CHECKPOINT SYSTEMS, INC.
PROXY STATEMENT
[LOGO]
1999 NOTICE OF ANNUAL MEETING
<PAGE>
[LOGO] CHECKPOINT SYSTEMS, INC.
101 Wolf Drive
P.O. Box 188
Thorofare, NJ 08086
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of Checkpoint Systems, Inc. will be held on
Wednesday, May 5, 1999, at 10:00 a.m., at the DoubleTree Hotel, Broad and Locust
Streets, Philadelphia, Pennsylvania for the following purposes:
1. To elect two directors for a three-year term; and
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 March 15, 1999 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, proxy card and Checkpoint's 1998 Annual Report are being
mailed to shareholders on or about March 29, 1999.
By Order of the Board of Directors
NEIL D. AUSTIN
VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
MARCH 29, 1999
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QUESTIONS AND ANSWERS
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1. Q: ON WHAT AM I VOTING?
A: You are being asked to vote on the election of two directors (David W.
Clark, Jr. and Elisa Margaona).
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2. Q. WHO IS ENTITLED TO VOTE?
A. Shareholders as of the close of business on March 15, 1999 (the Record
Date) are entitled to vote at the Annual Meeting.
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3. Q. WHO CAN ATTEND THE ANNUAL MEETING?
A. All Shareholders, as of the Record Date on March 15, 1999 can attend.
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4. 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 Meeting to anyone who wants to vote
at the 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 meeting, in order to vote at the 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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5. 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 meeting. To do this:
o Sign another proxy with a later date; or
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 Notify the Secretary of Checkpoint in writing and vote in person at
the meeting. If you hold your shares in street name, you must
request a legal proxy from your stockbroker in order to vote at the
meeting.
However, once the voting on a particular matter is completed at the
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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2
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6. Q. WHAT CONSTITUTES A QUORUM?
A. A quorum is present at the meeting when shareholders of record owning
a majority of the outstanding shares are present. Shareholders may be
present at the meeting in person or represented by proxy. As of the
Record Date, March 15, 1999, 30,126,884 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.
The affirmation vote of a majority of the votes which all shareholders
present are entitled to cast is required to approve any proposal. For
voting purposes, only shares voted FOR the adoption of a proposal or
the election of directors will be counted as voting in favor in
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.
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7. Q. WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
A. If your shares are held in street name, your brokerage firm, under
certain circumstances, may vote your shares.
Under the New York Stock Exchange Rules, brokerage firms have
authority to vote customers' unvoted shares on certain "routine"
matters, including the election of directors. 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 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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8. 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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9. Q. WHEN ARE SHAREHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING DUE?
A. In order for Shareholder proposals to be considered for inclusion in
the Company's proxy materials for the next Annual Meeting of
Shareholders, proposals must be submitted in writing and received by
the Company no later than December 7, 1999.
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10. Q. WHO ARE THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS?
A. PricewaterhouseCoopers LLP, the Company's independent certified public
accountants for the fiscal year 1998, have been selected to continue
for the fiscal year 1999. A representative of PricewaterhouseCoopers
LLP is expected to be present at the Meeting and will have the
opportunity to make a statement if he/she desires to do so. The
representative is also expected to be available to respond to
appropriate questions from shareholders.
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3
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PROPOSALS TO BE VOTED ON
1. ELECTION OF DIRECTORS
Nominees for re-election this year are:
o David W. Clark, Jr.
o Elisa Margaona
Each has consented to serve a three-year term.
THE BOARD RECOMMENDS A VOTE FOR THESE NOMINEES.
UNLESS YOU GIVE CONTRARY INSTRUCTIONS, THE SHARES WHICH YOU OWN WILL BE
VOTED "FOR" THE ELECTION OF THE NOMINEES.
2. 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.
GENERAL
This Proxy Statement is furnished by Checkpoint and the proxy card enclosed is
being solicited by the Board of Directors of Checkpoint for use at the 1999
Annual Meeting of Shareholders.
4
<PAGE>
THE BOARD OF DIRECTORS
At the Meeting, the Shareholders will elect two Class II directors to hold
office until the 2002 Annual Meeting of Shareholders and until their respective
successors have been duly elected and qualified. The Company's Board of
Directors is divided into three classes serving staggered three-year terms, the
term of one class of directors expiring in each year. The term of the Company's
three Class II directors, Robert O. Aders, David W. Clark, Jr., and Elisa
Margaona 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. Aders will not stand for re-election. No successor
is being named at this time.
The Board of Directors has nominated David W. Clark, Jr. and Elisa Margaona for
election at the Meeting as the Company's Class II directors and Mr. Clark and
Ms. Margaona 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
reasonable business judgment. Unless contrary instructions are given, the shares
represented by the enclosed proxy will be voted "FOR" the election of Mr. Clark
and Ms. Margaona. The Board of Directors recommends a vote "FOR" the election of
these nominees
The nominees for election as the Class II directors and the directors whose
terms of office will continue after the Meeting, together with certain
information about them, are as follows:
ROGER D. BLACKWELL
Director Since 1990
Term Expires 2001
Age 59
For more than the past five years, Dr. Blackwell has been a professor of
marketing at Ohio State University and President of Roger Blackwell Associates,
Inc., a consulting firm and a member of the Board of Directors of Max & Erma's,
Restaurants, Inc. In February 1992, Dr. Blackwell became a member of the Board
of Directors of Worthington Foods, Inc. Dr. Blackwell joined the Board of
Directors of Intimate Brands, Inc. in 1995. In 1996, Dr. Blackwell became a
director of Airnet Systems and Applied Industrial Technologies. Dr. Blackwell
also serves as a Trustee of Flex-Funds.
RICHARD J. CENSITS
Director Since 1985
Term Expires 2001
Age 61
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
5
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MedQuist, Inc. MedQuist provides electronic transcription information services
to the health care industry nationwide. Mr. Censits was a director of
EnergyNorth, Inc. from 1993 until February 1998, and is a Trustee of the
University of Pennsylvania.
DAVID W. CLARK, JR.
Director Since 1982
Term Expires 1999
Age 61
Mr. Clark has been Chairman of the Board since February 1999. 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.
KEVIN P. DOWD
Director Since 1995
Term Expires 2000
Age 50
Mr. Dowd has been President of the Company since August 1993, and was named
Chief Executive Officer and a Director of the Company in January 1995. Mr. Dowd
was also Chief Operating Officer from August 1993 to April 1997. Mr. Dowd was
Executive Vice President of the Company from May 1992 to August 1993. Mr. Dowd
was Executive Vice President -- Marketing, Sales and Service from April 1989 to
May 1992 and Vice President of Sales from August 1988 to April 1989. Mr. Dowd is
a director of MAB Paints, Inc., C&D Technologies, Inc., and Holy Redeemer Health
System, Inc. a not for profit organization.
ALAN R. HIRSIG
Director Since 1998
Term Expires 2001
Age 59
Mr. Hirsig is currently a business consultant. Mr. Hirsig was Chief Executive
Officer of ARCO Chemical Company. He had been President and Chief Executive
Officer of ARCO Chemical Company from 1991 until his retirement in July 1998.
Mr. Hirsig is a member of the Board of Directors of Hercules, Inc. and
Philadelphia Suburban Corporation. He is also Chairman of the PRIME Advisory
Board and a member of the Boards of the Curtis Institute of Music, Bryn Mawr
College, YMCA of Philadelphia and Vicinity and Rosenbach Museum and Library.
6
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WILLIAM P. LYONS, JR.
Director Since 1998
Term Expires 2001
Age 58
Mr. Lyons is a founding Managing Partner of Madison Partners, LLC, an investment
firm and currently serves as a Director of Keystone Consolidated Industries,
Inc. From 1995 to February 1998, Mr. Lyons was Chairman of the Board of Holmes
Protection Group, Inc. an electronic security systems and monitoring company.
Since 1993, Mr. Lyons has served as Chairman of the Board of JVL Corp., now an
investment firm, but formerly a generic pharmaceutical manufacturer.
ELISA MARGAONA
Director Since 1996
Term Expires 1999
Age 69
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.
RAYMOND R. MARTINO
Director Since 1996
Term Expires 2000
Age 61
Mr. Martino has been Vice Chairman of and a consultant to Symbol Technologies,
Inc. since October 1994 and was President of that Company from 1983 until
October 1994.
ALBERT E. WOLF
Director Since 1969
Term Expires 2000
Age 69
Mr. Wolf was Chairman of the Board from April 1986 until February 1999 and
Chairman of the Executive Committee from October 1994 to February 1999. Mr. Wolf
served as Chief Executive Officer of the Company from April 1972 to December
1994, President of the Company from July 1977 to April 1986 and from July 1991
through August 1993, and a director of the Company since July 1969. Mr. Wolf is
a director of Lydall, Inc.
7
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BOARD AND COMMITTEE MEETINGS
The Board held 4 regular and 2 special meetings in 1998. Each director attended
at least 75% of all Board and applicable committee meetings during 1998. The
following table describes the Board's committees:
<TABLE>
<CAPTION>
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Name of Committee Number of
and Members Functions of the Committee Meetings in 1998
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<S> <C> <C>
AUDIT Reviews the scope and results of 2
Roger D. Blackwell annual audit and questions of
Richard J. Censits* accounting and tax policy and the
David W. Clark, Jr. adequacy of internal controls, and
makes recommendations for the
selection of the Company's
independent certified public accountants.
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EXECUTIVE Considers various matter as delegated 4
Richard J. Censits by the full Board from time to time
David W. Clark, Jr.* including strategic financing alternatives,
William P. Lyons, Jr. acquisitions and long range goals and
Albert E. Wolf planning of the Company.
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STOCK OPTION Acts at various times during the year to Various Times
AND COMPENSATION approve salaries and benefits and During the
Robert O. Aders* compensation arrangements for the Year
Roger D. Blackwell Company's officers and to grant
Raymond R. Martino stock options.
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</TABLE>
* Chairperson for 1998.
In February 1999, the Board of Directors elected Richard J. Censits, David W.
Clark, Jr., and William P. Lyons as members of the Executive Committee of the
Board of Directors. At that meeting Mr. Lyons was elected Chairman of the
Executive Committee and Mr. Clark was elected Chairman of the Board of
Directors.
BOARD COMPENSATION
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Type of Compensation Cash
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Annual Retainer $4,000
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Board Attendance Fee (per meeting) $2,000
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Committee Attendance Fee (per meeting)* $1,000
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* Non-Employee directors are not compensated for attendance fees if a committee
meets on a day when a board meeting is taking place.
8
<PAGE>
Employee directors do not receive additional compensation, other than their
normal salary, for their service as a director.
Non-Employee directors receive reimbursement of out-of-pocket expenses for
attending Board and committee meetings.
OPTION AWARDS TO NON-EMPLOYEE DIRECTORS
Non-employee directors are entitled to receive non-incentive stock options to
purchase Checkpoint common stock under the Stock Option Plan (1992), but no
director may be awarded Options for an aggregate of more than 10% of the Option
or Options under the Stock Option Plan. Effective with the 1997 Shareholders'
Meeting each non-employee director is to receive, upon his initial election as a
director, and upon his subsequent re-election as a director, non-incentive stock
options for 10,000 shares.
In February 1999 the Board of Directors approved (with the members of the
Executive Committee abstaining) the grant of stock performance warrants to
purchase 50,000 shares of Checkpoint common stock, at an exercise price of $8.28
per share, to each member of the Executive Committee (Messrs. Censits, Clark and
Lyons) for future services related to participation on the Executive Committee
of the Board.
OTHER AGREEMENTS
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 paid the sum
of $125,000 in five equal installments of $25,000 each beginning January 1, 1995
to Mr. Wolf for his agreement not to compete.
9
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PRINCIPAL SHAREHOLDERS
Owners of More Than 5%
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, 1999. 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>
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Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Common Stock (1)
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<S> <C> <C>
Crabbe Huson Group, Inc.(1) 2,621,076 8.39%
121 SW Morrison, Suite 1400
Portland, Oregon 97204
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Westport Asset Management, Inc. (1) 2,320,300 7.43%
253 Riverside Avenue
Westport, Connecticut 06880
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Merrill Lynch, & Co., Inc. (1) 2,242,156 7.1%
250 Vesey Street
World Financial Center N. Tower
New York, NY 10381
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Albert E. Wolf 1,511,700 5.0%
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</TABLE>
(1) As reported on Schedules 13G filed with the Securities and Exchange
Commission ("SEC") on: (i) February 12, 1999 in the case of Crabbe Huson
Group, Inc.; (ii) February 16, 1999 in the case of Westport Asset
Management, Inc.; and (iii) February 4, 1999 in the case of Merrill Lynch &
Co., Inc.
10
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SECURITY OWNERSHIP OF MANAGEMENT
This table shows the number of shares of Checkpoint Common Stock owned by each
director, the Company's Chief Executive Officer and the four other most highly
compensated executive officers and other executive officers as of March 15,
1999. Each person named below has sole voting power and sole investment power
with respect to the shares indicated as beneficially owned, unless otherwise
stated.
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Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership (1) Common Stock
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Roger D. Blackwell 113,556 (2) .38%
Richard J. Censits 35,000 (3) .12%
David W. Clark, Jr. 134,000 (4) .44%
Alan R. Hirsig 10,000 (5) .03%
William P. Lyons, Jr. 83,200 (6) .28%
Elisa Margaona 4,791 (7) .02%
Raymond R. Martino 34,519 (8) .11%
Albert E. Wolf 1,511,700 (9) 5.00%
Kevin P. Dowd 475,721(10) 1.58%
William J. Reilly, Jr. 189,687(11) .63%
Michael E. Smith 165,624(12) .55%
Luis A. Aguilera 290,000(13) .96%
All Directors and 3,160,647(14) 9.93%
Officers as a Group
(15 persons)
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(1) Unissued shares subject to options exercisable within 60 days of March 15,
1999 are deemed to be outstanding for the purpose of calculating the
percent of Common Stock beneficially owned.
(2) Includes 103,356 Options and 200 shares purchased on behalf of Dr.
Blackwell as sole trustee under the Roger D. Blackwell Pension Plan.
(3) Includes 10,000 Options.
(4) Includes 69,356 Options.
(5) Consists of 10,000 Options.
(6) Includes 10,000 Options and 40,000 shares purchased by JVL Corporation, a
corporation that is wholly owned by Mr. Lyons, and 18,000 shares purchased
on behalf of Mr. Lyons under an IRA account.
(7) Includes 4,519 Options.
(8) Includes 14,519 Options.
(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
in held trust for Mr. Wolf's children as to which Mr. Wolf's children are
principal beneficiaries and Mr. Wolf is income beneficiary.
(10) Includes 450,000 Options and 25,721 shares owned by Mr. Dowd, 5,721 shares
of which are held by the custodian of the Company's Employees' Stock
Purchase Plan ("ESPP").
(11) Includes 180,000 Options and 9,687 shares owned by Mr. Reilly, 5,287 shares
of which are held by the custodian of the ESPP.
(12) Includes 160,000 Options and 5,624 shares that are held by the custodian of
the ESPP.
(13) Includes 240,000 Options.
(14) See footnotes 1-12 above. Total shown includes 21,686 shares held by the
custodian of the ESPP.
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EXECUTIVE COMPENSATION
Cash, Bonus and Deferred Compensation
This table 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.
Summary Compensation Table
<TABLE>
<CAPTION>
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Annual Long Term
Compensation Compensation
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Salary Bonus Stock Options
Name and Principal Position Year ($) (1) ($) (2)
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<S> <C> <C> <C> <C>
Kevin P. Dowd 1998 427,341 0 100,000
President, Chief Executive 1997 387,787 0 200,000
Officer and Director 1996 374,980 0 50,000
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Albert E. Wolf (3) 1998 324,000 0 0
1997 324,000 0 0
1996 314,300 0 0
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Steven G. Selfridge (4) 1998 262,554 0 0
Former Executive Vice President 1997 244,939 0 100,000
and Chief Operating Officer 1996 237,028 0 30,000
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William J. Reilly, Jr. 1998 260,230 0 75,000
Executive Vice President 1997 233,392 0 100,000
1996 217,801 0 30,000
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Michael E. Smith 1998 239,793 0 75,000
Executive Vice President 1997 221,101 0 100,000
1996 213,916 0 30,000
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Luis A. Aguilera 1998 210,010 0 15,000
Senior Vice President, 1997 194,079 0 100,000
Manufacturing 1996 194,079 0 30,000
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</TABLE>
(1) Amounts shown in the "Salary" column include payments under the:
o Company's Executive Supplemental Plan, a plan adopted in 1991 for
those of its highly compensated officers whose participation in the
Company's 401(K) savings plans may be limited by applicable Internal
Revenue Service regulations;
o Checkpoint Systems, Inc. Employee Stock Purchase Plan;
o Checkpoint Systems of Puerto Rico, Inc. Employee Savings Plan, but
only as to Mr. Aguilera. Mr. Aguilera does not participate in either
the Company's Employee Stock Purchase Plan or the Executive
Supplemental Plan.
(2) 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), described under the caption "Compensation and Stock
Option Committee Report on Executive Compensation."
(3) Beginning in 1995 Mr. Wolf ceased participating in the Executive
Supplemental Plan and the Employee Stock Purchase Plan. The salary
reflected above does not include $255,014 which is deferred annually.
(4) Mr. Selfridge ceased being an employee of Checkpoint in August, 1998 and
amounts shown in the "Salary" column include certain payments related to a
negotiated severance agreement dated August, 1998.
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<PAGE>
The table above does not include columns for Restricted Stock Awards, Long-Term
Incentive Plan Payouts, Other Annual Compensation and All Other Compensation.
Checkpoint had no amounts to report in the columns for Restricted Stock Awards
and Long-Term Incentive Plan Payouts. The amount of Other Annual Compensation
paid to the named executive officers was in each case for perquisites which are
not reportable since they did not exceed the lesser of $50,000 or 10% of salary
and bonus as reported for each named executive officer. Amounts reportable as
All Other Compensation are reported in the "Salary" column.
Stock Option Awards in 1998
The table below shows stock option grants to the Company's Chief Executive
Officer and named executive officers in 1998.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options/SAR's Price Appreciation
Options/SAR's Granted to Exercise of For Option Term (2) (3)
Granted Employees in Base Price Expiration -----------------------
Name (#) (1) Fiscal Year ($/Share) Date 5%($) 10%($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kevin P. Dowd 100,000 12.6904 11.00 04/23/09 735,910 1,891,983
- ----------------------------------------------------------------------------------------------------------------------------------
Albert E. Wolf 0 0 0 -- 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
Steven G. Selfridge 0 0 0 -- 0 0
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William J. Reilly, Jr. 75,000 9.5178 11.00 04/23/09 551,932 1,418,988
- ----------------------------------------------------------------------------------------------------------------------------------
Michael E. Smith 75,000 9.5178 11.00 04/23/09 551,932 1,418,988
- ----------------------------------------------------------------------------------------------------------------------------------
Luis A. Aguilera 5,000 0.6345 11.00 10/23/08 34,589 87,656
10,000 1.2690 11.00 04/23/09 73,591 189,198
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The top figure, where applicable, reflects an incentive stock option and
the bottom figure(s) reflects a non-incentive stock option. Only Mr.
Aguilera received an incentive stock option in 1998. Under the Checkpoint
Systems, Inc. Stock Option Plan (1992) 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-incentive stock options is ten years and
six months. In July 1997, the Compensation and Stock Option Committee
declared that all options issued under the Company's Stock Option Plan
(1992) on or after July 23, 1997 to persons with the title of vice
president or above were to vest over a period of three years at a rate of
33% per year. Options issued to persons with a title other than vice
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.
(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.
13
<PAGE>
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 Company's Chief Executive Officer and the named executive
officers.
Aggregated Option Exercises in 1998 and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SAR's Options/SAR's
At FY-End(#)(2) At FY-End($)(3)
Shares Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) ($)(1) Unexercisable Unexercisable
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Kevin P. Dowd 0 0 450,000/200,000 575,010/46,880
- -------------------------------------------------------------------------------------------------------------------
Albert E. Wolf 0 0 459,356/0 3,115,691/0
- -------------------------------------------------------------------------------------------------------------------
Steven G. Selfridge 0 0 270,000/0 91,950/0
- -------------------------------------------------------------------------------------------------------------------
William J. Reilly, Jr. 0 0 180,000/125,000 38,439/35,160
- -------------------------------------------------------------------------------------------------------------------
Michael E. Smith 0 0 160,000/125,000 12,813/35,160
- -------------------------------------------------------------------------------------------------------------------
Luis A. Aguilera 0 0 240,000/65,000 256,400/7,050
- -------------------------------------------------------------------------------------------------------------------
</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 on the stock price at fiscal
year-end of exercisable but unexercised options; the second number
represents the value of unexercisable options.
Employment Agreements
In July, 1997, the Company renewed and amended the original Employment
Agreements of Messrs. Aguilera, Reilly and Smith for an additional term of two
years, terminating July 1999. The Agreements state that upon termination of
employment, in certain circumstances, the executive would be entitled to
severance pay plus health insurance benefits during such period. If a
change-of-control of the Company should take place, as defined in the Agreement
and the Agreement is not assumed, or if the responsibilities of the executive
should change, the executive could receive severance payments under the
Agreement.
In July 1998, the Company entered into an Employment Agreement with Mr. Dowd,
who is also a Director of the Company. Mr. Dowd's agreement states that should
employment terminate, in certain circumstances, Mr. Dowd would be entitled to
severance pay of twenty-four months of base salary. Should a change-in-control
of the Company take place, as defined in the Agreement and the Agreement is not
assumed, or if the responsibilities of Mr. Dowd should change, in conjunction
with a change-of-control then he could receive severance payments under the
Agreement of thirty-six months of base salary.
Each Agreement provides for a two year non-compete period by the executive
beginning on the date of termination of employment from the Company.
14
<PAGE>
COMPENSATION AND STOCK OPTION COMMITTEE REPORT ON
EXECUTIVE COMPENSATION
The Compensation and Stock Option Committee of the Board of Directors has
furnished the following report on executive compensation:
General
Under the supervision of the Compensation and Stock Option Committee of the
Board of Directors, the Company has developed and implemented compensation
policies, plans and programs which seek to enhance the profitability of the
Company, and thus shareholder value, by aligning the financial interests of the
Company's senior management with those of its shareholders. In furtherance of
these goals, and because the Committee believes that it is appropriate that
senior management have a greater portion of their compensation at risk than
other employees, annual cash base salaries of senior management are generally
set somewhat below what the Committee (based on a review of various analytical
data secured from outside consultants) believes to be salary levels paid to
senior management of similar sized companies with comparable responsibilities.
Annual base salary and longer term incentive compensation provide an important
incentive in attracting and retaining corporate officers and other key employees
and motivating them to perform to the full extent of their abilities in the best
long-term interests of the shareholders. Both types of compensation are variable
and are closely tied to the Company's performance in a manner that encourages a
sharp and continuing focus on building revenue growth, long-term profitability
and shareholder value.
In the early part of each fiscal year, the Committee reviews with the Chief
Executive Officer and approves, with any modifications it deems appropriate, an
annual compensation plan for each of the Company's senior executives (other than
the Chief Executive Officer). This salary plan is developed by the Company's
human resources staff based on a review of industry, peer group and national
surveys of compensation levels, historical compensation policies of the Company,
and, to a large extent, subjective judgments of the Committee relating to the
past and expected future contributions, level of experience, leadership
abilities and overall performance. In addition, the Committee is advised, from
time to time upon request, by independent compensation consultants concerning
compensation competitiveness.
The Committee also reviews and fixes the base salary of the Chief Executive
Officer based on a review of similar data and the Committee's subjective
assessment of his past performance and its expectation as to his future
contributions in leading the Company and its businesses. For 1998, Mr. Dowd's
compensation was formulated by the Committee based on these factors and that
continued advancements in technology and market penetration would be required in
1998 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 1998 was set at
$373,000. Mr. Dowd was given the right to participate in the 1998 Bonus Plan
(see below). Mr. Dowd's targeted percentage was 160% and adjusted based on
earnings per share growth. Mr. Dowd did not receive a payment under the 1998
Bonus Plan for the fiscal year 1998.
While the targeted earnings per share growth plan was not achieved for 1998, the
Company did achieve increased market share in a variety of market segments
combined with substantial advancement in the development of new product
offerings. The Committee
15
<PAGE>
considered these factors, among others, and set Mr. Dowd's base salary for 1999
at $400,000. Mr. Dowd was also given the right to participate in the 1999 Bonus
Plan, which is substantially similar to the 1998 Bonus 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 1998 Bonus Plan, discretionary management bonuses and the Stock Option
Plan.
For 1998 the Board of Directors approved the 1998 Bonus Plan. The 1998
Bonus Plan provides for a Bonus Pool to be formed when earnings per share
("EPS") increases over a defined target. The Bonus Pool is then apportioned
among four (4) groups of employees; corporate officers; vice presidents, middle
management and front line employees. Each group has a targeted bonus percentage
assigned which is adjusted, depending on the percentage increase or decrease
over the targeted EPS growth. Other than for Messrs. Aguilera, Dowd, Reilly, and
Smith, whose bonuses are determined solely on the basis of financial performance
of the Company, all participants will have a percentage of their bonuses
determined by individual performance. No Bonus Pool will be formed unless 1998
EPS attains a specified level. The specified minimum target for EPS was not
attained for the fiscal year 1998 and therefore no bonuses were paid. No
discretionary bonuses were paid for the fiscal year 1998.
In order to provide incentives to employees over the longer term, the
Company maintains the Stock Option Plan (1992) ("Stock Option Plan"). At various
times during the year, the Committee grants options to purchase the Company's
Common Stock under the Stock Option Plan. Under the Stock Option Plan, as
approved by the Shareholders at the 1997 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 12,000,000; 2,190,414 remain available for grant
thereunder as of March 15, 1999. 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. In fixing the grants of stock options to the individual senior
management group during 1998, including the Named Executive 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.
16
<PAGE>
The Committee believes that its past grants of options and the Bonus Plan
have successfully focused the Company's senior management on building
profitability and shareholder value.
The foregoing report submitted by:
Robert O. Aders
Roger D. Blackwell
Raymond R. Martino
STOCK PERFORMANCE GRAPH
The following graph assumes the investment of $100 in Checkpoint Systems, Inc.
Common Stock on December 23, 1993, the Center for Research in Security Prices
Index ("CRSP Index") for NYSE/AMEX/NASDAQ Stock market, and the CRSP Index for
NYSE/AMEX/NASDAQ Electronic Components and Accessories.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts the
following plot points:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NYSE/AMEX/NASDAQ
NYSE/AMEX/NASDAQ Electronic Components
Year Checkpoint Systems, Inc. Stock Market Index and Accessories Index
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1993 100.0 100.0 100.0
- -------------------------------------------------------------------------------------------------------------------
1994 173.3 99.9 111.8
- -------------------------------------------------------------------------------------------------------------------
1995 332.2 136.5 175.8
- -------------------------------------------------------------------------------------------------------------------
1996 428.9 167.5 272.1
- -------------------------------------------------------------------------------------------------------------------
1997 286.7 209.1 287.6
- -------------------------------------------------------------------------------------------------------------------
1998 207.8 263.9 439.78
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
SUBMISSION OF PROPOSALS FOR THE 2000 ANNUAL MEETING
Shareholders of the Company are entitled to submit proposals on matters
appropriate for shareholder action consistent with regulations of the SEC and
the Company's By-Laws. Should a shareholder wish to have a proposal considered
for inclusion in the proxy statement for the Company's 2000 Annual Meeting, the
proposal must be received at the Company's offices no later than December 7,
1999.
In connection with the Company's 2000 Annual Meeting, if the shareholders'
notice is not received by the Company on or before February 19, 2000, the
Company (through management proxy holders) may exercise discretionary voting
authority when the proposal is raised at the annual meeting without any
reference to the matter in the proxy statement.
All shareholder proposals and notices should be directed to the Secretary of the
Company at 101 Wolf Drive, Thorofare, New Jersey 08086.
COST OF SOLICITATION
The Company pays for distributing and soliciting proxies and reimburses brokers,
nominees, fiduciaries and other custodians reasonable fees and expenses in
forwarding proxy materials to shareholders. The Company is not using an outside
proxy solicitation firm this year, but employees of the Company or its
subsidiaries may solicit proxies through mail, telephone or other means.
Employees do not receive additional compensation for soliciting proxies.
ANNUAL REPORT ON FORM 10-K
The Company will provide, without charge, a copy of the Company's Annual Report
on Form 10-K as filed with the SEC, on written request. Written requests should
be directed to the Secretary of the Company at 101 Wolf Drive, Thorofare, New
Jersey 08086.
By Order of the Board of Directors
Neil D. Austin
Vice President, General Counsel
and Corporate Secretary
18
<PAGE>
Beginning April 1, 1999, Checkpoint Systems' Shareholder Direct Service will
provide timely information about corporate financial results and other matters
of interest to shareholders. Through this service, you can hear recorded
summaries of major news developments at Checkpoint Systems, including quarterly
earnings releases, and request copies of our financial documents by fax or mail.
This service is available 24 hours a day, seven days a week. We hope you will
use the service to stay informed about important developments at Checkpoint
Systems. The toll free number is: 877-CKP-NEWS or 877-257-6397.
Please also visit our new enhanced Financials section of our corporate web site
at: www.checkpointsystems.com. This site will include updated stock quotes and
charts, historical closing price information, archived SEC filings, and the
ability to receive our news and earnings releases automatically via e-mail.
19
<PAGE>
DIRECTIONS TO THE DOUBLETREE HOTEL
Broad and Locust Streets
Philadelphia, Pennsylvania
[GRAPHIC]
From the Philadelphia International Airport - Take I-95 North to Broad Street.
Turn left and go about 3 miles. The hotel is on the right.
Transportation: Airport Shuttle
From Baltimore, Washington and points South of I-95 North - Take I-95 North past
the Philadelphia Intl. Airport following the signs to the Broad Street exit.
Take Broad Street North and follow Broad Street for about 3 miles. The hotel is
on the corner of Broad and Locust.
New York, New Jersey and points East (via I-95 S) - Take I-95 South to Vine
Street Expressway West (I-676). Exit at Broad Street. Left on 15th Street.
Follow 15th St. to Locust St. (approx. 7 blocks) and go left onto Locust. The
hotel is on the right at the corner of Broad and Locust.
Harrisburg, Hershey and points West - Take Pennsylvania Turnpike East to exit 24
(Valley Forge). Get onto 76 E following signs to Central Philadelphia. Take Vine
St. (I-676) to Broad St. exit and make a right onto 15th St. Follow 15th St. to
Locust and make a left onto Locust. Go 1 block to Broad St. and the hotel is on
the corner.
20
<PAGE>
APPENDIX B
CHECKPOINT SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS - MAY 5, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of CHECKPOINT SYSTEMS, INC. (the "Company"),
revoking all previous proxies, hereby appoints Neil D. Austin and Jeffrey A.
Reinhold, and each of them acting individually, as the attorney and proxy of the
undersigned, with full power of substitution, to vote all shares of Common Stock
of the Company which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of the Comany, to be held on
Wednesday, May 5, 1999, at 10:00 a.m., at the DoubleTree Hotel, Broad and Locust
Streets, Philadelphia, Pennsylvania, and at any adjournment or postponement
thereof, provided that said proxies are authorized and directed to vote.
(Continued and to be Signed on Reverse Side)
26
<PAGE>
PLEASE MARK YOU
[X] VOTES AS IN THIS
EXAMPLE
<TABLE>
<S> <C> <C> <C>
FOR all of the
nominees for WITHHOLD
Class II AUTHORITY
Director listed, To vote for
1. ELECTION except as all nominees NOMINEES: David W. Clark, Jr.
OF marked to the Elisa Margaona
CLASS II contrary below)
DIRECTORS
</TABLE>
For, except vote withheld from the following nominees:
- ----------------------------------------
2. To vote on such other business as may properly come before the meeting.
UNLESS OTHERWISE SPECIFIED, THE SHARES WILL BE VOTED "FOR" THE ELECTION OF THE
NOMINEES FOR THE CLASS II DIRECTORS.
THIS PROXY ALSO DELEGATES DISCRETIONARY AUTHORITY TO VOTE WITH RESPECT TO ANY
OTHER BUSINESS WHICH MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR
POSTPONEMENT THEREOF.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING,
PROXY STATEMENT AND ANNUAL REPORT OF CHECKPOINT SYSTEMS, INC.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
SIGNATURE(S)....................................DATE............................
SIGNATURE(S)....................................DATE............................
NOTE: Please sign this Proxy exactly as name(s) appear in address. When signing
as attorney-in-fact, executor, administrator, trustee or guardian, please add
your title as such. If the shareholder is a corporation, please sign with full
corporate name by duly authorized officer or officers and affix the corporate
seal. Where stock is held in the name of two or more persons, all such persons
should sign.
27
