SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities and Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHECKPOINT SYSTEMS, INC.
- -----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on
which the filing fee is calculated and state how it was
determined:
- -----------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------
(5) Total Fee paid:
- --------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or Schedule
and the date of its filing.
(1) Amount Previously Paid: .....................................
(2) Form Schedule or Registration Statement No:..................
(3) Filing Party:................................................
(4) Date Filed:..................................................
<PAGE>
[CHECKPOINT SYSTEMS, INC. LOGO]
101 WOLF DRIVE
P.O. BOX 188
THOROFARE, NJ 08086
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, APRIL 23, 1997
------------------------------
The Annual Meeting of Shareholders (the "Meeting") of Checkpoint Systems,
Inc. (the "Company") will be held on Wednesday, April 23, 1997, at 10:00 a.m.,
local time, at the Company's corporate headquarters located at 101 Wolf Drive,
Thorofare, New Jersey 08086, for the following purposes:
1. To elect three Class III directors to hold office until the 2000
Annual Meeting of Shareholders and until their successors are duly elected
and qualified;
2. To consider a proposal to approve amendments to the Checkpoint
Systems, Inc. Stock Option Plan (1992) to: (a) extend the termination date
of the Plan from May 17, 1997 to May 17, 2007; (b) increase the number of
shares issuable thereunder from 9,000,000 to 12,000,000; and (c) modify
both the number of Options issuable to Non-Employee Directors and the
issuance date of such Options.
3. To transact such other business as may properly come before the
Meeting.
You are cordially invited to attend the Meeting in person. The Board of
Directors has fixed the close of business on March 13, 1997 as the record date
for the Meeting. Only Shareholders of record at that date are entitled to notice
of and to vote at the Meeting and any adjournment or postponement thereof.
The enclosed proxy is solicited by the Board of Directors of the Company.
Reference is made to the attached proxy statement for further information with
respect to the business to be transacted at the Meeting. The Board of Directors
urges you to sign, date and return the enclosed proxy promptly. Should you
decide to attend the Meeting in person, you may revoke your proxy at that time.
NEIL D. AUSTIN
Secretary
March 21, 1997
<PAGE>
CHECKPOINT SYSTEMS, INC.
101 WOLF DRIVE
P.O. BOX 188
THOROFARE, NJ 08086
------------------------------
PROXY STATEMENT
------------------------------
GENERAL
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Checkpoint Systems, Inc. (the "Company")
for use at the Company's Annual Meeting of Shareholders (the "Meeting") which
will be held on the date, at the time and place and for the purposes set forth
in the foregoing notice, and any adjournment or postponement thereof. This proxy
statement, the foregoing notice and the enclosed proxy are first being sent to
shareholders of the Company (the "Shareholders") on or about March 21, 1997.
The Board of Directors does not presently intend to bring any matter before
the Meeting except as specifically indicated in the notice and does not know of
anyone else who intends to do so. If any other matters properly come before the
Meeting, however, the persons named in the enclosed proxy, or their duly
constituted substitutes acting at the Meeting, will be authorized to vote or
otherwise act thereon in accordance with their judgment on such matters. If the
enclosed proxy is properly executed and returned prior to voting at the Meeting,
the shares represented thereby will be voted in accordance with the instructions
marked thereon. In the absence of instructions, the shares will be voted "FOR"
the nominees of the Board of Directors in the election of the Class III
directors; "FOR" the proposal to approve amendments to the Checkpoint Systems,
Inc. Stock Option Plan (1992) to: (a) extend the termination date of the Plan
from May 17, 1997 to May 17, 2007; (b) increase the number of shares issuable
thereunder from 9,000,000 to 12,000,000; and (c) modify both the number of
Options issuable to Non-Employee Directors and the issuance date of such
Options.
Any proxy may be revoked at any time prior to its exercise by notifying the
Secretary in writing, by delivering a duly executed proxy bearing a later date,
or by attending the Meeting and voting in person. However, revocation of a proxy
shall not affect any vote taken prior to such revocation.
VOTING SECURITIES AND SECURITY OWNERSHIP
VOTING SECURITIES
At the close of business on March 13, 1997, the record date fixed for the
determination of Shareholders entitled to notice of and to vote at the Meeting,
there were outstanding 34,575,528 shares of the Company's Common Stock, $.10 par
value per share (the "Common Stock") outstanding, each entitled to one vote.
There is no other class of voting securities outstanding. The presence at the
Meeting, in person or by proxy, of at least a majority of the votes that all
Shareholders are entitled to cast shall constitute a quorum for purposes of
conducting business. If the Meeting is adjourned, any unfinished business of the
Meeting may be carried on at any continuation of the original meeting,
notwithstanding that a quorum is not present at the
<PAGE>
continued meeting. In the election of the Class III directors, Shareholders
entitled to vote do not have cumulative voting rights.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS
The following table sets forth certain information respecting the holdings
of the parties who were known to the Company to be the beneficial owners of more
than 5% of the outstanding Common Stock of the Company as of March 13, 1997. 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.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK
- ------------------------------------ -------------------- ------------
<S> <C> <C>
A I M Management Group Inc. 2,517,895(1) 7.4%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
</TABLE>
- ------------------
(1) Based on information supplied in a Schedule 13G dated February 12, 1997 as
filed with the Securities and Exchange Commission by A I M Management Group
Inc., on behalf of itself and its wholly-owned subsidiaries, A I M Advisors,
Inc. and A I M Capital Management, Inc.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth certain information respecting the Common
Stock of the Company beneficially owned by each director and nominee for
director, the Chief Executive Officer and the four other most highly compensated
executive officers of the Company other than the Chief Executive Officer, and by
the group consisting of such persons and the other executive officers as of
March 7, 1997. Each of the persons named below has sole voting power and sole
investment power with respect to the shares indicated as beneficially owned,
unless otherwise stated.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK(1)
---------------- -------------------- ---------------
<S> <C> <C>
Robert O. Aders 21,371(2) .06
Dr. Roger D. Blackwell 93,556(3) .27
Richard J. Censits 58,756 .17
David W. Clark, Jr. 134,506(4) .39
Allan S. Kalish 11,456(5) .03
Dr. Elisa Margaona 4,519(6) .01
Raymond R. Martino 4,519(7) .01
Jermain B. Porter 55,356(8) .16
Albert E. Wolf 1,210,185(9) 3.50
Kevin P. Dowd 374,949(10) 1.08
Steven G. Selfridge 242,457(11) .70
William J. Reilly, Jr. 138,914(12) .40
Michael E. Smith 114,851(13) .33
All Directors and Officers as a Group 3,223,570(14) 9.32
(25 persons)
</TABLE>
2
<PAGE>
- ------------------
(1) Unissued shares subject to options exercisable within 60 days of
March 7, 1997 are deemed to be outstanding for the purpose of
calculating the percent of Common Stock beneficially owned.
(2) Includes 9,356 shares subject to currently exercisable options to
purchase the Company's Common Stock, 10,000 shares purchased on
behalf of Mr. Aders as sole trustee under the Robert O. Aders IRA IMA
Rollover account and 2,015 shares held in trust by Mr. Aders' wife.
All options reported herein and in the footnotes below are currently
exercisable to purchase the Company's Common Stock (the "Options").
(3) Includes 93,356 Options and 200 shares purchased on behalf of
Dr. Blackwell as sole trustee under the Roger D. Blackwell Pension
Plan.
(4) Includes 89,356 Options.
(5) Includes 9,356 Options and excludes 175 shares owned by Mr. Kalish's
wife, as to which Mr. Kalish disclaims beneficial ownership.
(6) Consists of 4,519 Options.
(7) Consists of 4,519 Options.
(8) Includes 33,356 Options, and excludes 15,840 shares owned by
Mr. Porter's wife, as to which Mr. Porter disclaims beneficial
ownership.
(9) Includes 459,356 Options; 116,306 shares held in trust for Mr. Wolf
in accordance with the Will of his late father, as to which Mr. Wolf
is both a Trustee and income beneficiary and has sole voting power;
and 99,688 shares held in trust for Mr. Wolf's children as to which
Mr. Wolf's children are principal beneficiaries and Mr. Wolf is
income beneficiary. Amount shown excludes 279,800 shares owned by Mr.
Wolf's wife, for which Mr. Wolf disclaims beneficial ownership.
(10) Includes 370,000 Options and 4,949 shares held by the custodian of
the Company's Employees' Stock Purchase Plan ("ESPP").
(11) Includes 240,000 Options; 60 shares (30 shares each) which are held
by each of Mr. Selfridge's two minor children, under the NJ Unif Tran
Min Act; and 2,397 shares held by the custodian of the ESPP.
(12) Includes 130,000 Options and 4,514 shares held by the custodian of
the ESPP.
(13) Includes 110,000 Options and 4,851 shares held by the custodian of
the ESPP.
(14) See footnotes 1-12 above. Total shown includes 23,444 shares held by
the custodian of the ESPP.
ELECTION OF DIRECTORS
IDENTIFICATION OF THE DIRECTORS TO BE ELECTED
At the Meeting, the Shareholders will elect three Class III directors to
hold office until the 2000 Annual Meeting of Shareholders and until their
respective successors have been duly elected and qualified. The Company's Board
of Directors is divided into three classes serving staggered three-year terms,
the term of one class of directors expiring in each year. The term of the
Company's four Class III directors, Kevin P. Dowd, Allan S. Kalish, Raymond R.
Martino and Albert E. Wolf will expire at the Meeting. Pursuant to the Company's
Amended and Restated By-Laws, a Director reaching age 70 is no longer qualified
to stand for re-election; therefore, Mr. Kalish will not stand for re-election.
No successor is being named at this time.
The Board of Directors has nominated Kevin P. Dowd, Raymond R. Martino and
Albert E. Wolf for election at the Meeting as the Company's Class III directors
and Messrs. Dowd, Martino and Wolf have indicated their willingness to continue
to serve as directors. If a nominee, at the time of his election, is unable or
unwilling to serve, and as a result a substitute nominee is designated, the
persons named in the enclosed proxy or their substitutes will have discretionary
authority to vote or to refrain from voting for the substitute nominee in
accordance with their judgment. Unless
3
<PAGE>
contrary instructions are given, the shares represented by the enclosed proxy
will be voted "FOR" the election of Messrs. Dowd, Martino and Wolf.
The nominees for election as the Class III directors and the directors
whose terms of office will continue after the Meeting, together with certain
information about them, are as follows:
<TABLE>
<CAPTION>
DIRECTOR TERM
NAME AGE SINCE EXPIRES POSITIONS WITH THE COMPANY
- ---- --- ----- ------- --------------------------
<S> <C> <C> <C> <C>
Robert O. Aders 70 1994 1999 Director
Roger D. Blackwell 57 1990 1998 Director(1)(2)
Richard J. Censits 59 1985 1998 Director(1)(3)
David W. Clark, Jr. 59 1982 1999 Director(1)(3)
Kevin P. Dowd 48 1995 1997 President, Chief Executive Officer and
Director
Elisa Margaona 67 1996 1999 Director
Raymond R. Martino 59 1996 1997 Director(2)
Jermain B. Porter 70 1981 1998 Director(2)
Albert E. Wolf 67 1969 1997 Chairman of the Board and Director(3)
</TABLE>
- ------------------
(1) Member of the Company's Audit Committee.
(2) Member of the Company's Compensation and Stock Option Committee.
(3) Member of the Company's Executive Committee.
PRINCIPAL OCCUPATIONS AND DIRECTORSHIPS HELD BY EACH NOMINEE FOR DIRECTOR AND
THE DIRECTORS WHOSE TERMS OF OFFICE CONTINUE AFTER THE MEETING
Mr. Aders has been Chairman of The Advisory Board, Inc., an international
consulting organization since 1992. Mr. Aders is Of Counsel at the law firm of
Collier, Shannon, Rill & Scott. He is also President Emeritus and a member of
the Board of Directors of Food Marketing Institute ("FMI"), where he served as
Chief Executive Officer from the founding of FMI in 1976 until his retirement in
1993. Mr. Aders served as Under Secretary of Labor and Acting Secretary during
1975 and 1976 prior to which time he was Chairman of the Board of the Kroger Co.
Mr. Aders is a director of Telepanel Systems, Inc., a Canadian manufacturer of
electronic shelf labels for sale to retailers in Canada and the United States.
Mr. Aders is also a member of the Board of Directors of ICC Technologies, Inc. a
U.S. manufacturer of climate control and air conditioning equipment and
services.
For more than the past five years, Dr. Blackwell has been a professor of
marketing at Ohio State University and President of Roger Blackwell Associates,
Inc., a consulting firm and a member of the Board of Directors of Max & Erma's.
In February, 1992, Dr. Blackwell became a member of the Board of Directors of
Worthington Foods, Inc. Dr. Blackwell joined the Board of Directors of Intimate
Brands, Inc. in 1995. In 1996, Dr. Blackwell became a director of Abercrombie &
Fitch, Airnet Systems; and Applied Industrial Technologies. Dr. Blackwell also
serves as a Trustee of Flex-Funds.
Mr. Censits is currently a business consultant. Mr. Censits was Chief
Executive Officer and a member of the Board of Directors of MedQuist, Inc.
formerly Summit Health Group, Inc. from 1987 until 1995, and Chairman from
1992 to 1995. Mr. Censits is currently a director of MedQuist. MedQuist, Inc.
provides health information management services to hospitals and other health
4
<PAGE>
care providers nationwide. Mr. Censits is a director of EnergyNorth, Inc., and
is a Trustee of the University of Pennsylvania.
Mr. Clark has been a managing director of Pryor & Clark, a company engaged
in investments, since June, 1992. He served as President and Chief Operating
Officer of Corcap, Inc. ("Corcap"), a company engaged in the manufacture of
elastomer materials and components, from July, 1988 through June, 1992. From
October, 1985 to July, 1988, Mr. Clark was the President and Chief Operating
Officer of Lydall, Inc. ("Lydall"), a diversified manufacturing concern which
manufactures industrial materials and components. Mr. Clark is a director of
Acme United Corp., Corcap, CompuDyne Corporation and SS&C Technologies, Inc.
Mr. Dowd has been President, Chief Executive Officer and a Director of the
Company since January 1, 1995 and President and Chief Operating Officer of the
Company since August, 1993. He was Executive Vice President of the Company from
May 1992 to August 1993. Mr. Dowd was Executive Vice President -- Marketing,
Sales and Service from April, 1989 to May, 1992 and Vice President of Sales from
August, 1988 to April, 1989. Mr. Dowd is a director of MAB Paints, Inc., C&D
Charter Power, Inc., and a board member of Holy Redeemer Health System, Inc., a
not for profit organization.
Dr. Margaona has been President and Chief Executive Officer of the
Institute of Higher Studies and Research since 1982, President of MARESA since
1981 and President of the Certification Program for Retailing Managers since
1993. Dr. Margaona was founding President and Chief Executive Officer of ANTAD,
National Retailers Association of Mexico from 1983 to 1990 and a director from
1990 to 1994; founding President of ALAS, Latin American Association of
Supermarkets from 1986 to 1990; and an advisor to Food Marketing Institute
International Advisory Board from 1993 to 1995. Dr. Margaona was appointed World
Area Chair of the International Council of Psychologists in 1996 and a board
member of Catalina Marketing de Mexico in the same year.
Mr. Martino has been Vice Chairman of and a consultant to Symbol
Technologies, Inc. since October, 1994 and President from December 1983 until
October 1994.
Mr. Porter was a private consultant to business from January, 1982 through
1994. Mr. Porter previously was a principal and consultant with Towers Perrin,
international consultants to business in the management of human resources.
Mr. Wolf has been Chairman of the Board since April, 1986 and Chairman of
the Executive Committee since October, 1994. Mr. Wolf served as Chief Executive
Officer of the Company from April, 1972 to December, 1994, President of the
Company from July, 1977 to April, 1986 and from July, 1991 through August, 1993,
and a director of the Company since July, 1969. Mr. Wolf is a director of
Lydall.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held 4 regular and 2 special meetings during the
past fiscal year.
The Board of Directors has an Audit Committee, a Compensation and Stock
Option Committee and an Executive Committee. Messrs. Blackwell, Censits and
Clark constitute the members of the Audit Committee; Messrs. Porter and Kalish
constituted the members of the Compensation and Stock Option Committee; and
Messrs. Wolf, Censits, Clark and Kalish constituted the members of the Executive
Committee. The Audit Committee met twice during the last fiscal year with the
Company's independent public accountants to discuss the scope and results of the
annual audit
5
<PAGE>
and questions of accounting and tax policy. The Compensation and Stock Option
Committee acted at various times during the last fiscal year to approve salaries
and benefits and compensation arrangements for the Company's officers and to
grant stock options. The Executive Committee met four times during the year to
consider strategic financing alternatives, acquisitions and long-range goals of
the Company. During the 1996 fiscal year, all directors attended all of the
regularly scheduled meetings of the Board of Directors and of the committees on
which they served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation and Stock Option Committee (the "Committee")
consisted of Messrs. Porter and Kalish. None of the members of the Committee is
or, during the last fiscal year was, an officer or employee of the Company or
any of its subsidiaries.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Mr. Aders was late in filing two reports on Form 4 for transactions
executed by his wife during 1996.
EXECUTIVE COMPENSATION
CASH, BONUS AND DEFERRED COMPENSATION
The following table sets forth the total annual and long-term compensation
paid by the Company for services in all capacities rendered during the fiscal
years ended December 29, 1996, December 31, 1995 and December 25, 1994 to the
Chief Executive Officer and its four most highly compensated executive officers
other than the Chief Executive Officer (the "Named Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS
------------------- -------------
SALARY BONUS STOCK OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($)(1) ($)(2) (3)
- --------------------------- ---- -------- ------- -------------
<S> <C> <C> <C> <C>
Kevin P. Dowd 1996 374,980 0 50,000
President, Chief Executive 1995 331,770 150,000 200,000
Officer and Director 1994 282,214 0
Albert E. Wolf 1996 314,300 0 0
Chairman of the Board 1995 314,300 0 0
1994 335,079 0 0
Steven G. Selfridge 1996 237,028 0 30,000
Executive Vice President 1995 201,287 90,000 210,000
1994 187,979 0 40,000
William J. Reilly, Jr. 1996 217,801 0 30,000
Senior Vice President 1995 200,937 90,000 150,000
1994 186,127 0 40,000
Michael E. Smith 1996 213,916 0 30,000
Senior Vice President 1995 184,494 90,000 150,000
1994 159,330 0 40,000
</TABLE>
6
<PAGE>
- ------------------
(1) Amounts shown in the "Salary" column include payments to the Named Officers
under the Company's Executive Supplemental Plan, a plan adopted in 1991 for
those of its highly compensated officers who are excluded by Internal
Revenue Service regulations from participating in the Company's 401(k)
savings plans. Payments under the Executive Supplemental Plan were made to
or for the benefit of the Named Officers as follows: Mr. Dowd: 1996 --
$33,322; 1995 -- $30,293; 1994 -- $25,243; Mr. Wolf: 1994 -- $30,292; Mr.
Selfridge: 1996 -- $22,544; 1995 -- $19,347; 1994 -- $18,137; Mr. Reilly:
1996 -- $19,690; 1995 -- $18,175; 1994 -- $16,812; Mr. Smith: 1996 --
$19,185; 1995 -- $17,165; 1994 -- $14,338. Amounts shown also reflect the
Company's matching contribution under the Checkpoint Systems, Inc. Employee
Stock Purchase Plan for each of the Named Officers for the year 1996 in the
amount of $997 and the years 1994 and 1995 in the amount of $884 (but as to
Mr. Wolf for 1994 only) in the amount of $884. Beginning in 1995 Mr. Wolf
ceased participating in the Executive Supplemental Plan and the Employee
Stock Purchase Plan.
(2) Bonus amounts were paid pursuant to the Company's Profit Incentive Plan,
described under the caption "Compensation Committee Report on Executive
Compensation."
(3) Options reflected in the "Awards/Stock Options" column reflect grants of
options to purchase the Company's Common Stock under the Company's Stock
Option Plan (1992) and its predecessor plans, described under the caption
"Compensation Committee Report on Executive Compensation."
The Company does not grant SARs or restricted stock to officers.
The aggregate value of personal benefits received by each executive officer
named in the foregoing table during the last fiscal year did not exceed the
lesser of $50,000 or 10% of the annual salary and bonus reported for the Named
Officer in the "Salary" and "Bonus" columns of the Summary Compensation Table
above and thus is not required to be disclosed.
Set forth below is further information with respect to grants of stock
options made during the fiscal year ended December 29, 1996 under the Checkpoint
Systems, Inc. Stock Option Plan (1992) to the Named Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATES OF STOCK
SECURITIES OPTIONS/SAR'S PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (2)(3)
OPTIONS/SAR'S EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ---- ----------------- ----------------- ------------ ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kevin P. Dowd 3,524 0.3816 28.3750 07/23/06 62,885 159,364
46,476 5.0324 28.3750 01/23/07 312,975 2,270,115
Albert E. Wolf 0 0 0 0 0 0
0 0 0 0 0 0
Steven G. Selfridge 3,524 0.3816 28.3750 07/23/06 62,885 159,364
26,476 2.8668 28.3750 01/23/07 502,932 1,293,217
William J. Reilly, Jr. 3,524 0.3816 28.3750 07/23/06 62,885 159,364
26,476 2.8668 28.3750 01/23/07 502,932 1,293,217
Michael E. Smith 3,524 0.3816 28.3750 07/23/06 62,885 159,364
26,476 2.8668 28.3750 01/23/07 502,932 1,293,217
</TABLE>
- ------------------
(1) Table reflects options granted to the Named Officers listed above to
purchase the Company's Common Stock. For each of the named officers granted
options, the top figure reflects an incentive stock option ("ISO") and the
bottom figure(s) reflect a grant which is not an ISO ("NSO"). Under the
Checkpoint
7
<PAGE>
Systems, Inc. Stock Option Plan (1992) (the "Stock Option Plan"), options
are immediately exercisable (subject to a six-month holding requirement in
the case of management subject to Section 16 of the Securities Exchange Act
of 1934), and to purchase Common Stock; the term of such options is
generally ten years (in the case of an ISO), and ten years and six months
(in the case of an NSO).
(2) Represents gain that would be realized assuming the options were held until
expiration and the stock price increased at compounded rates of 5% and 10%
from the base price per share.
(3) The dollar amounts under these columns use the 5% and 10% rates of
appreciation required by the Securities and Exchange Commission. This
presentation is not intended to forecast possible future appreciation of the
Company's Common Stock.
OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
Set forth below is information with respect to options exercised and
unexercised as of the fiscal year ended December 29, 1996 for each of the Named
Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES ACQUIRED ON UNDERLYING UNEXERCISED IN-THE-MONEY
EXERCISE OR WITH OPTIONS/SAR'S AT OPTIONS/SAR'S
RESPECT TO WHICH FY-END (#)(2) AT FY-END ($)(3)
OPTION GRANTS ---------------------- -----------------------
EXERCISED VALUE EXERCISABLE/ EXERCISABLE/
NAME (#) ($)(1) UNEXERCISABLE UNEXERCISABLE
- ---- --------------------- ------------ ---------------------- -----------------------
<S> <C> <C> <C> <C>
Kevin P. Dowd 130,000 2,361,057 370,000/0 4,661,874/0
Albert E. Wolf 0 0 459,356/0 8,928,841/0
Steven G. Selfidge 192,000 3,206,601 240,000/0 2,340,625/0
William J. Reilly, Jr. 150,000 2,211,748 130,000/0 1,236,250/0
Michael E. Smith 160,000 2,251,061 110,000/0 957,500/0
</TABLE>
- ------------------
(1) Represents the difference between the fair market value of the shares at the
date of exercise and the exercise price multiplied by the number of shares
acquired.
(2) The first number represents the number of exercisable but unexercised
options; the second number represents the number of unexercisable options.
(3) The first number represents the value based upon the stock price at fiscal
year-end of exercisable but unexercised options; the second number
represents the value of unexercisable options.
COMPENSATION OF DIRECTORS
In 1996, directors who were not employees of the Company received $1,000
each fiscal quarter and $2,000 for each Board of Directors' meeting that they
attended. Directors who are employees of the Company do not receive any
additional compensation for their service as directors.
Non-employee directors are eligible to receive NSO's pursuant to a formula
set forth in the Company's Stock Option Plan, described in footnote (1) to the
"Option Grants" table and under the heading "Compensation Committee Report on
Executive Compensation." Under the Stock Option Plan, each non-employee member
of the Board of Directors shall be granted a NSO on April 29, 1995 and on April
29 of each third year thereafter during which the Plan shall remain in effect,
provided that the non-employee member of the Board of Directors is then serving
in such position and provided further that there are then available sufficient
shares under this Plan. Each such NSO will cover the lesser of (i) 10,000 shares
(approximately adjusted if necessary for stock dividends, stock split or other
changes) of common stock, (ii) a number of shares of common stock
8
<PAGE>
having an aggregate fair market value on the date of grant equal to $100,000, or
(iii) the number of shares then available under the applicable limits of the
plan. Pursuant to the Stock Option Plan, on April 29, 1995, each non-employee
director received options to purchase 9,356 shares.
Effective January 1, 1995, the Company entered into an agreement with
Mr. Wolf. As compensation, Mr. Wolf will receive $530,014 per year for five
years, of which $255,014 will be deferred annually. In addition, the Company
will pay the sum of $125,000 in five equal installments of $25,000 each
commencing January 1, 1995 to Mr. Wolf for his agreement not to compete.
The Company entered into a consulting agreement on November 1, 1994 with
The Advisory Board, Inc. a company owned by Robert O. Aders, a member of the
Board of Directors. The agreement term ends December 31, 1997 and requires a
payment of $20,000 per quarter during the contract period. The Company paid
$80,000 to The Advisory Board, Inc. for the year 1996.
Effective July 1, 1995, the Company entered into Employment Agreements
(each an "Agreement") with each of the Named Officers, one of whom is Mr. Dowd,
who is also a Director of the Company. Mr. Dowd's Agreement is for a period of
three years and each other Agreement is for a period of two years. Each
Agreement provides that upon termination of employment in certain circumstances
the executive would be entitled to severance pay of not less than twelve months
of base salary and not more than eighteen months of base salary plus health
insurance benefits during such period. A change-in-control of the Company (as
defined in the Agreement) or a change in the responsibilities or duties of the
executive could result in severance payments to the executive under the
Agreement. Each Agreement provides for a two year non-compete period by the
executive commencing upon the date of termination of employment from the
Company.
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation 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
thus shareholder value, by aligning the financial interests of the Company's
senior management with those of its shareholders. In furtherance of these goals,
and because the Committee believes that it is appropriate that senior management
have a greater portion of their compensation at risk than other employees,
annual cash base salaries of senior management are generally set somewhat below
what the Committee (based on a review of various analytical data secured from
outside consultants) believes to be salary levels paid to senior management of
similar sized companies with comparable responsibilities. Annual base salary and
longer term incentive compensation provide an important incentive in attracting
and retaining corporate officers and other key employees and motivating them to
perform to the full extent of their abilities in the best long-term interests of
the shareholders. Both types of compensation are variable and are closely tied
to the Company's performance in a manner that encourages a sharp and continuing
focus on building revenue growth, long term profitability and shareholder value.
In the early part of each fiscal year, the Committee reviews with the Chief
Executive Officer and approves, with any modifications it deems appropriate, an
annual compensation plan for each of the Company's senior executives (other than
the Chief Executive Officer). This salary plan is
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developed by the Company's human resources staff based on a review of industry,
peer group and national surveys of compensation levels, historical compensation
policies of the Company, and, to a large extent, subjective judgments of the
Committee relating to the past and expected future contributions, level of
experience, leadership abilities and overall performance. In addition, the
Committee is advised, from time to time upon request, by independent
compensation consultants concerning compensation competitiveness.
The Committee also reviews and fixes the base salary of the Chief Executive
Officer based on a review of similar data and the Committee's subjective
assessment of his past performance and its expectation as to his future
contributions in leading the Company and its businesses. For 1996, Mr. Dowd's
compensation was formulated by the Committee based on these factors as well as
the Committee's expectation that revenue growth of the Company would continue in
the 20% to 30% range and that continued structural changes would have to be made
in 1996 for the long-term benefit of the Company. Mr. Dowd's salary and
incentive program was approved by unanimous vote of the Board of Directors (with
Mr. Dowd abstaining). Mr. Dowd's base salary for the fiscal year 1996 was set at
$330,000. Mr. Dowd was given the right to participate in the Profit Incentive
Plan (see below). Mr. Dowd's participation percentage was 20% plus any
discretionary allocation. Mr. Dowd did not receive a payment under the Profit
Incentive Plan for the fiscal year 1996.
Effective January 1, 1995, the Company entered into an agreement with A.E.
Wolf, former Chief Executive Officer and current Chairman of the Board of
Directors. Pursuant to the agreement, Mr. Wolf is to receive $530,014 annually
for five years, of which $255,014 will be deferred annually. In addition, the
Company will pay the sum of $125,000 in five equal installments of $25,000 each
to Mr. Wolf for his agreement not to compete. Mr. Wolf does not participate in
the Profit Incentive Plan, discretionary bonus plan or the Stock Option Plan.
LONG TERM COMPENSATION
In addition to salary, senior management of the Company has the potential
to receive additional compensation from one of three possible sources: the
Company's Profit Incentive Plan, discretionary management bonuses and the Stock
Option Plan.
For 1996 and subsequent years, the Board of Directors approved the Profit
Incentive Plan ("PIP"). The Chief Executive Officer and President and certain
Vice Presidents participate in the PIP. Under the PIP, a bonus pool is created
when pre-tax, pre-bonus earnings exceed 18% of the adjusted beginning balance of
Shareholders Equity for the relevant year. If such earnings are attained, a
bonus pool is created equal to (i) 3% of all pre-tax, pre-bonus earnings, plus
(ii) 6% of pre-tax, pre-bonus earnings in excess of 27% of the adjusted
beginning balance of Shareholders Equity for the relevant year. Distribution of
the pool, if any was created, for 1996 was determined as follows: 20% to
Mr. Dowd; 10% to Mr. Aguilera, the Company's Senior Vice President --
Manufacturing; 10% to Mr. Selfridge; 10% to Mr. Reilly; 10% to Mr. Smith; 5% to
Mr. Austin, the Company's Vice President -- General Counsel and Secretary; and
5% to Mr. Reinhold, the Company's Vice President -- Finance, Chief Financial
Officer and Treasurer. The remaining 30% would be divided among the foregoing at
the discretion of the Committee taking into account such subjective factors as
they determined to be appropriate under the circumstances. The Board of
Directors, in conjunction with the Compensation Committee recommendation,
determined that setting a minimum floor on the PIP before any bonus pool is
created, equal to 18% of the adjusted beginning balance of shareholder equity,
focused the executive management of the Company on first addressing the minimum
appropriate level of shareholder value increases. Only after attaining this
appropriate return for shareholders, will senior management begin to participate
in
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the PIP. The target minimums were not attained by the Company in 1996, and
therefore no bonuses were paid from the PIP for the fiscal year 1996. No
discretionary bonuses were paid for the fiscal year 1996.
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
Committee grants options to purchase the Company's Common Stock under the Stock
Option Plan. The Company has granted options under various plans since 1982, but
the current plan has been in effect since 1987. Under this plan, as most
recently approved by the Shareholders at the 1992 Annual Meeting of
Shareholders, the Committee has the authority to grant both incentive and
non-incentive options to purchase the Company's Common Stock at an exercise
price of at least 100% of the fair market value on the date of grant. All
employees of the Company and its affiliates are eligible to receive awards of
options thereunder; non-employee directors may only receive non-incentive
options as set forth in the Stock Option Plan. The maximum number of shares
available for option under the Plan from its inception is 9,000,000; 341,114
remain available for grant thereunder as of March 13, 1997. The Committee
believes that the Stock Option Plan has been well-received by employees and
directors as a way to attract and retain quality management and encourage them
to strive for the long-term success of the Company.
Stock option awards under the Stock Option Plan typically are granted
annually, although several grants were made in 1996. In fixing the grants of
stock options to the individual senior management group during 1996, including
the Named Officers other than the Chief Executive Officer, the Committee
reviewed with the Chief Executive Officer the recommended individual awards,
taking into account such facts and subjective issues such as the respective
scope of accountability, strategic and operational goals, performance
requirements and anticipated contributions of each of the senior management
group and information on previous awards under the Stock Option Plan. Any awards
to the Chief Executive Officer are fixed separately by the Committee and are
based, among other things, upon a subjective review of competitive compensation
data from several surveys, data from selected peer companies, information
regarding his total compensation and historical information regarding his
long-term compensation awards as well as the Committee's subjective evaluation
of his past and expected future contributions to the Company's achievement of
long-term performance goals, including revenue and earnings growth.
The Committee believes that its past grants of options and the Profit
Incentive Plan have successfully focused the Company's senior management on
building profitability and shareholder value.
The foregoing report submitted by:
Allan S. Kalish
Jermain B. Porter
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[GRAPH]
In the printed version of the document, a line graph appears which depicts
the following plot points:
NYSE/AMEX/NASDAQ
NYSE/AMEX/NASDAQ Electronic Components
Stock Market and Accessories
Year Checkpoint Systems, Inc. Index Index
- ---- ------------------------ --------------- ---------------------
1991 100.0 100.0 100.0
1992 219.4 112.6 145.8
1993 145.2 124.4 196.9
1994 251.6 124.3 220.1
1995 482.3 169.9 208.4
1996 622.6 346.2 535.6
Assumes $100 invested on December 27, 1991 in Checkpoint Systems, Inc.
Common Stock, the Center for Research in Security Prices Index ("CRSP Index")
for NYSE/AMEX/NASDAQ Stock market, the CRSP Index for NYSE/AMEX/NASDAQ
Electronic Components and Accessories.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P. ("Coopers"), the Company's independent certified
public accountants for the fiscal year 1996, have been selected to continue for
the fiscal year 1997. A representative of Coopers is expected to be present at
the Meeting and will have the opportunity to make a statement if he desires to
do so. The representative is also expected to be available to respond to
appropriate questions.
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PROPOSALS FOR SHAREHOLDER APPROVAL
PROPOSAL TO EXTEND THE TERMINATION DATE OF THE STOCK OPTION PLAN (1992)
FROM MAY 17, 1997 TO MAY 17, 2007;
INCREASE THE NUMBER OF SHARES OF COMMON STOCK;
AND MODIFY BOTH THE NUMBER OF OPTIONS
ISSUABLE TO NON-EMPLOYEE DIRECTORS AND THE ISSUANCE DATE OF SUCH OPTIONS
CHECKPOINT SYSTEMS, INC. STOCK OPTION PLAN (1992)
At a regular meeting of the Board of Directors of the Company held on
February 26, 1997, proposals were considered and acted upon to: (a) extend the
termination date of the Stock Option Plan; (b) increase, by 3,000,000 shares to
12,000,000 shares the number of shares eligible to be optioned thereunder; and
(c) modify both the number of Options issuable to Non-Employee Directors and the
issuance date of such Options.
In the opinion of the Board of Directors, the ability to grant options to
employees and non-employee members of the Board of Directors gives the Company
the ability to attract and retain the highest caliber employees, officers and
directors. The Stock Option Plan has been very well received by the employees
and non-employee directors of the Company. Because the Stock Option Plan
terminates on May 17, 1997; nearly all of the shares of stock originally
allocated to the Stock Option Plan have been granted. Therefore, the Board is of
the view that the allocation of an additional 3,000,000 shares of Common Stock
of the Company is well advised, and that the Plan be extended to May 17, 2007.
In addition, the Board is of the opinion that the ability to grant stock options
to newly appointed or elected non-employee directors upon their first serving as
a director and upon their re-election is important in attracting qualified
candidates.
The key terms of the Stock Option Plan are as follows:
1. Number of Shares. The aggregate maximum number of shares of the
Company's Common Stock, $.10 par value per share (the "Shares") as to which
Options may be granted, will if the proposal set forth herein respecting
the Stock Option Plan is approved, be 12,000,000 Shares of which 8,658,886
Shares have already been optioned. The maximum number of Shares will be
adjusted to reflect certain changes in the Company's capitalization. The
Company receives no consideration in connection with the grant of an
Option.
2. Administration. The Stock Option Plan will be administered by the
Compensation and Stock Option Committee of the Board of Directors (the
"Committee") comprised of non-employee Directors of the Company.
3. Eligibility. Eligible participants under the Stock Option Plan are
all employees and non-employee directors of the Company and its
subsidiaries except that only employees are eligible to receive ISO's under
the Stock Option Plan. At December 29, 1996, approximately 2,628 employees
and 8 non-employee directors are eligible to participate in the Stock
Option Plan.
4. Term. The Stock Option Plan was approved at the April 29, 1992
Annual Meeting of Shareholders and further amended and restated at the
April 27, 1995 Annual Meeting of Shareholders. No Options may be granted
under the Stock Option Plan after May 17, 2007, if the proposal set forth
herein respecting the Stock Option Plan is approved.
5. Term of Options. All Options terminate on the earliest of: (a) the
expiration of the term specified in the Option, which shall not exceed
(i) ten years from the date of grant (plus
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six months in the case of non-incentive stock options) or (ii) in the case
of an ISO, five years from the date of grant if the recipient on the date
of grant owns, directly or by attribution under Section 425(d) of the Code,
Shares possessing more than 10% of the total combined voting power of all
classes of stock of the company or any affiliate; (b) the expiration of
three months from the date an employee's employment or non-employee
director's service terminates for any reason other than disability, death
or cause (unless the Committee in its discretion, at the time of
termination, approves an extension of such period under certain
circumstances); (c) the expiration of one year from the date the employee's
employment or non-employee director's service terminates by reason of the
employee or non-employee director's disability or death; (d) the date that
an employee's employment or a non-employee director's service terminates
for cause; or (e) the date set by the Committee to be an accelerated
expiration date in the event of a dissolution or liquidation of the Company
or upon the occurrence of certain other corporate transactions. The
Committee with the agreement of the Optionee, may extend, accelerate,
modify or terminate the term of any Option.
6. Option Price. The exercise price of Options must be at least 100%
of the fair market value of the Common Stock on the date the Option is
granted, however, if the recipient possesses more than 10% of the total
combined voting power of all classes of stock of the Company or an
affiliate, then the exercise price for an ISO must be at least 110% of the
fair market value of the Common Stock on the date the Option is granted.
7. Maximum Grant. Subject to the terms of the Stock Option Plan, the
number of Options to be granted to each Optionee is within the discretion
of the Committee. Any ISO or a number of Shares granted under the Plan
shall limit the number of Shares for which an Optionee may exercise the
Option for the first time in any calendar year to Shares with an aggregate
fair market value, determined at the time the Option is granted, not in
excess of $100,000. The $100,000 exercise limit for any calendar year shall
be reduced by the fair market value of Shares (determined at the time of
ISO grant) for which the Optionee was granted an ISO after December 31,
1986 under any plan of the company or subsidiary that first becomes
exercisable in such calendar year. In addition, no director may receive
Options to purchase in the aggregate, more than 10% of the Shares reserved
for issuance under the Stock Option Plan, subject to adjustment in the
event of certain changes in the Company's capitalization. Non-employee
directors may receive Options only in accordance with provisions contained
in the Stock Option Plan. If the proposal set forth herein respecting the
Stock Option Plan is approved, newly appointed or elected Non-employee
directors, first serving on the Board on or after April 23, 1997, shall
receive Options for 10,000 Shares and each member shall receive Options for
10,000 Shares upon re-election to the Board of Directors.
8. Payment. An Optionee may pay for Shares issuable upon the exercise
of an Option in a combination of cash or certified check, or if the
Committee so permits, in whole or in part in Shares held by the Optionee or
purchasable by the Optionee under the Option then being exercised. (Such
Shares, if utilized for payment of the Option Price, are valued at the fair
market value on the date of their delivery to the Company.)
9. Option Document. All Options are required to be evidenced by
written documents containing provisions consistent with the Stock Option
Plan and such other provisions as the Committee deems appropriate. Such
Option Documents limit the transferability of Options evidenced thereby.
10. Amendment. The Board of Directors may amend the Stock Option Plan
from time to time in such manner as it may deem advisable. However, the
Board of Directors may not,
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without obtaining Shareholder approval, (i) decrease the minimum exercise
price of an ISO granted under the Stock Option Plan, or increase the
maximum number of Shares which may be sold under the Stock Option Plan
(other than as a result of changes in the Company's capitalization),
(ii) materially increase the benefits accruing to Optionees under the Plan;
or (iii) materially modify the requirements for participation in the Plan.
For Federal income tax purposes, a recipient of an ISO will not recognize
taxable income upon either the grant or exercise of the ISO. However, the amount
by which the fair market value of the Shares at the time of exercise (determined
without regard to certain restrictions) exceeds the exercise price of the Option
will be treated as an item of tax preference and included in the computation of
such Optionee's "alternative minimum taxable income" in the year he exercises
the ISO. Such an Optionee will recognize long-term capital gain or loss on the
disposition of the Shares acquired upon exercise of the ISO provided the
Optionee does not dispose of the Shares within two years from the date the ISO
is granted or within one year after the Shares subject to the Option were
transferred to him. Long-term capital gain is, under present tax laws, taxed at
the same rate as ordinary income. If the Optionee satisfies both of the
foregoing holding periods, the Company will not be allowed a deduction by reason
of the grant or exercise of an ISO.
For Federal income tax purposes, a recipient of a non-qualified option will
not recognize taxable income at the time of grant, and the Company will not be
allowed a deduction by reason of the grant. Such an Optionee will recognize
ordinary income in the taxable year in which he exercises the non-qualified
option, in an amount equal to the excess of the fair market value of the Shares
at the time of exercise over the exercise price of the Option, and the Company
will be allowed a deduction in that amount. Upon disposition of the Shares
subject to the Option, the Optionee will recognize long-term or short-term
capital gain or loss, depending upon the length of time he held the Shares prior
to disposition and the Optionee's basis in the Shares subject to the Option
(which basis is ordinarily the fair market value of the Shares on the date the
Option was exercised).
The last reported sales price of the Company's Common Stock, as reported on
the New York Stock Exchange on March 18, 1997 was $18.19.
The foregoing description of the Stock Option Plan is qualified in its
entirety by reference to the Stock Option Plan document.
For information concerning the Company's employee benefit plans in which
executive officers are eligible to participate, see the Section of this Proxy
Statement entitled "Compensation Committee Report on Executive Compensation."
THE BOARD OF DIRECTORS RECOMMENDS VOTING "FOR" THE PROPOSAL TO APPROVE THE
AMENDMENTS TO THE CHECKPOINT SYSTEMS, INC. STOCK OPTION PLAN (1992). The
affirmative vote of a majority of the shares present and voting at the Meeting
shall be necessary to carry this proposal.
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SHAREHOLDER PROPOSALS
In order for Shareholder proposals to be considered for inclusion in the
Company's proxy materials for the next Annual Meeting of Shareholders, such
proposals must be received by the Company no later than November 26, 1997.
COST OF SOLICITATION OF PROXIES
The Company will bear the cost of the solicitation of the Board of
Directors' proxies for the Meeting, including the cost of preparing, assembling
and mailing proxy materials, the handling and tabulation of proxies received and
charges of brokerage houses and other institutions, nominees and fiduciaries
incurred in forwarding such materials to beneficial owners. In addition to the
mailing of the proxy material, such solicitation may be made in person or by
telephone or telegraph by directors, officers or regular employees of the
Company who will not be specifically compensated therefor, or by a professional
proxy solicitation organization engaged by the Company.
ANNUAL REPORT ON FORM 10-K
THE COMPANY WILL PROVIDE, WITHOUT CHARGE TO EACH PERSON SOLICITED BY THIS
PROXY STATEMENT, ON THE WRITTEN REQUEST OF ANY SUCH PERSON, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K (INCLUDING THE FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES THERETO) AS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR ITS MOST RECENT FISCAL YEAR. SUCH WRITTEN REQUEST SHOULD BE
DIRECTED TO NEIL D. AUSTIN, SECRETARY, AT THE ADDRESS OF THE COMPANY APPEARING
ON THE FIRST PAGE OF THIS PROXY STATEMENT.
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