<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
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
[X] Definitive Proxy Statement Rule 14a-6(e)(2))
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CHECKMATE ELECTRONICS, INC.
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No Filing Fee Required.
[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------
(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.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[Letterhead of Checkmate Electronics, Inc. Appears Here]
April 8, 1997
Dear Shareholder:
You are cordially invited to attend the 1997 Annual Meeting of
Shareholders of Checkmate Electronics, Inc. to be held in the Hill Auditorium at
the Atlanta High Museum of Art located at 1280 Peachtree Street, Atlanta,
Georgia, on Monday, May 19, 1997, at 10:00 a.m., local time.
The attached Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the meeting. During the meeting, we also
will report on the operations of the Company during the past year and our plans
for the future. Directors and officers of the Company, as well as a
representative from the Company's independent auditors, Ernst & Young LLP, will
be present to respond to appropriate questions from shareholders.
Please mark, date, sign and return your proxy card in the enclosed
envelope at your earliest convenience. This will assure that your shares will
be represented and voted at the meeting, even if you do not attend.
Sincerely,
JERRY P. MALEC
President and Chief
Executive Officer
<PAGE>
CHECKMATE ELECTRONICS, INC.
1003 MANSELL ROAD
ROSWELL, GEORGIA 30076
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1996
NOTICE HEREBY IS GIVEN that the 1997 Annual Meeting of Shareholders of
Checkmate Electronics, Inc. (the "Company") will be held in the Hill Auditorium
at the Atlanta High Museum of Art located at 1280 Peachtree Street, N.E.,
Atlanta, Georgia, on Monday, May 19, 1997 at 10:00 a.m., local time, for the
purposes of considering and voting upon:
(1) A proposal to elect six directors of the Company to serve until the
next Annual Meeting of Shareholders;
(2) A proposal to ratify the appointment of Ernst & Young, LLP as
independent auditors of the Company for the fiscal year ending
December 31, 1997; and
(3) Such other business as properly may come before the Annual Meeting or
any adjournments thereof. The Board of Directors is not aware of any
other business to be presented to a vote of the shareholders at the
Annual Meeting.
Information relating to the above matters is set forth in the attached
Proxy Statement. Shareholders of record at the close of business on April 1,
1997 are entitled to receive notice of and to vote at the Annual Meeting and any
adjournments thereof.
By Order of the Board of Directors
JERRY P. MALEC
President and Chief Executive Officer
Roswell, Georgia
April 8, 1997
PLEASE READ THE ATTACHED PROXY STATEMENT AND THEN PROMPTLY COMPLETE, EXECUTE AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE PAID ENVELOPE. IF
YOU ATTEND THE ANNUAL MEETING, YOU MAY REVOKE THE PROXY CARD AND VOTE IN PERSON
IF YOU SO DESIRE.
<PAGE>
CHECKMATE ELECTRONICS, INC.
1003 MANSELL ROAD
ROSWELL, GEORGIA 30076
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 19, 1997
This Proxy Statement is furnished to the shareholders of Checkmate
Electronics, Inc. (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company to be voted at the 1997 Annual Meeting
of Shareholders and at any adjournments thereof (the "Annual Meeting"). The
Annual Meeting will be held on Monday, May 19, 1997, in the Hill Auditorium at
the Atlanta High Museum of Art located at 1280 Peachtree Street, N.E., Atlanta,
Georgia, at 10:00 a.m., local time.
The approximate date on which this Proxy Statement and the
accompanying proxy card are first being sent or given to shareholders is April
8, 1997.
VOTING
GENERAL
The securities that can be voted at the Annual Meeting consist of
Common Stock of the Company, $.01 par value per share, with each share entitling
its owner to one vote on each matter submitted to the shareholders. The record
date for determining the holders of Common Stock who are entitled to receive
notice of and to vote at the Annual Meeting is April 1, 1997. On the record
date, 5,241,306 shares of Common Stock were outstanding and eligible to be voted
at the Annual Meeting.
QUORUM AND VOTE REQUIRED
The presence, in person or by proxy, of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum at the Annual
Meeting. In counting the votes to determine whether a quorum exists at the
Annual Meeting, the proposal receiving the greatest number of all votes cast
"for" or "against" and abstentions (including instructions to withhold authority
to vote) will be used.
In voting for the proposal to elect directors (Proposal 1),
shareholders may vote in favor of all nominees, withhold their votes as to all
nominees or withhold their votes as to specific nominees. The vote required to
approve Proposal 1 is a plurality of the votes cast by the holders of shares
entitled to vote, provided a quorum is present. As a result, votes that are
withheld will not be counted and will have no effect.
In voting with regard to the proposal to ratify the Board of
Directors' appointment of independent auditors of the Company (Proposal 2),
shareholders may vote in favor of the proposal or against the proposal or may
abstain from voting. The vote required to approve Proposal 2 is the affirmative
vote of the holders of a majority of the shares represented and entitled to vote
at the Annual Meeting, provided a quorum is present. As a result, abstentions
will be considered in determining the number of votes required to obtain the
necessary majority votes in each case and will have the same legal effect as a
vote against the proposal.
Under the rules of the New York and American Stock Exchanges (the
"Exchanges") that govern most domestic stock brokerage firms, member firms that
hold shares in street names for beneficial owners may, to the extent that such
beneficial owners do not furnish voting instructions with respect to any or all
proposals submitted for shareholder action, vote in their discretion upon
proposals which are considered "discretionary" proposals under the rules of the
Exchanges. Member brokerage firms that have received no instructions from their
clients as to "non-discretionary" proposals do not have discretion to vote on
these
1
<PAGE>
proposals. Such "broker non-votes" will not be considered in determining
whether a quorum exists at the Annual Meeting and will not be considered as
votes cast in determining the outcome of any proposal.
PROXIES
Shareholders should specify their choices with regard to each of the
two proposals on the enclosed proxy card. All properly executed proxy cards
delivered by shareholders to the Company in time to be voted at the Annual
Meeting and not revoked will be voted at the Annual Meeting in accordance with
the directions noted thereon. IN THE ABSENCE OF SUCH INSTRUCTIONS, THE SHARES
REPRESENTED BY A SIGNED AND DATED PROXY CARD WILL BE VOTED "FOR" THE ELECTION OF
ALL DIRECTOR NOMINEES AND "FOR" THE RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT AUDITORS. If any other matters properly come before the Annual
Meeting, the persons named as proxies will vote upon such matters according to
their judgment.
Any shareholder delivering a proxy has the power to revoke it at any
time before it is voted by giving written notice to Margaret Burkett, the
Secretary of the Company at 1003 Mansell Road, Roswell, Georgia 30076, by
executing and delivering to Ms. Burkett a proxy card bearing a later date or by
voting in person at the Annual Meeting; provided, however, that under the rules
of the Exchanges, any beneficial owner of the Company's Common Stock whose
shares are held in street name by a member brokerage firm may revoke his proxy
and vote his shares in person at the Annual Meeting only in accordance with
applicable rules and procedures of the Exchanges.
In addition to soliciting proxies through the mail, the Company may
solicit proxies through its directors, officers and employees in person and by
telephone or facsimile. Brokerage firms, nominees, custodians and fiduciaries
also may be requested to forward proxy materials to the beneficial owners of
shares held of record by them. All expenses incurred in connection with the
solicitation of proxies will be borne by the Company.
PRINCIPAL SHAREHOLDERS
The following table sets forth information as of December 31, 1996
regarding the ownership of the Company's Common Stock by each person known to
the Company to be the beneficial owner of more than 5% of the Company's Common
Stock and by all directors and executive officers of the Company as a group.
For information regarding the ownership of the Company's Common Stock by the
directors of the Company (which includes all of the executive officers of the
Company) see "Proposal 1 - Election of Directors - Information Regarding
Nominees for Director."
Stock Ownership information has been furnished to the Company by the
named person. Beneficial ownership as reported in this section was determined
in accordance with Securities and Exchange Commission regulations and includes
shares of Common Stock as to which a person possesses sole or shared voting
and/or investment power and shares which may be acquired on or before March 1,
1997 upon the exercise of stock options. Except as otherwise noted in the
footnotes below, the named persons have sole voting and investment power with
regard to the shares shown as beneficially owned by such persons.
Name and Number Percent
Relationship to Company of Shares of Class
----------------------- ---------- --------
J. Stanford Spence 626,055(1) 11.97%
Chairman of the Board
and Principal
Shareholder
2
<PAGE>
Name and Number Percent
Relationship to Company of Shares of Class
----------------------- ---------- --------
Dudley L. Moore, Jr. 494,788(2) 9.46%
Principal Shareholder
All directors and 1,220,650(3) 23.33%
executive officers
as a group
(6 persons)
- ------------------
(1) The shares shown include 26,397 shares owned by Stanford Technologies,
Inc., a corporation of which Mr. Spence and his wife are the sole
shareholders, and 120,000 shares that may be acquired upon exercise of
stock options granted to Mr. Spence. Mr. Spence's address is 7209 Valburn
Drive, Austin, Texas 78731. See "Executive Compensation - Stock Options."
(2) The shares shown include 466,994 shares owned by Moore family partnerships,
over which shares Mr. Moore, as the general partner of each of the
partnerships, has voting and investment control. Mr. Moore's address is
1000 Parkwood Circle, #1000, Atlanta, Georgia 30339.
(3) The shares shown include 537,539 shares that may be acquired upon exercise
of stock options granted to the directors and executive officers of the
Company.
PROPOSAL 1 - ELECTION OF DIRECTORS
NOMINEES
The Board of Directors has nominated the six persons named below to
serve as directors of the Company for a one year term expiring at the next
Annual Meeting. Each of the nominees is currently a director of the Company.
Information regarding the six nominees is set forth under the caption
"Information Regarding Nominees for Director" below.
The authorized number of directors of the Company has been fixed by
the Board of Directors at seven, but as noted above, the Board of Directors has
nominated only the six persons named below for election as directors at the
Annual Meeting. The Company's Bylaws and Georgia law (under which the Company
is organized) provide that the unfilled director position may be filled by the
affirmative vote of a majority of the Company's directors for a term of office
continuing until the next election of directors by the shareholders and until
the election and qualification of such director's successor. The Board of
Directors desires to fill the vacant director position but has not yet
identified an appropriate person to fill this position. The Board of Directors
in its discretion may fill this position prior to the 1998 Annual Meeting.
Shares may not be voted at the 1997 Annual Meeting for more than six nominees.
Each of the six nominees has consented to serve another term as a
director if elected as a director at the Annual Meeting. If any of the nominees
should be unavailable to serve for any reason (which is not anticipated), the
Board of Directors may designate a substitute nominee or nominees (in which
event the persons named as proxies on the enclosed proxy card will vote the
shares represented by all valid proxy cards for the election of such substitute
nominee or nominees), allow the vacancy or vacancies to remain open until a
suitable candidate or candidates are located, or by resolution provide for a
lesser number of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE PROPOSAL TO ELECT JAMES W. CROWLEY, JERRY P. MALEC, JOHN J.
NEUBERT, FRANK C. PETERS, J. STANFORD SPENCE AND HOWARD W. YENKE AS DIRECTORS OF
THE COMPANY FOR A TERM EXPIRING AT THE NEXT ANNUAL MEETING OF SHAREHOLDERS AND
UNTIL THEIR SUCCESSORS HAVE BEEN DULY ELECTED AND QUALIFIED.
3
<PAGE>
INFORMATION REGARDING NOMINEES FOR DIRECTORS
Set forth below is certain information regarding the six nominees for
director, including their principal occupations (which have continued for at
least the past five years unless otherwise noted), directorships held by them in
certain other companies and their ownership of the Company's Common Stock as of
December 31, 1996.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NAME INFORMATION ABOUT NOMINEES (PERCENT OF CLASS)(1)
---- ------------------------------------------ ---------------------
<S> <C> <C>
James W. Crowley Mr. Crowley, age 76, has been a director 157,028(2)
of the Company at various times since 3.00%
1976 and was most recently elected as a
director in 1992. He has been retired
for more than five years. Prior to his
retirement he was Chairman of the Board
of A.M.I., Inc., a technical school in
Daytona Beach, Florida. He also was a
founder of Repadco Industries, Inc., an
outdoor advertising company in Daytona
Beach, Florida.
Jerry P. Malec Mr. Malec, age 54, has been the President 183,122(2)
and Chief Executive Officer and a 3.50%
director of the Company since August 23,
1994, when he was elected to succeed
Raymond J. Homa who died in May 1994.
From 1987 to 1994, Mr. Malec was Vice
President and General Manager of the
Enterprise Markets Division of Apple
Computer, Inc., where he was responsible
for the sales, marketing, support and
distribution of all Apple products to the
Fortune 1000 and federal government
customer base. Mr. Malec previously
served in various executive positions at
International Business Machines
Corporation, including director of
manufacturing industry and manager of
retail and distribution industries.
John J. Neubert Mr. Neubert, age 58, has been the Senior 211,445(2)
Vice President-Finance and Administration 4.04%
and Chief Financial Officer of the
Company since 1990 and also has been the
Chief Operating Officer and a director of
the Company since May 1994. Mr. Neubert
was Executive Vice President and Chief
Financial Officer of Technology Research
Group, Inc., a software development and
systems integrator company, from 1987
until 1990. He was Vice President of RIM
Incorporated, a manufacturer and
distributor of leisure furniture, from
1985 to 1987. Prior to that time he was
employed by Uniroyal Incorporated in
various financial and operational
positions for approximately 15 years.
Frank C. Peters Mr. Peters, age 49, has been a director 23,000(2)
of the Company since 1993. From August 0.44%
1995 to present, Mr. Peters has been the
President and Chief Executive Officer of
MICR-Net International, Inc., an
authenticity verification systems
company. Mr. Peters served as Vice
President and Controller of
Merry-Go-Round Enterprises, Inc., a
publicly traded specialty retailer of
men's and women's apparel from
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NAME INFORMATION ABOUT NOMINEES (PERCENT OF CLASS)(1)
---- ------------------------------------------ ---------------------
<S> <C> <C>
1974 until his retirement in January 1995.
In that capacity, Mr. Peters has served as
the principal accounting officer. Merry-Go-
Round Enterprises, Inc. filed a petition
under the federal bankruptcy laws in
January 1994.
J. Stanford Spence Mr. Spence, age 67, is the founder and, 626,055(2)
except for two brief periods, has been 11.97%
Chairman of the Board of the Company and
its predecessors since 1973. Mr. Spence
also served as interim Chief Executive
Officer of the Company from May 1994
until August 1994. Mr. Spence has been
Chairman of the Board of Directors, Chief
Executive Officer and an owner of
Stanford Technologies, Inc., a financial
software development company in Austin,
Texas, since 1985.
Howard W. Yenke Mr. Yenke, age 60, has been a director of 20,000(2)
the Company since 1993. Since July 1996, 0.38%
Mr. Yenke has been the president and
chief operating officer of LANart Corp.,
a private local area network company.
From November 1995 to June 1996, Mr.
Yenke was the President of The Yenke
Group, a business consulting firm. From
November 1994 to October 1995, Mr. Yenke
was the president and chief executive
officer of Enterprise Development
Corporation of Palm Beach County, an
economic development consulting firm.
From June 1994 to October 1994, Mr. Yenke
was president and chief executive officer
of Arco Computer Products. From May 1989
to March 1994, Mr. Yenke was employed by
Boca Research, Inc. in several
capacities, including its president and
chief executive officer from September
1991 through March 1994. Prior thereto,
Mr. Yenke was employed by IBM Corporation
in various executive management
positions. Mr. Yenke is a Director of
Rexall Sundown, Inc. and Communications
Systems International, Inc.
</TABLE>
- --------------------
(1) The stock ownership information shown has been furnished to the Company by
the named persons. Beneficial ownership as reported in the table has been
determined in accordance with Securities and Exchange Commission
regulations and includes shares of the Company's Common Stock as to which a
person possesses sole or shared voting and/or investment power and shares
which may be acquired within 60 days upon the exercise of stock options.
Except as otherwise stated in the footnotes below, the named persons have
sole voting and investment power with regard to the shares shown as owned
by such persons.
(2) The shares shown include the following number of shares which may be
acquired upon the exercise of stock options: Mr. Crowley, 20,000; Mr.
Malec, 182,122; Mr. Neubert, 176,667; Mr. Peters, 20,000; Mr. Yenke,
18,750; and Mr. Spence, 120,000. The shares shown include 26,397 shares
owned by Stanford Technologies, Inc., a corporation of which Mr. Spence and
his wife are the sole shareholders. See "Director Compensation" and
"Executive Compensation - Stock Options" below. The shares shown exclude
10,000 shares that may be acquired by each of Messrs. Crowley, Peters,
Spence and Yenke following the vesting of certain stock options on May 20,
1997, and 166,666 shares that may be acquired by Mr. Malec following the
vesting of certain stock options at various times beginning on May 15,
1997, and 73,333 shares that may be acquired by Mr. Neubert following the
vesting of certain stock options at various times beginning on May 15,
1997. See "Executive Compensation - Stock Options."
5
<PAGE>
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors conducts its business through meetings of the
full Board and through committees of the Board. In accordance with the Bylaws
of the Company, the Board of Directors had established an Audit Committee, a
Compensation Committee, a 1993 Stock Option Plan Committee and a 1994 Directors
Stock Option Plan Committee. During 1996, the 1993 Stock Option Plan Committee
and the Compensation Committee were combined into a single committee entitled
the Compensation and Stock Option Committee.
The Audit Committee makes recommendations to the Board of Directors
concerning the appointment of the Company's independent auditors; reviews their
audit plan, the scope and results of their audit engagements and the
accompanying management letter, if any; reviews the scope and results of the
Company's internal auditing procedures; consults with the independent auditors
and management with regard to the Company's accounting methods and the adequacy
of its internal accounting controls; approves professional services provided by
the independent auditors; reviews the independence of the independent auditors;
and reviews the range of the independent auditors' audit and non-audit fees.
The Audit Committee is composed of Howard W. Yenke, James W. Crowley, John J.
Neubert, J. Stanford Spence, and Frank C. Peters. The Audit Committee met once
in 1996.
The Compensation and Stock Option Committee sets the compensation of
the Company's executive officers and ratifies the compensation of all other
officers and general wage and salary limits of employees. The Compensation and
Stock Option Committee also is responsible for administering the Company's 1993
Stock Option Plan. The Compensation and Stock Option Committee is composed of
James W. Crowley, Frank C. Peters, J. Stanford Spence and Howard W. Yenke. The
Compensation and Stock Option Committee met one time during 1996. See "Executive
Compensation - Stock Options," below.
The 1994 Directors Stock Option Plan Committee is responsible for
administering the Company's 1994 Directors Stock Option Plan for the benefit of
non-employee directors. The Directors Stock Option Plan Committee is composed
of Jerry P. Malec and John J. Neubert. The 1994 Directors Stock Option Plan
Committee did not meet during 1996 but conducted its meetings by way of written
unanimous consent. See "Executive Compensation - Stock Options," below.
The Board of Directors, as a whole, functions as the nominating
committee to select management's nominees for election as directors of the
Company. The Board of Directors will consider nominees recommended by
shareholders if submitted to the Company on or before December 12, 1997. See
"Shareholder Proposals for 1998 Annual Meeting" below.
During 1996, the full Board of Directors held four meetings. All of
the directors attended at least 75% of all meetings of the full Board and all
meetings of all committees of the Board on which they served during the fiscal
year.
DIRECTOR COMPENSATION
Directors who are not employees of the Company receive a fee of $4,000
per year, payable on a quarterly basis, a fee of $1,250 for each regularly
scheduled meeting attended and a fee of $250 for each scheduled telephone
meeting attended. Members of the Audit and the Compensation and Stock Option
Committees receive an annual fee of $2,000 for service on one or both of these
committees. Additionally, each non-employee member of the Board of Directors is
granted options to purchase 10,000 shares of the Company's Common Stock per year
pursuant to the Company's 1994 Directors Stock Option Plan. On May 20, 1996,
options to purchase 10,000 shares of Common Stock were granted to each of the
non-employee directors of the Company - James W. Crowley, Frank C. Peters, J.
Stanford Spence and Howard W. Yenke -pursuant to the 1994 Directors Stock Option
Plan. The exercise price of these options was $14.75 per share, which was the
closing sale price of the Company's Common Stock on the Nasdaq
6
<PAGE>
National Market System on the date of grant. The options vest on May 20, 1997,
or sooner upon the death or disability of the optionee or the occurrence of
certain events constituting a "change of control" of the Company, as such term
is defined in the 1994 Directors Stock Option Plan. The options expire on
May 15, 2006.
ADDITIONAL INFORMATION
For additional information that should be considered with regard to
the election of directors, see "Executive Compensation," "Certain Transactions,"
"Stock Performance Graph" and "Compliance With Section 16(a) of the Securities
Exchange Act of 1934" below.
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table summarizes by various categories, for the years
ended December 31, 1994, 1995 and 1996, the total compensation earned by each
person who served as an executive officer of the Company during 1996. For
information regarding the various factors considered by the Compensation and
Stock Option Committee of the Board of Directors in establishing the
compensation of such persons for 1996, see "Compensation and Stock Option
Committee Report on Executive Compensation" below.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
--------------------------
<TABLE>
<CAPTION>
LONG-TERM
---------
COMPENSATION
------------
AWARDS
-------------
NAME AND SECURITIES ALL OTHER
PRINCIPAL UNDERLYING COMPENSATION
POSITION(1) YEAR SALARY($)(1) BONUS($) OPTIONS(#) ($)(2)
- ----------- ---- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Jerry P. Malec 1996 216,000 67,500 - 6,046
President and Chief 1995 200,000 125,000 100,000 5,916
Executive Officer 1994 72,051(3) 36,026(3) 250,000 1,404
John J. Neubert 1996 129,600 43,500 - 6,141
Senior Vice 1995 120,000 80,000 50,000 6,385
President Finance 1994 112,205(4) 78,000 160,000 2,847
and Administration,
Chief Operating
Officer and Chief
Financial Officer
- -------------------
</TABLE>
(1) Includes amounts deferred at the election of the officers pursuant to the
Company's Section 401(k) retirement plan.
(2) Reflects (a) amounts of premiums paid by the Company for term life
insurance policies on the lives of the named executive officers, the
proceeds of which are payable to the respective beneficiaries designated by
them ($1,296 for Mr. Malec and $2,025 for Mr. Neubert in 1996; $1,296 for
Mr. Malec and $2,025 for Mr. Neubert in 1995; and $216 for Mr. Malec and
$788 for Mr. Neubert in 1994) and (b) amounts contributed by the Company on
behalf of the named executive officers pursuant to the Company's Section
401(k) retirement plan ($4,750 for Mr. Malec and $4,116 for Mr. Neubert in
1996; $4,620 for Mr. Malec and $4,360 for Mr. Neubert in 1995; and $1,188
for Mr. Malec and $2,059 for Mr. Neubert in 1994).
7
<PAGE>
(3) The 1994 salary and bonus paid to Mr. Malec are for the period from August
23, 1994 (date of employment) through December 31, 1994.
(4) Mr. Neubert's salary for 1994 was increased from $100,000 to $120,000 on
May 20, 1994 when he was elected to the additional position of Chief
Operating Officer.
STOCK OPTIONS
There were no stock options granted to Messrs. Malec and Neubert
during 1996. The following table sets forth information regarding (i) all
exercises of stock options by the named executive officers in 1996 and (ii) the
number of shares underlying stock options held by the named executive officers
as of December 31, 1996, and the respective values of these unexercised options
at December 31, 1996.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
-----------------------------
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
SHARES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ON VALUE AT FISCAL YEAR END (#) AT FISCAL YEAR END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jerry P. Malec - - 182,122/166,666 785,911/633,332
John J. Neubert - - 176,667/ 73,333 819,584/279,166
</TABLE>
- ------------
(1) Such value is computed by subtracting the option exercise price from the
market price of the Common Stock on (a) the date of exercise or (b)
December 31, 1996, in the case of unexercised options, and multiplying the
resulting figure by the total number of shares underlying the options in
question.
COMPENSATION AND STOCK OPTION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation and Stock Option Committee of the
Board of Directors (the "Committee") discusses the Committee's compensation
objectives and policies applicable to the Company's executive officers. The
report reviews the Committee's policy, generally with respect to the
compensation of all executive officers, as a group for 1996 and specifically
reviews the compensation established for the Company's Chief Executive Officer
for 1996 as reported in the Summary Compensation Table. The Committee is
composed entirely of non-employee directors of the Company.
COMPENSATION POLICY FOR EXECUTIVE OFFICERS
The Company's compensation policies for its executive officers are
intended to create a direct relationship between the level of compensation paid
to executives and the Company's current and long-term level of performance. The
Committee believes that this relationship is best implemented by providing a
compensation package consisting of separate components, all of which are
designed to enhance the Company's overall performance. These components are
base salary, short-term bonus compensation and long-term incentive compensation
in the form of stock options.
The base salaries for the Company's executive officers for 1996 were
established subjectively by the Committee. The salaries of Messrs. Malec and
Neubert were established at the beginning of 1996 based on the Committee's
evaluation of how well these two executive officers fulfilled their
responsibilities in 1995 taking into account their individual performances in
1995 as compared to the financial goals
8
<PAGE>
established for the Company by the Board of Directors as well. The base salaries
established for these two executive officers for 1996 were consistent with the
annualized 1995 levels. Net revenues increased from $17,186,000 in 1994 to
$29,160,000 in 1995, and net income increased from $1,458,000 in 1994 to
$2,542,000 in 1995. Based mainly on these increases in the Company's performance
and upon the Committee's general understanding of the salary levels paid to
executive officers performing equivalent functions at similar companies in the
same or related industries, the Committee determined that the base salaries of
these two executive officers for 1996 should each be increased by 8% to $216,000
for Mr. Malec and to $129,600 for Mr. Neubert.
Bonuses established for the executive officers are intended to provide
an incentive for improved performance in the coming year. Target bonus levels
for the executive officers are established by the Committee at the beginning of
each year. For 1996, these bonuses were established based on pre-determined
levels of pre-tax income in 1996, as reflected on the Company's audited
statement of income for such year. Subsequent to establishing the bonus plan,
however, the Committee determined that the bonus plan did not take into account
Messrs. Malec's and Neubert's valuable contributions to the Company's attainment
of non-financial goals. Accordingly, the Committee, in its discretion, awarded
bonuses to Messrs. Malec and Neubert in the amounts of $67,500 and $43,500,
respectively, for 1996.
The Company's long-term incentive compensation plan for its executive
officers is based on the Company's stock option plans. These plans promote
ownership of the Company's Common Stock which, in turn, provides a common
interest between the shareholders of the Company and the executive officers of
the Company. In establishing a long-term incentive compensation plan, the Board
of Directors concluded that incentive compensation opportunities (in the
form of stock option grants) should be established and that any compensation
received under such stock option plans should be directly linked to the
performance of the Company (as reflected by increases in the price of its Common
Stock) and the contribution of the individual thereto. Options, usually granted
annually, have an exercise price equal to the fair market value of the shares on
the date of grant and, to encourage a long-term perspective, have an exercise
period of ten years. The number of options granted to executive officers is
determined by the Committee, which is charged with administering the stock
option plans. No stock options were granted to the named executive officers
during 1996. Year-end stock option values are reflected in "Executive
Compensation - Stock Options - Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year End Option Values."
The base salaries, targeted bonus amounts and number of stock options
established for or granted to the Company's executive officers for 1996 are
based, in part, on the Committee's understanding of compensation amounts and
forms paid to persons in comparable roles performing at comparable levels at
other companies in the same or related industries. Such amounts, however,
mainly reflect the subjective discretion of the members of the Committee based
on their evaluation of the Company's current and anticipated future financial
performance, the contribution of the individual executive officers to such
financial performance, the contribution of the individual executive officers to
the Company in areas not necessarily reflected by the company's financial
performance and the most appropriate incentive to link the performance and
compensation of the executive officers to the shareholder's return on the
Company's Common Stock.
CHIEF EXECUTIVE OFFICER COMPENSATION
In structuring the 1996 compensation plan for Mr. Malec, the Committee
considered the alignment of his compensation with the financial performance of
the Company to be essential. Accordingly, the Committee negotiated a
compensation structure that tied high levels of compensation for Mr. Malec to a
substantial improvement in corporate performance, including new product and
service developments, that would correspondingly enhance shareholder value.
Specifically, for 1996, Mr. Malec was entitled to receive a base salary at a
rate of $216,000 per year. The base salary was consistent with Mr. Malec's 1995
base salary and was awarded to Mr. Malec by the Committee in its subjective
discretion based on the Company's financial performance in 1996 and Mr. Malec's
other contributions to the Company. To provide incentive to Mr. Malec to devote
additional efforts to improve the Company's
9
<PAGE>
performance and to further the Company's new product development efforts in 1996
the Committee established a bonus plan that provided for the payment of a tiered
cash bonus to Mr. Malec for 1996 based upon the Company's achieving certain
levels of pre-tax income. However, as a result of Mr. Malec's contributions to
the company not necessarily reflected in the Company's financial performance,
the Committee reconsidered the plan and, in its discretion, awarded Mr. Malec a
bonus for 1996 in the amount of $67,500. With regard to longer term incentive
compensation, the Committee determined that the grants of stock options made to
Mr. Malec in the prior two years were sufficient to provide incentive to Mr.
Malec and to link his performance and compensation to the shareholder's return
on the Company's Common Stock.
SECTION 162(M) OF THE INTERNAL REVENUE CODE
It is the responsibility of the Committee to address the issues raised
by the recent change in the tax laws which made certain non-performance-based
compensation in excess of $1,000,000 to executives of public companies non-
deductible to these companies beginning in 1994. The Committee has reviewed the
issues applicable to the Company and has determined that it is not necessary for
the Company to take any action at this time with regard to this new limit.
COMPENSATION AND STOCK OPTION COMMITTEE
J. Stanford Spence
James W. Crowley
Frank C. Peters
Howard W. Yenke
CERTAIN TRANSACTIONS
In 1984, the Company entered into an agreement that gave J. Stanford
Spence, who is the Chairman of the Board of the Company, exclusive rights to
sell and market the Company's MICR reader products. Subsequently, after
determining that the Company should market its own products, the Company entered
into a settlement agreement with Mr. Spence and Stanford Technologies, Inc.
("STI"), which is owned by Mr. Spence and his wife (the "STI Agreement").
Pursuant to the STI Agreement, Mr. Spence and STI transferred and assigned to
the Company all of their rights to market the Company's MICR analyzers. Also
pursuant to the STI Agreement, Mr. Spence and STI agreed to refrain from
competing against the Company for a period of eleven years following his
resignation or removal from the Company's Board of Directors. In exchange for
such benefits, the STI Agreement provides that the Company shall make minimum
monthly payments aggregating no less than $15,000 per month (of which $10,000 is
adjusted semi-annually for inflation) or, at the Company's option in order to
accelerate full payment (as described in the preceding sentence), 5% of sales if
this amount exceeds the minimum aggregate amount due. Payments under the terms
of the STI Agreement terminate upon the first to occur of (i) June 30, 2000; or
(ii) that time at which payments pursuant to the STI Agreement equal $1,758,321
(plus adjustments for inflation). The Company paid $221,000 to STI in 1996,
pursuant to the STI Agreement, and as of December 31, 1996, a total of
$1,397,000 (including $167,000 of inflation adjustments) had been paid by the
Company to STI pursuant to the STI Agreement.
STOCK PERFORMANCE GRAPH
The Company's Common Stock began trading on the Nasdaq National Market
System on September 28, 1993. The price information reflected for the Company's
Common Stock in the following performance graph and accompanying table
represents the closing sales prices of the Common Stock for the period from
September 28, 1993 through December 31, 1996, on an annual basis. The graph and
the accompanying table compare the cumulative total shareholders' return on the
Company's Common Stock during such period with the cumulative total return of
the Nasdaq Stock Market (U.S. Companies) Index
10
<PAGE>
and the Nasdaq Computer Manufacturing Companies Index for such period. The
calculations in the graph and table assume that $100 was invested on
September 28, 1993, in each of the Company's Common Stock and each index and
also assume dividend reinvestment.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
AMONG CHECKMATE ELECTRONICS, INC., NASDAQ COMPOSITE INDEX
AND NASDAQ COMPUTER INDEX
<CAPTION> Checkmate NASDAQ NASDAQ
Measurement period Electronics, Composite Computer
(Fiscal Year Covered) Inc. Index Index
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
09/28/93 $ 100.00 $ 100.00 $ 100.00
FYE 12/31/93 $ 111.76 $ 104.01 $ 114.54
FYE 12/31/94 $ 85.29 $ 101.67 $ 125.80
FYE 12/31/95 $ 173.53 $ 143.78 $ 198.16
FYE 12/31/96 $ 152.94 $ 176.86 $ 266.09
</TABLE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, and
regulations of the Securities and Exchange Commission thereunder require the
Company's directors and executive officers and persons who own more than 10% of
the Company's Common Stock, as well as certain affiliates of such persons, to
file initial reports of their ownership of the Company's Common Stock and
subsequent reports of changes in such ownership with the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. Directors,
executive officers and persons owning more than 10% of the Company's Common
Stock are required by Securities and Exchange Commission regulations to furnish
the Company with copies of all Section 16(a) reports they file. Based solely on
its review of the copies of such reports received by it and written
representations that no other reports were required for those persons, the
Company believes that during the year ended December 31, 1996, all filing
requirements applicable to its directors, executive officers and owners of more
than 10% of its Common Stock were complied with in a timely manner.
PROPOSAL 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors of the Company has appointed the firm of
Ernst & Young LLP to serve as independent auditors of the Company for the fiscal
year ending December 31, 1997, and has directed that such appointment be
submitted to shareholders of the Company for ratification at the Annual Meeting.
11
<PAGE>
Ernst & Young LLP has served as independent auditors of the Company since 1989
and is considered by management of the Company to be well qualified. If the
shareholders do not ratify the appointment of Ernst & Young LLP, the Board of
Directors will reconsider the appointment.
Representatives of Ernst & Young LLP will be present at the Annual
Meeting and will have an opportunity to make a statement if they desire to do
so. They also will be available to respond to appropriate questions from
shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE PROPOSAL TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP AS
INDEPENDENT AUDITORS OF THE COMPANY.
SHAREHOLDERS' PROPOSALS FOR 1997 ANNUAL MEETING
Proposals of shareholders, including nominations for the Board of
Directors, intended to be presented at the 1998 Annual Meeting of Shareholders
should be submitted by certified mail, return receipt requested, and must be
received by the Company at its executive offices in Roswell, Georgia on or
before December 12, 1997 to be eligible for inclusion in the Company's proxy
statement and form of proxy relating to that meeting. Any shareholder proposal
must be in writing and must set forth (i) a description of the business desired
to be brought before the meeting and the reasons for conducting the business at
the meeting; (ii) the name and address, as they appear on the Company's books,
of such shareholder; (iii) the class and number of shares that are beneficially
owned by such shareholder; (iv) the dates on which such shareholder acquired the
shares; (v) documentary support for any claim of beneficial ownership; (vi) any
material interest of the shareholder in the proposal; (vii) a statement in
support of the proposal, and (viii) any other information required by the rules
and regulations of the Securities and Exchange Commission.
OTHER MATTERS THAT MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of the Company knows of no matters other than
those referred to in the accompanying Notice of Annual Meeting of Shareholders
which may properly come before the Annual Meeting. However, if any other matter
should be properly presented for consideration and voting at the Annual Meeting
or any adjournments thereof, it is the intention of the undersigned, as the
person named as proxy on the accompanying form of proxy card, to vote the shares
represented by all valid proxy cards in accordance with his judgment of what is
in the best interest of the Company.
By Order of the Board of Directors
JERRY P. MALEC
President and Chief Executive Officer
Roswell, Georgia
April 8, 1997
The Company's 1996 Annual Report, which includes audited financial statements,
has been mailed to shareholders of the Company with these proxy materials. The
Annual Report does not form any part of the material for the solicitation of
proxies.
12
<PAGE>
REVOCABLE PROXY
CHECKMATE ELECTRONICS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR
THE 1997 ANNUAL MEETING OF SHAREHOLDERS
The undersigned hereby appoints J. Stanford Spence and Jerry P. Malec, and
each of them, as proxies, with full power of substitution, to act for and in the
name of the undersigned to vote all shares of Common Stock of Checkmate
Electronics, Inc. (the "Company") which the undersigned is entitled to vote at
the 1997 Annual Meeting of Shareholders of the Company, to be held in the Hill
Auditorium at the Atlanta High Museum of Art located at 1280 Peachtree Street,
N.E., Atlanta, Georgia, May 19, 1997 at 10:00 a.m., local time, and at any and
all adjournments thereof, as indicated below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE LISTED
PROPOSALS.
1. The election as directors of the six nominees listed below to serve until the
1998 Annual Meeting of Shareholders and until their respective successors are
elected and qualified.
[_] FOR ALL nominees listed below [_] WITHHOLD AUTHORITY to vote for
(except as marked to the contrary all nominees listed below.
below).
INSTRUCTION: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.
JAMES W. CROWLEY, JERRY P. MALEC, JOHN J. NEUBERT, FRANK C. PETERS,
J. STANFORD SPENCE AND HOWARD W. YENKE
2. The ratification of the appointment of Ernst & Young LLP as independent
auditors of the Company for the 1997 fiscal year.
[_] FOR [_] AGAINST [_] ABSTAIN
In their discretion, the above-named proxies, or their duly appointed
substitute(s), are authorized to vote upon such other business as properly may
come before the Annual Meeting and any adjournments thereof.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED
POSTAGE-PAID ENVELOPE
(Continued, and to be signed and dated, on the reverse side)
<PAGE>
THIS PROXY CARD WILL BE VOTED AS DIRECTED. IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY CARD WILL BE VOTED "FOR" EACH OF THE PROPOSALS LISTED ON
THE REVERSE SIDE OF THIS PROXY CARD. If any other business is properly presented
at the Annual Meeting, this proxy card will be voted by the proxies in their
best judgment. At the present time, the Board of Directors knows of no other
business to be presented to a vote of the shareholders at the Annual Meeting.
The undersigned may withdraw this proxy card at any time prior to its use
by giving written notice to Margaret Burkett, the Secretary of the Company, by
executing and delivering to the Secretary a duly executed proxy card bearing a
later date, or by appearing and voting in person at the Annual Meeting all
shares of Common Stock of the Company owned by the undersigned as of the record
date (April 1, 1997).
Please mark, date and sign exactly as
your name appears on this proxy card.
When shares are held jointly, both
holders should sign. When signing as
attorney, executor, administrator,
trustee, custodian or guardian, please
give your full title. If the holder is a
corporation or partnership, the full
corporate or partnership name should be
signed by a duly authorized officer.
Date: , 1997
-----------------------------
----------------------------------------
Signature
----------------------------------------
Signature, if shares held jointly
Do you plan to attend the Annual Meeting?
[_] YES [_] NO
