DEF 14A 1 d456697ddef14a.htm DEF 14A DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities

Exchange Act of 1934 (Amendment No.  )

Filed by the Registrant  ¨

Filed by a Party other than the Registrant  ¨

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¨ Preliminary Proxy Statement
¨ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
¨ Definitive Additional Materials
¨ Soliciting Material under Rule 14a-12

Checkpoint Systems, Inc.

 

(Name of Registrant as Specified In Its Charter)

 

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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CHECKPOINT SYSTEMS, INC.

PROXY STATEMENT

 

LOGO

2013 NOTICE OF ANNUAL MEETING

This Proxy Statement, the enclosed proxy card, and the

Checkpoint Systems, Inc. 2012 Annual Report are being mailed

to shareholders on or about April 30, 2013.

 


Table of Contents

NOTICE OF 2013

ANNUAL SHAREHOLDERS’ MEETING

and

PROXY STATEMENT

Table of Contents

 

Questions and Answers

     4   

General

     7   

Proposals to be Voted On

     8   

Proposal 1 — Election of Directors

     8   

Proposal 2  — To approve, by non-binding advisory vote, the fiscal 2012 compensation of the named executive officers of the Company

     11   

Proposal 3 — Ratification of Appointment of Independent Registered Public Accounting Firm

     12   

Corporate Governance

     13   

Compensation Discussion and Analysis

     20   

Executive Compensation

     24   

Audit Committee Report

     43   

Security Ownership of Principal Shareholders

     45   

Security Ownership of Management

     46   

Other Business

     49   

 

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LOGO

CHECKPOINT SYSTEMS, INC.

101 Wolf Drive

Thorofare, NJ 08086

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

The Annual Meeting of Shareholders (the “Annual Meeting”) of Checkpoint Systems, Inc. (which we refer to as the “Company,” “we,” “us” or “Checkpoint”) will be held on Thursday, May 30, 2013, commencing at 10:00 a.m. at the Company’s Corporate Headquarters located at 101 Wolf Drive, Thorofare, New Jersey, for the following purposes:

1. To elect three Class I directors for a three-year term and one Class II director for a one-year term;

2. To approve, by non-binding advisory vote, the fiscal 2012 compensation of the named executive officers of the Company;

3. To vote on the ratification of the appointment of PricewaterhouseCoopers, LLP (“PwC”) as the independent registered public accounting firm of the Company for the fiscal year ending December 29, 2013; and

4. To transact such other business as may properly come before the Annual Meeting.

A complete list of shareholders will be available at the Company’s corporate offices noted above, prior to the Annual Meeting. Holders owning Company shares at the close of business on April 10, 2013 are entitled to receive notice of the Annual Meeting and to vote at the Annual Meeting or any adjournments that may take place.

You are cordially invited to attend the Annual Meeting in person. If you are unable to attend in person, the Board of Directors urges you to sign, date, and return the enclosed proxy card promptly.

This Proxy Statement, the enclosed proxy card, and Checkpoint’s 2012 Annual Report are being mailed to shareholders on or about April 30, 2013.

By Order of the Board of Directors

BRYAN T. R. ROWLAND

ASSOCIATE GENERAL COUNSEL

AND CORPORATE SECRETARY

APRIL 30, 2013

 

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1.    Q:    WHEN AND WHERE IS THE 2013 ANNUAL MEETING OF SHAREHOLDERS BEING HELD?
   A:    The Annual Meeting of Shareholders of the Company will be held on Thursday, May 30, 2013, at 10:00 a.m. at Company’s Corporate Headquarters located at 101 Wolf Drive Thorofare, New Jersey, 08086.
2.    Q:    ON WHAT AM I VOTING?
   A:    You are being asked to vote on:
     

1. The election of three Class I directors (William S. Antle, III, Stephen N. David and R. Keith Elliott) and one Class II Director (Marc T. Giles);

     

2. To approve, by non-binding advisory vote, the fiscal 2012 compensation of the named executive officers of the Company;

     

3. The ratification of the appointment of PwC as the independent registered public accounting firm of the Company for the fiscal year ending December 29, 2013; and

     

4. Any other business properly raised at the Annual Meeting.

3.    Q:    WHO IS ENTITLED TO VOTE?
   A:    Shareholders as of the close of business on April 10, 2013 (the “Record Date”) are entitled to vote at the Annual Meeting.
4.    Q:    WHO CAN ATTEND THE ANNUAL MEETING?
   A:    Any shareholder may attend.
5.    Q:    HOW DO I VOTE?
   A:    You May Vote By Mail.
      You do this by signing each proxy card you receive and returning your proxy card(s) in the enclosed, prepaid and addressed envelope. If you mark your voting instructions on the proxy card your shares will be voted as you instruct. If you return a signed card but do not provide voting instructions, your shares will be voted as recommended by the Board of Directors.
      You May Vote in Person at the Annual Meeting.
      Ballots will be passed out at the Annual Meeting to anyone who wants to vote at the Annual Meeting. If you hold your shares in street name, you must request a legal proxy from your stockbroker, and bring it with you to the Annual Meeting, in order to vote at the Annual Meeting.
      You May Vote by Telephone.
      Shareholders may vote by telephone. To do this, follow the instructions entitled “Vote by Telephone” that came with this Proxy Statement. The telephone voting procedure is designed to verify shareholders through the use of a Control Number that is provided on each proxy card. If you vote by telephone, you do not have to mail in your proxy card.
      You May Vote on the Internet.
      Shareholders may vote on the Internet. To do this, follow the instructions entitled “Vote by Internet” that came with your proxy statement. If you vote by Internet, you do not have to mail in your proxy card.

 

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6.    Q:    CAN I CHANGE MY VOTE?
   A:    You can revoke your proxy and change your vote at any time before the polls close at the Annual Meeting. To do this:
     

•File a written notice of revocation with the Secretary of the Company;

     

•Deliver to the Company a duly executed proxy bearing a later date;

     

•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

     

•Vote in person at the Annual Meeting. If you hold your shares in street name, you must request a legal proxy from your stockbroker and bring it with you in order to vote at the Annual Meeting. However, once the voting on a particular matter is completed at the Annual Meeting, you will not be able to revoke your proxy or change your vote as to any matters on which voting has been completed.

7.    Q:    WHAT CONSTITUTES A QUORUM?
   A:    The Company’s By-Laws provide that the presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on the particular matter shall constitute a quorum for the purpose of considering such matters, and, unless otherwise provided by law or in the Articles of Incorporation or in the Company’s By-Laws, the acts, at a duly organized meeting, of the shareholders present, in person or by proxy, entitled to cast at least a majority of the votes which all shareholders present are entitled to cast, shall be the acts of the shareholders. In the election for Directors, the candidates receiving the highest number of votes up to the number of Directors to be elected shall be elected. The shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. If a meeting cannot be organized because a quorum has not attended, those present may, except as otherwise provided by law, adjourn the meeting to such time and place as they may determine, but in the case of any meeting called for the election of Directors, those shareholders who attend the second of such adjourned meetings, although less than a quorum as fixed in this Section or in the Articles of Incorporation, shall nevertheless constitute a quorum for the purpose of electing Directors.
      As of the Record Date, April 10, 2013, 41,023,247 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 your shares will be counted as present for quorum purposes. A WITHHELD vote is the same as an abstention. Similarly, if a broker fails to vote shares with respect to which it has discretionary authority (“broker non-votes”), the shares will still be counted as present for quorum purposes.

 

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8.    Q:    HOW MANY VOTES ARE REQUIRED TO APPROVE THE PROPOSALS?
   A:    Assuming the presence of a quorum, the affirmative vote of a majority of the votes present that shareholders are entitled to cast is required to approve any proposal. In the election for Directors, the candidates receiving the highest number of votes up to the number of Directors to be elected shall be elected. For voting purposes, only shares voted FOR the adoption of any proposal or FOR the election of a director will be counted as voting in favor, when determining whether a proposal is approved or a director is elected. As a consequence, abstentions, broker non-votes and WITHHELD votes will all have the same effect as a vote against the adoption of a proposal or the election of a director. Shares represented by a properly delivered proxy will be voted in accordance with the instructions marked thereon. Properly delivered proxies that do not specify how the shares are to be voted will be voted “FOR” the election, as directors, of the Board of Directors’ nominees. Properly delivered proxies will be voted “FOR” or “AGAINST” any other matter that properly comes before the Annual Meeting or any adjournment thereof, at the discretion of the persons named as proxy holders.
9.    Q:    WILL MY SHARES BE VOTED IF I DO NOT SIGN AND RETURN MY PROXY CARD?
   A:    If you do not vote your proxy, your brokerage firm may either:
     

•Vote your shares on routine matters, or

     

•Leave your shares unvoted.

      When a brokerage firm votes its customers’ unvoted shares on routine matters, these shares are counted for purposes of establishing a quorum to conduct business at the Annual Meeting. A brokerage firm cannot vote customers’ shares on non-routine matters.
      You may have granted your stockbroker discretionary voting authority over your account. Your stockbroker may be able to vote your shares depending upon the terms of the agreement you have with your stockbroker. However, even where you have given your stockbroker discretionary authority, your stockbroker will nevertheless be prohibited from voting on your behalf in regards to “non-routine” matters unless you sign and return your proxy card with specific voting instructions.
10.    Q:    WHAT IF I RECEIVE MORE THAN ONE PROXY CARD?
   A:    This means that you have various accounts that are registered differently with the transfer agent and/or with brokerage firms. Please sign and return all proxy cards to ensure that all your shares are voted.
11.    Q:    WHO ARE THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS?
   A:    PwC was the Company’s independent registered public accountants for the fiscal year 2012. A representative of PwC is expected to be present at the Annual Meeting and will have the opportunity to make a statement if he/she desires to do so. The representative is also expected to be available to respond to appropriate questions from shareholders.

 

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GENERAL

These proxy materials are being furnished by Checkpoint Systems, Inc. in connection with the solicitation of proxies by the Board of Directors of Checkpoint for use at the 2013 Annual Meeting of Shareholders and any adjournments thereof.

The Board of Directors approved the following proposals for shareholder approval at a meeting held on February 27, 2013:

 

Proposal 1)    Election of three Class I Directors to hold office until the 2016 Annual Meeting of Shareholders and one Class II Director to hold office until the 2014 Annual Meeting of Shareholders. The Board has nominated William S. Antle, III, Stephen N. David and R. Keith Elliott as the Class I Directors and Marc T. Giles as the Class II Director;
Proposal 2)    To approve, by non-binding advisory vote, the fiscal 2012 compensation of the named executive officers of the Company (“Say on Pay”);
Proposal 3)    The ratification of the appointment of PwC as the independent registered public accounting firm of the Company for the fiscal year ending December 29, 2013; and
Proposal 4)    Any other business properly raised at the Annual Meeting.

 

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PROPOSALS TO BE VOTED ON

1. ELECTION OF DIRECTORS

At the Annual Meeting, the shareholders will elect three Class I directors to hold office until the 2016 Annual Meeting of Shareholders and one Class II director to hold office until the 2014 Annual Meeting of Shareholders or until their respective successors have been elected and qualified. The Company’s Board of Directors is divided into three classes serving staggered three-year terms, the term of one class of directors expiring in each year. On February 27, 2013, the Board of Directors, upon the recommendation of its Governance and Nominating Committee, nominated William S. Antle, III, R. Keith Elliott and Stephen N. David to stand for election as the Class I directors and Marc T. Giles to stand for election as a Class II director of the Company. The term of the Company’s current Class I directors, William S. Antle, III, R. Keith Elliott and Stephen N. David, will expire at the 2013 Annual Meeting. The Company’s By-laws provide that the Board of Directors consist of no less than three and no more than eleven directors, with the specific number within that range to be set by the Board. Each of the nominees has indicated his or her willingness to serve as directors. If a nominee, at the time of his or her election, is unable or unwilling to serve, and as a result a substitute nominee is designated, the persons named in the enclosed proxy or their substitutes will have discretionary authority to vote or to refrain from voting for the substitute nominee in accordance with their reasonable business judgment. The nominees for election as the Class I and Class II directors and the directors whose terms of office will continue after the Annual Meeting, together with certain information about them, are as follows:

Class I Directors Nominated to Serve Until 2016

William S. Antle, III

Director Since 2003

Age 68

Mr. Antle has been Chairman of the Board since May 2012. Mr. Antle previously served as the Chairman, President and Chief Executive Officer of Oak Industries, Inc., a manufacturer of leading-edge communications components, from 1989 until its merger with Corning Incorporated in 2000. Prior to his tenure there, he held senior management positions with Bain and Company, Inc., an international strategy-consulting firm. Mr. Antle served as a member of the Board of John H. Harland Company from 1999 until May 2007 when it was acquired by M & F Worldwide Corp. He served as a member of their Corporate Governance Committee from 1999 to 2007. Mr. Antle served on the Board of ESCO Technologies, Inc. from 1994 until November 2007 and served as a member of their Audit Committee from 1994 to 2007 (Chairman 1999 to 2007), a member of their Executive Committee from 1996 to 2007, and a member of their Human Resources and Ethical Committee from 1996 to 1999. He is a graduate of the United States Naval Academy in Annapolis, Maryland, and holds an MBA from the Harvard Graduate School of Business. The Board believes that Mr. Antle’s experience as President and CEO of Oak Industries provides the Company with extensive manufacturing experience as well as comprehensive management expertise.

R. Keith Elliott

Director Since 2000

Age 71

Mr. Elliott was Lead Director from August 2002 to May 2012 and served as Chairman of the Board from May 2002 to August 2002. Mr. Elliott retired as Chairman and Chief Executive Officer of Hercules Incorporated. From 1991 through April 2000, he served that company as Chairman and Chief Executive Officer, President and Chief Executive Officer, President and Chief Operating Officer, and Executive Vice President and Chief Financial Officer. He is a director of The Institute for Defense Analyses. He previously also served as director of Wilmington Trust Company, Alliant Techsystems, Inc., Computer Task Group, Inc., QSGI, Inc., Engelhard Corporation, and Peco Energy. He also has served as Chairman of the Board of Alliant Techsystems, Chair of the Audit Committees of Checkpoint Systems, Wilmington Trust Company and QSGI, Inc. and a member of the Audit Committee of Peco Energy and Computer Task Group, Chair of the Compensation Committee of Wilmington Trust Company and QSGI, Inc., Chair of the Finance Committee of Peco Energy Mr. Elliott holds a B.S. from the University of South Carolina and received an MBA in Finance from the University of South Carolina. The Board

 

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believes that Mr. Elliott’s long standing as a director and former Lead Director of the Company in addition to his experience as a Chairman and CEO and other senior executive positions at Hercules, Inc. allows him to understand precisely the challenges and opportunities the Company has and will meet and provides the Company with extensive manufacturing experience as well as comprehensive management expertise.

Stephen N. David

Director Since 2012

Age 64

Mr. David is a senior adviser with Boston Consulting Group, where he provides strategic planning services in sales, marketing and IT to a variety of clients in the consumer products, pharmaceutical and financial services industries. In 2005, Mr. David retired from Procter & Gamble after 34 years, during which he served in varied roles including Country Manager P&G Hellas (Greece) and later General Manager of the company’s Arabian Peninsula operations. Mr. David has served on a number of corporate boards and industry advisory committees. Among them are Ahold USA, Cisco Systems, Inc., Hewlett-Packard Company, TrueDemand Software, InformationWeek, Global Commerce Initiative, EPCglobal, the Uniform Code Council and Institute for the Future. From 2003 to 2008, Mr. David was a board member and served as Chairman of the Board and interim Chief Executive Officer of Iomega, a worldwide leader in storage solutions for consumers and small business. He has served as a member of the Board of Directors of Kovio, Inc., a privately held technology company, from 2005 to present. Mr. David has a Bachelor’s degree in Business Administration from the University of Nebraska. The Board believes that Mr. David’s wealth of experience not only as a business leader but as a board member of world class technology companies, hi-tech startups and industry organizations will assist the Company as it transforms from a product-protection business to a provider of inventory management solutions.

Class II Director Nominated to Serve Until 2014

Marc T. Giles

Director Since 2013

Age 57

Mr. Giles was President and Chief Executive Officer of Gerber Scientific, Inc., a manufacturer that provides software, computerized manufacturing systems, supplies and services to a wide variety of industries, from 2001 until February 2012, and provided transitional executive services to Gerber Scientific through December 31, 2012, after the manufacturer was acquired by a private equity firm in August 2011. Mr. Giles previously served as Senior Vice President and President of Gerber Technology, Inc., or Gerber Technology, a subsidiary of Gerber Scientific. Prior to joining Gerber Technology, Mr. Giles served in several senior positions in business unit management, strategy development, mergers and acquisitions and sales and marketing management with FMC Corp., a manufacturer of machinery and chemicals. Mr. Giles has served as a Director of Lydall, Inc. from April 2008 to present and has served as a member of their Compensation Committee and Corporate Governance Committee from April 2008 to present. He also serves as a Director of Gerber Scientific, Inc. Mr. Giles holds a B.A. in Economics from Union College, Schenectady, New York. The Board believes that Mr. Giles wealth of experience leading companies through major turnarounds will be invaluable in light of the strategic shift and operational changes taking place at the Company. He brings to the board particular strengths in strategic planning, business development, mergers and acquisitions and finance.

Class II Directors Serving Until 2014

Harald Einsmann, Ph.D.

Director Since 2005

Age 79

Dr. Einsmann currently has served as Special Advisor to the CEO of Tesco, the world’s second largest retail group, and he is Vice Chairman of their Chinese Company (125 stores, mostly Hypermarkets, 55,000 people) from 2010 to present. Dr. Einsmann served on the Board of Tesco PLC from 1999 to 2010 and was a member of their Nominations and Remuneration Committee from 2005 to 2010. He has also served on the Board of

 

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Directors of Harman International, from 2007 to present, and on their Audit Committee from 2007 to present. Harman International is a leading audio, consumer goods and audio equipment company (who supplies Mercedes, BMW, Audi, Kia, Chrysler etc.). Dr. Einsmann served as a member of the Board of Carlson Group in the United States (which includes, among others, Regent, Radisson Hotels, Park Inn and Thank God Its Friday Restaurants) from 1999 to 2010 and served on their Compensation Committee from 2005 to 2010. Dr. Einsmann also served as a member of the Board of Rezidor Hotel Group in Scandinavia from 2007 to 2010 and served on their Compensation Committee from 2007 to 2010. Dr. Einsmann previously was the President and CEO of the Procter and Gamble Company, Europe, Middle East and Africa.

Dr. Einsmann is a graduate of the Hamburg and Heidelberg Universities in Germany where he received an MBA and a doctorate in Business Administration, Economics and Law. He was also a Fulbright scholar at the University of Florida, Gainesville, earning a Ph.D. The Board believes that Dr. Einsmann’s experience as President of Procter and Gamble, Europe, Middle East and Africa provides the Company with extensive experience in retail and consumer goods and manufacturing as well comprehensive management experience.

Jack W. Partridge

Director Since 2002

Age 67

Mr. Partridge previously served as President of Partridge & Associates, Inc., a consulting firm providing strategic planning and other services to retailers and companies serving the retail industry. Prior thereto, he served for two years as Vice Chairman of the Board and Chief Administrative Officer of the Grand Union Company, a food retailer. Prior to joining Grand Union in 1998, Mr. Partridge was Group Vice President of the Kroger Company, where he served for 23 years in several executive positions. He has been actively involved in a number of industry organizations in both the food retailing and chain drug industries. Mr. Partridge has been a member of the Board of SPAR Group, Inc. from 2001 to present and has served on their Audit Committee from 2004 to present and has been Chairman of their Compensation Committee from 2001 to present. He has also provided leadership for a broad range of civic, cultural, and community organizations. Mr. Partridge holds a B.S. degree from the Arkansas State University. The Board believes that Mr. Partridge’s experience as President of Partridge & Associates and thirty years senior executive management experience in large retail and consumer goods companies provides the Company with extensive expertise in retail and consumer goods as well as comprehensive management expertise.

Class III Directors Serving Until 2015

George Babich, Jr.

Director Since 2006

Age 61

Mr. Babich has been President and Chief Executive Officer of the Company since February 2013. He served as Interim President and Chief Executive Officer of the Company from May 2012 until February 2013. Mr. Babich served as a business consultant for public companies from 2005 until 2012. Mr. Babich was President of Pep Boys — Manny Moe & Jack from 2002 until 2005; from 2000 until 2004 Mr. Babich was Chief Financial Officer of Pep Boys. Mr. Babich served as an Officer of Pep Boys since 1996. Previously, Mr. Babich was a Financial Executive for Morgan, Lewis & Bockius, The Franklin Mint, Pepsico Inc. and Ford Motor Company. Mr. Babich has served as a member of the Board of Teleflex Inc. from 2005 to present and has served on their Audit Committee from 2005 to present. Mr. Babich holds a BSA in Accounting from the University of Michigan. The Board believes that Mr. Babich’s experience as President and CFO of Pep Boys and his financial executive roles for Morgan, Lewis & Bockius, The Franklin Mint, Pepsico Inc. and Ford Motor Company provides the Company with extensive retail and consumer goods, financial and manufacturing experience as well as comprehensive executive and management experience.

 

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Julie S. England

Director Since 2010

Age 55

Ms. England was appointed to the board of directors in October 2010. In 2009, Ms. England retired from Texas Instruments, Inc. after a 30-year career there. She was Vice President and General Manager of RFID from 2004 until June, 2009. She was Vice President of a microprocessor division (1998-2004) and prior to that, Vice President of Quality for the Semiconductor Group (1994 until 1998). She held various engineering, quality and business management positions with Texas Instruments, Inc. Ms. England has been actively involved in a number of industry organizations in the semiconductor, defense electronics and RFID industries. Ms. England is a member of the board of Intelleflex Corp., a private company and is a former director of the Federal Reserve Bank of Dallas, TX. Ms. England has also provided leadership for a broad range of civic, cultural and community organizations most recently serving on the board of the Georgia O’Keeffe Museum. Ms. England holds a B.S. in Chemical Engineering from Texas Tech University. The Board believes that Ms. England brings to the Board thirty years of business, leadership and technology experience.

Sally Pearson

Director Since 2002

Age 63

Ms. Pearson was Vice President and General Manager of Merchandise and Retail for the Metropolitan Museum of Art in New York from April 2000 until October 2007. Prior to that, Ms. Pearson was President of Liz Claiborne Specialty Stores, served as Executive Vice President of Merchandising for a division of Limited Brands, Inc. and Senior Vice President and General Merchandise Manager of Women’s Apparel at Saks Fifth Avenue, Jordan Marsh in Boston and Bullock’s in Los Angeles. She held various management positions with Federated Department Stores over a 24-year period after completing Federated’s Executive Management Training Program. Ms. Pearson attended both public and private schools in Oslo and Copenhagen. The Board believes that Mrs. Pearson’s experience as Vice President and General Manager of Merchandise and Retail for the Metropolitan Museum of Art and her twenty-five years of senior executive management experience in large retail and apparel companies provides the Company with extensive retail and apparel experience as well as comprehensive management experience.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” EACH OF THE NOMINEES FOR CLASS I AND CLASS II DIRECTORS

The proposal to elect three Class I directors and one Class II director requires the affirmative vote of the plurality of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the proposal. The three Class I and one Class II candidates receiving the highest number of votes “For” shall be elected as the Class I and Class II Directors respectively.

This will be considered a non-routine proposal. As a non-routine proposal, there may be broker non-votes where a shareholder does not sign and return a proxy card providing the broker with specific voting instructions. Any broker non-votes or abstentions will have the same effect as a vote against this proposal.

2. ADVISORY VOTE ON EXECUTIVE COMPENSATION

In accordance with Section 14A of the Securities Exchange Act, we are providing shareholders the opportunity to approve, on an advisory basis, the compensation of our named executive officers as presented in the Compensation Discussion & Analysis beginning at page 20 and the compensation tables included in the discussion of Executive Compensation beginning on page 32, including the narrative disclosure.

Our executive compensation program has been designed to retain and encourage a talented, motivated and focused executive team by providing competitive compensation within our market. We believe that our executive compensation program provides an appropriate mix of salary, bonus and stock options, which together, is an “at-risk” form of incentive compensation. The stock options encourage executive focus on both short and long-term goals of the Company. As an advisory vote, this proposal is not binding upon us as a company.

 

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Accordingly, we will present the following resolution for vote at the 2013 Annual Meeting of Shareholders:

“RESOLVED, that the shareholders of Checkpoint Systems, Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers as described in the Compensation Discussion & Analysis and disclosed in the 2012 Summary Compensation Table and related compensation tables and narrative disclosure as set forth in the 2013 Proxy Statement.”

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF OUR EXECUTIVE COMPENSATION PROGRAM AS PRESENTED IN THIS PROXY STATEMENT.

The proposal to approve our executive compensation program, on an advisory basis, requires an affirmative vote of the majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the proposal. We have determined to hold an advisory vote to approve our executive compensation program every year and the next such advisory vote will occur at the 2014 Annual Meeting of Shareholders.

This will be considered a non-routine proposal. As a non-routine proposal, there may be broker non-votes where a shareholder does not sign and return a proxy card providing the broker with specific voting instructions. Any broker non-votes or abstentions will have the same effect as a vote against this proposal.

3. THE RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF THE COMPANY FOR THE FISCAL YEAR ENDING DECEMBER 29, 2013.

The Audit Committee has appointed the firm of PricewaterhouseCoopers LLP to act as the Company’s independent registered public accounting firm and to audit the consolidated financial statements of the Company for the fiscal year ending December 29, 2013. This appointment will continue at the determination of the Audit Committee and is presented to the shareholders for ratification as a matter of good governance.

PwC has served as the Company’s independent registered accounting firm since August 1988, and one or more of the representatives of PwC will be present at the Annual Meeting. These representatives will be provided an opportunity to make a statement at the Annual Meeting if they desire to do so and will be available to respond to appropriate questions from shareholders.

THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

The proposal to ratify the selection of PwC as the independent registered public accounting firm of the Company for the 2013 fiscal year requires an affirmative vote of the majority of the shares represented in person or by proxy at the Annual Meeting and entitled to vote on the proposal.

This will be considered a routine proposal, and brokers have the discretion to vote uninstructed shares on behalf of the shareholder. As a routine proposal, there will be no broker non-votes, although brokers may otherwise fail to submit a vote. Any failures by brokers to vote or abstentions will have the same effect as a vote against this proposal.

The Board knows of no other business for consideration at the Annual Meeting. If any matters not specifically set forth on the proxy card and in this Proxy Statement properly come before the Annual Meeting, the persons named in the enclosed proxy will vote or otherwise act, on your behalf, in accordance with their reasonable business judgment on such matters.

 

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CORPORATE GOVERNANCE

Director Nomination Procedures

Criteria for Board Nomination. The Governance and Nominating Committee considers the appropriate balance of experience, skills, and characteristics required of the Board of Directors and ensures that at least a majority of the directors are independent under the rules of the New York Stock Exchange, that members of the Company’s Audit Committee meet the financial literacy requirements under the rules of the New York Stock Exchange, and that at least one of them qualifies as an “audit committee financial expert” under the rules of the Securities and Exchange Commission (the “SEC”). Nominees for director are selected on the basis of their depth and breadth of experience, integrity, ability to make independent analytical inquiries, understanding of the Company’s business, and willingness to devote adequate time to Board duties. A more detailed description of the qualifications for directors is contained in the Company’s Corporate Governance Guidelines, a copy of which is available on the Company’s website at www.checkpointsystems.com.

The Governance and Nominating Committee annually reviews the individual skills and characteristics of the Directors, as well as the composition of the Board as a whole. This assessment includes a consideration of independence, diversity, age, skills, expertise, time availability, and industry backgrounds in the context of the needs of the Board and the Company. Although the Company has no formal policy regarding diversity, the Governance and Nominating Committee seeks a broad range of perspectives and considers both the personal characteristics (gender, ethnicity, age) and experience (industry, professional, public service) of Directors and prospective nominees to the Board. The Company recognizes the value of diversity and seeks to have a diverse Board, with experience in global retail, apparel and consumer goods along with experience in manufacturing, mergers and acquisitions and financial expertise. Directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively and should be committed to serve on the Board for an extended period of time.

Board Nomination Process. The process for identifying and evaluating nominees to the Board of Directors is initiated by identifying a slate of candidates who meet the criteria for selection as a nominee and have the specific qualities or skills being sought based on input from members of the Board. The Governance and Nominating Committee generally considers re-nomination of incumbent directors, provided they continue to meet the qualification criteria adopted by the Board of Directors. New director candidates are evaluated by the Governance and Nominating Committee by reviewing the candidates’ biographical information and qualification and checking the candidates’ references. Qualified nominees are interviewed by at least one member of the Governance and Nominating Committee and the Chairman of the Board. The Governance and Nominating Committee evaluates which of the prospective candidates are qualified to serve as a director and whether the Governance and Nominating Committee should recommend to the Board that the Board nominate, or elect to fill a vacancy with these final prospective candidates. Candidates recommended by the Governance and Nominating Committee are presented to the Board for selection as nominees to be presented for the approval of the shareholders or for election to fill a vacancy.

Shareholder Recommendations. The Governance and Nominating Committee uses a similar process to evaluate candidates recommended by shareholders. To date, the Company has not received any shareholders proposals to nominate a director.

In accordance with the Company’s bylaws, shareholder nominations for director may be made only by a shareholder who (1) was a shareholder of record (or, with respect to any beneficial owner, if different, on whose behalf such nomination is proposed to be made, only if such beneficial owner was the beneficial owner of shares of the Corporation) both at the time of giving the notice provided for in Section 2-10 of the Company’s bylaws and at the time of the annual meeting, (2) is entitled to vote at the annual meeting, and (3) has complied with Section 2-10 of the Company’s bylaws as to such nomination.

The bylaws require the nominating shareholder to (1) provide timely notice (which, for the 2014 annual meeting, must be received no earlier than January 31, 2014 nor later than March 22, 2014, subject to certain conditions if the meeting date changes by more than 30 days from the date of the 2013 annual meeting) in writing and in proper form to the Secretary of the Company at Checkpoint Systems, Inc. Checkpoint Systems, Inc. 101 Wolf Drive, Thorofare, New Jersey 08086, attention Corporate Secretary, and (2) provide any updates or supplements to such notice as required by Section 2-10 of the bylaws.

 

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The shareholder’s notice to the Secretary must set forth:

(1) As to the nominating shareholder, (A) the name and address of such person (including, if applicable, the name and address that appear on the Company’s books and records), (B) the class or series and number of shares of the Company that are, directly or indirectly, owned of record or beneficially owned by such person, or as to which such person has a right to acquire beneficial ownership at any time in the future, and (C) any “Disclosable Interests” of such person (as such term is defined by Section 2-9(c)(ii) of the bylaws, as modified by Section 2-10); and

(2) As to each person who a nominating shareholder proposes to nominate as a director, (A) the name and address of such person (including, if applicable, the name and address that appear on the Company’s books and records), (B) the class or series and number of shares of the Company that are, directly or indirectly, owned of record or beneficially owned by such person, or as to which such person has a right to acquire beneficial ownership at any time in the future, and (C) any “Disclosable Interests” of such person (as such term is defined by Section 2-9(c)(ii) of the bylaws, as modified by Section 2-10), (D) all information relating to such proposed nominee that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a contested election pursuant to Section 14(a) under the Securities Exchange Act of 1934 (including such proposed nominee’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (E) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings during the past three years, and any other material relationships, between or among the nominating shareholder, on the one hand, and each proposed nominee, and his or her respective affiliates and associates, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if the nominating shareholder were the “registrant” for purposes of such rule and the proposed nominee were a director or executive officer of such registrant; and

(3) Such other information (A) as may reasonably be required by the Company to determine the eligibility of such proposed nominee to serve as an independent director of the Company in accordance with the Company’s corporate governance guidelines or (B) that could be material to a reasonable shareholder’s understanding of the independence or lack of independence of such proposed nominee.

Board of Directors and Committees

Board Composition. With the exception of George Babich, Jr., who serves as an officer of the Company, all other directors have been determined to be independent by the Board of Directors, in accordance with the listing standards of the New York Stock Exchange, the Sarbanes-Oxley Act of 2002 and the rules and regulations of the SEC. The Board of Directors has made an affirmative determination that each of William S. Antle, III, Stephen N. David, Harald Einsmann, R. Keith Elliott, Julie S. England, Marc T. Giles, Jack W. Partridge and Sally Pearson (each, an “Independent Director” and together, the “Independent Directors”) has no material relationship with the Company.

These conclusions were based on a separate review with the Governance and Nominating Committee of each Independent Director’s background for any possible affiliations with or any compensation received (other than compensation for service on the Company’s Board of Directors or committees thereof) from the Company and/or its subsidiaries. Following these reviews, the Board of Directors determined that all of the Independent Directors were “independent” for purposes of the New York Stock Exchange listing standards and the categorical standards for independence set forth below. During the past three years, no Independent Director (or any member of an Independent Director’s immediate family) has:

 

   

been employed by the Company;

 

   

received more than $120,000 in direct compensation from the Company in any 12-month period (other than for director and committee fees and pension or other forms of deferred compensation for prior service);

 

   

been affiliated with or employed by an auditor of the Company or the Company’s internal audit staff;

 

   

been employed by any company whose compensation committee includes an officer of the Company; or

 

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been employed by a company that has made payments to, or received payments from, the Company in an amount that exceeds the greater of $1 million or 2% of such other company’s consolidated gross revenues.

Mr. Antle serves as Chairman of the Board of Directors. The Chairman of the Board is responsible for:

 

   

convening and presiding at all meetings of the board, including executive sessions of the independent directors;

 

   

coordinating the activities of our independent directors;

 

   

facilitating communications between the chief executive officer and other board members;

 

   

reviewing meeting agendas and schedules, as well as board materials, prior to board meetings;

 

   

assuring that appropriate topics are being discussed with sufficient time allocated for each; and

 

   

reviewing the results of the chief executive officer’s performance evaluation with the chief executive officer and with the chair of the Compensation Committee.

When performing these duties, the chairman of the board consults with the chairs of our other board committees, as needed, to avoid any dilution of their authority or responsibility.

Board Meetings.  The Board met fifteen times during 2012 (six regular meetings and nine telephonic meetings). Each Director attended at least 75% of the toal regularly-scheduled and special meetings of the Board of Directors and the committees on which he or she served (held during the period that he or she served). It has been our longstanding practice for all Directors to attend the Annual Meeting of Shareholders. All of the Board members, who were serving as Board members in 2012, attended the Company’s 2012 Annual Meeting of Shareholders.

The Board believes that the number of scheduled Board meetings should vary with circumstances, and that special meetings should be called as necessary. While the Board recognizes that directors discharge their duties in a variety of ways, including personal meetings and telephone contact with management and others regarding the business and affairs of the Company, the Board feels it is the responsibility of individual directors to make themselves available to attend both scheduled and special Board and committee meetings on a consistent basis. There are a minimum of four Board meetings annually.

Non-employee directors regularly meet in executive sessions without the presence of management. Mr. Antle, as Chairman of the Board, presides over such executive sessions. Non-employee directors include all Independent Directors as well as any other directors who are not officers of the Company, whether or not “independent” by virtue of a material relationship with the Company or otherwise.

During 2012, the Board and each of the Board Committees evaluated their own performance through self assessments.

 

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Board Committees.  It is the intent of the Board that Committee members and Committee Chairs will be rotated on a regular basis in accordance with a pre-determined rotation schedule. The assignment of Committee members and Committee Chairs shall be recommended by the Governance and Nominating Committee and approved by the Board. Although rotation is preferred there is no specific restriction on assignments outside of the rotation based on Committee requirements. The following table sets forth the Committees of the Board, the composition thereof, as of April 10, 2013, and the number of meetings of each Committee held in 2012:

 

Name of Committee   

Members of the

Committee

  

Number of

Meetings Held in 2012

 

Audit Committee

   R. Keith Elliott*      6   
   William S. Antle, III   
   Stephen N. David   
   Harald Einsmann   
   Julie S. England   

Compensation Committee

   Harald Einsmann*      5   
   William S. Antle, III   
   Jack W. Partridge   
   Sally Pearson   

Governance and Nominating Committee

   Jack W. Partridge*      6   
   Stephen N. David   
   R. Keith Elliott   
   Julie S. England   
   Sally Pearson   

 

 

* Chairperson.

Audit Committee.  The Audit Committee monitors the financial reporting policies and processes and system of internal controls of the Company. The Committee monitors the audit process and has sole responsibility for selecting the Company’s independent auditors. The Audit Committee operates under a charter which is available on the Company’s website at www.checkpointsystems.com. In addition to being “independent” directors within the meaning of the New York Stock Exchange listing standards, all members of the Audit Committee satisfy the heightened independence standards under the SEC rules. Dr. Einsmann has served on the Audit Committee of Harman International Industries, Inc., from 2007 to present. The Board has determined that such simultaneous audit committee service would not impair the ability of Dr. Einsmann to effectively serve on the Company’s Audit Committee.

The Board has determined that Messrs. Antle, Elliott and Einsmann are “audit committee financial experts” as that term is defined in Item 407(d)(5) of Regulation S-K of the Securities Exchange Act of 1934. Item 407(d)(5) further provides for the following safe harbor:

 

(i) A person who is determined to be an audit committee financial expert will not be deemed an expert for any other purpose, including without limitation for purposes of section 11 of the Securities Act of 1933 (15 U.S.C. 77k), as a result of being designated or identified as an audit committee financial expert pursuant to this Item 407.

 

(ii) The designation or identification of a person as an audit committee financial expert pursuant to this Item 407 does not impose on such person any duties, obligations or liability that are greater than the duties, obligations and liability imposed on such person as a member of the audit committee and board of directors in the absence of such designation or identification.

 

(iii) The designation or identification of a person as an audit committee financial expert pursuant to this Item 407 does not affect the duties, obligations or liability of any other member of the audit committee or board of directors.

Compensation Committee.  The Compensation Committee is responsible for reviewing the performance of the Chief Executive Officer and acts at various times during the year to approve salaries, benefits and compensation arrangements for the Company’s officers, including the Chief Executive Officer, and to grant stock compensation

 

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and other equity based awards. The compensation paid to employee directors is approved by all of the Company’s independent directors. Each member of the Compensation Committee is independent as required by the New York Stock Exchange listing standards. The Compensation Committee operates under a charter, a copy of which is available on the Company’s website at www.checkpointsystems.com.

Consistent with new SEC disclosure requirements, we have assessed the Company’s compensation programs and have concluded that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect on the company.

Compensation Committee Interlocks and Insider Participation.  The Compensation Committee members have no interlocking relationships required to be disclosed under SEC rules and regulations.

Board Leadership Structure and Rationale.  The Company’s business and affairs are managed by the Board currently comprised of 9 members. The Chairman of the Board is not an officer or employee of the Company. Mr. Babich, the Company’s President and CEO, is a member of the Board and is the only member of the Board who is employed by the Company. Mr. Babich is not a member of any of the Board’s three standing committees. The roles of Chairman of the Board and Chief Executive Officer were split in May 2012 to allow Mr. Babich to focus on the operational issues facing the Company while the board continued to provide strategic oversight, perspective and guidance to the Company’s leadership team.

Governance and Nominating Committee.  The Governance and Nominating Committee provides advice to the full Board with respect to: (a) Board organization, membership and function; (b) Committee structure and membership; and (c) succession planning for the executive management of the Company. In carrying out its duties, the Governance and Nominating Committee has also been delegated the responsibility to: determine criteria for the selection and qualification of the Board members; recommend for Board approval persons to fill vacancies on the Board which occur between annual meetings; evaluate, at least annually, each Board member’s “independence” and make recommendations, at least annually, regarding each Board member’s “independence” status consistent with then applicable listing and legal requirements; make recommendations regarding director orientation and continuing education; consider the effectiveness of corporate governance practices and policies followed by the Company and the Board; and conduct at least annually a performance assessment of the Board. Each member of the Governance and Nominating Committee is independent as required by the New York Stock Exchange listing standards. The Governance and Nominating Committee operates under a charter, a copy of which is available on the Company’s website at www.checkpointsystems.com.

Risk Oversight.  Our Board of Directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance shareholder value. A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. Management is responsible for developing our business strategy, identifying and assessing the related risks and establishing appropriate risk management practices. Our Board of Directors approves our business strategy, reviews management’s assessment of the related risk, and determines with management the appropriate level of risk for the Company.

Our Board of Directors administers its risk oversight function with respect to our operating risk as a whole, and meets with management to receive updates with respect to our operations, business strategies and the monitoring of related risks. The Board also delegates oversight to Board committees to oversee selected elements of risk:

 

   

Our Audit Committee oversees financial risk exposures, including monitoring the integrity of the financial statements and internal controls over financial reporting, and ensuring the independence of the independent auditor of the Company. The Audit Committee receives an annual risk and internal controls assessment report from the Company’s internal auditors. The Audit Committee also assists the Board of Directors in fulfilling its oversight responsibility with respect to compliance with legal and regulatory matters related to the Company’s financial statements and meets at least quarterly with our financial management, independent auditors and legal advisors for updates on risks related to our financial reporting function. The Audit Committee also monitors our whistleblower hot line with respect to financial reporting matters.

 

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Our Governance and Nominating Committee oversees governance related risks by working with management to establish corporate governance guidelines applicable to the Company, recommendations regarding director nominees, the determination of director independence, Board leadership structure and membership on Board Committees.

 

   

Our Compensation Committee oversees risk management by participating in the creation and subsequent review and approval of compensation structures that create incentives that encourage the appropriate level of risk-taking behavior consistent with the Company’s business.

Board Compensation. Directors receive reimbursement of out-of-pocket expenses for attending Board and Committee meetings. Employee directors receive no additional compensation for attending Board and Committee meetings. Set forth below is the compensation received in 2012 for non-employee directors.

Non-Employee Director Compensation

The following table sets forth the amount of various cash payments to non-employee directors for board and committee service in 2012.

 

Type of Compensation   

Amount of

Payment

 

Annual Retainer — Board Members

   $ 30,000   

Additional Annual Retainer — Chairman of the Board(1)

   $ 60,000   

Additional Annual Retainer — Committee Chairpersons

   $ 7,500   

Additional Annual Retainer — Audit Committee Chairperson

   $ 10,000   

In Person Board Attendance Fee (per day)

   $ 2,000   

Telephonic Board and Committee Meetings

   $ 1,000   

In Person Committee Meetings

   $ 2,000   

 

(1) The Board approved an increase of the Chairman’s Annual Compensation from $30,000 per year to $60,000 for the period May 2, 2012 through May 30, 2013. The Chairman’s compensation will revert to $30,000 per year on May 31, 2013.

DIRECTOR COMPENSATION FOR 2012

 

Name   

Fees earned or

paid in cash

($)(1)

    

Stock

Awards

($)(2)(3)

    

All Other

Compensation

($)(4)

    

Total

($)

 

William S. Antle, III

     119,039         66,828         29,760         215,627   

George Babich, Jr.

     29,541                         29,541   

Stephen N. David

     21,568         83,800         5,392         110,760   

Harald Einsmann

     73,537         66,828                 140,365   

R. Keith Elliott

     82,938         66,828                 149,766   

Julie S. England

     73,000         66,828                 139,828   

Jack W. Partridge

     83,202         66,828                 150,030   

Sally Pearson

     79,000         66,828                 145,828   

Robert N. Wildrick(5)

     20,875         66,828         19,875         87,703   

 

(1) Amounts reflect compensation earned by each director during 2012. Messrs. Antle, David and Wildrick elected to defer their earned fees into phantom restricted stock under the Directors’ Deferred Compensation Plan.

 

(2) The amounts shown represent the aggregate grant date fair value of stock awards granted during 2012, determined in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, “Compensation — Stock Compensation” (“ASC Topic 718”). The valuation assumptions used in determining such amounts are described in Note 1 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ending December 30, 2012, and filed on March 5, 2013.

 

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(3) During 2012, each director was awarded 7,000 restricted stock units (grant date fair value of $7.6375), which vest over a one year period. For each director who was awarded 7,000 restricted stock units who elected to defer their restricted stock units upon vesting, a 25% or 1,750 share matching restricted stock unit grant (grant date fair value of $7.6375), was awarded pursuant to the terms of the Directors’ Deferred Compensation Plan.

 

(4) The amounts shown represent the fiscal 2012 Company match under the Directors’ Deferred Compensation Plan. The Company credits each participant with a match equal to 25% of any fees earned in cash and deferred into phantom restricted stock units in accordance with the Plan. The match for these deferrals vest one year from the date of grant.

 

(5) Mr. Wildrick retired from the Company’s Board on April 13, 2012.

As of December 30, 2012, each director has the following number of options and stock awards outstanding, respectively: Mr. Antle, 42,000 and 61,250; Mr. David, 10,000 and -0-; Dr. Einsmann, 22,000 and 61,250; Mr. Elliott, 32,000 and 61,250; Ms. England 10,000 and 17,500; Mr. Partridge, 32,000 and 61,250; and Ms. Pearson, 37,000 and 56,000.

Awards to Non-Employee Directors and Other Compensation.

Under the Company’s 2004 Omnibus Incentive Compensation Plan (the “Omnibus Plan”), non-employee directors are eligible to receive equity-based compensation awards, including non-qualified stock options to purchase Common Stock of the Company. Pursuant to the terms of the Omnibus Plan, no director may receive total stock-denominated awards in a calendar year which correspond to more than 250,000 shares of Common Stock of the Company.

Each non-employee director receives a non-qualified stock option grant to purchase 10,000 shares of the Company’s common stock upon his or her initial election as a director. Beginning in 2006, pursuant to a board resolution, directors also receive an annual grant of 7,000 Restricted Stock Units (RSUs). The RSUs vest one year from the date of grant and a Director may elect to defer the receipt of the RSUs upon vesting under the Directors Deferred Compensation Plan. The Company credits each participant with a match equal to 25% of any fees earned and deferred into phantom restricted stock units in accordance with the Plan. The match for these deferrals vest one year from the date of grant.

Under the Company’s Directors’ Deferred Compensation Plan, non-employee directors may defer all or a portion of their cash compensation to a deferred compensation account. Under the Directors’ Deferred Compensation Plan, non-employee directors may elect to: (1) receive cash for all services; (2) defer a percentage of cash compensation and receive 125% of the value of the deferred amounts in phantom common stock of the Company, valued on the last trading day of the calendar quarter in which he or she would have received a cash payment; provided, however, that any such shares that are deferred may generally not be distributed to the director until the earlier of the director’s separation from service or death; or (3) any combination thereof.

Shareholder Access to Directors

Generally, shareholders who have questions or concerns regarding the Company should contact the Investor Relations department at (856) 848-1800, Ext. 2174. Any shareholders, however, who wish to address questions regarding the business or affairs of the Company directly with the Board of Directors, or any individual director, should direct his or her questions in writing to any director or to all directors c/o Checkpoint Systems, Inc. 101 Wolf Drive, Thorofare, New Jersey 08086.

 

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

In 2012, Checkpoint went through a series of sweeping changes in response to ongoing economic uncertainty and operational challenges. Mr. van der Merwe retired from the Company on May 3, 2012. Mr. Babich was appointed as the Interim CEO on May 3, 2012 and has since been appointed as permanent CEO effective February 4, 2013. References to Mr. van der Merwe are included in the CD&A, Summary Compensation Table and other executive compensation tables because he was CEO for a portion of 2012.

The Compensation Committee has developed and implemented compensation policies, plans and programs that seek to enhance shareholder value by aligning the financial interests of executive officers with those of shareholders. Annual base salary, annual incentive bonuses, and long-term incentive compensation are tied to performance in a manner that aims to encourage a sharp and continuing focus on effective capital allocation, cash flow management, revenue growth and long-term profitability, while motivating senior management to perform to the full extent of their abilities in the long-term interests of shareholders. The Company’s executive compensation programs also provide an important incentive in attracting and retaining talented executive officers.

Consideration of Shareholder Say-on-Pay Vote

The Company provides its shareholders with the opportunity to cast an annual advisory vote on executive compensation (a “say-on-pay proposal”). At the Company’s annual meeting of shareholders held in May 2012, a substantial majority of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Compensation Committee will continue to consider the outcome of say-on-pay proposals when making future compensation decisions for the named executive officers (NEOs).

Oversight of the Executive Compensation Program

The Compensation Committee provides oversight of and has overall responsibility for the Company’s executive compensation programs and established the specific compensation for the Company’s Named Executive Officers. The members of the Committee are: William S. Antle III, Harald Einsmann, Chairperson, Jack W. Partridge and Sally Pearson. In order to maintain objectivity, Committee members, who are all independent directors, have a three-year rotation schedule. The chair rotates every two years. Mr. Einsmann was appointed as Chairperson in May 2012. The Committee may retain the services of an outside compensation consultant to support the Committee’s oversight of the executive compensation programs. During fiscal year 2012, the Committee did not engage the services of any outside compensation consultants to review executive compensation.

Management’s Role in the Executive Compensation Process

The Company’s CEO and Vice President of Global Compensation, Benefits & HRIS, each played an important role in the Committee’s executive compensation process for fiscal year 2012. For fiscal year 2012, these executives provided their perspectives to the Committee regarding both executive compensation matters generally and the performance of the executives reporting to Mr. van der Merwe. At the Committee’s February 2012 meeting to approve 2011 incentive compensation and 2012 long-term incentive grants, these executives presented recommendations to the Committee on annual bonuses and long-term incentive compensation strategy. The Committee exercised its independent discretion regarding whether to accept management’s recommendations and made final decisions about each executive officer’s compensation levels and targets in executive session without management present.

The Role of the Consultants in the Executive Compensation Process

Mercer (a Marsh & McLennan Company specializing in global consulting for talent, health, retirement and investments) has been a consultant to the Compensation Committee since 2004 and representatives of Mercer have historically attended Committee meetings and attended executive sessions as requested by the Committee

 

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chairperson. In 2012, Mercer did not provide any compensation consulting services to Checkpoint and did not attend any of our Compensation Committee meetings. Specific to 2012 compensation the process included analyses that were conducted by Mercer in 2011, as well as 2012 published survey data from Mercer in making compensation decisions for the NEOs as it pertained to salary, bonus and long-term incentive grants.

Our Executive Compensation Program Objectives

This section covers the objectives of the executive compensation program, including the types of behavior and focus the program is designed to reward and how the various compensation components fit into the program. The following core principles reflect our compensation philosophy and objectives. The Company’s compensation program is intended to encourage superior performance and rewards executives only when specific results have been attained. The program is used to reinforce and encourage the attainment of performance objectives. Ultimately, executives who do not meet expected levels of performance over time could be terminated.

1. Provide Competitive Compensation to Executives

The Company operates in a competitive market for executive talent and aims to provide compensation that is sufficient to attract and retain the best talent. We have articulated a philosophy for competitive pay with respect to each compensation element and with respect to the compensation elements in the aggregate, as described below. In determining what constitutes the “market” against which NEO pay is evaluated for appropriateness, the Committee referenced broader published survey data in 2012. The source of our 2012 published survey data was Mercer.

In 2012, the Committee moved away from utilizing a formal peer group in order to save on external consulting fees for peer group analyses and because the annual long-term incentive plans no longer utilize peer group performance to determine payouts. The long-term incentive plans payout based on either an internal performance metric and/or performance versus a broader index (i.e. the Russell 2000). As stated in the above paragraph, we used published survey data to benchmark NEO compensation in 2012. The following surveys were referenced when benchmarking each NEO for 2012: 2012 Spain Total Remuneration Survey (TRS), 2012 Mercer United Kingdom Total Remuneration Survey (TRS) and 2012 Mercer United States Market Benchmark Database (MBD).

Competitive data is compiled from published surveys to provide information on the magnitude of total executive pay, the mix between base salary, annual incentives and long-term incentives, and executive compensation practices and plan designs. The broader published survey data focuses on (i) general industry companies ranging in revenue size from $375 Million to $1.5 Billion and (ii) companies within the electronics and general manufacturing industries. This data, which includes broadly-available compensation survey data from leading survey providers, including Mercer and other companies, is used to provide a reference of competitive pay data for purposes of consistency. The Committee reviews and considers the aggregated survey data for purposes of developing a baseline understanding of types of compensation, including compensation levels and elements derived from this supplementary pooled data. The Committee does not see the identity of any of the surveyed companies and the aggregated data is reviewed to ensure that our compensation levels and elements are consistent with market standards and norms.

The survey data identifies the competitive market for pay for individual positions. The Company’s executive pay packages are evaluated against this survey data and, in combination with other factors, judgments about appropriate compensation levels are determined. The Committee’s philosophy is to, over time, provide base salaries (fixed salaries) that fall within a competitive range and take into consideration a series of factors, such as compensation levels required to recruit talent capable of leading significant growth. Our NEO base salaries are intended to align with the median of the published survey data. Performance-based, variable incentives are emphasized to deliver total compensation levels that vary depending upon individual and Company performance. In 2012, we determined total cash compensation (“TCC”) comparative levels for the NEOs based on published survey data.

 

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2. Emphasize Variable Performance Pay Over Fixed Pay and Long-Term Goal Attainment Over Short-Term Goal Attainment

The Committee believes that the higher the level of executive responsibility, the more pay should be tied to performance. The targeted compensation mix is aligned with competitive market pay mix practices so that on average approximately 40% of each NEOs compensation is in base salary and approximately 60% is in variable compensation. In keeping with this philosophy, 31% of the CEO’s compensation is in base salary. As described more fully below, variable compensation consists of awards for both annual and long-term performance. The mix of variable compensation is intended to emphasize achievement of both short and long range goals. As a result, of the total amount of variable compensation target opportunity, approximately one-half focuses on long-term performance and one-half focuses on the achievement of annual goals. This mix helps us support the objective of focusing the NEOs on achieving long-term results, but also placing meaningful weight on the achievement of annual operating objectives.

 

LOGO

 

3. Align our Compensation with Shareholders’ Economic Interests

The Committee’s ultimate objective is to increase the value of the Company’s shares for our shareholders. The compensation program is designed to align management with this objective through the use of long-term incentives that are delivered in the form of equity, including stock options and performance-contingent stock grants. In other words, a significant portion of each executive’s compensation package serves to align the level of compensation received with the benefits delivered to shareholders. The Company also has share ownership guidelines that require each executive and director to hold a meaningful economic stake in our stock. Finally, the Company offers a voluntary deferred compensation plan under which executives may defer cash compensation in the form of stock units, which encourages executives to invest in Company stock. These programs are described in more detail below. See “Elements of the Executive Compensation Program”.

Differentiate Compensation for Individual Performance

The Committee aims to foster a performance-oriented culture that recognizes differing contributions from our executives. The executive compensation program is administered to reinforce the specific contributions of individuals in furthering our goals. Specifically, each year an annual performance evaluation of each NEO is completed to assess individual contributions to the Company. The evaluation for NEOs other than the CEO is

 

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conducted by the CEO and reviewed by the Committee. The CEO evaluation is conducted by the Committee for determining overall performance and related compensation decisions. Performance is assessed based on agreed upon objectives and other criteria, such as contributions made outside specified goals. The performance rating of each individual NEO, in addition to the performance of the Company as a whole, is measured through annual and long-term incentive goals, directly affecting compensation levels. For example, base salary increases, annual incentive awards, and grants of long-term incentives are tied to both Company and individual performance. Individual performance is determined by a review of management business objectives (“MBOs”), leadership competencies and other significant contributions made outside stated MBOs. In 2012, Corporate Financial Performance was measured by Revenue Growth, Operating Margin and Return on Invested Capital (ROIC). The CEO’s bonus target opportunity was 100% of base salary and the other NEOs’ bonus targets were 75% of base salary.

The Committee aims to establish executive compensation that is competitive on a global basis recognizing that the business operates globally and that we need talent that can be recruited from a variety of locations around the world. Our compensation structure also is intended to enable our most senior executives to maintain a consistent emphasis on achieving annual and long-term performance results regardless of location. Total compensation levels for each NEO may differ based on his or her responsibilities, level of performance, and geographic location to account for cost of living differences.

 

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Elements of the Executive Compensation Program

This section describes each element of compensation used by us, the rationale for each element, why the Committee chose to incorporate each element into our compensation practices, how each element furthers the Committee’s compensation goals and philosophies and the methodology used to determine the amount of each element.

The primary elements of the executive compensation program are summarized as follows:

 

Element

 

Objective Achieved

 

Purpose

 

Competitive Position

Base salary  

Pay-for-performance

 

Quality of talent to lead growth

 

Provide annual cash income based on:

 

• level of responsibilty, experience and performance

 

• comparison to market pay information

 

Compared to 25-75th percentile range of published survey data

 

Actual base salary will vary based on the individual’s performance and proven capabilities

Annual cash incentive   Pay-for-performance  

Motivate and reward achievement of the following annual performance goals:

 

• key corporate financial goals

 

• other corporate financial and strategic performance goals

 

• performance of the business unit or staff function of the individual, as applicable

 

Target compared to median of published survey data

 

Actual payout will vary based on actual corporate and business unit or staff function performance

Long-term equity incentive  

Shareholder alignment

 

Focus on long-term success

 

Pay-for-performance

 

Quality of talent

 

Provide an incentive to deliver shareholder value and to achieve our long-term objectives, through awards of:

 

• performance-based restricted share units

 

• stock option grants

 

Target compared to median of published survey data

 

Actual payout of performance-based restricted share units will vary based on actual corporate performance

 

Actual payout will vary based on actual stock performance

Retirement benefits   Quality of talent   Provide competitive retirement plan benefits through pension plans, 401(k) plan and other defined contribution plans   Benefits comparable to published survey data
Post-termination compensation (severance and change in control)   Quality of talent  

Attract and retain executives critical to our long-term success and competitiveness:

 

• Severance Pay Plan, which provides eligible employees with payments and benefits in the event of certain involuntary terminations

 

• Executive Severance Plan, which provides executives payments in the event of a qualified separation of service following a change in control

  Subject to review and approval by the Committee on a case-by-case basis

 

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Base Salary

NEO base salaries are intended to provide a base level of fixed compensation for performance of the core function of each position’s responsibilities. Salary levels are set based on a variety of factors, including the executive’s responsibilities, skill, experience and performance, as well as competitive norms.

Salaries for NEOs may be adjusted periodically if a significant change in market salary level occurs, a NEO is promoted, or internal inequities warrant an adjustment. The CEO’s salary is established by the Committee. For other NEOs, the CEO recommends a base salary adjustment to the Committee for its review and approval. Salary increases are meant to make our base salaries competitive as compared to the published survey data, to recognize increased levels of responsibilities, and due to inflation. In 2012, none of our NEOs received base salary adjustments.

Annual Incentive

NEOs are also eligible for annual incentive awards, which are approved by the Committee. Annual incentive awards are dependent on the achievement of (i) the Company’s Corporate Financial Performance objectives and (ii) individual objectives (that is, MBOs). For 2012, performance awards were provided under the shareholder-approved Omnibus Plan. The purpose of the annual incentive awards is to reinforce the importance of attaining targeted financial performance and other objectives determined to be important for each year based on our business strategy. For 2012, the Corporate Financial Performance (CFP) measures were Revenue Growth, Operating Margin and Return on Invested Capital (ROIC).

The target annual incentive payouts for the NEOs for 2012, as approved by the Committee, were as follows:

 

NEO   Grade     Target MBO Payout as a
% of Base Salary
(If All Individual
MBO’s are Achieved)
    Threshold* MBO
Payout as % of
Base Salary
    Maximum MBO
Payout as % of
Base Salary
    Maximum Payout as
% of Base Salary
(If both MBO and
CFP are Achieved
at Maximum Levels)
 

George Babich, Jr.1

    25        n.a.        n.a.        n.a.        n.a.   

Raymond D. Andrews

    21        75%        15%        90%        135%   

Per H. Levin

    21        75%        15%        90%        135%   

S. James Wrigley

    21        75%        15%        90%        135%   

Farrokh K. Abadi

    21        75%        15%        90%        135%   

John R. Van Zile2

    21        75%        15%        90%        135%   

Robert P. van der Merwe3

    25        100%        25%        150%        150%   

 

* - no payout below threshold result

 

(1) Mr. Babich was appointed Interim CEO on May 3, 2012 and has since been appointed permanent CEO on February 4, 2013. He was not part of the MBO plan in 2012.

 

(2) Mr. Van Zile retired on August 16, 2012.

 

(3) Mr. van der Merwe retired as CEO & Chairman on May 3, 2012.

These levels were established to ensure a competitive annual incentive opportunity with a range of payouts tied to performance achievements, consistent with the philosophy of linking compensation to performance. Payment of maximum annual incentive amounts is targeted so that cash compensation approximates the 75th percentile of the published survey data, with strong business performance. The maximum percentage was determined by the Committee after reviewing market data.

After individual MBO results are tabulated, the Corporate Financial Performance multiplier is applied to calculate the final bonus. The Corporate Financial Performance multiplier can range from 0% up to 150%. If the 3 CFP metrics are achieved at threshold, the multiplier would be 25%. In 2012, Operating Margin had the highest weight (50%) in the plan for the NEOs, while Revenue Growth and ROIC were each weighted at 25%.

 

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MBOs and Incentive Payouts

Annual incentive compensation is determined on an individualized basis according to a list of MBOs, which is set for each of our executives, as recommended by the CEO and approved by the Committee, including each NEO, at the beginning of each year. Each NEO is eligible for a targeted payout, measured as a percentage of base salary for achieving the MBOs at target. Actual results against the stated MBO will determine the ultimate payout. The maximum payout percentages are set forth in the table above. For the maximum payout to be realized, all MBOs and Corporate Financial Performance need to be achieved at the maximum performance levels.

The MBOs are performance targets and are directly linked to each year’s financial and strategic objectives of the Company. In addition to a Corporate Financial Performance MBO, each executive is assigned between five and eight individual performance goals to achieve. The MBOs are assigned a weight based on their relative importance which corresponds to the portion of the annual incentive that is linked to achievement of a particular goal. If the MBO threshold achievement is reached, a portion of the annual incentive is paid. If it is not reached, that portion of the incentive is not paid. The Committee’s intent in establishing these goals and target percentages for each NEO is to provide a certain level of difficulty (compared to prior year goals) in achieving the goals and receiving annual incentive awards. Payment of annual incentives will vary from year to year based on both individual and Company performance.

A primary component of each NEO’s MBOs is the achievement of Corporate Financial Performance. In 2012, the Corporate Financial Performance multiplier acted as a modifier for bonus pool funding. For 2012, the following payout schedule applied to the NEOs:

 

           CKP Performance     Payout %  
Metric    Weight     Threshold     Target     Maximum     Threshold     Target     Maximum  

Revenue (as % of Target)

     25   $ 813.1M      $ 873.9M      $ 935.5M        25     100     150

Operating Margin

     50     5.04     6.60     7.61     25     100     150

ROIC

     25     4.29     6.30     7.85     25     100     150
       100     2012 CFP Multilpier        25     100     150

Based on actual 2012 results, the 2012 Corporate Financial Performance Multiplier was 0%, which resulted in no performance incentive payouts for our NEOs.

2012 Discretionary Bonuses

The Committee met in February 2013, to review overall Company performance within the context of a revised strategy and reforecast results. After reviewing all information related to 2012, the Committee approved discretionary bonuses for the NEOs as follows:

 

NEO    2012 Discretionary Bonus  

George Babich, Jr.

   $ 565,000   

Raymond D. Andrews

   $ 125,000   

Per H. Levin

   $ 275,000   

S. James Wrigley

   $ 325,000   

Farrokh K. Abadi

   $ 225,000   

 

Mr. Babich’s discretionary bonus was based on his Interim CEO agreement, which allowed the Board to award him a bonus based on the Board’s discretion. For the other listed NEOs, Mr. Babich recommended the amounts to the Committee and the Board based on our improved performance in the second half of 2012. Each of the listed NEOs had responsibility for (i) the execution of the $102 million Global Restructuring Plan, including Project LEAN, which delivered $14.1 million of incremental cost savings in the second half of 2012, and (ii) the objective to deliver $50 million to $60 million of working capital improvements by June 2013 of which $34.6 million were achieved in the second half of 2012, the first six months of the program. After reviewing this information, the Committee approved the discretionary bonuses.

 

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Long-Term Incentives

The Committee grants long-term compensation pursuant to the shareholder-approved Omnibus Plan. The plan provides that the Committee has the authority to award stock options (incentive and non-qualified stock options), stock appreciation rights, stock awards (restricted and unrestricted), phantom shares, dividend equivalent rights and cash awards to eligible individuals.

Long-term incentives are typically structured to reward multi-year performance, focusing both on the achievement of multi-year financial objectives and long-term increases in shareholder value. For NEOs, long-term incentive target amounts are set by referencing a variety of factors. Actual awards may fall above or below the target level (typically within 10-15%) for an individual based on the individual and/or Company performance.

In 2012, long-term incentive awards to NEOs were in the form of stock options (representing 30% of the total value of awards granted in 2012), restricted stock units or RSUs (representing 20% of the total value of awards granted in 2012) and performance shares (representing 50% of the total value of awards granted in 2012 at target performance shares issued). The Committee used published survey data to provide examples of target equity incentive awards granted to similarly situated executives as one reference in the target setting process. The targeted long-term incentive values for the NEOs when added to their targeted Total Cash Compensation (TCC = base salary + annual target incentive) opportunity, approximate the 75th percentile of published survey data for Total Direct Compensation (TDC = TCC + LTI).

The dollar amounts for stock options, RSUs and performance shares awarded during 2012 were converted into options and shares by estimating a stock price for the date of grant. The equity incentive award target amounts are recommended by management to the Committee for approval. The Committee, at its discretion, may modify the amounts recommended to take into account historical factors such as legacy grants, previous equity incentive awards received by an executive officer or prior awards granted to our other executive officers and/or to take into account management’s qualitative review of performance. In addition, the amount of equity incentive awards provided to NEOs may also be adjusted by the Committee based upon the level of achievement by the NEOs of the MBOs discussed above under the section regarding Annual Incentives. The Committee may also evaluate the expected future contributions of the NEOs to achieve our strategies when determining the long-term incentive awards to ensure proper retention and alignment of each NEO.

Awarding stock options, restricted stock units and performance shares reinforces the achievement of shareholder value objectives, because the ultimate award payout is denominated in our stock, reinforcing management’s alignment with shareholder interests. As more fully described below, the performance share program also provides an incentive to attain high-priority, multi-year financial objectives to reinforce management’s long-term performance orientation.

The following discussion provides additional detail regarding our stock options, RSUs and performance share grant practices and the policies behind these practices.

Stock Options

Stock options are used to provide an incentive to increase the share price of our stock. We believe stock options are particularly effective since a recipient receives economic value only when our share price appreciates. Option grants also support NEO retention by providing for vesting in installments over three years. If an NEO’s employment is terminated prior to vesting for any reason other than in connection with a Change in Control, any remaining unvested awards are forfeited. For all NEOs, vested awards may continue to be exercised for a defined period of time following termination of employment, which varies depending upon the reason for termination of employment. The ability to exercise the stock options for limited periods of time post-termination enables the employee to realize any gain on options that were earned prior to termination, which is consistent with the incentive aspect of the award. In the event of a Change in Control of the Company, any unvested options become fully vested and exercisable only if the NEO’s employment is also terminated without “cause” by the Committee or its successor. The Company provides for the vesting upon termination of employment in connection with a Change in Control of the Company in order to encourage executives to seek out and support transactions that are in the best interest of the Company and its shareholders even though they may personally experience potential loss of employment and other economic risk as a result of the transaction.

 

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The Committee follows a process of granting equity awards annually. This is typically reviewed at the first Committee meeting each year. The exercise price of an option is equal to the average trading price on the date of grant. Outside of this timeframe, grants are sometimes provided to new hires.

Restricted Stock Units (RSUs)

Restricted Stock Units are used to encourage retention with a time-vested, long-term incentive award to our NEOs. The other long-term incentive vehicles (stock options and performance shares), which are typically weighted at 70% of the grant value for an NEO, require an increase in stock price (in the case of stock options) or attainment of aggressive performance goals (in the case of performance shares). Approximately 30% of the total long-term incentive grant value is provided to our NEOs in the form of RSUs. The greater the Company’s stock price on the day the RSU vests, the greater the value delivered to the NEO.

Performance Shares

The Long Term Incentive Plan (“LTIP”), which was developed and adopted in 2005, provides for distributions under the plan in the form of shares of Company stock. With the introduction of this performance share plan, the Committee began a shift in the composition of our equity-based awards, in line with market trends, away from awarding primarily options and toward a mix of performance share awards and stock options, as appropriate for the individual receiving the awards.

Under the LTIP, a NEO is granted a target number of shares that would be paid to the NEO at the end of a three-year period if specific corporate performance objectives are met. The actual number of shares paid may range from 0% to 200% of the target award amount based on the achievement of performance objectives. The performance goals are Company-wide financial measures selected and set by the Committee and may be different for different performance periods. None of the awards granted under these plans have vested due to performance thresholds not being met.

2010 — 2012 Performance Shares

The 2010 — 2012 Performance Share plan uses 2 performance metrics: 3-year average Return on Invested Capital (ROIC) and EPS percent growth. The ROIC metric is measured on an absolute basis, while the EPS metric is measured on a relative basis versus the Russell 2000 Index. The program pays out in accordance with the following schedule:

 

          CKP Performance     Payout %  
Metric   Weight     Threshold     Target     Maximum     Threshold     Target     Maximum  

3-year average ROIC (absolute)

    50     9.5     10.0     10.5     50     100     200

3-year EPS % Growth (relative to Russell 2000)

    50    
 
25th
Percentile
  
  
   
 
50th
Percentile
  
  
   
 
75th
Percentile
  
  
    50     100     200

 

 

Payouts will be interpolated using linear regression for results between threshold and target, and target and maximum levels.

 

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2011 — 2013 Performance Shares

The 2011 — 2013 Performance Share plan uses 2 performance metrics: 3-year average Return on Invested Capital (ROIC) and EPS percent growth. The ROIC metric is measured on an absolute basis, while the EPS metric is measured on a relative basis versus the Russell 2000 Index. The program pays out in accordance with the following schedule:

 

          CKP Performance     Payout %  
Metric   Weight     Threshold     Target     Maximum     Threshold     Target     Maximum  

3-year average ROIC (absolute)

    50     9.0     11.0     13.0     50     100     200

3-year EPS % Growth (relative to Russell 2000)

    50    
 
25th
Percentile
  
  
   
 
50th
Percentile
  
  
   
 
75th
Percentile
  
  
    50     100     200

 

 

Payouts will be interpolated using linear regression for results between threshold and target, and target and maximum levels.

2012 — 2014 Performance Shares

The 2012 — 2014 Performance Share plan uses 1 performance metric: EBITDA growth. This performance goal has a potential to vest 1/3rd per year based upon obtaining the EBITDA goals listed in the table below for each of the performance periods. If the vesting in one performance period is missed, cumulative vesting will occur if the multiple periods’ average EBITDA growth is achieved. The program pays out in accordance with the following schedule:

 

Year    EBITDA Growth
(needed for 
period
vesting)
   

Period
Vesting

%

    EBITDA Growth
(needed for
cumulative vesting)
 

Cumulative
Vesting

%

 

2012

     25     33   25.0%     33

2013

     20     33   22.5% (2 yr avg)     66

2014

     10     34   18.3% (3 yr avg)     100

 

 

Performance Share Termination Provisions

If employment is terminated for any reason (other than change in control) prior to the end of the performance period, or if there is a change to ineligible status prior to the end of the performance period, all outstanding shares are canceled. Upon a termination due to a change in control (as defined below), a payout of shares at target, pro-rated for the full months elapsed during the performance period, is to be made within two and one-half months after the change in control takes effect or the termination occurs, whichever is later.

For purposes of the Performance Share Plan, a “change in control” of Checkpoint will occur if (i) any person or entity or group acting in concert (an “Acquirer”) acquires from the shareholders of the Company (whether through a merger, a consolidation, or otherwise) and possesses, directly or indirectly, the power to elect or appoint or approve the appointment of a majority of the Board of Directors and does, in fact, elect or appoint or approve the appointment of the majority of the Board; or (ii) an Acquirer obtains the right or power to elect a substitute or replacement Board, and does, in fact, exercise such right; or (iii) the shareholders of the Company approve an agreement for the sale or disposition by Checkpoint of substantially all of the Company’s assets to an Acquirer.

In the event of a change in control as defined above, a termination due to a change in control shall have occurred only if one of the following occurs within 90 days before or after the date of the change in control: (i) the employee’s employment is terminated by Checkpoint or the Acquirer without cause (as defined below); (ii) the employee is assigned duties substantially inconsistent with his or her position, duties, responsibilities or status, or the employee’s duties are substantially reduced; (iii) the employee’s principal office is relocated more than thirty (30) miles from our current principal office location; or (iv) the employee’s base salary is reduced.

 

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For purposes of the Performance Share Plan, “cause” means (i) the employee’s willful and continued insubordination or failure or refusal to perform his or her duties after notice by the Company specifically identifying the offending conduct; (ii) dishonesty in the performance of job duties; (iii) the employee’s subjection to a judgment, decree or final order of a judicial or administrative body of competent jurisdiction effectively preventing participant from the substantial performance of his or her duties or causing substantial damage to the Company or to its business reputation; or (iv) employee’s conviction of a felony or a crime involving moral turpitude which, in the reasonable judgment of the Company, renders participant unfit to continue his or her office or causes substantial damage to the Company or its business reputation.

Share Ownership Guidelines

To ensure that the interests of all executives and senior managers are aligned with shareholder interests, the Board has established a program that requires that the non-employee directors and NEOs (and other executives and managers) have a meaningful equity stake in the Company by investing and holding a significant amount of our stock. The Stock Ownership Program sets stock ownership levels for the NEOs, which are set forth in the table below. Vested and unvested “in the money” stock options, vested and unvested restricted stock, deferred compensation units and all of the stock held in our 423 Employee Stock Purchase Plan count toward compliance. Each NEO has five years from their appointment date in which to meet their holding requirements.

We changed our share ownership guidelines in 2008 because the drop in stock price due to poor economic conditions would have made the ownership targets unrealistically high under the prior guidelines. In 2008, the guidelines were amended to provide that for an NEO with a grade of 18 or higher, including the CEO, the level is set as the lesser of (i) a dollar value or (ii) a fixed number of shares. The current guidelines are set forth in the table below:

 

NEO   Grade     Salary
(USD)1
    Multiplier     Level of
Stock
Ownership
Required2
    Amount
Required
   

Status as of

10 April 2013

  Required by
Date
 

George Babich, Jr.

    25      $ 850,000        4        226,667      $ 3,400,000      Meets     May-17   

S. James Wrigley

    21      $ 436,800        3        87,360      $ 1,310,400      Does not meet     Mar-15   

Per H. Levin

    21      $ 377,000        3        75,400      $ 1,131,000      Meets     Mar-09   

Raymond D. Andrews

    21      $ 357,000        3        71,400      $ 1,071,000      Meets     Sep-13   

Farrokh K. Abadi

    21      $ 315,000        3        63,000      $ 945,000      Meets     Dec-12   

 

 

 

(1) FX Rates: 1 EUR = 1.3 USD; 1 GBP = 1.6 USD; excludes pension amounts captured as salary in Summary Compensation Table

 

(2) Assumes a stock price of $15

Deferred Compensation Program

To assist NEOs in meeting their capital accumulation objectives and to provide for income tax deferral opportunities, each NEO may defer up to 50% of base salary and up to 100% of bonus (Annual Cash Incentive Compensation) into our deferred compensation plan. This facilitates ownership of our stock by participants. The Company currently match 25% of the deferred amounts, up to the indicated maximum amounts. The 25% match is provided to give executives an incentive to acquire and hold Company stock. It also facilitates compliance with the Share Ownership Guidelines discussed above. All deferred amounts are invested in Company stock, with a three-year vesting period, except for executives 55 years old or older, for whom the match vests immediately.

Benefits and Perquisites

The NEOs generally receive the same benefits as other employees. During 2011, nominal benefits and perquisites were paid to NEOs. These are described more fully in the footnotes to the Summary Compensation Table.

 

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Severance Policy for NEOs

The Committee believes that providing a reasonable severance payment in the event of termination of employment of an NEO is an important retention tool and provides security to the NEOs with respect to their terms of employment. The severance policy for NEOs provides severance benefits for terminations other than voluntary terminations or terminations for “cause”. Please see the section below titled “Potential Payments Upon Termination or Change in Control” for a description of the terms of these agreements.

Severance/Change in Control Arrangements for NEOs

The Board has established certain severance arrangements (including benefits upon a Change in Control) under a Termination Policy for our NEOs. Our policies on severance are intended to provide fair and equitable compensation in the event of termination of employment.

For Change in Control situations, the policy helps to ensure that NEOs will undertake transactions and other corporate actions that may be in the shareholders’ best interests, but that may lead to the termination of the NEOs’ employment. By providing severance upon termination of employment in connection with a Change in Control of the Company, we intend to provide executive compensation that is sufficient to mitigate the risk of loss of employment and make the executives willing to undertake a transaction.

Severance includes:

 

   

Levels of severance that are competitive with the market; for executives the total amount of severance is directly tied to the length of the non-compete period.

 

   

Upon a Change in Control, a requirement that an executive actually be terminated without Cause, or terminate for Good Reason, in order to receive severance. Our policies for this severance reflect that an executive should face a true economic loss before severance is collected.

The purpose of the Termination Policy for executives is to provide a fair framework in the event of the termination of employment of executives for reasons other than for Cause or Good Reason. The policy does not apply to executives who voluntarily terminate or who are terminated for Cause. The amount of severance is the greater of that provided by the policy, any employment contract, local law or other entitlement, but is not cumulative. With respect to the NEOs, any severance provided under the Termination Policy would be in excess of any severance the individual NEO may be entitled to under the NEOs employment agreement, and therefore severance is generally not paid pursuant to the terms of the NEO employment agreements but rather the Termination Policy. A condition of receiving severance under the policy is that the executive sign a general release and non-compete agreement in a form satisfactory to us at the time of termination. The non-compete period under this policy is twelve months. The severance payment period under the Termination Policy in the event of termination not in connection with a Change in Control is 24 months for the NEOs.

If an NEO is terminated pursuant to a Change in Control as defined in the Termination Policy, the NEO will be entitled to receive the following:

 

   

The executive’s base salary for a period equal to 1.5 times the severance payment period;

 

   

Continued participation in our welfare benefit plans for the period during which severance is paid.

Additional Tax and Accounting Implications

Section 162(m) of the Internal Revenue Code limits to $1 million per year the federal income tax deduction to public corporations for compensation paid for any fiscal year to the corporation’s Chief Executive Officer and the other NEOs (other than the CFO) included in the Summary Compensation Table. This limitation does not apply to qualifying “performance-based compensation.” Section 162(m) considerations, as well as financial accounting implications, are factors considered when developing executive compensation programs. However, the Committee primarily considers our business purpose when structuring compensation arrangements with NEOs as appropriate to support the Company’s strategic business objectives and the attraction and retention of executives.

 

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SUMMARY COMPENSATION TABLE FOR FISCAL YEARS 2010, 2011, AND 2012

The following table shows the compensation for each of the Named Executive Officers (collectively, the “NEOs”) for fiscal years 2010, 2011, and 2012:

 

Name and

Principal Position

  Year    

Salary

($)

   

Bonus

($)(1)

   

Stock

Awards

($)(2)

   

Option

Awards

($)(2)

   

Non-Equity

Incentive Plan

Compensation

($)(3)

   

All Other

Compensation

($)(4)

   

Total

($)

 

George Babich, Jr.

    2012        562,308        565,000        194,064        477,646               91,137        1,890,155   

President and Chief

    2011                      147,656                      76,555        224,211   

Executive Officer(6)

    2010                      165,068                      81,000        246,068   

Raymond D. Andrews

    2012        363,865        125,000        101,931        45,017               29,670        665,483   

Senior Vice President and

    2011        357,000               143,367        63,337               23,452        587,156   

Chief Financial Officer(7)

    2010        351,900               138,156        76,346        96,847        37,227        700,476   

S. James Wrigley

    2012 (5)      458,589        325,000        114,583        50,678               3,914        952,764   

President,

    2011        453,218               161,302        71,251               4,016        689,787   

Apparel Labeling Solutions

    2010        340,939               142,234        361,920        104,601        3,872        953,566   

Per H. Levin

    2012 (5)      423,043        275,000        101,931        45,017               17,250        862,241   

President and Chief Sales Officer,

    2011        458,234               143,367        63,337        230,454        11,658        907,050   

Shrink Management Solutions and

    2010        437,172               155,430        85,886        115,644        51,271        845,403   

Merchandise Visibility Solutions

               

Farrokh K. Abadi

    2012        321,058        225,000        101,931        45,017               33,007        726,013   

President and Chief Operating Officer,

    2011        311,020               143,367        63,337               20,269        537,993   

Shrink Management Solutions

    2010        299,423               120,883        66,803        95,490        18,785        601,384   

Robert P. van der Merwe

    2012        375,962                                    2,176,664        2,552,626   

Former Chairman, President and

    2011        850,000               716,905        316,670               60,511        1,944,086   

Chief Executive Officer(8)

    2010        848,365               587,172        324,472        350,000        122,586        2,232,595   

John R. Van Zile

    2012        222,547               89,041        39,411               116,933        467,932   

Former Senior Vice President, General

    2011        290,850               125,455        55,414               6,961        478,680   

Counsel and Secretary(9)

    2010        286,695               120,883        66,803        87,094        30,503        591,978   

 

 

 

(1) These amounts represent discretionary performance bonuses earned during fiscal years 2012, 2011 and 2010.

 

(2) The amounts shown represent the aggregate grant date fair value of stock awards and stock options granted during 2012, 2011 and 2010, determined in accordance with ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 1 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ending December 30, 2012. The maximum possible grant date value of performance shares granted during 2012 was as follows: $72,773 for Mr. Andrews; $81,840 for Mr. Wrigley; $72,773 for Mr. Levin; $72,773 for Mr. Abadi, and $63,587 for Mr. Van Zile. The value of the stock awards and option awards granted to the NEO in 2012 is reflected on the Grants of Plan–Based Award table below. In accordance with Mr. van der Merwe’s employment agreement, all unvested stock options and stock awards became vested upon his retirement. All unvested stock awards and option awards granted to Mr. Van Zile were forfeited upon his retirement in 2012.

 

(3) Non-Equity Incentive Plan Compensation is comprised of annual incentive bonuses and individual performance incentive bonuses awarded under the Omnibus Plan earned in fiscal 2012 and paid in 2013, earned in fiscal 2011 and paid in 2012, or earned in fiscal 2010 and paid in 2011, as applicable. In 2012, no NEO realized an annual incentive bonus as a result of quantitative objectives regarding financial performance not being met.

 

(4) The amounts reported in the All Other Compensation column for fiscal 2012 include: (1) Mr. Babich’s $61,298 deferred compensation match expense under the Company’s Executive Deferred Compensation Plan, director compensation of $29,541, and $298 for life insurance premiums; (2) Mr. Andrews’ $19,406 related to transition reimbursements, $9,753 deferred compensation match expense under the Company’s Executive Deferred Compensation Plan, and $511 for life insurance premiums; (3) Mr. Wrigley’s $3,914 related to the payment of health benefits; (4) Mr. Levin’s $13,771 deferred compensation match expense under the Company’s Executive Deferred Compensation Plan and $3,479 related to the payment of health benefits; (5) Mr. Abadi’s $16,264 related to transition reimbursements, $16,232 deferred compensation match expense under the Company’s Executive Deferred Compensation Plan, and $511 for life insurance premiums; (6) Mr. van der Merwe’s $2,125,676 management transition compensation pursuant to his employment agreement, $33,101 related to unused vacation, $17,674 deferred compensation match expense under the Company’s Executive Deferred Compensation Plan, and $213 for life insurance premiums, and (7) Mr. Van Zile’s $89,492 management transition compensation pursuant to his severance agreement, $15,596 related to transition reimbursements, $11,349 related to unused vacation, and $496 for life insurance premiums.

 

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(5) Mr. Wrigley’s 2012 Salary and All Other Compensation was paid in British Pounds and converted to USD using the Oanda.com YTD average exchange rate of 1.58474 as of December 30, 2012. Mr. Levin’s 2012 Salary and All Other Compensation was paid in Euros and converted to USD using the Oanda.com YTD average exchange rate of 1.28628 as of December 30, 2012.

 

(6) Mr. Babich was appointed interim Chief Executive Officer and President on May 3, 2012. Mr. Babich’s interim status was eliminated on February 4, 2013 as he was appointed President and Chief Executive Officer.

 

(7) Mr. Andrews was appointed Senior Vice President and Chief Financial Officer on December 6, 2007.

 

(8) Mr. van der Merwe left the Company on May 3, 2012.

 

(9) Mr. Van Zile left the Company on September 7, 2012.

Employment Agreement with Mr. Babich

On May 2, 2012, the Board appointed George Babich, Jr. as interim President and Chief Executive Officer. Under a letter agreement, Mr. Babich was entitled to receive an annual base salary of $850,000. Additionally, under the letter agreement, Mr. Babich received the following equity awards: 32,000 shares of Company common stock (i.e., “fully vested RSUs”), to be awarded at the rate of 8,000 shares as of the first day of each full calendar quarter of his service as interim CEO. For the period beginning on May 2, 2012 and ending June 30, 2012, he received a pro-rated portion of 8,000 shares as of May 2, 2012, based on his service for 60 days in the 91-day second quarter of 2012. For the calendar quarter beginning on April 1, 2013, he was to receive the balance of the 32,000 shares if he was serving as interim CEO as of that date.

Mr. Babich was awarded a stock option to acquire 120,000 shares of the Company common stock on May 7, 2012, which vested 30,000 shares as of the first day of each full calendar quarter of his service as interim CEO. For the period beginning on May 7, 2012 and ending June 30, 2012, shares were vested in a pro-rated portion of 30,000 shares as of May 7, 2012, based on his service for 60 days in the 91-day second quarter of 2012. For the calendar quarter beginning on April 1, 2013, the balance of the 120,000 shares vested.

On February 4, 2013 the Company entered into an employment agreement with Mr. Babich. Mr. Babich is entitled to receive an annual base salary of $850,000 and participate in annual incentive compensation programs to be developed by the Board that will enable Mr. Babich to earn incentive compensation programs to be developed by the Compensation Committee of the Board. In addition, Mr. Babich is eligible for an annual bonus of up to 100% of his base salary upon achievement of certain annual targeted goals and objectives, with the possibility of a maximum bonus of up to 150% upon achievement of specified goals and objectives beyond the target level. Mr. Babich also is entitled to participate in all pension plans as well as medical, dental and other benefit plans and perquisites generally available to the Company’s senior management and is subject to customary non-competition and confidentiality provisions.

Mr. Babich received grants of restricted stock units (“Units”), comprising (i) 70,000 Units which vest and become nonforfeitable on December 31, 2013; (ii) 70,000 Units which vest and become nonforfeitable on December 31, 2014; and (iii) 60,000 Units which vest and become nonforfeitable if and when the closing price of the Company’s common stock has averaged at least $15.00 per share for 30 trading days after February 4, 2013 through December 31, 2014.

If the board of directors elects not to renew Mr. Babich’s employment agreement on comparable terms for at least two (2) additional years beyond its initial termination date of December 31, 2014, the agreement and Mr. Babich’s employment will terminate on December 31, 2014, the termination will be considered a termination without cause as defined under his agreement and all of his time-based Units will become immediately vested, to the extent not already vested. The expiration of the term under any other circumstances shall be considered a termination by Mr. Babich without Good Reason.

In the event of a Termination Without Cause or a termination for good reason, as defined under his agreement, all timeMBO-based Units become immediately vested, to the extent not already vested.

Except as described below, within 45 days of his termination, the Company is obligated to pay to Mr. Babich a cash payment (“Severance Payment) in an amount equal to (i) all accrued but unpaid base salary through the date of his termination, plus (ii) one year’s base salary.

 

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If at any time up to Mr. Babich’s termination without cause or termination for good reason the closing price of the Company’s common stock has averaged at least $12.00 per share for 30 trading days, his Severance Payment shall be an amount equal to (i) all accrued but unpaid base salary through the date of his termination, plus (ii) one year’s base salary, plus (iii) the amount of any cash bonus awarded to Mr. Babich for the year preceding the year of his termination.

If at any time up to Mr. Babich’s termination without cause or termination for good reason the closing price of the Company’s common stock has averaged at least $17.00 per share for 30 trading days, the Severance Payment shall be an amount equal to (i) all accrued but unpaid base salary through the date of his termination, plus (ii) two year’s base salary, plus (iii) two times the amount of any cash bonus awarded to Mr. Babich for the year preceding the year of his termination.

In the event of a termination without cause or a termination for good reason within 12 months following a Change in Control (as defined in the agreement), all Units will vest, to the extent not already vested, and the Severance Payment shall be an amount equal to (i) all accrued but unpaid base salary through the date of his termination, plus (ii) two and one-half year’s base salary, plus (iii) if at any time up to Mr. Babich’s termination without cause or termination for good reason, the closing price of the Company’s common stock has averaged at least $12.00 per share for 30 trading days, the amount of any cash bonus awarded to Mr. Babich for the year preceding the year of termination, or two times the amount of any cash bonus awarded to Mr. Babich for the year preceding the year of termination if such average closing price was at least $17.00 per share.

 

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GRANTS OF PLAN-BASED AWARDS

The following table provides information on stock options and restricted stock units granted to the NEOs during fiscal year 2012:

 

          Estimated Future Payouts
Under Non-Equity
Incentive Plan Awards(1)
    Estimated Future Payouts
Under Equity
Incentive Plan Awards(2)
   

All Other
Stock
Awards:
Number of
Shares of

Stock or

Units (#)(3)

   

All Other
Option
Awards:
Number of
Securities

Underlying

Options (#)(4)

   

Exercise
or Base
Price of
Option

Awards

($/Sh)(5)

   

Closing
Market
Price on

Grant

Date

($/Sh)

   

Grant
Date Fair
Value of
Stock and

Option

Awards(6)

 
Name
  Grant
Date
    ($)
Threshold
    ($)
Target
    ($)
Maximum
    (#)
Threshold
    (#)
Target
    (#)
Maximum
           

George Babich, Jr.

    5/07/2012                                                         120,000        8.79        8.61        477,646   
    5/02/2012                                                  5,275                      11.14        58,104   
    7/01/2012                                                  8,000                      8.81        69,360   
    10/01/2012                                                  8,000                      8.26        66,600   
    FY 2012        449,846        562,308        674,770                                                           

Raymond D. Andrews

    2/22/2012                             N/A        6,100        N/A                             11.93        72,773   
    2/22/2012                                                         8,350        11.95        11.93        45,017   
    2/22/2012                                                  2,440                      11.93        29,158   
    FY 2012        218,319        272,899        327,479                                                           

S. James Wrigley

    2/22/2012                             N/A        6,860        N/A                             11.93        81,840   
    2/22/2012                                                         9,400        11.95        11.93        50,678   
    2/22/2012                                                  2,740                      11.93        32,743   
    FY 2012        275,154        343,942        412,730                                                           

Per H. Levin

    2/22/2012                             N/A        6,100        N/A                             11.93        72,773   
    2/22/2012                                                         8,350        11.95        11.93        45,017   
    2/22/2122                                                  2,440                      11.93        29,158   
    FY 2012        253,826        317,283        380,739                                                           

Farrokh K. Abadi

    2/22/2012                             N/A        6,100        N/A                             11.93        72,773   
    2/22/2012                                                         8,350        11.95        11.93        45,017   
    2/22/2012                                                  2,440                      11.93        29,158   
    FY 2012        192,635        240,794        288,952                                                           

Robert P. van der Merwe

    2/22/2012                                                                                
    2/22/2012                                                                                
    2/22/2012                                                                                
    FY 2012                                                                                

John R. Van Zile

    2/22/2012                             N/A        5,330        N/A                             11.93        63,587   
    2/22/2012                                                         7,310        11.95        11.93        39,411   
    2/22/2012                                                  2,130                      11.93        25,454   
    FY 2012                                                                                

 

 

 

(1) The amounts represent the threshold, target, and maximum that could have been earned during 2012 pursuant to the annual incentive awards provided under the Omnibus Plan. The individual performance incentive award contains multiple performance objectives, which are aggregated for this presentation. Actual amounts earned during 2012 are included in the “Summary Compensation Table” above. For additional information regarding these awards see “Compensation Discussion and Analysis.”

 

(2) Estimated Future Payouts Under Equity Incentive Plan Awards reflect the threshold, target and maximum number of shares which may be granted pursuant to the performance share program. For additional information see “Performance Shares”.

 

(3) With the exception of certain of Mr. Babich’s stock awards, all stock awards issued vest one-third each year over a three year period commencing on the date of grant. All stock awards granted in 2012 associated with Mr. Babich’s employment agreement dated May 2, 2012 vested immediately. The 2012 stock awards were provided under the Omnibus Plan.

 

(4) With the exception of certain of Mr. Babich’s option awards, all option awards issued vest one-third each year over a three year period commencing on the date of grant and have a term of ten years. Mr. Babich’s stock options vest in accordance with his employment agreement dated May 2, 2012 and have a term of ten years. The 2012 option awards were provided under the Omnibus Plan.

 

(5) Option pricing is set using the average of the high and low market price on the day of grant.

 

(6) The amounts shown represent the aggregate grant date fair value of stock awards and stock options granted during 2012 in accordance with ASC Topic 718. The valuation assumptions used in determining such amounts are described in Note 1 to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ending December 30, 2012.

 

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OUTSTANDING EQUITY AWARDS AT 2012 FISCAL YEAR-END

The following table provides information on stock and options awards held by the NEOs as of December 30, 2012:

 

    Option Awards     Stock Awards  
Name   Option
Vest
Date(1)
   

Number of

Securities
Underlying
Unexercised
Options
(#)
Exercisable

   

Number of

Securities
Underlying
Unexercised
Options
(#)

Unexercisable

   

Equity
Incentive
Plan
Awards:
Number of

Securities
Underlying
Unexercised
Unearned
Options
(#)

    Option
Exercise
Price
$
    Option
Expiration
Date
    Stock
Award
Vest
Date(2)
    Number of
Shares or
Units of
Stock that
have not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock that
have not
Vested
($)(3)
   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
that have

not Vested
(#)(4)

   

Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that have

not Vested
($)(3)

 

George Babich, Jr.

    7/17/2006        10,000                      19.82        7/17/2016                                      
    5/07/2012        8,404                      8.79        5/07/2022                                      
    5/07/2012        11,376                      8.79        5/07/2022                                      
    7/01/2012        30,000                      8.79        5/07/2022                                      
    10/01/2012        30,000                      8.79        5/07/2022                                      
    1/01/2013               18,624               8.79        5/07/2022                                      
    1/01/2013               11,376               8.79        5/07/2022                                      
    4/01/2013               10,220               8.79        5/07/2022                                      

Raymond D. Andrews

    8/01/2006        3,334                      17.51        8/01/2015                                      
    8/01/2007        3,333                      17.51        8/01/2015                                      
    8/01/2008        3,333                      17.51        8/01/2015                                      
    2/17/2007        359                      28.89        2/17/2016                                      
    2/17/2007        1,441                      28.89        2/17/2016                                      
    2/17/2008        359                      28.89        2/17/2016                                      
    2/17/2008        1,441                      28.89        2/17/2016                                      
    2/17/2009        1,800                      28.89        2/17/2016                                      
    4/04/2008        1,500                      23.74        4/04/2017                                      
    4/04/2009        1,500                      23.74        4/04/2017                                      
    4/04/2010        1,500                      23.74        4/04/2017                                      
    12/11/2008        3,000                      22.75        12/11/2017                                      
    12/11/2009        544                      22.75        12/11/2017                                      
    12/11/2009        2,456                      22.75        12/11/2017                                      
    12/11/2010        169                      22.75        12/11/2017                                      
    12/11/2010        2,831                      22.75        12/11/2017                                      
    12/11/2011        3,000                      22.75        12/11/2017                                      
    12/11/2012        3,000                      22.75        12/11/2017                                      
    3/03/2009        3,040                      23.78        3/03/2018                                      
    3/03/2010        3,040                      23.78        3/03/2018                                      
    3/03/2011        1,336                      23.78        3/03/2018                                      
    3/03/2011        1,703                      23.78        3/03/2018                                      
    2/17/2010        1,855                      8.26        2/17/2019                                      
    2/17/2011        1,855                      8.26        2/17/2019                                      
    2/17/2012        1,855                      8.26        2/17/2019                                      
    2/12/2011        3,750                      15.74        2/12/2020                                      
    2/12/2012        1,045                      15.74        2/12/2020                                      
    2/12/2012        2,705                      15.74        2/12/2020                                      
    2/12/2013               3,750               15.74        2/12/2020                                      
    2/17/2013               1,820               22.52        2/17/2021                                      
    2/17/2014               2,075               22.52        2/17/2021                                      
    2/17/2012        2,076                      22.52        2/17/2021                                      
    2/17/2013               256               22.52        2/17/2021                                      
    2/22/2013               2,784               11.95        2/22/2022                                      
    2/22/2014               2,783               11.95        2/22/2022                                      
    2/22/2015               2,783               11.95        2/22/2022                                      
                                              2/12/2013        1,250        13,050                 
                                              2/17/2013        909        9,490                 
                                              2/17/2014        909        9,490                 
                                              2/22/2013        814        8,498                 
                                              2/22/2014        813        8,488                 
                                              2/22/2015        813        8,488                 
                                              12/29/2013                      909        9,490   
                                              12/28/2014                      6,100        63,684   

 

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    Option Awards     Stock Awards  
Name   Option
Vest
Date(1)
   

Number of

Securities
Underlying
Unexercised
Options
(#)
Exercisable

   

Number of

Securities
Underlying
Unexercised
Options
(#)

Unexercisable

   

Equity
Incentive
Plan
Awards:
Number of

Securities
Underlying
Unexercised
Unearned
Options
(#)

    Option
Exercise
Price
$
    Option
Expiration
Date
    Stock
Award
Vest
Date(2)
    Number of
Shares or
Units of
Stock that
have not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock that
have not
Vested
($)(3)
   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
that have

not Vested
(#)(4)

   

Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that have

not Vested
($)(3)

 

S. James Wrigley

    3/11/2011        10,000                      21.56        3/11/2020                                      
    3/11/2012        10,000                      21.56        3/11/2020                                      
    3/11/2013               10,000               21.56        3/11/2020                                      
    3/11/2011        2,813                      21.56        3/11/2020                                      
    3/11/2012        2,813                      21.56        3/11/2020                                      
    3/11/2013               2,812               21.56        3/11/2020                                      
    2/17/2012        2,335                      22.52        2/17/2021                                      
    2/17/2013               2,335               22.52        2/17/2021                                      
    2/17/2014               2,335               22.52        2/17/2021                                      
    2/22/2013               3,134               11.95        2/22/2022                                      
    2/22/2014               3,133               11.95        2/22/2022                                      
    2/22/2015               3,133               11.95        2/22/2022                                      
                                              3/11/2013        937        9,782                 
                                              2/17/2013        1,023        10,680                 
                                              2/17/2014        1,022        10,670                 
                                              2/22/2013        914        9,542                 
                                              2/22/2014        913        9,532                 
                                              2/22/2015        913        9,532                 
                                              12/29/2013                      1,023        10,680   
                                              12/28/2014                      6,860        71,618   

Per H. Levin

    5/01/2005        1,100                      13.09        5/01/2013                                      
    5/01/2006        7,639                      13.09        5/01/2013                                      
    5/01/2004        20,000                      13.09        11/01/2013                                      
    5/01/2005        18,900                      13.09        11/01/2013                                      
    5/01/2006        12,361                      13.09        11/01/2013                                      
    2/17/2007        5,219                      19.16        2/17/2014                                      
    2/17/2005        20,000                      19.16        8/17/2014                                      
    2/17/2006        20,000                      19.16        8/17/2014                                      
    2/17/2007        14,781                      19.16        8/17/2014                                      
    4/01/2006        3,750                      16.94        4/01/2015                                      
    4/01/2007        3,750                      16.94        4/01/2015                                      
    4/01/2008        3,750                      16.94        4/01/2015                                      
    2/17/2007        3,500                      28.89        2/17/2016                                      
    2/17/2008        1,262                      28.89        2/17/2016                                      
    2/17/2008        2,238                      28.89        2/17/2016                                      
    2/17/2009        3,461                      28.89        2/17/2016                                      
    2/17/2009        39                      28.89        2/17/2016                                      
    4/04/2008        1,667                      23.74        4/04/2017                                      
    4/04/2009        1,667                      23.74        4/04/2017                                      
    4/04/2010        1,666                      23.74        4/04/2017                                      
    3/03/2009        3,040                      23.78        3/03/2018                                      
    3/03/2010        498                      23.78        3/03/2018                                      
    3/03/2010        2,542                      23.78        3/03/2018                                      
    3/03/2011        3,039                      23.78        3/03/2018                                      
    2/17/2010        2                      8.26        2/17/2019                                      
    2/17/2010        1,853                      8.26        2/17/2019                                      
    2/17/2011        1,855                      8.26        2/17/2019                                      
    2/17/2012        1,855                      8.26        2/17/2019                                      
    2/12/2011        4,219                      15.74        2/12/2020                                      
    2/12/2012        4,219                      15.74        2/12/2020                                      
    2/12/2013               4,218               15.74        2/12/2020                                      
    2/17/2012        2,076                      22.52        2/17/2021                                      
    2/17/2013               2,076               22.52        2/17/2021                                      
    2/17/2014               2,075               22.52        2/17/2021                                      
    2/22/2013               2,784               11.95        2/22/2022                                      
    2/22/2014               2,783               11.95        2/22/2022                                      
    2/22/2015               2,783               11.95        2/22/2022                                      
                                              2/12/2013        1,406        14,679                 
                                              2/17/2013        909        9,490                 
                                              2/17/2014        909        9,490                 
                                              2/22/2013        814        8,498                 

 

37


Table of Contents
    Option Awards     Stock Awards  
Name   Option
Vest
Date(1)
   

Number of

Securities
Underlying
Unexercised
Options
(#)
Exercisable

   

Number of

Securities
Underlying
Unexercised
Options
(#)

Unexercisable

   

Equity
Incentive
Plan
Awards:
Number of

Securities
Underlying
Unexercised
Unearned
Options
(#)

    Option
Exercise
Price
$
    Option
Expiration
Date
    Stock
Award
Vest
Date(2)
    Number of
Shares or
Units of
Stock that
have not
Vested
(#)
    Market
Value of
Shares or
Units of
Stock that
have not
Vested
($)(3)
   

Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
that have

not Vested
(#)(4)

   

Equity
Incentive
Plan
Awards:
Market
or Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that have

not Vested
($)(3)

 
                                              2/22/2014        813        8,488                 
                                              2/22/2015        813        8,488                 
                                              12/29/2013                      909        9,490   
                                              12/28/2014                      6,100        63,684   

Farrokh K. Abadi

    2/22/2007        5,000                      16.85        2/22/2015                                      
    2/22/2008        5,000                      16.85        2/22/2015                                      
    4/01/2006        929                      16.94        4/01/2015                                      
    4/01/2006        4,271                      16.94        4/01/2015                                      
    4/01/2007        929                      16.94        4/01/2015                                      
    4/01/2007        4,271                      16.94        4/01/2015                                      
    4/01/2008        929                      16.94        4/01/2015                                      
    4/01/2008        4,271                      16.94        4/01/2015                                      
    2/17/2007        1,800                      28.89        2/17/2016                                      
    2/17/2008        1,800                      28.89        2/17/2016                                      
    2/17/2009        1,800                      28.89        2/17/2016                                      
    4/04/2008        4,667                      23.74        4/04/2017                                      
    4/04/2009        454                      23.74        4/04/2017                                      
    4/04/2009        4,213                      23.74        4/04/2017                                      
    4/04/2010        453                      23.74        4/04/2017                                      
    4/04/2010        4,213                      23.74        4/04/2017                                      
    3/03/2009        2,787                      23.78        3/03/2018                                      
    3/03/2010        2,786                      23.78        3/03/2018                                      
    3/03/2011        2,786                      23.78        3/03/2018                                      
    2/17/2010        1,855                      8.26        2/17/2019                                      
    2/17/2011        1,855                      8.26        2/17/2019                                      
    2/17/2012        1,855                      8.26        2/17/2019                                      
    2/12/2011        1,172                      15.74        2/12/2020                                      
    2/12/2011        2,110                      15.74        2/12/2020                                      
    2/12/2012        3,281                      15.74        2/12/2020