a three-year term;
2. To transact such other business as may properly come before the
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 April 19, 2005 are entitled to receive notice of
the Meeting and to vote at the Meeting or any adjournments that may take
place.
You are cordially invited to attend the 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.
This Proxy Statement, the enclosed proxy card, and Checkpoint's 2004 Annual
Report are being mailed to shareholders on or about April 25, 2005.
By Order of the Board of Directors
JOHN R. VAN ZILE
Senior Vice President, General Counsel
and Corporate Secretary
April 25, 2005
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1. Q: WHEN AND WHERE IS THE 2005 ANNUAL MEETING OF SHAREHOLDERS BEING
HELD?
A: The Annual Meeting of Shareholders of the Company ("Annual
Meeting") will be held on Wednesday, June 8, 2005 at 9:00 a.m. at
The Union League of Philadelphia, 140 South Broad Street,
Philadelphia, Pennsylvania.
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2. Q: ON WHAT AM I VOTING?
A: You are also being asked to vote to approve:
1. Election of three Class II directors (David W. Clark, Jr.,
Harald Einsmann and Jack W. Partridge);
2. 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 April 19, 2005 (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.
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 and bring it with you 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, April 19, 2005,
37,838,520 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 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: HOW MANY VOTES ARE REQUIRED TO APPROVE THE PROPOSALS?
A: 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. 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 proxy holders.
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9. Q: WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
A: 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 2006 ANNUAL MEETING DUE?
A: If the date of the 2006 Annual Meeting of Shareholders is advanced
or delayed more than 30 days from June 8, 2006, shareholder
proposals intended to be included in the proxy statement for the
2006 annual meeting must be received by the Company within a
reasonable time before the Company begins to print and mail its
proxy materials for the 2006 annual meeting. Upon any
determination that the date of the 2006 annual meeting will be
advanced or delayed by more than 30 days from the date of the 2005
annual meeting, the Company will disclose the change in the
earliest practicable Quarterly Report on Form 10-Q. In order for
Shareholder proposals to be considered for inclusion in the
Company's proxy materials for the 2006 Annual Meeting of
Shareholders, proposals must be submitted in writing and received
by the Company no later than December 26, 2005.
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12. Q: WHO ARE THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS?
A: PricewaterhouseCoopers, LLP, was the Company's independent
certified public accountants for the fiscal year 2004 and has been
selected by the Audit Committee as the Company's independent
certified public accountants for fiscal year 2005. 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 Checkpoint in connection with the
solicitation of proxies by the Board of Directors of Checkpoint for use at the
2005 Annual Meeting of Shareholders and any adjournments thereof.
The Board of Directors approved the following proposals for shareholder
approval at a meeting held on March 31, 2005:
Proposal 1) Election of three Class II Directors to hold office until the
2008 Annual Meeting of Shareholders. The Board has nominated
David W. Clark, Jr., Harald Einsmann and Jack W. Partridge;
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SUMMARY OF PROPOSALS TO BE VOTED ON
1. ELECTION OF DIRECTORS
Nominees for re-election this year are:
o David W. Clark, Jr.
o Harald Einsmann
o Jack W. Partridge
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
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 three Class II directors to
hold office until the 2008 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 II directors, Robert O. Aders, David W. Clark, Jr.,
Harald Einsmann and Jack W. Partridge will expire at the Annual Meeting. Mr.
Aders has elected not to stand for re-election and is retiring from the Board
effective at the Annual Meeting. The terms of the Company's four Class I and
three Class III directors will expire at the Annual Meetings of Shareholders
to be held in 2007 and 2006, respectively. In addition, Messrs. Burns and
Davies have announced their intention to resign from the Board of Directors
following the Annual Meeting, but will continue to serve as executive officers
of the Company. The Company's By-laws provide that the Board of Directors
consist of no less than three and no more than eleven directors, with the
specific number within that range to be set by the Board.
The Board of Directors has nominated David W. Clark, Harald Einsmann and Jack
W. Partridge for election at the Meeting as the Company's Class II directors,
each of whom were recommended by the Nominating and Governance Committee.
Messrs. Clark, Einsmann and Partridge 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 II directors and the directors, with
the exception of Messrs. Aders, Burns and Davies who have announced their
intention to resign at the Annual Meeting, whose terms of office will continue
after the Annual Meeting, together with certain information about them, are as
follows:
NOMINEES FOR CLASS II DIRECTORS TO SERVE UNTIL 2008
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.
HARALD EINSMANN, PH.D.
Director Since 2005
Age 71
Dr. Einsmann currently serves as an Operating Partner and a member of the
Board of Directors/Investment Committee of EQT, a leading European Private
Equity Group sponsored by the Wallenberg group of Scandinavia (which includes,
among others, Erickson Telephones, ABB Engineering, Astra Zeneca and Gambro
Pharmaceuticals, SEB
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Bank, Scania Trucks). In addition, Dr. Einsmann serves on the Boards of Tesco
PLC, in the United Kingdom, Carlson Group in the United States, (which
includes, among others, Radisson Hotels, Radisson Seven Seas Cruise Ships,
Thank God Its Friday Restaurants), and StoraEnso AB in Scandinavia, one of the
worlds largest forest and paper product companies.
Prior to his tenure at EQT, Dr. Einsmann held senior management positions, as
well as a seat on the Worldwide Board at Procter and Gamble, one of the
world's largest manufacturers and marketers of consumer products. Before
leaving in 1999, Dr. Einsmann served as Procter and Gamble's President Europe,
Middle East and Africa, and increased revenues from the seventy-six countries
in these regions to $13 billion, growing net after tax profits 23% per year,
every year, for fifteen years to $1.3 billion.
Dr. Einsmann is a graduate of the Hamburg and Heidelberg Universities in
Germany where he received an MBA and a doctorate in Business Administration,
Economics and Law. He was also a Fulbright scholar at the University of
Florida, Gainesville, earning a Ph.D., with a thesis about the impact of the
European Union on several U.S. industries.
JACK W. PARTRIDGE
Director Since 2002
Age 59
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. Prior thereto, he served for two years as Vice
Chairman of the Board and Chief Administrative 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.
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 I DIRECTORS TO SERVE UNTIL 2007
WILLIAM S. ANTLE, III
Director Since 2003
Age 60
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 and ESCO Technologies, Inc.
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R. KEITH ELLIOTT
Director Since 2000
Age 63
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, and the Institute for Defense Analyses.
CLASS III DIRECTORS SERVING UNTIL 2006
ALAN R. HIRSIG
Director Since 1998
Age 65
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.
He is also a member of the Boards of various non-profit charitable
organizations.
GEORGE W. OFF
Director Since 2002
Age 58
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 55
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 Merchandise 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 24 year
period.
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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 will insure that at least a clear
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. A more detailed description of the
qualifications for directors is contained in the Company's Corporate
Governance Guidelines, a copy of which is available on the Company's website
at www.checkpointsystems.com.
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 re-nomination 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
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the board and to serve if elected by the shareholders. Recommendations
received by December 26, 2005, will be considered for nomination at the 2006
Annual Meeting of Shareholders. However, if the date of the 2006 Annual
Meeting of Shareholders has been changed by more than 30 days from the date of
the 2005 annual meeting, the recommendation must be received a reasonable time
before the Company begins to print and mail its proxy materials for the 2006
annual meeting.
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 has made an affirmative determination that each of R. Keith
Elliott, William S. Antle, III, David W. Clark, Jr., Jack W. Partridge, Robert
O. Aders, Alan R. Hirsig and Sally Pearson (each, an "Independent Director"
and together, the "Independent Directors") has no material relationship with
the Company. These conclusions were based on a separate review with the
Governance and Nominating Committee of each Independent Director's background
for any possible affiliations with or any compensation received (other than
compensation for service on the Company's Board of Directors or committees
thereof) from the Company and/or its subsidiaries. Following these reviews,
the Board of Directors determined that all of the Independent Directors were
"independent" for purposes of the New York Stock Exchange listing standards
and the categorical standards for independence set forth below because during
the past four years, no Independent Direcotr (or any member of an Independent
Director's immediate family) has:
o been employed by the Company;
o received more than $100,000 in direct compensation from the Company
in any 12-month period;
o been affiliated with or employed by an auditor of the Company or the
Company's internal audit staff; or
o been employed by any company whose compensation committee includes
an officer of the Company.
Board Meetings. The Board held six regular meetings in 2004. Each director
attended 100% of all Board and applicable committee meetings during 2004,
except for Messrs. Antle, Elliott and Hirsig who, in separate instances, were
unable to take part in one out of thirteen Audit Committee Meetings. The Board
of Directors has a policy requiring attendance at the Annual Meeting of
Shareholders. All of the Company's directors attended the 2004 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.
During 2004 the Board and each of the Board Committees evaluated their own
performance through self assessments.
R. Keith Elliott, as Lead Director, has been selected to preside over such
executive sessions.
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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
2004:
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NUMBER OF
NAME OF COMMITTEE MEMBERS OF THE COMMITTEE MEETINGS IN 2004
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AUDIT COMMITTEE William S. Antle, III 13
David W. Clark, Jr.
R. Keith Elliott*
Alan R. Hirsig
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COMPENSATION AND STOCK OPTION Robert O. Aders 3
COMMITTEE Alan R. Hirsig
Jack W. Partridge*
Sally Pearson
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GOVERNANCE AND NOMINATING Robert O. Aders 3
COMMITTEE David W. Clark, Jr.
R. Keith Elliott
Alan R. Hirsig
Sally Pearson*
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* Chairperson for 2004.
Audit Committee. The Audit Committee monitors the financial reporting
policies and processes and system of internal controls of the Company. The
Committee monitors the audit process and has sole responsibility for selecting
the Company's independent auditors. The Audit Committee operates under a
charter 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. Elliott serves on the audit committee of Wilmington
Trust Company and Computer Task Group. 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.
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(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 and Stock Option
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 advice 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 "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 2004 for non-employee
directors.
13
NON-EMPLOYEE DIRECTOR 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 2004 Omnibus Incentive Compensation
Plan, but no director may be awarded options for an aggregate of more than 10%
of the shares available under the that 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.
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.
14
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 15, 2005.
The parties named below have sole voting power and sole investment power with
respect to the shares indicated as beneficially owned, except where otherwise
indicated.
- --------------------------------------------------------------------------------
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP COMMON STOCK
- --------------------------------------------------------------------------------
Earnest Partners, LLC(1) 5,064,070 13.5%
75 Fourteenth Street, Suite 2300
Atlanta, GA 30309
- --------------------------------------------------------------------------------
Westport Asset Management, Inc.(1) 2,754,800 7.32%
253 Riverside Avenue
Westport, Connecticut 06880
- --------------------------------------------------------------------------------
Barclay's Global Investors, NA(1) 2,189,424 5.82%
45 Fremont Street
San Francisco, CA 94105
- --------------------------------------------------------------------------------
MMI Investments 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 9, 2005 in the case of Earnest
Partners, LLC and (ii) February 14, 2005 in the case of Westport Asset
Management, Inc. and Barclay's Global Investors, NA.
(2) Based on the most recent Schedule 13G filed with the SEC by MMI
Investments L.P. in March 2004.
15
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 and the other
most highly compensated executive officers and other executive officers as of
March 15, 2005. Each person named below has sole voting power and sole
investment power with respect to the shares indicated as beneficially owned,
unless otherwise stated.
-----------------------------------------------------------------------------------------
AMOUNT AND NATURE PERCENT OF PHANTOM
NAME AND ADDRESS OF OF BENEFICIAL COMMON STOCK
BENEFICIAL OWNER OWNERSHIP (1) STOCK UNITS (2)
-----------------------------------------------------------------------------------------
William S. Antle, III (3) 30,000 * 5,985
-----------------------------------------------------------------------------------------
W. Craig Burns (4) 348,897 * 0
-----------------------------------------------------------------------------------------
David W. Clark, Jr. (5) 85,392 * 28,343
-----------------------------------------------------------------------------------------
John E. Davies, Jr. (6) 205,411 * 0
-----------------------------------------------------------------------------------------
Harald Einsmann. (7) 10,000 * 0
-----------------------------------------------------------------------------------------
R. Keith Elliott (8) 33,000 * 23,931
-----------------------------------------------------------------------------------------
Alan R. Hirsig (9) 49,300 * 29,593
-----------------------------------------------------------------------------------------
George W. Off (10) 377,500 1.00 0
-----------------------------------------------------------------------------------------
Jack W. Partridge (11) 45,000 * 0
-----------------------------------------------------------------------------------------
Sally Pearson (12) 30,000 * 4,186
-----------------------------------------------------------------------------------------
David C. Donnan (13) 200,000 * 0
-----------------------------------------------------------------------------------------
Per Levin (14) 119,666 * 0
-----------------------------------------------------------------------------------------
Arthur W. Todd (15) 42,500 * 0
-----------------------------------------------------------------------------------------
John R. VanZile (16) 18,334 * 0
-----------------------------------------------------------------------------------------
All Directors and Officers as a
Group (13 persons) (17) 1,595,000 4.23 92,038
-----------------------------------------------------------------------------------------
* Less than one percent
(1) Unissued shares subject to options exercisable by a particular
beneficial owner within 60 days of March 14, 2005 are deemed to be
outstanding for the purpose of calculating the percent of Common Stock
beneficially owned by such beneficial owner
(2) 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.
(3) Consists of options to purchase 30,000 shares of Common Stock.
(4) Includes options to purchase 342,500 shares of Common Stock.
(5) Includes options to purchase 49,356 shares of Common Stock
(6) Includes options to purchase 204,000 shares of Common Stock.
(7) Consists of options to purchase 10,000 shares of Common Stock.
(8) Includes options to purchase 30,000 shares of Common Stock
16
(9) Includes of options to purchase 40,000 shares of Common Stock.
(10) Consists of options to purchase 377,500 shares of Common Stock.
(11) Includes options to purchase 40,000 shares of Common Stock
(12) Consists of options to purchase 30,000 shares of Common Stock.
(13) Consists of options to purchase 200,000 shares of Common Stock.
(14) Consists of options to purchase 119,666 shares of Common Stock.
(15) Consists of options to purchase 42,500 shares of Common Stock
(16) Consists of options to purchase 18,334 shares of Common Stock
(17) See footnotes 4 and 6 above. Total shown includes 5,058 shares held by
the custodian of the ESPP.
17
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors has
furnished the following report on executive compensation.
GENERAL
Under the supervision of the Compensation and Stock Option Committee of the
Board of Directors, the Company has developed and implemented compensation
policies, plans and programs which seek to enhance the profitability of the
Company and, 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. The
Committee has retained a nationally-recognized independent compensation-
consulting firm to assist the Committee in reviewing various analytical data
to ensure 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 and Stock Option
Committee, whom the Board has affirmatively determined to be comprised of
independent directors, reviews with the Chief Executive Officer and recommends
to the Board, with modifications it deems appropriate, an annual compensation
plan for each of the Company's senior executives other than the Chief
Executive Officer. 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 Committee relating to the past and expected future contributions, level
of experience, leadership abilities, and overall performance
The Compensation and Stock Option Committee also reviews and recommends to the
Board the compensation 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 2004, Mr. Off's compensation
was formulated by the Compensation and Stock Option Committee based on these
historic factors and preset performance goals, 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 2004 was $767,463 with a
targeted bonus percentage of 100%. Mr. Off `s 2004 bonus was $422,105. The
bonus payment for 2004 was paid in April 2005. Mr. Off was also awarded 90,000
options in 2004.
18
EXECUTIVE COMPENSATION
In addition to salary, senior management of the Company has the potential to
receive additional compensation from one of three possible sources: the
Company's 2004 Corporate Bonus Plan, discretionary management bonuses, and the
Omnibus Incentive Compensation Plan.
In 2004, the Board of Directors approved the 2004 Corporate Bonus Plan. The
2004 Corporate Bonus Plan provides for bonuses to be paid upon achievement of
specified objectives. The 2005 Bonus Plan, which includes an earnings per
share financial objective for executives, was approved at the Board meeting
held on February 23, 2005.
In order to provide incentives to employees over the longer term, the Company
maintains the 2004 Omnibus Incentive Compensation Plan ("Omnibus Plan"). At
various times during the year, the Compensation and Stock Option Committee
grants options to purchase the Company's Common Stock under the Omnibus Plan.
Under the Omnibus Plan, which was approved by the Shareholders at the 2004
Annual Meeting of Shareholders, the Compensation and Stock Option Committee
has the authority to award stock options (incentive and non-qualified stock
options), stock appreciation rights, stock awards (restricted and
unrestricted), phantom shares, dividend equivalent rights and cash awards. All
employees, non-employee directors and independent contractors of the Company
and its subsidiaries are eligible to receive awards under the Omnibus Plan.
The maximum number of shares available for option awards under the Plan from
its inception is approximately 3,500,000 and 3,392,056 remain available for
grant thereunder as of March 14, 2005. The Compensation and Stock Option
Committee believes that the Omnibus Plan is an important tool in attracting
and retaining employees and directors and encourages them to strive for the
long-term success of the Company.
In fixing the grants of awards to the individual senior management group
during 2004, including the Named Executive Officers other than the Chief
Executive Officer, the Compensation and Stock Option Committee reviewed with
the Chief Executive Officer the recommended individual awards, taking into
account 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 and
Stock Option Committee and are based, among other things, upon a subjective
review of competitive compensation data from several surveys, data from
selected peer companies, information regarding his total compensation and
historical information regarding his long-term compensation awards as well as
the Committee's subjective evaluation of his past and expected future
contributions to the Company's achievement of long-term performance goals,
including revenue and earnings growth. In 2004, the Compensation and Stock
Option Committee granted options to purchase 90,000 shares of the Company's
Common Stock to the Chief Executive Officer.
The Compensation and Stock Option Committee believes that its past grants of
options and the Omnibus Plan has successfully focused the Company's senior
management on building profitability and shareholder value.
Under the 1993 Omnibus Budget Reconciliation Act ("COBRA") 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
19
"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 and Stock Option Committee. In addition, the
material terms of the plan must be disclosed to and approved by shareholders
and the Compensation and Stock Option Committee must certify that the
performance goals were achieved before payments can be made. The Compensation
and Stock Option Committee has designed certain of the Company's compensation
programs to conform to 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 ("Deferred Compensation Plan"). The purpose of the Deferred
Compensation Plan, which is administered by the Compensation and Stock Option
Committee, is to provide certain eligible employees of the Company and its
subsidiaries the opportunity to defer portions of their compensation. In
addition, the Deferred Compensation Plan is designed to encourage participants
to participate in an investment return which tracks the performance of Company
stock, therefore aligning the interests of plan participants with those of the
Company's shareholders. The Plan is designed to comply with Internal Revenue
Code Section 409A
U.S. payroll Grade 18 executives and above and non-US Grade 20 executives and
above currently are eligible to 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. After 2005, deferral elections
are irrevocable for one year, except in the case of unforeseeable severe
financial emergency.
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 company stock.
Participants will receive a 25% match on amounts deferred. Company matching
amounts are subject to gradual vesting over three years with full vesting upon
termination on or after a participant's age 55. Normally, lump-sum
distribution will occur at termination of employment. However, at the time of
completing the first election form, participants may choose distribution upon
termination on or after age 55 in either a lump sum or a series of
substantially equal annual payments over the five years immediately following
termination. At the Compensation and Stock Option Committee's discretion,
distributions under the Plan may be in cash, shares of Company stock or a
combination of both.
STOCK OWNERSHIP PROGRAM
On February 17, 2004 the Compensation and Stock Option Committee adopted the
Checkpoint Systems, Inc. Management and Director Stock Ownership Program
("Stock Ownership Program"). The Stock Ownership Program sets stock ownership
levels for
20
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
Omnibus 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
Jack W. Partridge, Chairperson
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 member of the Compensation and Stock Option 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 Compensation and Stock
Option Committee.
No executive officer of the Company served as a director of another entity,
one of whose executive officers served on the Compensation and Stock Option
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.
21
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
- ---------------------------------------------------------------------------------------------------------------------------
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS(#) OTHER ($)
- ---------------------------------------------------------------------------------------------------------------------------
George W. Off 2004 768,753 422,105 90,000 359,407(1)
Chairman of the Board, 2003 772,820 762,375 60,000 0
President and Chief 2002 372,427 0 420,000 267,592(1)
Executive Officer
- ---------------------------------------------------------------------------------------------------------------------------
W. Craig Burns 2004 388,335 364,377(2) 60,000 0
Executive Vice President, 2003 393,245 415,735(2) 60,000 0
Chief Financial Officer and 2002 377,579 922,254(3) 50,000 0
Treasurer
- ---------------------------------------------------------------------------------------------------------------------------
John E. Davies, Jr. 2004 304,671 265,462 60,000 0
President, Asia Pacific 2003 308,773 433,600 60,000 0
and Latin America 2002 270,970 0 25,000 0
- ---------------------------------------------------------------------------------------------------------------------------
Per H. Levin 2004 347,844 122,850 60,000 69,569(4)
President of Europe 2003 315,579 294,010 60,000 62,813(4)
2002 249,427 753,671 20,000 51,322(4)
- ---------------------------------------------------------------------------------------------------------------------------
David C. Donnan 2004 185,806 152,000 200,000 0
President of North America
- ---------------------------------------------------------------------------------------------------------------------------
John R. Van Zile 2004 243,112 109,161 30,000 0
Senior Vice President, 2003 137,328 83,837 25,000 13,000(5)
General Counsel and Secretary
- ---------------------------------------------------------------------------------------------------------------------------
Arthur W. Todd 2004 206,866 66,182 7,500 0
Vice President, Corporate 2003 195,294 63,609 15,000 0
Controller and Chief 2002 179,159 0 15,000 0
Accounting Officer
- ---------------------------------------------------------------------------------------------------------------------------
(1) Consists of a relocation reimbursement of $359,407 in 2004 and $267,592
in 2002.
(2) In 2003, Mr. Burns received a special bonus of $350,000 which will vest
and be payable over three years. $116,666 of the special bonus is
included in the 2003 and 2004 bonus award.
(3) Includes $772,254 vested deferred compensation award.
(4) Amounts shown in All Other compensation includes pension and housing
allowances related to Mr. Levin in the amount of $48,450 and $21,119 in
2004 and $43,969 and $18,844 in 2003, and 36,758 and $14,564 in 2002
respectively.
(5) Consists of a relocation reimbursement of $13,000.
22
STOCK OPTION GRANTS IN 2004
The table below shows stock option grants to the individuals listed below in
2004.
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------------------------------------------------------------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT
ASSUMED ANNUAL RATES
OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
---------------------------------------------------------------------------------------------------------------------------------
George W. Off 5,219 0.4989 19.16 02/17/14 62,887 159,368
84,781 8.1053 19.16 08/17/14 1,086,378 2,792,797
---------------------------------------------------------------------------------------------------------------------------------
W. Craig Burns 5,219 0.4989 19.16 02/17/14 62,887 159,368
54,781 5.2372 19.16 08/17/14 701,960 1,804,558
---------------------------------------------------------------------------------------------------------------------------------
John E. Davies, Jr. 5,219 0.4989 19.16 02/17/14 62,887 159,368
54,781 5.2372 19.16 08/17/14 701,960 1,804,558
---------------------------------------------------------------------------------------------------------------------------------
David C. Donnan 200,000 19.1205 17.74 07/01/14 2,231,318 5,654,598
---------------------------------------------------------------------------------------------------------------------------------
Per H. Levin 5,219 0.4989 19.16 02/17/14 62,887 159,368
54,781 5.2372 19.16 08/17/14 701,960 1,804,558
---------------------------------------------------------------------------------------------------------------------------------
John R. Van Zile 5,219 0.4989 19.16 02/17/14 62,887 159,368
24,781 2.3691 19.16 08/17/14 317,542 816,318
---------------------------------------------------------------------------------------------------------------------------------
Arthur W. Todd 5,000 0.4780 19.16 02/17/14 60,248 152,681
2,500 0.2390 19.16 08/17/14 32,035 82,353
---------------------------------------------------------------------------------------------------------------------------------
(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.
23
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 AT OPTIONS AT
SHARES FY-END(#)(2) FY-END($)(3)
ACQUIRED ON REALIZED EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) VALUE ($)(1) UNEXERCISABLE UNEXERCISABLE
----------------------------------------------------------------------------------------------
George W. Off 0 0 327,500/242,500 2,169,600/984,038
----------------------------------------------------------------------------------------------
W. Craig Burns 0 0 285,834/116,666 2,039,449/277,013
----------------------------------------------------------------------------------------------
John E. Davies, Jr. 10,000 81,310 150,475/113,525 1,008,784/261,104
----------------------------------------------------------------------------------------------
David C. Donnan 0 0 0/200,000 0/33,000
----------------------------------------------------------------------------------------------
Per H. Levin 0 0 68,556/111,110 444,338/248,872
----------------------------------------------------------------------------------------------
(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 maximum 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 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
24
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, 2005.
Under the Agreement, Mr. Burns is bound to a non-competition provision for a
period of twelve (12) months from the date his employment terminates. In the
event of non-voluntary termination, for other than cause, Mr. Burns would
receive the greater of the benefits under his Employment Agreement or the
Company's Termination Policy for Executives Grades 18 to 21, as defined below.
Under his Employment Agreement he would receive as severance base salary and
benefit continuation for twenty-four (24) months. Should a Change-in-Control
of the Company take place, as defined in the Agreement, and his employment is
terminated Mr. Burns would receive as 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 was be
paid in 2004, one third was paid in January 2005; and the remaining one third
will vest and be paid on 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, 2005.
Mr. Davies is bound to a non-competition provision for a period of twelve (12)
months from the date his employment terminates. In the event of non-voluntary
termination, for other than cause, Mr. Davies would receive the greater of the
benefits under his Employment Agreement or the Company's Termination Policy
for Executives Grades 18 to 21, as defined below. Under his Employment
Agreement he would receive as severance base salary and benefit continuation
for twenty-four (24) months. Should a Change-in-Control of the Company take
place, as defined in the Agreement, and his employment is terminated Mr.
Davies would receive as severance benefits base salary continuation and
various benefits for thirty-six (36) months.
Mr. Donnan has a written Employment Agreement which expires December 31, 2005.
Mr. Donnan is bound to a non-competition provision for a period of twelve (12)
months from the date his employment terminates. In the event of non-voluntary
termination, for other than cause, Mr. Donnan would receive the greater of the
benefits under his Employment Agreement or the Company's Termination Policy
for Executives Grades 18 to 21, as defined below. Under his Employment
Agreement he would receive as severance base salary and benefit continuation
for twenty-four (24) months. Should a Change-in-Control of the Company take
place, as defined in the Agreement, and his employment is terminated Mr.
Donnan would receive as severance benefits base salary continuation and
various benefits for thirty-six (36) months.
Mr. Levin has a written Employment Agreement, which expires December 31, 2005.
Mr. Levin is bound to a non-competition provision for a period of twelve (12)
months from the date his employment terminates. In the event of non-voluntary
termination, for other than cause, Mr. Levin would receive the greater of the
benefits under his Employment Agreement or the Company's Termination Policy
for Executives Grades 18 to 21, as defined below. Under his Employment
Agreement he would receive as severance base salary and benefit continuation
for twenty-four (24) months. Should a Change-in-Control of the Company take
place, as defined in the Agreement, and his employment is terminated Mr. Levin
would receive as severance benefits base salary continuation and various
benefits for thirty-six (36) months. In addition to his base salary and
eligibility to participate
25
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,
2005. Mr. Van Zile is bound to a non-competition provision for a period of
twelve (12) months from the date his employment terminates. In the event of
non-voluntary termination, for other than cause, Mr. Van Zile would receive
the greater of the benefits under his Employment Agreement or the Company's
Termination Policy for Executives Grades 18 to 21, as defined below. Under his
Employment Agreement he would receive as severance base salary and benefit
continuation for eighteen (18) months. Should a Change-in-Control of the
Company take place, as defined in the Agreement, and his employment is
terminated Mr. Van Zile would receive as severance benefits base salary
continuation and various benefits for twenty-seven (27) months.
Mr. Todd has a written Employment Agreement which expires December 31, 2005.
Mr. Todd is bound to a non-competition provision for a period of twelve (12)
months from the date his employment terminates. In the event of non-voluntary
termination, for other than cause, Mr. Todd would receive the greater of the
benefits under his Employment Agreement or the Company's Termination Policy
for Executives Grades 18 to 21, as defined below. Under his Employment
Agreement he would receive as severance base salary and benefit continuation
for twelve (12) months. Should a Change-in-Control of the Company take place,
as defined in the Agreement, and his employment is terminated Mr. Todd would
receive as severance benefits base salary continuation and various benefits
for eighteen (18) months.
In February 2005, the Board of Directors approved a Termination Policy for
Executives Grade 18 to 21. The Termination Policy provides a fair framework in
the event of the termination of employment of executives grades 18 to 21
("Executive") for reasons other than for cause, as defined in the Termination
Policy. The policy does not apply to executives who become unable to perform
the essential functions of his/her position due to sickness or disability. The
amount of severance is the greater of that provided by the policy, any
employment contract, local law or other entitlement, but is not cumulative. A
condition of receiving severance under the policy is that the executive must
sign a general release and non-compete agreement in a form satisfactory to the
Company at the time of termination. The non-compete period would be equal to
the months of the severance paid. Under the Termination Policy, should an
Executive's employment with the Company terminate upon his/her death, the
Company's obligation to pay further compensation hereunder shall cease
immediately, except that Executive's legal representative(s) shall be entitled
to receive Executive's salary for the period up to the last day of the
calendar month in which his/her death occurred.
In the absence of "cause", the Company may terminate an Executive's employment
upon thirty (30) days written notice. In such event, Executive shall be
entitled to receive the following:
o The Base Salary for the period of months based on grade (Severance
Payment Period, see below), to be paid in accordance with the
Company's normal payroll practices;
o Any payment to which Executive may be entitled in accordance with
the terms of any applicable Bonus Plan then existing;
26
o Continued participation in the Company's welfare benefit plans
(including, without limitation, medical, dental, group life,
dependent life, supplemental life, short-term disability) for which
he/she was eligible at the time of termination as though his/her
termination of employment had not occurred for the Severance Payment
Period, at the Company's sole expense. Immediately following
severance period employee will be entitled to elect continuation of
medical and/or dental benefits under the provisions of COBRA.
In the event of a Change-in-Control as defined in the policy, Executive may
terminate employment upon thirty (30) days written notice if, but only if, one
of the following occurs:
o Executive is assigned duties substantially inconsistent with his/her
position, duties, responsibilities or status, or his/her duties are
substantially reduced; or
o Executive's principal office is relocated more than thirty (30)
miles; or
o Executive's Base Salary is reduced.
If Executive is terminated or properly terminates employment pursuant to the
Change-in-Control section above, Executive shall be entitled to receive the
following:
o The Base Salary for a period equal to 1- 1/2 times the Severance
Payment Period, to be paid in accordance with the Company's normal
payroll practices;
o Any payment to which Executive may be entitled in accordance with
the terms of any applicable Bonus Plan then existing;
o Continued participation in welfare benefit plans of the Company
(including, without limitation, medical, dental, group life,
dependent life, supplemental life, short-term disability) for which
he/she was eligible at the time of termination as though his/her
termination of employment had not occurred for a period equal to 1-
1/2 times the Severance Payment Period, at the Company's sole
expense. Immediately following severance period employee will be
entitled to elect continuation of medical and/or dental benefits
under the provisions of COBRA;
o Any stock options or similar equity incentive rights previously
granted to Executive that are not then fully vested and exercisable
pursuant to their terms shall become fully vested and immediately
exercisable.
SEVERANCE PAYMENT PERIOD
Grade 21: 24 months
Grade 20: 18 months
Grades: 18-19: 12 months
There are 4 executives in Grade 21, 2 in Grade 20 and 8 in Grades 18-19.
27
AUDIT COMMITTEE REPORT
The Audit Committee provides the following report with respect to the
Company's audited financial statements for the fiscal year ended December 26,
2004.
Management is responsible for the Company's internal controls and the
financial reporting process. The Company has an internal audit staff, which
performs testing of internal controls and the financial reporting process. The
independent auditors are responsible for performing an independent audit of
the Company's consolidated financial statements in accordance with auditing
standards generally accepted in the United States of America and issuing a
report thereon. The Audit Committee's responsibility is to monitor and oversee
these processes.
The Audit Committee has reviewed and discussed with management the Company's
fiscal 2004 audited financial statements. The Audit Committee has discussed
with the Company's independent registered public accounting firm,
PricewaterhouseCoopers LLP, the matters required to be discussed by Statement
on Auditing Standards No. 61 and Staff Accounting Bulletin No. 99. The Audit
Committee has received the written disclosures and letter from
PricewaterhouseCoopers required by Independence Standards Board No.1, relating
to the auditors' independence from the Company and its related entities, and
has discussed with the auditors their independence from the Company.
The Audit Committee monitors the financial reporting policies and processes
and system of internal controls of the Company. The Committee monitors the
audit process and has sole responsibility for selecting the Company's
independent auditors. The Audit Committee operates under a charter 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. Elliott serves on
the audit committee of Wilmington Trust Company and Computer Task Group. 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.
Based on, and in reliance upon these reviews and discussions, the Audit
Committee recommended to the board of directors that the audited financial
statements as of and for the year ended December 26, 2004 be included in the
Company's Annual Report on Form 10-K for the year ended December 26, 2004.
The foregoing report submitted by:
William S. Antle, III
David W. Clark, Jr.
R. Keith Elliott, Chairman
Jack W. Partridge
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.
28
INDEPENDENT AUDITORS
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 26, 2004 and its limited reviews of the Company's
unaudited condensed consolidated interim financial statements were $2.8
million. For the year ended December 28, 2003 the amount was $1,471,000. Audit
fees for 2004 included approximately $1,700,000 for compliance with Section
404 of the Sarbanes-Oxley Act.
AUDIT RELATED FEES
During the year ended December 26, 2004 and December 28, 2003 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 $0 and $42,000, respectively.
TAX 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 26, 2004 and December 28, 2003. The annual fees related
to these tax related professional services were $396,889 and $927,000,
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. All of the Audit
Related and Tax Fees described above were pre-approved by the Audit Committee.
29
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return on the
Common Stock of the Company for the period beginning December 26, 1999 and
ending on December 26, 2004, 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: Chart]
- ---------------------------------------------------------------------------------------------------------------------------------
Legend
Symbol CRSP Total Returns Index for: 12/1999 12/2000 12/2001 12/2002 12/2003 12/2004
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
___________ [] Checkpoint Systems, Inc. 100.0 81.5 146.0 118.6 210.3 198.1
__ __ __ __ * NYSE/AMEX/Nasdaq Stock Market (US Companies) 100.0 89.9 81.1 63.4 82.9 94.0
_ _ _ _ _ _ /\ Nasdaq Electronic Components Stocks 100.0 83.5 58.5 31.2 57.6 46.4
SIC 3670-3679 US & Foreign
NOTES:
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceeding trading day is used.
D. The index level for all series was set to $100.0 on 12/23/1999.
- ---------------------------------------------------------------------------------------------------------------------------------
30
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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
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. To the Company's
knowledge, all required Section 16(a) reports during the fiscal year ended
December 26, 2004, were timely filed.
SUBMISSION OF PROPOSALS FOR THE 2006 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. If the date of the 2006 Annual Meeting of Shareholders
is advanced or delayed more than 30 days from June 8, 2006, shareholder
proposals intended to be included in the proxy statement for the 2006 annual
meeting must be received by the Company within a reasonable time before the
Company begins to print and mail its proxy materials for the 2006 annual
meeting. Upon any determination that the date of the 2006 annual meeting will
be advanced or delayed by more than 30 days from the date of the 2005 annual
meeting, the Company will disclose the change in the earliest practicable
Quarterly Report on Form 10-Q. Should a shareholder wish to have a proposal
considered for inclusion in the proxy statement for the Company's 2006 Annual
Meeting, the proposal must be received at the Company's offices no later than
December 26, 2005.
In connection with the Company's 2006 Annual Meeting, if the shareholders'
notice is not received by the Company on or before March 11, 2006, 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. However, if the date of the 2006 Annual Meeting
of Shareholders has been changed by more than 30 days from the date of the
2005 annual meeting, the recommendation must be received a reasonable time
before the Company begins to print and mail its proxy material for the 2006
annual meeting.
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
31
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.
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 Securities and Exchange Commission, 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 the Code of Ethics, the Governance Guidelines and each
of the Committee Charters on its website at www.checkpointsystems.com, and
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.
32
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
33