CHECKPOINT SYSTEMS INC, S-3/A, 1995-03-17

CHECKPOINT SYSTEMS INC
S-3/A, 1995-03-17
COMMUNICATIONS EQUIPMENT, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 17, 1995

REGISTRATION NO. 33-57415
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1
TO
FORM S-3

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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CHECKPOINT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)

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PENNSYLVANIA 22-1895850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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101 WOLF DRIVE
THOROFARE, NEW JERSEY 08086
(609) 848-1800
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

NEIL D. AUSTIN, ESQ.

VICE PRESIDENT -- GENERAL COUNSEL AND SECRETARY
CHECKPOINT SYSTEMS, INC.
101 WOLF DRIVE
THOROFARE, NEW JERSEY 08086
(609) 848-1800
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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Copies to:

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JAMES M. PAPADA, III, ESQ. WINTHROP B. CONRAD, JR., ESQ.
STRADLEY, RONON, STEVENS & YOUNG DAVIS POLK & WARDWELL
2600 ONE COMMERCE SQUARE 450 LEXINGTON AVENUE
PHILADELPHIA, PENNSYLVANIA 19103-7098 NEW YORK, NEW YORK 10017
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. _____

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. _____

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The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.

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PROSPECTUS (SUBJECT TO COMPLETION)
ISSUED MARCH 17, 1995

3,000,000 SHARES
CHECKPOINT SYSTEMS, INC.
COMMON STOCK

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ALL OF THE SHARES OF COMMON STOCK OFFERED HEREBY ARE BEING SOLD BY THE COMPANY.
THE COMMON STOCK OF THE COMPANY IS LISTED ON THE NEW YORK STOCK EXCHANGE UNDER
THE SYMBOL 'CKP.' ON MARCH 16, 1995, THE REPORTED LAST SALE PRICE OF THE
COMMON STOCK ON THE NEW YORK STOCK EXCHANGE WAS
$17 1/2 PER SHARE.

------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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PRICE $ A SHARE

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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY (2)
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Per Share................................................ $ $ $
Total (3)................................................ $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted to the Underwriters an option, exercisable
within 30 days of the date hereof, to purchase up to an aggregate of
450,000 additional shares at the price to public less underwriting
discounts and commissions, for the purpose of covering over-allotments,
if any. If the Underwriters exercise such option in full, the total
price to public, underwriting discounts and commissions and proceeds to
Company will be $ , $ and $ , respectively. See
'Underwriters.'

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The shares are offered, subject to prior sale, when, as and if accepted by
the Underwriters named herein, and subject to approval of certain legal matters
by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that
delivery of the shares will be made on or about , 1995 at the
office of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment
therefor in New York funds.

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MORGAN STANLEY & CO.
INCORPORATED

NATWEST SECURITIES LIMITED
PAINEWEBBER INCORPORATED

, 1995
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[ ART TO COME ]

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE
COMMON STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW
YORK STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED BY REFERENCE HEREIN MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCE AT ANY TIME
IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF.
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TABLE OF CONTENTS

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PAGE
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Incorporation of Certain Documents by Reference... 3
Prospectus Summary................................ 4
Investment Considerations......................... 8
The Company....................................... 10
Use of Proceeds................................... 11
Common Stock Price Range and
Dividends....................................... 12
Capitalization.................................... 13
Pro Forma Combined Financial
Information..................................... 14
Selected Historical Financial
Information..................................... 17
PAGE
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Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 18
Business.......................................... 24
Management........................................ 35
Description of Capital Stock...................... 36
Underwriters...................................... 38
Legal Matters..................................... 39
Experts........................................... 39
Available Information............................. 40
Index to Consolidated Financial
Statements...................................... F-1
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents heretofore filed by the Company with the Securities
and Exchange Commission (the 'Commission') are incorporated by reference in this
Prospectus:

1. Annual Report on Form 10-K for the fiscal year ended December 25,
1994 filed on March 7, 1995.

2. Report on Form 8-K filed on February 15, 1995.

3. Report on Form 8-K/A filed on February 17, 1995.

4. Report on Form 10-K/A filed on March 14, 1995, amending Annual
Report on Form 10-K for the fiscal year ended December 25, 1994.

5. Report on Form 8-K/A filed on March 16, 1995, amending Report on
Form 8-K filed on February 15, 1995.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934, as amended (the 'Exchange Act'),
after the date of this Prospectus and prior to the termination of the offering
made hereunder shall be deemed to be incorporated by reference into this
Prospectus and to be a part of this Prospectus from the respective dates of the
filing of such documents. The Company will provide without charge to each person
to whom this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all of the documents incorporated by reference herein
(other than exhibits not specifically incorporated by reference into the text of
such documents). Requests should be directed to Neil D. Austin, Esq., Vice
President-General Counsel and Secretary, Checkpoint Systems, Inc., 101 Wolf
Drive, Thorofare, New Jersey 08086 (telephone (609) 848-1800).

Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained in this
Prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated herein by reference modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and consolidated financial
statements appearing elsewhere, or incorporated by reference, in this
Prospectus. Unless the context otherwise requires, the information in this
Prospectus assumes no exercise of the Underwriters' over-allotment option. In
addition, unless otherwise indicated, references in this Prospectus to
'Checkpoint' or the 'Company' mean Checkpoint Systems, Inc. and its predecessors
and subsidiaries. The Company's fiscal year is a rolling fifty-two or
fifty-three week year generally ending at or close to the end of the calendar
year. References in this Prospectus to the Company's fiscal years for 1990,
1991, 1992, 1993 and 1994 are to the fifty-two or fifty-three week periods
ending on December 30, 1990, December 29, 1991, December 27, 1992, December 26,
1993 and December 25, 1994, respectively.

THE COMPANY

Checkpoint is a designer, manufacturer and distributor of integrated
electronic security systems -- utilizing proprietary radio frequency ('RF')
technologies -- designed primarily to help retailers prevent losses caused by
theft of merchandise. The Company markets a wide range of these systems,
including electronic article surveillance ('EAS') systems, closed circuit
television ('CCTV') systems, point of sale ('POS') monitoring systems and access
control systems. Over the past four years, the Company has achieved substantial
growth, both through internal expansion and acquisitions, as a result of the
repositioning of the Company by current management through the introduction of
new products, broadened and more direct distribution (particularly in its
international markets) and increased and more efficient manufacturing
capability. The Company holds or licenses over 200 patents and proprietary
technologies relating to its products and their manufacture.

The Company's key product offerings use a low-cost disposable, paper-thin
tag (or 'target') which triggers an alarm when passed through the Company's
sensors at the point of exit from the retail site. These disposable targets,
which are manufactured using the Company's proprietary technology at its
state-of-the-art facility in Puerto Rico, can be easily installed on products or
within packaging at the retail outlet or at the product manufacturing source and
can be easily deactivated without locating the tag. Sales of these disposable
targets and field service of their associated sensors and deactivation units
provide a significant and growing source of recurring revenues and accounted for
approximately 37% of the Company's net revenues for fiscal year 1994. The
Company believes that the net proceeds from the sale of the shares of Common
Stock offered hereby will provide it with the additional capital resources
necessary to continue to implement the Company's business strategy, which
focuses on capitalizing on retailers' increasing attention to theft prevention
through use of the Company's proprietary RF technology-based products.

The Company's diversified product lines are designed to help retailers
prevent losses caused by theft (both by customers and employees) while at the
same time enabling retailers to capitalize on consumer impulse buying by openly
displaying higher volume, higher margin merchandise, and to reduce associated
selling costs through lower staff requirements. The Company's broad and flexible
product lines, marketed and serviced by its extensive sales and service
organization, have helped the Company emerge as the preferred supplier to such
hard goods retail chains as Caldor, Circuit City, Lucky's Grocery, Ralph's,
Rite-Aid, Ross, Target, and Walgreens. In addition, the Company's manufacturing
facilities have the current capacity to produce up to three billion disposable
RF targets per year at a low cost.

THE RETAIL OPPORTUNITY

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an effective electronic security system can significantly increase
profitability. Accordingly, the retail industry is becoming increasingly focused
on theft prevention.

Industry sources estimate there are approximately 330,000 major retail
locations in the United States that would benefit from the installation of an
EAS system and the Company estimates that less than one-third of these locations
have installed systems. The Company believes, moreover, that in the hard goods
market less than 10% of such sites are EAS protected. While industry sources
expect the growth of EAS systems in the retail soft goods market to be about 5%
to 10% annually, the retail hard goods market is expected to grow at
approximately 20% per year over the next five years, thus providing an even more
significant growth opportunity.

Retailers generally apply the targets used in EAS systems at the retail
site. Retailers have expressed interest in moving the insertion or application
of the targets to the point of manufacture ('source tagging'). Manufacturers
have been receptive to source tagging in light of the potential increase in
product volume (that is, more sales at the retail level due to easier customer
access to products). The Company believes that source tagging provides
retailers, manufacturers and retail customers with distinct benefits, principal
among which are: enhanced protection from theft, activation and deactivation
without the need for special training of store employees, more open display of
merchandise resulting in increased sales for manufacturers and reduced costs for
retail products.

CHECKPOINT PRODUCTS AND TECHNOLOGY

The Company believes its single proprietary RF technology approach to the
EAS marketplace has certain product advantages, especially in the faster
growing, hard goods market. First, the Company can produce a high volume of
paper-thin targets at a low per unit cost. Second, the small size and
flexibility of the Company's RF targets enable them to be used in a broad array
of products and markets. Third, the Company's RF technology allows retailers to
simultaneously deactivate the target and scan barcodes. Finally, RF technology
permits retailers to deactivate targets without specifically locating or making
contact with the targets.

The Company also believes that its RF technology is more conducive to usage
in source tagging because: (i) manufacturers can machine-insert the Company's
easily concealed flexible targets at high production speeds during the
manufacturing or packaging process (e.g., in boxes or other types of packaging)
at little or no additional cost and (ii) the retailer can deactivate the target
and scan the bar code simultaneously with readily available scanning equipment.

Checkpoint's principal global competitor in the EAS industry is Sensormatic
Electronics Corporation ('Sensormatic'). Sensormatic is a fully integrated
supplier of electronic security systems with an approximately 68% market share
and total revenues of approximately $656.0 million in its most recent fiscal
year. Management estimates that the Company's market share in the EAS industry
is approximately 15%. Unlike Checkpoint which utilizes its compatible RF
technologies across all market segments, Sensormatic employs five separate,
non-compatible technologies -- acousto-magnetic, magnetic, radio frequency,
microwave, and frequency division magnetic. Sensormatic's recommendation of a
technology depends on the market. Checkpoint's competitive position is supported
by its extensive manufacturing experience and know-how and, to a lesser degree,
its technology and patents. There can be no assurance, however, that a
competitor, including Sensormatic, could not develop a product comparable to
that of Checkpoint.

STRATEGY

Beginning in September 1991, the Company's current management started to
reposition the Company through the introduction of new products, broadened and
more direct distribution (particularly in its international markets) and
increased and more efficient manufacturing capability. Checkpoint's strategy is
to continue to increase its sales penetration in existing markets and develop a
significant presence in new geographic markets. These objectives will be
attained by continually enhancing and expanding its RF technologies and
products, providing superior service to its customers and expanding its direct
sales activities through acquisitions and start-up operations. The Company is
focused on providing its customers with a wide variety of fully integrated
electronic security system solutions characterized by superior quality, ease of
use, good value and merchandising opportunity for the retailer.

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More specifically, in order to interact more closely with retailers and
better understand and respond to their needs (including reducing shrinkage and
providing retailers with enhanced sales opportunities through more open display
of merchandise), the Company is pursuing the following strategies:

- Expanding its direct sales and service capabilities in strategic
geographic areas;

- Broadening its product lines;

- Increasing its penetration of the hard goods retail market (currently
estimated to be less than 10% penetrated by the EAS industry);

- Continuing to promote source tagging;

- Continuing to improve the Company's highly integrated and
state-of-the-art manufacturing processes and technologies; and

- Continuing to explore strategic acquisitions or start-up opportunities in
the following areas: international direct distribution, a second source
of manufacturing capacity and product line diversification within the
Company's core businesses.

RECENT ACQUISITION

On February 1, 1995, the Company consummated the purchase of Alarmex, Inc.
and its related company Bayport Controls, Inc. (together, 'Alarmex') for
approximately $13.5 million ($10 million in cash and the balance in 200,717
shares of restricted Common Stock of Checkpoint) (the 'Alarmex Acquisition').
The Company financed the cash portion of the Alarmex Acquisition with the
private placement of the Company's long-term notes which will continue to be
outstanding after completion of the Offering.

THE OFFERING

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Common Stock offered............................ 3,000,000 shares
Common Stock to be outstanding after the
Offering(1)................................... 13,751,679 shares
Use of Proceeds................................. For general corporate purposes including (i) funding strategic
acquisitions or start-up opportunities, (ii) repaying certain
indebtedness and (iii) funding the Company's leasing programs.
See 'Investment Considerations' and 'Use of Proceeds.'
NYSE Symbol..................................... CKP
</TABLE>

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(1) As at March 16, 1995. Includes 200,717 restricted shares issued by the
Company in connection with the Alarmex Acquisition. Excludes 1,536,051
shares subject to options to purchase granted pursuant to the Company's
Stock Option Plan (1992).

INVESTMENT CONSIDERATIONS

PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY CERTAIN MATTERS RELATING TO
AN INVESTMENT IN THE COMPANY. SEE 'INVESTMENT CONSIDERATIONS.'

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SUMMARY FINANCIAL INFORMATION

The summary historical and pro forma financial information presented below
has been derived from the consolidated financial statements of the Company and
Alarmex and the pro forma financial information of the Company appearing
elsewhere, or incorporated by reference, in this Prospectus and should be read
in conjunction with 'Use of Proceeds,' 'Pro Forma Combined Financial
Information,' 'Selected Historical Financial Information,' 'Management's
Discussion and Analysis of Results of Operations and Financial Condition' and
the consolidated financial statements of the Company and Alarmex appearing
elsewhere, or incorporated by reference, in this Prospectus. The summary pro
forma statement of operations data presented below give effect to the Alarmex
Acquisition and the sale of the shares of Common Stock offered hereby, and the
application of the net proceeds therefrom, as if they had occurred at the
beginning of fiscal year 1994. The summary as adjusted balance sheet data give
effect to the Alarmex Acquisition and the sale of the shares of Common Stock
offered hereby, and the application of net proceeds therefrom, as if they had
occurred on December 25, 1994.

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FISCAL YEAR
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ACTUAL PRO FORMA
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1992 1993 1994 1994
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(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
STATEMENT OF OPERATIONS DATA:
Net revenues.......................................................... $ 72,166 $ 93,034 $ 128,331 $ 151,008
Cost of revenues...................................................... 38,650 54,421 66,360 79,351
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Gross profit........................................................ 33,516 38,613 61,971 71,657
Selling, general and administrative expenses.......................... 28,342 39,238 50,243 58,940
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Operating income (loss)............................................. 5,174 (625) 11,728 12,717
Contract settlement income............................................ -- 3,500 -- --
Interest expense, net................................................. 283 477 2,589 2,865
Other expense......................................................... -- 327 762 766
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Income before income taxes.......................................... 4,891 2,071 8,377 9,086
Income taxes.......................................................... 463 456 2,094 2,355
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Net earnings........................................................ $ 4,428 $ 1,615 $ 6,283 $ 6,731
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Net earnings per share................................................ $ .45 $ .16 $ .58 $ .48
Weighted average number of common and common equivalent shares........ 9,951 10,386 10,806 14,007
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1992 1993 1994
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(IN THOUSANDS, EXCEPT TOTAL
DEACTIVATION SYSTEMS INSTALLED
AND TOTAL SENSORS INSTALLED)
SELECTED OPERATING DATA:
Disposable labels sold (during period).............................................. 691,494 733,530 959,249
Total deactivation systems installed (at period end)................................ 43,771 61,417 91,549
Total sensors installed (at period end)............................................. 70,256 91,648 107,068
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AS OF
DECEMBER 25, 1994
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ACTUAL AS ADJUSTED
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(IN THOUSANDS)
BALANCE SHEET DATA:
Working capital.......................................................................... $ 39,427 $ 83,573
Total assets............................................................................. 127,925 184,954
Long-term debt........................................................................... 35,556 38,109
Total debt............................................................................... 42,262 41,570
Shareholders' equity..................................................................... 61,303 114,045
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INVESTMENT CONSIDERATIONS

Prospective purchasers of the Common Stock offered hereby should consider
carefully the following considerations, as well as the other information
appearing elsewhere in this Prospectus, in evaluating an investment in the
Common Stock.

COMPETITION

The Company's business is intensely competitive. Competition in the EAS
market is principally based upon the technologies underlying security systems,
as well as price, breadth and quality of product offering, and service to
customers. While there are a number of competitors in the market, Sensormatic, a
fully integrated supplier of electronic security systems to retail and other
markets, has a dominant market share of the electronic security systems
industry, with approximately 68% of the global market for electronic security
systems. With total revenues of approximately $656.0 million for its most recent
fiscal year, Sensormatic has economic and other resources substantially greater
than those of the Company.

Within the U.S. market additional competitors include Knogo North America,
Inc. ('Knogo'), principally in the retail market and Minnesota Mining and
Manufacturing Company, principally in the library market. Within the Company's
international markets, mainly Western Europe, Actron AG ('Actron'), a subsidiary
of ADT, Inc., Knogo (whose international operations were purchased by
Sensormatic on December 29, 1994) and Esselte Meto, along with Sensormatic, are
the Company's most significant competitors.

The market served by the Company and its competitors is price sensitive. In
1994, the Western European markets were characterized by intense price
competition as participants adjusted prices to retain market shares. This price
competition is expected to continue and perhaps intensify through fiscal year
1995.

Checkpoint's competitive position is supported by its extensive
manufacturing experience and know-how and, to a lesser degree, its technology
and patents. See 'Dependence on Patents and Proprietary Technology' below. There
can be no assurance, however, that a competitor, including Sensormatic, could
not develop a product comparable to that of Checkpoint.

DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY

The Company believes that its patented and proprietary technologies are
important to its business and strategies for growth and provide it with distinct
competitive advantages. The Company holds or licenses over 200 patents and
proprietary technologies relating to its products and their manufacture. On
March 10, 1993, the Company instituted proceedings in the International Trade
Commission (the 'ITC') alleging that certain parties had imported into the
United States anti-theft tags that infringed certain patents, of which the
Company is exclusive licensee, which relate to the methods of deactivation of
the tags. On March 10, 1994, the ITC issued a Notice of Determination Not to
Review an Initial Determination Finding No Violation of Section 337 of the
Tariff Act of 1930. This notice was based upon a finding by the ITC that the
Company's patents were not infringed by defendant's tags and, further, that such
patents were invalid. This issue has yet to be resolved, as the Company has
appealed the ITC's Determination to the U.S. Court of Appeals for the Federal
Circuit. In addition, the ITC's findings of no infringement and of invalidity
are not binding on the Federal courts regardless of the Court of Appeals'
holding with respect to the ITC's Final Determination. In addition, a proceeding
in the Court of Commerce of the canton of Zurich, Switzerland involving certain
of the same parties and the Swiss counterpart of the U.S. patent found that the
defendants' tags do infringe the Company's patents; such finding is being
appealed by those defendants.

The patents at issue in these proceedings provide patent protection for the
Company's disposable tag. However, the Company believes that the manufacture of
its disposable tags involves significant proprietary information and know-how
which it believes would be difficult for a competitor to

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duplicate. Accordingly, management believes that if the patents at issue were to
be held invalid, it would not have a material adverse impact on the Company.

In conjunction with the ITC proceedings, the Company has capitalized
approximately $1.9 million in patent defense costs, which is included in
'Intangibles' on the Company's balance sheet at December 25, 1994. An
unfavorable resolution of the current suit in the Federal Circuit would result
in a charge to earnings of these deferred patent costs at the time of such
resolution.

SINGLE MANUFACTURING SOURCE FOR DISPOSABLE TARGETS

The Company manufactures all of its disposable targets at its recently
constructed, fully integrated facility in Puerto Rico. While the Company has
substantial excess capacity at this facility, any event which would
significantly reduce production at this facility would materially affect results
of operations. The Company is currently exploring development of a second source
for the manufacture of its disposable targets, although no assurance can be
given that it will be successful.

EXPOSURE TO INTERNATIONAL OPERATIONS

During fiscal year 1994, sales of the Company's products outside the United
States accounted for approximately 39.4% of net revenues. Substantial dependence
on foreign markets increases the risks associated with economic and other
developments in other jurisdictions. In 1993, due to the termination of the
Company's European distribution arrangement, the Company moved from indirect
sales to direct sales and substantially increased its sales force. As a result,
the Company experienced a significant increase in selling and service expenses
attributable to foreign operations.

Prior to fiscal year 1993, substantially all the Company's international
sales were made to distributors and were paid in U.S. dollars. As a result of
the Company's strategy to increase distribution directly to its customers (as
opposed to sales through independent distributors), approximately 79.4% of the
Company's international sales for fiscal year 1994 were made in local
currencies. This increase in sales denominated in currencies other than U.S.
dollars increases the Company's potential exposure to currency fluctuations,
which can adversely affect results. During fiscal year 1994, currency exchange
losses amounted to $762,000 compared to losses of $327,000 for fiscal year 1993.
The primary increase in the currency exchange losses from 1993 to 1994 was the
result of the devaluation of the Mexican peso in late 1994. As a result of the
peso devaluation and continued difficulties in Mexico, the Company's operations
in Mexico could be negatively impacted during fiscal year 1995 but this is not
expected to materially affect the Company's consolidated results.

The Company sells products for foreign sales to its international
subsidiaries. The subsidiaries in turn, sell these products to customers in
their respective geographic areas of operations in local currencies. This method
of sales and resale gives rise to the risk of gains or losses as a result of
foreign currency exchange rate fluctuations.

In order to reduce the Company's exposure resulting from currency
fluctuations the Company has been purchasing currency exchange forward contracts
on a regular basis. These contracts guarantee a predetermined exchange rate at
the time the contract is purchased. This allows the Company to shift the risk,
whether positive or negative, of currency fluctuations from the date of the
contract to a third party. As of December 25, 1994, the Company had currency
exchange forward contracts totalling approximately $8.8 million. The contracts
are in the various local currencies covering the Company's six Western European
operations. The Company's operations in Canada, Argentina, Mexico and Australia
were not covered by currency exchange forward contracts at December 25, 1994.

The Company is considering increasing the amount of currencies covered by
currency exchange forward contracts during fiscal year 1995. In addition, the
Company is evaluating the use of currency options in order to reduce the impact
that exchange rate fluctuations have on the Company's gross margins for sales
made by the Company's international operations. The combination of currency
exchange forward contracts and currency options should result in reducing the
Company's risks associated with significant exchange rate fluctuations.

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SEASONALITY AND QUARTERLY FLUCTUATIONS

The Company's customers are substantially dependent on retail sales which
are seasonal and subject to significant fluctations which are difficult to
predict. The Company's sales are impacted by such seasonality and fluctations.
Historically, the Company has experienced lower sales in the first and second
fiscal quarters of each year. Disposable tag sales, which accounted for
approximately 29% of net revenues in fiscal year 1994 and which are expected to
remain an important contributor to net revenues as more of the Company's EAS
systems are installed, are directly tied to retail inventory turnover rates and
can also be expected to vary with retailers' seasonal fluctuations.

USE OF PROCEEDS

The Company intends to use approximately $9.2 million of the net proceeds
from the sale of the Common Stock offered hereby for strategic acquisitions,
start-up operations and related capital expenditures. There can be no assurance,
however, that any acquisition or start-up operation will be identified or
consummated or, if consummated, that any such acquisition or start-up operation
will be profitable or enhance the Company's competitive position now or in the
future. The Company is not currently engaged in any material negotiations with
respect to any particular acquisition.

DIVIDENDS

The Company has never paid cash dividends on its Common Stock, does not
anticipate paying any cash dividends in the near future and is limited by
existing covenants in the Company's debt instruments from paying dividends. The
Company has retained, and expects to continue to retain, its earnings for
reinvestment in its business. See 'Common Stock Price Range and Dividends.'

THE COMPANY

OVERVIEW

Checkpoint is a designer, manufacturer and distributor of integrated
electronic security systems -- utilizing proprietary RF technologies -- designed
primarily to help retailers prevent losses caused by theft of merchandise. The
Company markets a wide range of these systems, including EAS systems, CCTV
systems, POS monitoring systems and access control systems. Over the past four
years, the Company has achieved substantial growth, both through internal
expansion and acquisitions, as a result of the repositioning of the Company by
current management through the introduction of new products, broadened and more
direct distribution (particularly in its international markets) and increased
and more efficient manufacturing capability. The Company holds or licenses over
200 patents and proprietary technologies relating to its products and their
manufacture.

The Company's key product offerings use a low-cost disposable, paper-thin
target which triggers an alarm when passed through the Company's sensors at the
point of exit from the retail site. These disposable targets, which are
manufactured using the Company's proprietary technology at its state-of-the-art
facility in Puerto Rico, can be easily installed on products or within packaging
at the retail outlet or at the product manufacturing source and can be easily
deactivated without locating the tag. Sales of these disposable targets and
field service of their associated sensors and deactivation units provide a
significant and growing source of recurring revenues and accounted for
approximately 37% of the Company's net revenues for fiscal year 1994. The
Company believes that the net proceeds from the sale of the shares of Common
Stock offered hereby will provide it with the additional capital resources
necessary to continue to implement the Company's business strategy, which
focuses on capitalizing on retailers' increasing attention to theft prevention
through use of the Company's proprietary RF technology-based products.

10
<PAGE>

product lines, marketed and serviced by its extensive sales and service
organization, have helped the Company emerge as the preferred supplier to such
hard goods retail chains as Caldor, Circuit City, Lucky's Grocery, Ralph's,
Rite-Aid, Ross, Target, and Walgreens. In addition, the Company's manufacturing
facilities have the current capacity to produce up to three billion disposable
RF targets per year at a low cost.

The Company has its principal executive offices at 101 Wolf Drive,
Thorofare, New Jersey 08086, (609) 848-1800.

COMPANY HISTORY

In 1969, the Company was incorporated in Pennsylvania as a wholly-owned
subsidiary of Logistics Industries Corporation. In 1977, Logistics, pursuant to
the terms of its merger into Lydall, Inc., distributed the Company's Common
Stock to Logistics' shareholders as a dividend. In February, 1986, the Company
acquired Sielox Systems, Inc., which developed, produced and marketed electronic
access control systems for use in commercial and institutional applications. In
August, 1990, Sielox's operations were combined with the Company's.

ACQUISITION OF ALARMEX

On February 1, 1995, the Company consummated the Alarmex Acquisition for
approximately $13.5 million ($10 million in cash and the balance in 200,717
shares of restricted Common Stock of Checkpoint). The Company financed the cash
portion of the Alarmex Acquisition with the private placement of the Company's
long-term notes which will continue to be outstanding after completion of the
Offering.

Alarmex designs and provides CCTV, POS monitoring, burglar and fire alarm
systems and also provides related central station monitoring services to over
9,000 retail sites in the United States. The Company believes the acquisition of
Alarmex complements Checkpoint's current CCTV and POS monitoring products. With
the acquisition of Alarmex, Checkpoint is able to offer its customers a broader
and more sophisticated range of CCTV and POS monitoring products. In addition,
the acquisition of Alarmex enables Checkpoint to enter the burglar and fire
alarm market with related central station alarm monitoring capabilities.

USE OF PROCEEDS

The net proceeds from the sale of shares of Common Stock offered hereby are
estimated to be approximately $49.2 million ($56.7 million if the Underwriters'
over-allotment option is exercised in full). These proceeds are expected to be
used for general corporate purposes including the following: (i) approximately
$9.2 million for potential strategic acquisitions and related start-up
operations and capital expenditures in the following areas: international direct
distribution, a second source of manufacturing capacity and product line
diversification within the Company's core business, (ii) approximately $20
million to retire existing short and long-term indebtedness outstanding under
the Company's revolving credit facility, and (iii) approximately $20 million to
provide the necessary capital to enable the Company to lease equipment to
retailers under long-term leases. At February 28, 1995, the indebtedness
outstanding to be repaid from the net proceeds of the sale of shares of Common
Stock, bore an average interest rate of approximately 7.63% at such date and
becomes due in 1996.

11
<PAGE>

On February 1, 1995, the Company consummated the Alarmex Acquisition. The
Company financed the cash portion of the Alarmex Acquisition with the private
placement of the Company's long-term notes which will continue to be outstanding
after completion of the Offering. The Company continues to explore strategic
acquisitions in the areas described in the preceding paragraph. There can be no
assurance, however, that any particular acquisition will be identified or
consummated or, if consummated, that such acquisition will be profitable or
enhance the Company's competitive position now or in the future. The Company is
not currently engaged in any material negotiations with respect to any
particular acquisition. If the Company is unable to consummate any particular
acquisition, the proceeds will be applied to alternative start-up operations or
capital expenditures.

The foregoing represents the Company's best estimate of the allocation of
the net proceeds of the sale of shares of Common Stock offered hereby based upon
current economic and industry conditions and the current state of its business
operations and plans. Pending the application of the proceeds, the Company
intends to invest such proceeds in short-term, investment-grade,
interest-bearing securities.

COMMON STOCK PRICE RANGE AND DIVIDENDS

Checkpoint's Common Stock is listed on the New York Stock Exchange ('NYSE')
under the symbol CKP. Trading on such exchange commenced on October 29, 1993,
prior to which Checkpoint's Common Stock was traded on the Nasdaq National
Market ('NASDAQ') under the symbol CHEK. The following table sets forth for the
periods indicated the high and low closing sale prices for the Company's Common
Stock as reported by NASDAQ prior to October 29, 1993 and as reported on the
NYSE Composite Tape commencing October 29, 1993.

<TABLE>
<S> <C> <C>
HIGH LOW
----- ---------
Fiscal Year 1992
First Quarter................................................................... $ 13 $ 73/4
Second Quarter.................................................................. 11 71/8
Third Quarter................................................................... 107/8 85/8
Fourth Quarter.................................................................. 181/8 91/8
Fiscal Year 1993
First Quarter................................................................... 201/8 83/4
Second Quarter.................................................................. 127/8 83/4
Third Quarter................................................................... 113/4 81/8
Fourth Quarter.................................................................. 14 81/2
Fiscal Year 1994
First Quarter................................................................... 141/2 103/8
Second Quarter.................................................................. 171/4 123/4
Third Quarter................................................................... 187/8 147/8
Fourth Quarter.................................................................. 211/2 163/8
Fiscal Year 1995
First Quarter (through March 16, 1995).......................................... 25 171/4
</TABLE>

A recent reported last sale price per share for the Company's Common Stock
on the NYSE is set forth on the cover page of this Prospectus.

12
<PAGE>
The Company has never paid a cash dividend on its Common Stock and does not
anticipate paying any cash dividends in the near future. The Company has
retained, and expects to continue to retain, its earnings for reinvestment in
its business. The payment of dividends in the future will depend on the
financial condition and results of operations of the Company, its cash needs and
other factors deemed relevant by the Board of Directors. In addition, certain
covenants in the Company's debt instruments limit the amounts available for
dividends on its common stock. See 'Description of Capital Stock -- Common
Stock.'

CAPITALIZATION

The following table sets forth the short-term debt and total capitalization
of the Company at December 25, 1994, and as adjusted to give effect to the (i)
Alarmex Acquisition and (ii) sale of the shares of the Common Stock offered
hereby and the application of the net proceeds therefrom as described under 'Use
of Proceeds.' This table should be read in conjunction with 'Use of Proceeds,'
'Pro Forma Combined Financial Information,' 'Selected Historical Financial
Information,' and the consolidated financial statements of the Company and
Alarmex appearing elsewhere, or incorporated by reference, in this Prospectus.

<TABLE>
<S> <C> <C>
DECEMBER 25, 1994
------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
Short-term debt:
Line of Credit................................................................. $ 3,429 $ --
Current portion of long-term debt.............................................. 3,277 3,461
----------- -----------
Total short-term debt....................................................... $ 6,706 $ 3,461
----------- -----------
----------- -----------
Long-term debt (less current portion):
Revolving Credit Facility...................................................... $ 12,880 $ --
Term Debt...................................................................... 22,676 38,109
----------- -----------
Total long-term debt........................................................ 35,556 38,109
----------- -----------
Shareholders' equity:
Preferred stock, no par value, authorized 500,000 shares, none issued.......... -- --
Common Stock, par value $.10 per share, 100,000,000 shares authorized,
11,278,511 shares issued and outstanding; 14,479,228 shares issued and
outstanding (as adjusted)................................................... 1,128 1,448(1)
Additional capital............................................................. 21,592 74,014(1)
Retained earnings.............................................................. 46,789 46,789
Common stock in treasury, at cost, 799,000 shares.............................. (5,664) (5,664)
Foreign currency adjustments................................................... (2,542) (2,542)
----------- -----------
Total shareholders' equity.................................................. 61,303 114,045
----------- -----------
Total capitalization..................................................... $ 96,859 $ 152,154
----------- -----------
----------- -----------
</TABLE>

- ------------------

(1) Reflects the (i) issuance of 200,717 shares of Common Stock in connection
with the Alarmex Acquisition (valued at a price of $17.43 per share) and
(ii) issuance and sale of 3,000,000 shares of the Common Stock offered
hereby (assuming an offering price of $17.50 per share based upon the
closing price on the NYSE on March 16, 1995) less underwriting discounts and
offering expenses.

13
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION

The following pro forma financial information is based on the historical
consolidated financial statements of the Company and Alarmex appearing
elsewhere, or incorporated by reference, in this Prospectus adjusted to give
effect to the Alarmex Acquisition and the sale of the shares of the Common Stock
offered hereby, and the application of the net proceeds therefrom. The Pro Forma
Combined Statement of Operations Data for fiscal year 1994 give effect to the
Alarmex Acquisition and the sale of the shares of the Common Stock offered
hereby, and the application of the net proceeds therefrom, as if they had
occurred at the beginning of fiscal year 1994 and the Pro Forma Combined Balance
Sheet Data give effect to the Alarmex Acquisition and the sale of the shares of
the Common Stock offered hereby and the application of the net proceeds
therefrom, as if they had occurred on December 25, 1994. The pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable. The pro forma financial information does not
purport to represent what the Company's results of operations or financial
position would actually have been had the Alarmex Acquisition and the sale of
the shares of the Common Stock offered hereby, and the application of the net
proceeds therefrom, in fact occurred at such dates or to project the Company's
results of operations or financial position for or at any future period or date.
The pro forma financial information should be read in conjunction with 'Use of
Proceeds,' 'Capitalization,' 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the historical consolidated financial
statements of the Company and Alarmex appearing elsewhere, or incorporated by
reference, in this Prospectus.

The Alarmex Acquisition will be accounted for under the purchase method of
accounting. The total purchase price for the Alarmex Acquisition of
approximately $13.5 million ($10 million in cash and the balance in 200,717
restricted shares of Checkpoint Common Stock), including estimated aggregate
related acquisition costs of $300,000, will be allocated to the tangible and
identifiable intangible assets and liabilities of Alarmex based upon
management's estimates of their fair value with the remainder to be allocated to
cost in excess of assets acquired. For purposes of presenting pro forma results,
no changes in revenues or expenses have been made to reflect the result of any
modification to operations that might have been made had the Alarmex Acquisition
been consummated at the beginning of fiscal year 1994. The pro forma expenses
include the recurring costs which are directly attributable to the Alarmex
Acquisition, such as the change in depreciation and the amortization expenses
resulting from the allocation of the purchase price.

14
<PAGE>
PRO FORMA COMBINED BALANCE SHEET DATA

DECEMBER 25, 1994

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA
FOR THE
ADJUSTMENTS PRO FORMA ALARMEX
FOR THE FOR THE ADJUSTMENTS ACQUISITION
CHECKPOINT ALARMEX ALARMEX ALARMEX FOR THE AND THE
ACTUAL ACTUAL ACQUISITION ACQUISITION OFFERING OFFERING
----------- ----------- ------------- ----------- ------------- -----------
(IN THOUSANDS)
Current assets:
Cash............................... $ 944 $ 18 $ 2,105(1) $ 3,067 $ 32,935(5) $ 36,002
Accounts receivable, net........... 33,290 4,594 -- 37,884 -- 37,884
Inventories........................ 29,486 4,346 1,304(2) 35,136 -- 35,136
Other current assets............... 4,385 462 -- 4,847 -- 4,847
Deferred income taxes.............. 1,117 116 -- 1,233 -- 1,233
----------- ----------- ------------- ----------- ------------- -----------
Total current assets............... 69,222 9,536 3,409 82,167 32,935 115,102
Property, plant and equipment, net of
accumulated depreciation........... 36,799 689 -- 37,488 -- 37,488
Excess of purchase price over fair
value of net assets acquired....... 10,120 -- 9,413(2) 19,533 -- 19,533
Investment in partnerships........... -- 315 -- 315 -- 315
Intangibles.......................... 5,826 337 -- 6,163 -- 6,163
Deferred taxes, net of valuation
allowances......................... -- 249 -- 249 -- 249
Other assets......................... 5,958 146 -- 6,104 -- 6,104
----------- ----------- ------------- ----------- ------------- -----------
Total assets......................... $ 127,925 $ 11,272 $ 12,822 $ 152,019 $ 32,935 $ 184,954
----------- ----------- ------------- ----------- ------------- -----------
----------- ----------- ------------- ----------- ------------- -----------
Current liabilities:
Accounts payable................... $ 10,064 $ 2,548 $ -- $ 12,612 $ -- $ 12,612
Accrued compensation............... 2,635 342 -- 2,977 -- 2,977
Income taxes....................... 2,223 420 -- 2,643 -- 2,643
Unearned revenues.................. 3,357 983 -- 4,340 -- 4,340
Other current liabilities.......... 4,810 686 -- 5,496 -- 5,496
Short-term borrowings and current
portion long-term debt........... 6,706 3,079 (2,895)(3) 6,890 (3,429)(5) 3,461
----------- ----------- ------------- ----------- ------------- -----------
Total current liabilities.......... 29,795 8,058 (2,895) 34,958 (3,429) 31,529
Long-term debt, less current
maturities......................... 35,556 433 15,000(3) 50,989 (12,880)(5) 38,109
Deferred income taxes................ 1,271 -- -- 1,271 -- 1,271
Shareholders' equity:
Preferred stock, no par value...... -- -- -- -- -- --
Common stock, par value $.10 per
share............................ 1,128 9 11(4) 1,148 300(5) 1,448
Additional capital................. 21,592 -- 3,478(4) 25,070 48,944(5) 74,014
Retained earnings.................. 46,789 2,772 (2,772)(2) 46,789 -- 46,789
Common stock in treasury........... (5,664) -- -- (5,664) -- (5,664)
Foreign currency adjustment........ (2,542) -- -- (2,542) -- (2,542)
----------- ----------- ------------- ----------- ------------- -----------
Total shareholders' equity......... 61,303 2,781 717 64,801 49,244 114,045
----------- ----------- ------------- ----------- ------------- -----------
Total liabilities and shareholders'
equity............................. $ 127,925 $ 11,272 $ 12,822 $ 152,019 $ 32,935 $ 184,954
----------- ----------- ------------- ----------- ------------- -----------
----------- ----------- ------------- ----------- ------------- -----------
</TABLE>

- ------------------

(1) Reflects the issuance of a $15.0 million eight-year note at an interest rate
of 9.35% (the '9.35% Note') less (i) payment of $10.0 million as the cash
portion of the purchase price for Alarmex and (ii) repayment of $2.9 million
of Alarmex debt.

(2) Reflects purchase accounting adjustments as a result of the Alarmex
Acquisition as follows:

Step-up in basis of Alarmex inventories....................... $1.3 million

Increase in goodwill in connection with the purchase of Alarmex....... $9.4
million

Elimination of the retained earnings of Alarmex............... $2.8 million

(3) Reflects (i) the issue of the 9.35% Note ($15.0 million), (ii) repayment of
$2.0 million of Alarmex revolving line of credit and (iii) repayment of $.9
million of Alarmex current maturities of long-term debt.

(4) Reflects the (i) issuance of 200,717 shares of Common Stock as the stock
portion of the purchase price (valued at a price of $17.43 per share) and
(ii) elimination of the stated value of Alarmex common stock.

(5) Reflects the issuance and sale of 3,000,000 shares of the Common Stock
offered hereby (assuming an offering price of $17.50 per share based upon
the closing price on the NYSE on March 16, 1995) less underwriting discounts
and offering expenses less (i) repayment of $3.4 million of the Company's
short-term borrowings and (ii) repayment of $12.9 million of the Company's
long-term debt.

15
<PAGE>
PRO FORMA COMBINED STATEMENT OF OPERATIONS DATA
FISCAL YEAR 1994

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
ADJUSTMENTS PRO FORMA PRO FORMA
FOR THE FOR THE ADJUSTMENTS FOR THE ALARMEX
CHECKPOINT ALARMEX ALARMEX ALARMEX FOR THE ACQUISITION AND
ACTUAL ACTUAL ACQUISITION ACQUISITION OFFERING THE OFFERING
----------- ----------- ----------- ----------- ------------- ---------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net revenues..................... $ 128,331 $ 22,677 $ -- $ 151,008 $ -- $ 151,008
Cost of revenues................. 66,360 12,991 --(1) 79,351 -- 79,351
----------- ----------- ----------- ----------- ------ ---------------
Gross profit................... 61,971 9,686 -- 71,657 -- 71,657
Selling, general and
administrative expenses........ 50,243 8,169 528(2) 58,940 -- 58,940
----------- ----------- ----------- ----------- ------ ---------------
Operating income............... 11,728 1,517 (528) 12,717 -- 12,717
Interest expense, net............ 2,589 228 1,190(3) 4,007 (1,142)(6) 2,865
Other expense.................... 762 4 -- 766 -- 766
----------- ----------- ----------- ----------- ------ ---------------
Income before income tax....... 8,377 1,285 (1,718) 7,944 1,142 9,086
Income taxes..................... 2,094 278 (428)(4) 1,944 411(4) 2,355
----------- ----------- ----------- ----------- ------ ---------------
Net earnings................... $ 6,283 $ 1,007 $ ( 1,290) $ 6,000 $ 731 $ 6,731
----------- ----------- ----------- ----------- ------ ---------------
----------- ----------- ----------- ----------- ------ ---------------
Net earnings per share........... $ .58 $ .55 $ .48
Weighted average number of common
and common equivalent shares... 10,806 11,007(5) 14,007(7)
</TABLE>

- ------------------

(1) The step-up in inventories of approximately $1.3 million described in Note 2
to the Pro Forma Combined Balance Sheet Data is expected to be included in
fiscal year 1995 Cost of revenues, and therefore, is excluded from the Pro
Forma Consolidated Statement of Operations Data.

(2) Reflects the increase in amortization of goodwill (over a 20-year period) in
connection with the Alarmex Acquisition as if the acquisition had occurred
on December 27, 1993.

(3) Reflects the increase in interest expense due to the issue of the 9.35%
Notes offset by the reduction in interest expense due to the repayment of
Alarmex debt.

<TABLE>
<S> <C>
FISCAL YEAR
1994
---------------
(IN THOUSANDS)
Interest on 9.35% Notes................................................................ $ 1,403
Interest on Alarmex debt............................................................... (213)
------
Total.................................................................................. $ 1,190
------
------
</TABLE>

(4) Reflects the change in the provision for income taxes as a result of the pro
forma adjustments. Such adjustments were based on the combined effective
federal and state tax rate of 36%, however, no deduction was taken for the
amortization of the goodwill acquired as this amount is not deductible.

(5) Reflects the issuance of 200,717 restricted shares of Common Stock as the
stock portion of the purchase price of Alarmex.

(6) Reflects the reduction in interest expense due to the repayment of $3.4
million of the Company's short-term borrowing and $12.9 million of the
Company's long-term debt with a portion of the net proceeds of the Offering.

(7) Reflects the issuance and sale of 3,000,000 shares of the Common Stock
offered hereby.

16
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION

The selected historical financial information presented below has been
derived from the consolidated financial statements of the Company. The
consolidated financial statements of the Company as of December 26, 1993 and
December 25, 1994, and for each of the three fiscal years in the period ended
December 25, 1994 are included elsewhere in this Prospectus and have been
audited by Coopers & Lybrand L.L.P., independent certified public accountants,
whose report thereon is also included herein.

The information presented below should be read in conjunction with, and is
qualified by, 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' and the Company's consolidated financial statements and
related notes included elsewhere in this Prospectus.

<TABLE>
<S> <C> <C> <C> <C> <C>
FISCAL YEAR
-----------------------------------------------------
1990 1991 1992 1993 1994
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, TOTAL
DEACTIVATION
SYSTEMS INSTALLED AND TOTAL SENSORS INSTALLED)
STATEMENT OF OPERATIONS DATA:
Net revenues...................................... $ 56,742 $ 52,943 $ 72,166 $ 93,034 $ 128,331
Cost of revenues.................................. 26,370 28,479 38,650 54,421 66,360
--------- --------- --------- --------- ---------
Gross profit.................................... 30,372 24,464 33,516 38,613 61,971
Selling, general and administrative expenses...... 23,871 23,646 28,342 39,238 50,243
--------- --------- --------- --------- ---------
Operating income (loss)......................... 6,501 818 5,174 (625) 11,728
Contract settlement income........................ -- -- -- 3,500 --
Interest expense (income), net.................... (206) 183 283 477 2,589
Other expense..................................... -- -- -- 327 762
--------- --------- --------- --------- ---------
Income before income taxes...................... 6,707 635 4,891 2,071 8,377
Income taxes (benefit)............................ (225) 127 463 456 2,094
--------- --------- --------- --------- ---------
Net earnings.................................... $ 6,932 $ 508 $ 4,428 $ 1,615 $ 6,283
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net earnings per share............................ $ .72 $ .05 $ .45 $ .16 $ .58
Weighted average number of common and common
equivalent shares............................... 9,579 9,591 9,951 10,386 10,806
SELECTED OPERATING DATA:
Disposable labels sold (during period)............ 434,912 537,833 691,494 733,530 959,249
Total deactivation systems installed
(at period end)................................. 24,190 30,003 43,771 61,417 91,549
Total sensors installed (at period end)........... 52,237 58,859 70,256 91,648 107,068
BALANCE SHEET DATA (END OF PERIOD):
Working capital................................... $ 17,915 $ 14,245 $ 25,792 $ 27,984 $ 39,427
Total assets...................................... 53,129 57,675 74,333 104,999 127,925
Long-term debt.................................... -- 783 9,322 24,302 35,556
Total debt........................................ 1,200 7,005 10,614 28,399 42,262
Shareholders' equity.............................. 41,321 42,087 51,061 53,779 61,303
</TABLE>

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is
qualified in its entirety by reference to, the consolidated financial statements
of the Company included elsewhere in the Prospectus.

OVERVIEW

Checkpoint is a designer, manufacturer and distributor of integrated
electronic security systems -- utilizing proprietary RF technologies -- designed
primarily to help retailers prevent losses caused by theft of merchandise. In
fiscal year 1991, the Company's revenues declined 6.7% from the prior fiscal
year at a time of substantial growth in the industry. As a result, the Company's
current management adopted a new strategy which focused on introducing new
products to meet retailers' needs, moving to direct distribution internationally
through strategic acquisitions, increasing the number of direct sales and
service personnel and making substantial investments in its manufacturing
facility in Puerto Rico to increase its manufacturing capacity and further
integrate the manufacturing of its disposable targets. The costs associated with
the implementation of this strategy have been significant and have impacted the
Company's profitability. In management's opinion, however, these investments
have positioned the Company for the future.

Net Revenues

The Company's unit volume is driven by product offerings, number of direct
sales personnel, recurring revenues and, to some extent, prices. Since 1991, the
Company's unit volume of sales has increased dramatically. During that time the
Company has introduced over 40 new products. Increases in the Company's U.S.
direct sales personnel and, through various acquisitions, the establishment of a
direct sales force in ten other countries, have resulted in the Company's total
sales force growing to approximately 180 as of December, 1994 as compared to 47
as of September 1991. In addition, sales of the Company's disposable targets and
field service revenues related to sensors and deactivation units provide a
significant and growing source of recurring revenues. Checkpoint's increasing
base of installed systems also results in additional unit volume. For fiscal
year 1994, approximately 37% of the Company's net revenues were attributable to
sales of targets and service to its installed base of customers.

The Company's unique and proprietary product line has enabled it to
increase its domestic prices over the past four years. These price increases,
however, have been substantially offset by volume discounts offered to national
retailers. Internationally, in fiscal year 1993 prices were favorably impacted
by moving to direct sales in various countries. In fiscal year 1994, however,
intense price competition in Western Europe significantly impacted selling
prices as competitors moved to protect market shares. This price sensitivity in
Western Europe is expected to continue and perhaps intensify in 1995.

Cost of Revenues

The principal elements comprising cost of revenues are product cost,
development cost and field and installation cost.

Across all of the Company's product lines, product costs average
approximately 40% of net revenues. The components of cost of revenues are as
follows: 74% -- material, 14% -- labor, and 12% -- manufacturing overhead. The
primary raw materials used in the manufacture of the Company's products include
electronic components for its systems, aluminum foil, resins, and paper used for
its disposable tags, ferric chloride solutions for the Company's etching
operation of disposable tags and printed circuit boards. Although aluminum,
resins and paper are subject to some commodity pricing, in recent years the
Company has generally been able to offset price increases through volume
purchasing and manufacturing efficiencies.

The Company believes that its manufacturing know-how and efficiencies
relating to disposable and reusable tags give it a significant cost advantage
over its competitors. Checkpoint expects volume increases to result in a
decrease of product cost as a percentage of net revenues because of the

18
<PAGE>
Company's substantial available manufacturing capacity and its ability to more
broadly distribute its fixed manufacturing costs over more units.

For fiscal year 1994, field service and installation costs approximated 8%
of net revenues and include ongoing product service costs and installation
costs. The Company believes that it has and will continue to make product design
changes which improve product performance and result in easier installation,
thereby reducing these costs as a percentage of net revenues.

Selling, General and Administrative Expenses

For fiscal year 1994, sales, marketing and customer service comprised
approximately 60% of all selling, general and administrative expenses. Selling,
general and administrative expenses have increased significantly due to an
expansion of Checkpoint's sales force both domestically and internationally
(through acquisitions) from a September 1991 sales force of 47 people to a
December 1994 sales force of approximately 180. During this same period,
significant investment was also made in the establishment of a multifaceted
product management team and a professional customer service organization.

Taxes

The Company's net earnings generated by the operations of its Puerto Rican
subsidiary are exempt from Federal income taxes under section 936 of the
Internal Revenue Code ('Section 936') and are substantially exempt from Puerto
Rican income taxes. As a result, the Company's effective tax rate for fiscal
year 1994 was 25%. Changes to Section 936 resulting from the Revenue
Reconciliation Act of 1993 are not expected to have an impact on the Company's
tax status from earnings generated by the operations in Puerto Rico as a result
of substantial investments made by the Company in property, plant and equipment
combined with the large workforce currently employed by the Company at the
facility. The Company anticipates that its effective tax rate may increase in
fiscal year 1995 and beyond due to (i) increased net income due to the Alarmex
Acquisition and other possible acquisitions, (ii) a change in U.S. tax laws
resulting in a partial tax on Section 936 earnings, whether or not such earnings
are repatriated and (iii) additional taxable income attributable to foreign
jurisdictions where tax rates may be marginally higher than in the U.S.

Exposure to International Operations

Prior to fiscal year 1993, substantially all the Company's international
sales were made to distributors and were paid in U.S. dollars. As a result of
the Company's strategy to increase its distribution directly to customers (as
opposed to sales through independent distributors), approximately 79.4% of the
Company's international sales for fiscal year 1994 were made in local
currencies. This increase in sales denominated in currencies other than U.S.
dollars increases the Company's potential exposure to currency fluctuations,
which can adversely affect results. During fiscal year 1994, currency exchange
losses amounted to $762,000 compared to losses of $327,000 for fiscal year 1993.
The primary increase in the currency exchange losses from 1993 to 1994 was the
result of the devaluation of the Mexican peso in late 1994. As a result of the
peso devaluation and continued difficulties in Mexico, the Company's operations
in Mexico could be negatively impacted during fiscal year 1995 but this is not
expected to materially affect the Company's consolidated results.

The Company sells products for international sales to its international
subsidiaries. The subsidiaries, in turn, sell these products to customers in
their respective geographic areas of operation in local currencies. This method
of sales and resale gives rise to the risk of gains or losses as a result of
currency exchange rate fluctuations.

19
<PAGE>

The Company is considering increasing the amount of currencies covered by
currency exchange forward contracts during fiscal year 1995. In addition, the
Company is evaluating the use of currency options in order to reduce the impact
that exchange rate fluctuations have on the Company's gross margins for sales
made by the Company's foreign operations. The combination of currency exchange
forward contracts and currency options should result in reducing the Company's
risks associated with significant exchange rate fluctuations.

Seasonality

The Company's customers are substantially dependent on retail sales which
are seasonal and subject to significant fluctuations which are difficult to
predict. The Company's sales are impacted by such seasonality and fluctuations.
Historically, the Company has experienced lower sales in the first and second
fiscal quarters of each year.

The following table presents unaudited interim operating results of the
Company. The Company believes that the following information includes all
adjustments (consisting only of normal, recurring adjustments) that the Company
considers necessary for a fair presentation, in accordance with generally
accepted accounting principles. The operating results for any interim period are
not necessarily indicative of results for any future interim period or the
entire fiscal year.

<TABLE>
<S> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(IN THOUSANDS)
Fiscal year 1994
Net revenues..................................................... $ 26,223 $ 28,656 $ 33,928 $ 39,524
Gross profit..................................................... 12,262 13,552 17,023 19,134
Selling, general and administrative expenses..................... 11,009 11,934 13,001 14,299
Net earnings..................................................... $ 526 $ 1,067 $ 2,162 $ 2,528
Fiscal year 1993
Net revenues..................................................... $ 20,016 $ 18,026 $ 26,604 $ 28,388
Gross profit..................................................... 8,700 6,880 11,385 11,648
Selling, general and administrative expenses..................... 8,002 9,069 11,092 11,075
Net earnings..................................................... $ 507 $ 884 $ 112 $ 112
Fiscal year 1992
Net revenues..................................................... $ 14,222 $ 16,567 $ 19,159 $ 22,218
Gross profit..................................................... 6,427 7,570 9,057 10,462
Selling, general and administrative expenses..................... 6,200 6,870 7,451 7,821
Net earnings..................................................... $ 150 $ 943 $ 1,272 $ 2,063
</TABLE>

First Quarter Fiscal Year 1995

Based upon the Company's sales in January and February of 1995 and other
factors, the Company currently believes that its results of operations for the
first quarter of fiscal year 1995, excluding the impact of the Alarmex
Acquisition, will be approximately break-even or a slight loss, as compared to
net income of $526,756 ($.05 per share) for the first quarter of fiscal year
1994. The Company also estimates that interest and amortization expenses and
other charges and expenses related to the Alarmex Acquisition, to the extent not
fully absorbed by Alarmex's revenues, could adversely impact earnings by up to
an additional $.03 per share for the first quarter of fiscal year 1995.

Anticipated first quarter 1995 sales will be affected by normal seasonality
and stronger than expected shipments in December 1994. Expected results also
reflect planned increases in expenses to support anticipated growth in the
Company's business. Increased planned expenses over the first quarter of fiscal
year 1994 include an increase of approximately $2 million in selling, general
and administrative expenses and increased interest on higher debt incurred to
finance expansion of the Company's business. The charges and expenses
attributable to the Alarmex Acquisition include increased expenses related to
inventory write-ups required by purchase accounting which will be charged over
the first two quarters of fiscal year 1995 as this inventory is sold, increased
interest expense on debt incurred to finance the acquisition and refinance
existing Alarmex debt and amortization of intangibles including goodwill,
arising from the acquisition.

20
<PAGE>

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, the percentage
relationship to net revenues of certain items included in the Company's
statements of operations:

<TABLE>
<S> <C> <C> <C>
1992 1993 1994
--------- --------- ---------
Net revenues....................................................................... 100.0% 100.0% 100.0%
Cost of revenues................................................................... 53.6 58.5 51.7
--------- --------- ---------
Gross profit..................................................................... 46.4 41.5 48.3
Selling, general and administrative expenses....................................... 39.3 42.2 39.2
--------- --------- ---------
Operating income (loss)............................................................ 7.1 (0.7) 9.1
Other income (loss), net........................................................... -- 3.4 (0.6)
Interest expense, net.............................................................. 0.4 0.5 2.0
--------- --------- ---------
Income before income tax......................................................... 6.7 2.2 6.5
Income taxes....................................................................... 0.6 0.5 1.6
--------- --------- ---------
Net earnings..................................................................... 6.1% 1.7% 4.9%
--------- --------- ---------
--------- --------- ---------
</TABLE>

Fiscal Year 1994 Compared to Fiscal Year 1993

Overview

In fiscal year 1994, the Company began to realize the full impact of
acquisitions completed and new products introduced in fiscal year 1993. Net
revenues increased $35.3 million over fiscal year 1993. Continued improvements
in the cost of revenues as a percentage of net revenues resulted in a
significant increase in incremental gross profit from that obtained in fiscal
year 1993. This improvement was driven primarily by increased efficiencies in
manufacturing (achieved through (i) closure of a high cost European
manufacturing operation, (ii) improvement in manufacturing efficiencies of
existing as well as newer generation products introduced in fiscal year 1993 and
(iii) higher unit volumes (contributing significantly to more efficient overhead
absorption)) in Western Europe as a result of Company-sponsored direct sales
activities (offset, however, by significant price reductions as a result of
intense price competition). These factors combined to produce operating income
of approximately $11.7 million during fiscal year 1994 compared to an operating
loss of $.6 million in fiscal year 1993.

Net Revenues

Net revenues increased $35.3 million (or 37.9%) over fiscal year 1993 (from
$93.0 million to $128.3 million). Domestic and foreign net revenues accounted
for approximately 60.6% and 39.4%, respectively, of total net revenues compared
to 64.1% and 35.9% for fiscal year 1993. Domestic EAS net revenues increased
$17.1 million (or 31.3%) primarily as a result of increased unit sales. In
addition, higher prices in certain product offerings and increases in recurring
service revenues also contributed to the increase. International EAS net
revenues increased $17.2 million (or 51.5%) primarily as a result of higher
prices received by the Company as a result of direct sales as compared to
selling through distributors. However, during fiscal year 1994 the Company's
operations in Western Europe were significantly impacted by price competition as
a result of ongoing efforts by competitors in that area to retain their
respective market shares. These price reductions negatively impacted the
Company's earnings from its international operations by approximately $3
million. This price competition is expected to continue and possibly intensify
through fiscal year 1995.

Cost of Revenues

Cost of revenues increased $12.0 million (or 21.9%) over fiscal year 1993
(from $54.4 million to $66.4 million). As a percentage of net revenues, however,
cost of revenues decreased 6.8% (from 58.5% to 51.7%) compared to fiscal year
1993 primarily due to (i) increased production volumes resulting in favorable
overhead absorption combined with greater manufacturing efficiencies, (ii) the
relocation of European production into lower cost Caribbean based operations,
and (iii) increased manufacturing efficiencies of existing as well as newer
generation products introduced in fiscal year 1993. Combined, these items
resulted in lowering production cost as a percentage of revenues by 1.8% (from
41.7% to 39.9%). Lower spending on research and development from the prior year
(from $5.4

21
<PAGE>
million to $4.9 million) as a result of the completion of new products during
the past several years also contributed to reducing costs as a percentage of
revenues by 2.0%. In addition, the Company's service costs were positively
impacted by the introduction of new deactivation products, Counterpoint IV and
V, with their increased deactivation heights thereby reducing the frequency of
customers' failures to deactivate disposable labels. Increased service revenues
without the cost for proportionately greater service personnel resulted in
reducing service costs as a percentage of revenues by 3.0%.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $11.0 million (or
28.1%) over fiscal year 1993 (from $39.2 million to $50.2 million). As a
percentage of net revenues, however, selling, general and administrative
expenses decreased by 3.0% (from 42.2% to 39.2%). The higher expenses (in
dollars) were due to (i) increases in variable selling expenses resulting from
greater domestic sales (an increase of approximately $1.0 million over fiscal
year 1993) and (ii) increases in selling, general and administrative expenses
resulting from the acquisitions made in fiscal year 1993 (an increase of
approximately $9.0 million over fiscal year 1993).

Net Earnings

Net earnings were $6.3 million or $.58 per share versus $1.6 million or
$.16 per share for fiscal year 1993. The results for fiscal year 1993, however,
include a one-time benefit of $3.5 million ($2.7 million after tax) from a
settlement of a contract dispute with the Company's former exclusive distributor
for Western Europe.

Fiscal Year 1993 Compared to Fiscal Year 1992

Overview

Fiscal year 1993 was characterized by a difficult transition from
distribution to direct sales and introduction of new products with attendant
start-up problems and expenses. Net revenues increased $20.9 million over fiscal
year 1992. These revenues, however, generated only approximately $5.1 million of
incremental gross profit. Factors adversely affecting gross margin were (i)
increased manufacturing costs attributable to a European factory acquired in
1993 (and since closed) as part of Western European distribution operations,
(ii) start-up manufacturing and installation inefficiencies related to the
introduction of certain new high unit volume products and (iii) reduced unit
sales in Western Europe (and consequently lower fixed cost absorption)
attributable to the reorganization from distribution through independent
distributors to direct sales in Western Europe. At the same time, due primarily
to a change from distribution sales and related service to Company-sponsored
direct sales and service in Western Europe, selling and related expenses
(primarily direct and indirect sales and related product installation and
service) increased by approximately $10.9 million over fiscal year 1992. These
factors resulted in an operating loss of approximately $.6 million for the year.

Net Revenues

Net revenues increased $20.9 million (or 28.9%) over fiscal year 1992 (from
$72.2 million to $93.0 million). Domestic and foreign net revenues were 64.1%
and 35.9%, respectively, of total net revenues, compared to 68.7% and 31.3% for
fiscal year 1992. Domestic EAS net revenues increased $9.4 million (or 20.7%)
primarily as a result of unit volume increases across all major product lines
and increases in service revenues. Domestically, these positive effects were
somewhat offset by lower pricing from high volume national retailers.
International EAS net revenues increased $10.8 million (or 47.6%), primarily as
a result of higher unit volumes and price increases on reusable tags combined
with significantly higher prices across other major product lines attributable
to various acquisitions and start up operations made in late 1992 and throughout
the year in numerous countries where the Company previously sold through
distributors.

Cost of Revenues

Cost of revenues increased $15.8 million (or 40.8%) over fiscal year 1992
(from $38.7 million to $54.4 million). As a percentage of net revenues, cost of
revenues increased 4.9% (from 53.6% to 58.5%) over fiscal year 1992 thereby
reducing gross margin from 46.4% in fiscal year 1992 to 41.5% in fiscal year
1993. This decrease in gross margin was primarily due to the factors set forth
in the first paragraph of this section.

22
<PAGE>
Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $10.9 million (or
38.4%) over fiscal year 1992 (from $28.3 million to $39.2 million) and by 2.9%
as a percentage of net revenues (from 39.3% to 42.2%). The higher expenses are
primarily due to (i) increases in variable selling and marketing expenses
resulting from higher domestic sales and (ii) sales, marketing, installation and
service costs borne by the Company which had been borne by independent
distributors.

Net Earnings

Net earnings were $1.6 million or $.16 per share versus net earnings of
$4.4 million or $.45 per share for fiscal year 1992. Included in the fiscal year
1993 results is a one-time benefit of $3.5 million ($2.7 million after tax) from
a settlement of a contract dispute with the Company's former exclusive
distributor for Western Europe.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs have related to, and are expected to continue
to relate to, capital investments, acquisitions and working capital
requirements. The Company has met its liquidity needs over the last three years
primarily through funds provided by operations and long-term borrowings. The
Company believes that cash provided from operating activities and funding
available under its current credit agreements, together with the net proceeds
from the sale of the shares of Common Stock offered hereby, will be adequate for
its working capital and capital expenditure requirements. Cash provided (used)
by operating activities for fiscal years 1992, 1993 and 1994 was $1.5 million,
$(6.3) million and $(7.6) million, respectively. In fiscal years 1993 and 1994,
cash used by operating activities was negatively impacted by increases in
accounts receivables and inventories relating to significant sales increases in
those periods and increases in rental equipment as a result of allowing
retailers to test equipment before finalizing a purchase decision or to lease
the equipment under operating leases for a period which usually ranges from
three to five years.

The allowance for doubtful accounts showed a significant reduction between
fiscal years 1993 and 1994 (from $2.2 million to $1.6 million) as a final
determination was made as to the collectability of certain trade receivable
which were acquired as part of the Company's acquisition of ID Systems in July
of 1993. At the time of acquisition the Company set up an appropriate allowance
totalling $1.6 million in order to reflect the reduced value of this portfolio.

During fiscal year 1994 the Company completed a private placement debt
funding of $12 million. A significant portion of the proceeds were used to repay
existing debt under the Company's long-term revolving credit facility. The
remaining proceeds were used for general corporate purposes. At December 31,
1994, the Company had no availability remaining under its revolving credit
facility with two banks. Subsequent to year end the Company completed a private
placement debt funding of $15 million. In addition, the Company entered into a
new $25 million revolving credit agreement with a group of banks to replace the
existing $15 million in revolving credit indebtedness outstanding at year end.
Of the $25 million available under the revolving credit agreement, at February
28, 1995, there was approximately $20 million outstanding at an interest rate of
7.63% and $5 million available for future borrowings. A significant portion of
the private placement funding proceeds, approximately $13 million, was used for
the acquisition of Alarmex and the repayment of existing debt held by Alarmex at
the time of acquisition. The balance of the private placement funding of
approximately $2 million was used for general corporate purposes.

The Company's capital expenditures were $6.1 million in fiscal year 1992,
$4.6 million in fiscal year 1993 and $4.5 million in fiscal year 1994. The
Company expects that for the next several years similar levels of investments in
property, plant and equipment will be made. These capital expenditures will be
used to expand, improve and maintain plant efficiency at the Company's various
production facilities located in the Caribbean. As part of its continuing
strategy, the Company is exploring strategic acquisitions in the following
areas: international direct distribution, a second source of manufacturing
capacity and product line diversification within the Company's core businesses.
In order to consummate a particular acquisition, the Company may require
additional debt or equity financing. The Company has never paid a cash dividend
and has no plans to do so in the foreseeable future. Certain covenants in the
Company's debt instruments limit the amounts available for dividends.

23
<PAGE>
BUSINESS

OVERVIEW

THE RETAIL OPPORTUNITY

The Company markets its products primarily to retailers in the following
market segments: hard goods (supermarkets, drug stores, mass merchandisers and
music/electronics) and soft goods (apparel). The U.S. Department of Commerce
estimates that over 15% of retail costs are attributable to inventory
'shrinkage' (the value of goods which are not paid for). Shrinkage is caused
primarily by shoplifting and employee theft. Industry sources estimate that
shrinkage is a $30 billion annual problem for the U.S. retail industry and a
concern of at least a comparable magnitude throughout the rest of the world.
Sophisticated data collection systems (primarily barcode scanners) available to
retailers have highlighted the shrinkage problem and, consequently, retailers
now realize that the implementation of an effective electronic security system
can significantly increase profitability. Accordingly, the retail industry is
becoming increasingly focused on theft prevention. An effective EAS program can
reduce the loss from shrinkage by over 50%. Since the U.S. Department of
Commerce estimates that over 15% of retail costs are a result of theft, a
significant decline in shrinkage can result in a substantial jump in profits for
retailers by (i) reducing the amount of merchandise that leaves stores without
being paid for, (ii) giving retailers price flexibility, and (iii) allowing
retailers to openly display higher priced, higher margin merchandise (i.e.
jewelry, electronics) with greater visibility resulting in an increase in higher
profit impulse sales at a lower sales cost.

24
<PAGE>
EAS products were first used by retailers to protect soft goods or apparel
merchandise. Due to advances in technology applications in recent years, hard
goods merchandise can also be economically and effectively protected by EAS
products. Traditionally, certain of the hard goods retail markets used bulky
packaging to prevent shrinkage. Due to environmental and cost concerns, these
markets are looking to EAS products as a less expensive, environmental friendly
alternative. Accordingly, hard goods retailers such as supermarkets and
hypermarkets, and drug, discount, eyeglass, music, hardware, 'do-it-yourself',
home improvement, book and video stores have increasingly become large users of
EAS products.

The hard goods retail markets, estimated to be substantially larger in the
aggregate than the EAS retail soft goods market, are relatively unpenetrated.
Further, the EAS hard goods retail markets primarily use disposable labels which
are affixed to merchandise. Use of the hard goods EAS systems creates a
continuing need on the part of retailers for additional disposable labels to be
affixed to new merchandise resulting in a major source of recurring revenues for
Checkpoint.

Retailers generally apply the targets used in EAS systems at the retail
site. Retailers have expressed interest in source tagging. Manufacturers have
been receptive to source tagging in light of the potential increase in product
volume (that is, more sales at the retail level due to easier customer access to
products). According to one fragrance manufacturer's study, self-service
fragrance sales are 60% greater than sales of products kept under lock and key.
In addition, a study, conducted for the Company by Management Horizons, a
division of Price Waterhouse, reported that consumers made to wait in line or
search for a salesperson to buy batteries or camera film are likely to forego
the purchase. The Company believes that source tagging provides retailers,
manufacturers and retail customers with distinct benefits, principal among which
are: enhanced protection from theft, activation and deactivation without the
need for special training of store employees, more open display of merchandise
resulting in increased sales for manufacturers and reduced costs for retail
products.

Strategies to increase acceptability of source tagging are to (i) intensify
vertical market focus into key product segments where RF technology is the only
logical choice, such as liquors; (ii) expand source tagging activities into
international markets; (iii) increase staffing for source tagging efforts
supporting manufacturers and suppliers to speed implementation; and (iv) expand
RF target products to accommodate more packaging schemes.

Newer applications of the technologies used in retail hard goods markets
can also be used by non-retail businesses to protect assets such as personal
computers, facsimile and copy machines, telephones, artwork, laboratory
equipment and tools from loss by unauthorized removal. Other specialized
applications include protection of newborn infants in hospitals and patients in
nursing homes and other long-term care facilities. Further, non-retail
businesses make extensive use of CCTV and electronic access control products to
enhance security.

CHECKPOINT PRODUCTS AND TECHNOLOGY

25
<PAGE>

Checkpoint developed the concept of source tagging more than ten years ago.
Since then, the Company has focused on developing all of the elements required
for successful source tagging. In 1993, Checkpoint implemented the concept of
bulk activation. The Company believes bulk label activation is helpful to a
successful source tagging program because (i) not all retail stores are EAS-
equipped, (ii) sending activated tags to unprotected stores could create alarm
situations if customers take purchases to an EAS-protected store; (iii) it is
not cost-effective for manufacturers to create separate inventories
(EAS-protected versus non-EAS-protected) and (iv) RF technology does not damage
products.

Checkpoint's principal global competitor in the EAS industry is
Sensormatic. Sensormatic is a fully integrated supplier of electronic security
systems with an approximately 68% market share and total revenues of
approximately $656.0 million in its most recent fiscal year. Management
estimates that the Company's market share in the EAS industry is approximately
15%. Unlike Checkpoint which utilizes its compatible RF technologies across all
market segments, Sensormatic employs five separate, non-compatible technologies
- -- acousto-magnetic, magnetic, radio frequency, microwave, and frequency
division magnetic. Sensormatic's recommendation of a technology depends on the
market. Checkpoint's competitive position is supported by its extensive
manufacturing experience and know-how and, to a lesser degree, its technology
and patents. There can be no assurance, however, that a competitor, including
Sensormatic, could not develop a product comparable to that of Checkpoint.

STRATEGY

More specifically, the Company is pursuing the following strategies:

- - Expanding its direct sales and service capabilities in strategic geographic
areas.

In order to interact more closely with retailers and better understand and
respond to their needs, the Company will continue to expand its direct sales
and service capabilities. Checkpoint markets, distributes and services its
products in the United States, Canada and, as a result of acquisitions in
1993, in Mexico, Argentina, Australia and throughout most of Western Europe,
through a direct sales force of approximately 180. Since September 1991, the
Company has expanded its direct sales force from approximately 47 to 180. The
Company intends to continue to expand its international sales force either
through acquisitions or by establishing start-up operations. In addition, the
Company intends to continue to invest in its domestic sales channel to achieve
new account penetrations and revenue growth.

26
<PAGE>

- - Broadening its product lines.

In order to satisfy the needs of its customers (including reducing shrinkage
and providing the retailer with enhanced sales opportunities through more open
display of merchandise), the Company will continue to broaden its product
lines. Since 1991, the Company has introduced 43 new products. The Company
continues to expand its product line with performance improvement products
such as multifrequency tags and less intrusive wide aisle RF detection
sensors.

- - Increasing its penetration of the hard goods retail market (currently
estimated to be less than 10% penetrated by the EAS industry).

By highlighting the competitive advantages of Checkpoint's RF technologies
(including disposable targets), the Company seeks to increase its penetration
of the retail hard goods market. For fiscal year 1994, sales of RF disposable
targets and field service of their associated sensors and deactivation units
accounted for approximately 37% of the Company's net revenues and provide the
Company with a major source of recurring revenues. As the Company's installed
base of systems increases, so will its recurring disposable label and service
revenues and, at some point, the Company believes such products will
constitute a majority of sales.

- - Continuing to promote source tagging.

Checkpoint will continue to promote source tagging by providing manufacturers
and retailers with a full range of equipment based on RF technologies. To help
manufacturers easily conceal Checkpoint's paper-thin disposable RF target in
products at the point of manufacture, the Company continues to work closely
with the manufacturers in selection of standard application equipment and
package design for target placement opportunities.

- - Continuing to improve the Company's highly integrated and state-of-the-art
manufacturing processes and technologies.

The Company recently built state-of-the-art facilities located in Puerto Rico
and the Dominican Republic which have allowed the Company to become a low cost
producer of high quality EAS products. In addition, the Company is currently
exploring alternate source manufacturing opportunities.

- - Continuing to explore strategic acquisitions or start-up opportunities.

The Company is exploring acquisitions or start-up opportunities in the
following areas: international direct distribution, a second source of
manufacturing capacity and product line diversification within the Company's
core businesses.

PRODUCTS

Product Descriptions

EAS Systems

Checkpoint offers a wide variety of EAS solutions to meet the requirements
of different retail store configurations. A Checkpoint EAS system is primarily
comprised of sensors and deactivation units, which respond to or act upon the
Company's targets.

The Company's EAS products are designed and built to comply with applicable
Federal Communications Commissions ('FCC') regulations governing radio
frequencies, signal strengths and other factors. The Company's present EAS
products requiring FCC certification comply with applicable regulations. In
addition, the Company's present EAS products meet other regulatory
specifications for the countries in which they are sold.

Sensors. The Company's sensor product lines are used principally in retail
establishments and libraries. In retail establishments, EAS system sensors are
usually positioned at the exits from the areas

27
<PAGE>
in which protected articles are displayed. Each sensor unit includes either one
or two vertical posts placed at preset distances (e.g. three to twelve feet)
apart.

In libraries, sensors are positioned at the exit paths, and gates or
turnstiles which control traffic. Targets are placed inside books and other
materials to be protected. A target passing through the sensor triggers an
alarm, which locks the gate or turnstile. The target can easily be deactivated
or passed around the sensor by library personnel.

EAS system components include twelve styles of sensors (each including
transmitter, receiver and alarm), and the customer's choice of patented
disposable paper targets, reusable flexible targets and reusable hard plastic
targets. The EAS system's transmitter emits an RF signal and the receiver
measures the change in that signal caused by an active target, causing the
system to alarm.

Introduced in 1990, the QS2000 is the latest evolution in the Company's
proven Quicksilver sensor product line. With the addition of
microprocessor-based radio frequency signal processing, the QS2000 has been
engineered to provide excellent target detection with enhanced
target-discrimination capabilities. The QS2000 analyzes RF signals in its
detection zone and can discriminate between unique target signals and
environmental interference. This development greatly reduces false and 'phantom'
alarms while increasing target detection. The QS2000 is also available in a
weatherized version for outdoor use. The QX2000 is a similar system to the
microprocessor based QS2000 system with the added flexibility of modular
electronics design. The modular design provides an improved service capability
in addition to permitting the system to operate at three different RF
frequencies.

Introduced in 1993, the Condor sensor, is the most technically advanced RF
system on the market today. A significant feature of this system is the
combination of a receiver and transmitter in a single post. Utilizing a
microprocessor and two digital signal processors, the Condor has an aisle width
of 12 feet using two posts. One sensor is capable of three feet detection on
either side of the sensor. Additional features include the ability to mount
full-sized merchandising panels, a customer counter, an alarm counter and
variable alarm tone.

Also introduced in 1993, the QS1500 and QS1600 are value-priced, reusable
target systems designed primarily for providing wide aisle protection for the
apparel marketplace. The QS1500 has three feet of detection on either side of a
single post, or it can protect up to six feet between two posts. For wider
detection, the QS1600 with two pedestals can detect targets at distances of up
to twelve feet, which is ideal for shopping mall environments. This system is an
inexpensive answer to wide aisle detection.

The Company also offers chrome-finished Quicksilver sensors, solid-oak
Signature sensors, featuring an earlier generation of components, the QS3000, a
wide aisle system that can span up to five feet, and the In-Line Supermarket,
which is a narrow aisle system designed specifically for hypermarkets. Most of
the Company's sensors can be used with the various targets available.

In 1994, the Company introduced the QS4000 sensor. With digital signal
processing, this advanced sensing system adjusts its detection to changing
environmental conditions. This new Sensor model may be placed in close proximity
to deactivation units or near tagged merchandise so that stores can maximize
selling space. The QS4000 protects aisle widths up to 42 inches using disposable
targets, and up to 60 inches using reusable targets.

Deactivation Units. Deactivation units are used to eliminate the ability
of the tag to be identified by the RF field in the sensor and set off an alarm.
Deactivation usually occurs at the check-out point. In 1986, the Company
introduced Counterpoint, a noncontact deactivation unit which eliminated the
need to search for and remove or manually detune disposable targets. Since 1989,
the Company has expanded its deactivation products with electronic modules that
can be installed into numerous bar code scanners including those manufactured by
SpectraPhysics Retail Systems, Symbol Technologies, Inc., Metrologic, Inc.,
National Cash Register, Inc., ICL Systems, Inc., IBM (International Business
Machines) and Fujitsu Ltd. These modules allow the reading of bar code
information, while deactivating targets in a single step. These deactivation
units allow check out personnel to focus on the customer and minimize errors at
check-out. During 1993, the Company developed an improved

28
<PAGE>
deactivation unit, Counterpoint IV, which increased deactivation height to
twelve inches and improves the rate of product deactivation. In 1994, the
Company increased the deactivation height beyond twelve inches with the
introduction of Counterpoint V. These product improvements have significantly
increased the reliability of accurate deactivation.

Five convenient deactivation configurations -- horizontal counter-mounted
slot scanners, a vertical mounted scanner, hand-held scanners, a weigh scale
scanner and a deactivation pad -- are available for a variety of POS
environments. Most of these units transmit an audible tone that alerts the user
that a target has been detected. The tone stops when the target has been
deactivated.

With the exception of the Counterpoint deactivation pad, all of the above
scanners read bar code information while deactivating hidden ChekInk targets in
a single step. Ideal for high-volume environments, these scanners mount easily
at POS, and can deactivate multiple targets on a single item.

The Counterpoint deactivation pad is placed at the check-out counter, and
targets are deactivated automatically by simply passing protected items across
the low profile pad which audibly signals that targets have been deactivated.
There is no need to see the targets in order to deactivate them. Two sizes of
the pads are available, both of which have a very low profile on the counter top
of 3/4 or less.

Targets

All targets contain an electronic circuit that unless deactivated
(disposable targets) or removed (reusable targets), triggers an alarm when
passed through the sensors. Customers can choose from a wide variety of targets,
depending on their merchandise mix. Targets can be applied either in-store or at
the point of manufacture.

Disposable Targets. Disposable security targets are affixed to merchandise
by pressure sensitive adhesive or other means. These range in size from 1.125 x
1.5 to 2.0 x 3.0, enabling retailers to protect smaller, frequently-pilfered
items. Disposable targets must be deactivated at the point-of-sale, either
manually or electronically, or passed around the sensors. Checkpoint provides
labels compatible with a wide variety of standard pricemarking/barcoding
printers. Checkpoints labels can be integrated with printers from Sato, Zebra,
Monarch, Printronix and Sobar. When used with electronic deactivation equipment,
they represent the Cheklink concept, developed to combine pricing,
merchandising, data collection and protection in a single step. Targets can be
applied at the vendor level, in the distribution center or in-store. Under the
Company's Impulse program tags can be embedded in products or packaging at the
point-of-manufacture or packaging.

In 1992, the Company was licensed to sell and provide targets in roll form
for the Model 4021 label applicator (Pathfinder) printer manufactured by Monarch
Marking Systems. This product is a sophisticated electronic portable bar code
label printer and applicator ideal for use in high volume mass merchandise,
drugstore and supermarket applications. In addition, Pathfinder has a
self-contained keyboard which allows for easy entry of various types of label
data including: bar code, price and size. The Pathfinder also has built-in
scanning capability that can scan existing package bar codes, then print
identical Checkpoint labels for application without obscuring important product
information.

The Company has entered into a business agreement with Hobart Corporation,
a manufacturer and distributor of weigh scales, label printers and meat wrappers
used in supermarket meat rooms. The Company's Hobart tag, 1315 Series, is
compatible with the Hobart weigh scales Model 5000 T/TE and Model 18VP. This
labor-saving tag is integrated with the Hobart Weigh Scale/Printer to display
the weight and price of the item.

In addition, the Company has an agreement with A&H Manufacturing, the
dominant U.S. supplier of costume jewelry cards, which grants A&H the right to
embed Checkpoint targets in cards during manufacturing.

Reusable Targets. Reusable security targets fall into two categories.
Flexible targets are plastic-laminated tags used in a variety of markets that
are removed at the point-of-sale. Hard targets consist of a target and a locking
mechanism within a plastic case. They are used primarily in the apparel market

29
<PAGE>
and present a visible psychological deterrent. Both flexible and hard targets
use a nickel-plated steel pin which is pushed through the protected item with a
magnetic fastener. These targets can also be attached with a lanyard using the
magnetic fastener. An easy-to-use detacher unit removes reusable targets from
protected articles without damage.

The Company also supplies the UFO hard target. The UFO hard target design
combined with a superior locking device makes the UFO, in the opinion of the
Company's management, a difficult hard target to defeat. The UFO tag, due to its
patented design, combines a unique conical shape with an interior antenna which,
due to its placement at an angle, provides a tag which can be detected by the
system better than tags in which the interior antenna is placed in a flat
position. During 1993, the Company began manufacturing the Teardrop hard target,
which is made to function only with the QS1500 and QS1600 systems, primarily
used in the apparel market.

During 1993, the Company also introduced a line of fluid tags marketed
under the name ChekInk which provides a cost-effective second line of defense
against shoplifters. Unauthorized removal of these targets will cause sealed
vials of dye to break open, rendering the garment unusable. ChekInk serves as a
practical alternative to chaining down valuable merchandise. Ideal for use in
department stores, mass merchandisers, and sporting goods stores, ChekInk can be
removed quickly and easily at check-out in the same manner as the reusable
targets.

During 1994, the Company entered into a business agreement with MW Trading
ApS, a manufacturer and distributor of home entertainment security products, to
license and manufacture these products for the North and South American
marketplace.

Access Control Systems

The electronic access control Threshold product line consists of seven
systems, ranging from small, relatively simple systems, to large, sophisticated
systems which provide a maximum degree of control, monitoring and reporting.

The Threshold product line features a Distributed Network Architecture
which means no single point of failure can affect the entire system. These
systems are capable of controlling up to 500 doors for access control and up to
50,000 cardholders. The incorporation of alarm monitoring and point control
(i.e. turning lights on or off) are also integral features of all seven
Threshold systems.

The use of Threshold Remote Software Package allows the connection of
controllers from anywhere in the country via telephone lines. This functionality
opens major markets for communications, utilities and large scale customers with
remote facilities to manage.

All electronic access control systems can also monitor other occurrences,
such as a change in the status of environmental systems, motors, safety devices
or any controller with a digital output. While monitoring these controllers, any
output can, by a pre-programmed decision, cause an alarm to sound or another
event to occur.

The Company has several proprietary proximity card/tag and reader systems
for all environments. The Mirage family of readers provides the fastest card
verification in the industry and the release of the Mirage SG allows these
readers to be directly mounted on metal without degradation in performance. The
Mirage SG provides the same read performance in a smaller more aesthetically
pleasing package.

The proximity cards are comprised of a custom-integrated circuit implanted
in a plastic card or key tag which is powered by RF energy transmitted from a
reader unit located at the entrance to a controlled door. Access is gained after
a reader controller unit verifies a code transmitted by the card. The proximity
card cannot be copied or duplicated due to the use of a programmed integrated
circuit. In addition, a Mirage reader unit can be protected from environmental
damage or vandalism by installing it inside a wall or behind a glass window. A
Mirage reader unit is usable throughout the Threshold product line.

30
<PAGE>
POS Monitoring Systems

In December 1991, the Company licensed the worldwide rights to a POS
monitoring system that is marketed under the name Viewpoint. Viewpoint records
and stores on videotape every transaction at each check-out, both the visual and
the individual transaction data. Viewpoint connects directly to the
point-of-sale network using a PC compatible computer and fixed CCTV cameras
usually mounted inside domes affixed to a retailer's ceiling. Because all
transaction data is stored in the computer's relational data base,
user-generated reports can match questionable transactions to events recorded on
the tape. The system also features a remote dial-in capability that allows users
to monitor multiple store locations from one site, significantly lowering
personnel cost. Viewpoint can be linked to Checkpoint EAS systems in order to
record incidents that have caused the EAS system to register an alarm.

In early 1995, the Company acquired Alarmex which designs and provides
CCTV, POS monitoring and fire alarm systems to over 9,000 retail sites in the
U.S. The Company believes the acquisition of Alarmex complements the Company's
current CCTV and POS monitoring products. With the acquisition of Alarmex, the
Company is able to offer its customers a broader and more sophisticated range of
CCTV and POS monitoring products. In addition, the acquisition of Alarmex
enables the Company to enter the burglar and fire alarm market with the related
central station alarm monitoring capabilities.

Net Revenues by Product

The following table sets forth the percentage of net revenues derived from
each major product group for the last five fiscal years:

NET REVENUES BY PRODUCT
<TABLE>
<S> <C> <C> <C> <C>
FISCAL YEAR
------------------------------------------
1990 1991 1992 1993
--------- --------- --------- ---------
Electronic Article Surveillance Systems........................................ 46% 38% 45% 41%
Reusable tags used in EAS Systems.............................................. 10 8 8 12
Disposable tags used in EAS Systems............................................ 30 37 32 30
Access Control Systems......................................................... 6 7 6 5
Service and Installation....................................................... 6 8 6 8
CCTV/Viewpoint................................................................. -- -- -- 1
Other.......................................................................... 2 2 3 3
--------- --------- --------- ---------
100% 100% 100% 100%
--------- --------- --------- ---------
--------- --------- --------- ---------

1994
---------
Electronic Article Surveillance Systems........................................ 39%
Reusable tags used in EAS Systems.............................................. 12
Disposable tags used in EAS Systems............................................ 29
Access Control Systems......................................................... 5
Service and Installation....................................................... 8
CCTV/Viewpoint................................................................. 2
Other.......................................................................... 5
---------
100%
---------
---------

</TABLE>

MARKETS AND SALES

The Company markets its products primarily to retailers in the following
market segments: hard goods (supermarkets, drug stores, mass merchandiser and
music/electronics) and soft goods (apparel). The Company is a market leader in
the supermarkets, drugstores and mass merchandiser market segments with such
customers as Caldor, Lucky's Grocery, Ralph's, Rite-Aid, Target and Walgreens.

EAS Systems. The Company sells its EAS systems principally throughout
North America and Europe. During fiscal year 1994, EAS revenues from outside the
United States (principally Europe and Scandinavia) represented approximately
39.4% of the Company's net revenues.

In the United States, the Company markets its EAS products through its own
sales personnel, independent representatives and independent dealers.
Independent dealers accounted for less than 1% of the Company's net revenues in
the United States during fiscal year 1994. The Company, at December 25, 1994,
employed 79 salespeople who sell the Company's products to the domestic retail
market and who are compensated by salary plus commissions. The Company's
independent representatives sell the Company's products to the domestic library
market on a commission basis. At December 25, 1994, the Company had 27 such
independent representatives. Three members of the

31
<PAGE>
Company's sales management staff are assigned to manage and assist these
independent representatives. Of total EAS domestic revenues during fiscal year
1994, 92% was generated by the Company's own sales personnel.

Internationally, the Company markets its EAS products principally through
various international subsidiaries which sell directly to the end user and
through independent distributors. The Company's foreign subsidiaries, as of
December 25, 1994, employed a total of 102 salespeople who sell the Company's
products to the retail and library markets. The Company's direct international
sales operations are currently located in Western Europe, Canada, Mexico,
Argentina and Australia.

Until 1993, the Company's sales in Western Europe were made principally
through distributors. In mid-1993, the Company acquired a competing EAS company
in Western Europe. In 1994, the Western European market was characterized by
intense price competition as competitors endeavored to retain market share.

Independent distributors accounted for 21% of the Company's international
revenues during fiscal year 1994. International distributors sell the Company's
products to both the retail and library markets. The Company's distribution
agreements generally appoint an independent distributor for a specified term as
an exclusive distributor for a specified territory. The agreements require the
distributor to purchase a specified dollar amount of the Company's products over
the term of the agreement. The Company sells its products to independent
distributors at prices significantly below those charged to end-users because
the distributors make volume purchases and assume marketing, customer training,
maintenance and financing responsibilities.

Access Control Systems. The Company's electronic access control sales
personnel, together with manufacturers' representatives, market its electronic
access control products to approximately 150 independent dealers. The Company
employs five salespeople who are compensated by salary plus commissions. The
Company's one manufacturer representative is compensated solely by commissions.
Under the independent dealer program, the dealer takes title to the Company's
products and sells them to the end-user customer. The dealer installs the
systems and provides ongoing service to the end-user customer.

POS Monitoring Systems. The Company markets the POS monitoring products
throughout the world through its own sales personnel. Sales of the POS
monitoring produces are sold to the Company's existing EAS retail customers
along with those retailers that currently do not have the Company's EAS
products.

Salespeople. Checkpoint presently employs approximately 180 salespeople.
They are an experienced, effective sales force and one of the Company's most
important assets. On the average, the sales people have over four years
experience in the industry. Checkpoint invests heavily in sales training
programs and experiences little turnover among its top performers.

Marketing Strategies. The Company promotes its products primarily through
(i) comprehensive tag and equipment sales and product brochures, (ii)
emphasizing environmental benefits by promoting reduced packaging through source
tagging, (iii) extensive trade show participation and (iv) targeting specific
retail markets that offer substantial opportunity for growth (i.e.,
supermarkets).

MANUFACTURING

Checkpoint manufactures most of its products in state-of-the-art facilities
located in Puerto Rico and the Dominican Republic and has a highly integrated
manufacturing capability. Checkpoint's manufacturing strategy is to rely
primarily on in-house capability and to vertically integrate manufacturing
operations to the extent economically practical. This integration and in-house
capability provides significant control over costs, quality and responsiveness
to market demand which results in a distinct competitive advantage.

32
<PAGE>
As part of its total quality management program, the Company practices
concurrent engineering techniques in the design and development of its products
involving engineering, manufacturing, marketing and customers early in the
development process.

Management of the Company believes that it has the manufacturing capability
to satisfy its projected production needs in the foreseeable future. While the
Company sold over 950 million disposable RF targets in 1994, it has the current
manufacturing capacity to produce as many as three billion disposable RF targets
per year at a low cost. In addition, with the expenditure of approximately $2.5
million, the Company could increase its capacity to produce as many as eight
billion disposable RF targets annually.

Checkpoint has improved, and expects to continue to improve, its production
efficiencies through increased automation and improved cost reducing product
designs.

RAW MATERIALS

The principal raw materials and components used by Checkpoint in the
manufacture of its targets are electronic components for its systems, aluminum
foil, resins, and paper used for its disposable tags, ferric chloride solutions
for the Company's etching operation of disposable tags and printed circuit
boards. While most of these materials are purchased from several suppliers,
there are numerous alternative sources for all such materials. In general, there
is an adequate supply of raw materials to satisfy the needs of the industry.

RESEARCH AND DEVELOPMENT

Checkpoint has increased its research and development expenditures during
the past three years over prior levels. The Company expended approximately $4.5
million, $5.4 million, and $4.9 million in research and development activities
during fiscal years 1992, 1993 and 1994, respectively. The Company estimates
that it will expend approximately $5.0 million in fiscal year 1995. The emphasis
of these activities is the continued broadening of the product lines offered by
Checkpoint and an expansion of the markets and applications for Checkpoint's
products. Checkpoint's continued growth in revenue can be attributed, in part,
to the products and technologies resulting from these efforts.

Another important source of new products and technologies has been
Checkpoint's acquisitions of companies and products during the last few years.
Checkpoint will continue to make acquisitions of related businesses or products
consistent with its overall product and marketing strategies.

Over the last four years, the Company has introduced 43 new products.
Currently, the Company has under development approximately 60 product
development or enhancement projects. In addition, the Company holds or licenses
over 200 patents and proprietary technologies relating to its products and their
manufacture.

EMPLOYEES

As of February 1, 1995 and inclusive of the Alarmex Acquisition, Checkpoint
had 1,942 employees, including nine officers, 95 persons engaged in research and
development activities and 213 persons engaged in sales and marketing
activities. Except for approximately 14 installers who belong to the
International Brotherhood of Electrical Workers, none of the Company's employees
are represented by a union. Checkpoint believes its relations with its employees
are satisfactory.

LEGAL PROCEEDINGS

On March 10, 1993 the United States International Trade Commission
instituted an investigation of a complaint filed by the Company under Section
337 of the Tariff Act of 1930. On March 10, 1994 the United States International
Trade Commission issued a Notice of Commission Determination Not to Review an
Initial Determination Finding No Violation of Section 337 of the Tariff Act of
1930. The Company has capitalized approximately $1.9 million in patent defense
costs, which is included in 'Intangibles' as of December 25, 1994. The ultimate
resolution is undetermined at this time due to the

33
<PAGE>
various courses of action available to management. The Company has appealed this
determination to the appropriate United States Court of Appeals. Although the
Company's management ultimately expects a favorable outcome, should resolution
of this matter result in a less than successful defense of the patents in
question the deferred patent costs (approximately $1.9 million at December 25,
1994) will be written off as a charge to earnings at the time of such
resolution.

The Company, together with two of its senior officers, are defendants in an
action entitled ADT, Inc. and Actron AG v. Checkpoint Systems, Inc. and Albert
E. Wolf and Kevin P. Dowd (D.C.N.J. #95-730) which was filed on February 9,
1995.

In this action, Actron AG, one of the Company's principal European
competitors, alleges that the Company, in violation of certain common laws and
contractual obligations (1) unlawfully employed in Europe three former employees
of Actron who are allegedly in possession of, and have disclosed to the Company,
certain of Actron's confidential information, (2) has attempted to employ in
Europe certain other of Actron's current employees, (3) has interfered with
certain contractual relationships between Actron, its former employees, and the
supplier of Actron's disposable EAS tags and (4) has, in allegedly engaging in
the activities complained of, committed acts of unfair competition. The Court
has set a date in early April 1995 to hear arguments on the Company's motion to
dismiss the complaint and has also set a date in mid-April 1995 to hear
testimony and arguments on the parties' allegations relating to Actron's motion
to enjoin the Company from allegedly using Actron's confidential information.
Discovery by both parties has commenced. The Company intends to defend itself
vigorously. While the outcome of litigation can never be predicted with
certainty and the lawsuit is still in its very preliminary stages, the Company
does not anticipate that its ultimate outcome will have a material effect on its
operations or financial condition.

On March 2, 1995, as a result of a private complaint filed in Switzerland
by Actron against three of its former employees who are now employees of the
Company's Swiss subsidiary, Swiss authorities questioned two of these employees
regarding alleged improper possession and/or use of confidential information and
proprietary data allegedly belonging to Actron. In addition, Swiss authorities
took possession of certain files from the homes of the employees questioned and
from the office of the Company's Swiss subsidiary. The Company has not been
advised that it is the subject of any legal proceedings in Switzerland. The
Company believes that Actron's private complaint (and the resultant actions of
the Swiss authorities) are directly related to the Company's litigation with
Actron as described above.

The Company has been informed that it, along with several officers and a
director, have been named as defendants in an action entitled Cohen v.
Checkpoint Systems, Inc. et. al. (No. 95-1042) which was filed on March 9, 1995
in the United States District Court in New Jersey. This action, which seeks
class certification, alleges generally that the defendants participated in a
course of conduct to conceal adverse material information about the operating
results and future business prospects of the Company as a result of which the
Company's stock price was artificially inflated during the period October 21,
1994 through March 7, 1995. Plaintiff alleges that the conduct set forth in the
preceding sentence was in violation of certain federal securities laws. The
Company believes that the plaintiffs' allegations are entirely without merit and
intends to defend itself vigorously.

34
<PAGE>
MANAGEMENT

The following table sets forth certain information concerning the executive
officers of the Company, including their ages, position and tenure as of the
date hereof:

<TABLE>
<S> <C> <C> <C>
OFFICER
NAME AGE SINCE POSITIONS WITH THE COMPANY
- ------------------------------------------------ --- ----------- ------------------------------------------------
Kevin P. Dowd................................... 46 1988 President and Chief Executive Officer
Luis A. Aguilera................................ 46 1982 Senior Vice President -- Manufacturing
Steven G. Selfridge............................. 39 1988 Senior Vice President -- Operations, Chief
Financial Officer and Treasurer
Mitchell T. Codkind............................. 35 1992 Corporate Controller and Chief Accounting
Officer
Muns A. Farestad................................ 46 1990 Vice President -- Research and Development
William J. Reilly, Jr........................... 46 1989 Senior Vice President -- Americas' and Pacific
Rim
Michael E. Smith................................ 39 1990 Senior Vice President -- Marketing and Western
European Operations
Neil D. Austin.................................. 48 1989 Vice President -- General Counsel and Secretary
Lukas A. Geiges................................. 56 1995 Senior Vice President -- International
Development of Checkpoint Systems International
B.V.
</TABLE>

Mr. Dowd has been President and Chief Operating Officer of the Company
since August 1993 and Chief Executive Officer and Director of the Company since
January 1995. He was Executive Vice President of the Company from May 1992 to
August 1993. Mr. Dowd was Executive Vice President -- Marketing, Sales and
Service from April 1989 to May 1992 and Vice President of Sales from August 1988
to August 1989. Prior to joining the Company, Mr. Dowd was Director --
Industrial Products Group, Mars Electronics from January 1987 to July 1988.

Mr. Aguilera has been Senior Vice President -- Manufacturing since August
1993. He was Vice President -- Manufacturing of the Company from April 1982 to
August 1993, and Vice President and General Manager of the Company's Puerto Rico
subsidiary since February 1979.

Mr. Selfridge has been Senior Vice President -- Operations and Chief
Financial Officer and Treasurer since August 1993. He was Chief Financial
Officer and Vice President -- Finance and Treasurer of the Company from December
1990 to August 1993; and Vice President -- Finance and Treasurer of the Company
since September 1989. Mr. Selfridge was Corporate Controller, Chief Accounting
Officer and Secretary from April 1988 to September 1989 and Controller of
Domestic Operations from July 1986 to April 1988. Mr. Selfridge is a Certified
Public Accountant.

Mr. Codkind has been Corporate Controller and Chief Accounting Officer
since January 1992. Mr. Codkind was Controller of Domestic Operations from
January 1990 to January 1992 and Accounting Manager of Domestic Operations from
June 1986 to January of 1990. Mr. Codkind is a Certified Public Accountant.

Mr. Farestad has been Vice President -- Research and Development since
October 1990. From January 1989 to October 1990 he was Director of Process
Engineering and Shared Resources and from July 1987 to January 1989 Mr. Farestad
was Director of Manufacturing Engineering.

Mr. Reilly has been Senior Vice President -- Americas' and Pacific Rim
since August 1993. He was Vice President -- Sales of the Company from April 1989
to August 1993. Mr. Reilly was Eastern Regional Sales Manager from March 1989 to
April 1989. Prior to joining the Company, Mr. Reilly was U.S. Sales Manager for
Multitone Electronics PLC, London, U.K. from 1982 to 1989.

35
<PAGE>
Mr. Smith has been Senior Vice President -- Marketing and Western European
Operations since August 1993. He was Vice President -- Marketing from August
1990 to August 1993. Mr. Smith was Director of Marketing from April 1989 to
August 1990 and Program Manager -- National/Major Accounts from December 1988 to
April 1989. Prior to joining the Company, Mr. Smith was Marketing Manager with
Mars Electronics International from June 1987 to November 1988.

Mr. Austin has been Vice President -- General Counsel and Secretary since
September 1990. Mr. Austin was General Counsel and Secretary from September 1989
to September 1990 and General Counsel from June 1989 to September 1989. Prior to
joining the Company, Mr. Austin was a managing consultant with Mercer,
Meidinger, Hansen Inc. from 1987 to 1989.

Mr. Geiges has been Senior Vice President -- International Development of
Checkpoint Systems International B.V. since April 1994 and is considered to be a
person who makes a significant contribution to the Company's business. Prior to
joining the Company, Mr. Geiges was a consultant to the Board of Directors of
Actron AG from 1993 to March 1994. Mr. Geiges was President and Chairman of the
Board of Directors of Actron AG from 1988 to 1993. Mr. Geiges has advised the
Company that, on March 2, 1995, he was questioned by Swiss authorities with
respect to alleged improper possession and/or use of proprietary data and
confidential information allegedly belonging to Actron AG, his former employer.
The Company is involved in litigation with Actron AG. See 'Business -- Legal
Proceedings' above.

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 100,000,000 shares of
Common Stock, par value $.10 per share (Common Stock), and 500,000 shares of
Class A Preferred stock, without par value.

COMMON STOCK

Holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. There are no
cumulative voting rights. Unless otherwise required by law, the affirmative vote
of a majority of the votes cast is required to authorize stockholder actions,
except that a plurality of the votes cast determines the election of directors
and the affirmative vote of at least 80% of the voting stock of the Company is
required to authorize certain other actions as described below. The Common Stock
has no preemptive, conversion, redemption or other similar rights. Upon
liquidation of the Company, subject to any preferential liquidation rights of
any then outstanding shares of Preferred Stock, the holders of the Common Stock
would be entitled to share ratably in the net assets available for distribution
to stockholders. Subject to any preferential dividend rights of any outstanding
Preferred Stock, the holders of the Common Stock are entitled to such dividends
as may be declared by the Board of Directors of the Company out of funds legally
available therefor.

The Company's Board of Directors is classified into three classes of
directors, with Class I Directors consisting of three directors, Class II
Directors consisting of three directors, and Class III Directors consisting of
three directors. The term of office of one of the three classes terminates each
year, and each class is elected for a three-year term.

Under certain circumstances, the holders of at least 80% of the outstanding
voting stock of the Company must approve (a) any merger of the Company, unless
such transaction is approved by 80% of the Board of Directors, (b) any changes
in provisions of the Company's Articles of Incorporation or By-Laws regarding
the number, classification, term of office, qualifications, election and removal
of directors and the filling of vacancies and newly created directorship, or (c)
any amendment to the foregoing super majority voting requirements.

In addition, the Company has adopted a Shareholder Rights Agreement
intended to discourage attempts to acquire control of or adversely affect the
Company through an acquisition of Common Stock. Under the Agreement, in certain
situations shareholders other than those determined to be an

36
<PAGE>
'Acquiring Person' or an 'Adverse Person' under the provisions of the Agreement
will have the right to acquire a certain number of shares of Common Stock from
the Company at a substantial discount off the prevailing market price.

These foregoing provisions may make more difficult, and therefore
discourage, attempts to acquire control of the Company through acquisitions of
shares of Common Stock or otherwise, in transactions not approved by the
Company's Board of Directors. As a result of these provisions, transactions or
proposed transactions which might have the short-term effect of increasing the
market price of the Company's common stock may be discouraged, and management of
the Company may be able to resist changes which the stockholders might otherwise
have the power to impose. The division of the Company's Board of Directors into
three classes could discourage third parties from seeking to acquire control of
the Board of Directors and could impede proxy contests or other attempts to
change the Company's management.

The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company, 40 Wall Street, 46th Floor, New York, New York
10005.

PREFERRED STOCK

The Board of Directors of the Company is authorized, without further action
by the stockholders, to provide for the issuance of shares of Preferred Stock
from time to time, in different series, and to fix before issuance the powers,
designation, preferences and relative rights of each series, the qualifications,
limitations or restrictions thereof, and the number of shares included in each
series. There presently are no outstanding shares of Preferred Stock nor has the
Board of Directors fixed the terms of any series of Preferred Stock to be issued
in the future.

PRINCIPAL SHAREHOLDERS

As of January 25, 1995 there were no shareholders, other than Albert E.
Wolf (Chairman of the Board of Directors of the Company) and Westport Asset
Management, Inc., who owned more than five percent of the Company's Common
Stock. As of January 25, 1995, (i) Mr. Wolf owned 819,191 shares or 7.6 percent
(including currently exercisable options to purchase 225,000 shares of Common
Stock), and (ii) Westport Asset Management Inc. owned 562,500 shares or 5.3
percent, of the Company's Common Stock.

37
<PAGE>
UNDERWRITERS

Under the terms and subject to the conditions set forth in the Underwriting
Agreement dated the date hereof, the Underwriters named below have severally and
not jointly agreed to purchase, and the Company has agreed to sell to them, the
respective number of shares of Common Stock set forth opposite the names of such
Underwriters below.

<TABLE>
<S> <C>
NUMBER OF
NAME SHARES
-----------
Morgan, Stanley & Co. Incorporated............................................
NatWest Securities Limited....................................................
PaineWebber Incorporated......................................................
-----------
Total.............................................................. 3,000,000
-----------
-----------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the shares of Common Stock
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all the shares of Common Stock offered hereby (other than those
covered by the over-allotment option described below) if any such shares are
taken.

The Underwriters initially propose to offer part of the shares of Common
Stock offered hereby directly to the public at the public offering price set
forth on the cover page hereof and part to certain dealers at a price which
represents a concession not in excess of $ a share under the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ a share to other Underwriters and to
certain dealers. After the initial offering of the shares of Common Stock, the
offering price and other selling terms may from time to time be varied by the
representatives of the Underwriters.

The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an additional 450,000
shares of Common Stock at the price to public set forth on the cover page
hereof, less underwriting discounts and commissions. The Underwriters may
exercise such option solely for the purpose of covering over-allotments, if any,
made in connection with the offering of the shares of Common Stock. To the
extent such option is exercised, each Underwriter will become obligated, subject
to certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of shares offered hereby.

38
<PAGE>
The Company, its directors and certain of its executive officers have
agreed with the Underwriters not (i) to offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, or register or announce the sale or offering
of any shares of Common Stock, or, in the case of the Company, any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) to
enter into any agreement that transfers, in whole or in part, the economic
consequences of ownership of the Common Stock, whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Common
Stock or such other securities in cash or otherwise, for a period of 90 days
after the date of this Prospectus without the prior written consent of Morgan
Stanley & Co. Incorporated, provided that the Company may (a) issue the shares
of Common Stock offered hereby, (b) issue shares of Common Stock upon the
exercise of options or warrants and upon the conversion of any outstanding
security, (c) grant options to purchase Common Stock under its Stock Option Plan
(1992) and Employee Stock Purchase Plan in amounts and on terms consistent with
past practices and (iv) issue shares of Common Stock pursuant to its Shareholder
Rights Agreement.

The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the 'Securities Act').

NatWest Securities Limited ('NatWest'), a United Kingdom broker-dealer and
a member of the Securities and Futures Authority Limited, has agreed that, as
part of the distribution of the shares of Common Stock offered hereby and
subject to certain exceptions, it will not offer or sell any shares of Common
Stock within the United States, its territories or possessions or to persons who
are citizens or residents therein. The Underwriting Agreement does not limit the
sale of the Common Stock offered hereby outside the United States.

NatWest has further represented and agreed that (a) it has not offered or
sold and will not offer or sell in the United Kingdom by means of any document,
any Common Stock other than to persons whose ordinary business it is to buy or
sell shares or debentures (whether as principal or agent) or in circumstances
which do not constitute an offer to the public within the meaning of the
Companies Act of 1985; (b) it has complied and will comply with all applicable
provisions of the Financial Services Act 1986 with respect to anything done by
it in relation to the Common Stock in, from or otherwise involving the United
Kingdom; and (c) it has issued or passed on and will issue or pass on to any
person in the United Kingdom any document received by it in connection with the
issue of the Common Stock only if that person is of a kind described in Article
9(3) of the Financial Services Act of 1986 (Investment Advertisements)
(Exemptions) Order 1988, as amended.

LEGAL MATTERS

Stradley, Ronon, Stevens & Young, Philadelphia, Pennsylvania, will pass
upon certain legal matters with respect to the shares offered hereby for the
Company. Davis Polk & Wardwell, New York, New York will pass upon certain legal
matters for the Underwriters.

EXPERTS

The consolidated balance sheets as of December 25, 1994 and December 26,
1993 and the consolidated earnings statements, statements of shareholders'
equity and cash flows for each of the three years in the period ended December
25, 1994, included in this Prospectus, have been included herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.

39
<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. Such reports and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional
Offices of the Commission: Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Northeast Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material can also be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed rates.
In addition, reports, proxy statements and other information concerning the
Company may be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.

The Company has filed with the Commission a Registration Statement on Form
S-3 (the 'Registration Statement') under the Securities Act, with respect to the
shares of the Common Stock offered hereby. The Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto (certain parts of which have been omitted in accordance with
the rules and regulations of the Commission). For further information with
respect to the Company and the shares of Common Stock offered hereby, reference
is made with respect to the Company and the shares of Common Stock offered
hereby, reference is made to the Registration Statement and to the financial
statements, schedules and exhibits filed as a part thereof. Statements contained
in this Prospectus as to the contents of any contract, agreement or any other
document are not necessarily complete, and, in each instance, reference is made
to the copy of such document filed as an exhibit to the Registration Statement
or otherwise with the Commission, each such statement being qualified in all
respects by such reference, schedules and exhibits. The Registration Statement
including, all exhibits, thereby may be inspected without charge at the
Commission's principal office in Washington, D.C., and copies of all or any part
thereof may be obtained from such office after payment of the fees presented by
the Commissioner.

40
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
YEAR END FINANCIAL INFORMATION PAGE
----------------
Report of Independent Accountants............................................................... F-2
Consolidated Balance Sheets as of December 25, 1994 and December 26, 1993....................... F-3
Consolidated Earnings Statements for each of the years in the three-year period ended December
25, 1994...................................................................................... F-4
Consolidated Statement of Shareholders' Equity for each of the years in the three-year period
ended December 25, 1994....................................................................... F-4
Consolidated Statements of Cash Flows for each of the years in the three-year period ended
December 25, 1994............................................................................. F-5
Notes to Consolidated Financial Statements...................................................... F-6
</TABLE>

F-1

<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Shareholders
Checkpoint Systems, Inc.

We have audited the accompanying consolidated balance sheets of Checkpoint
Systems, Inc. and subsidiaries as of December 25, 1994 and December 26, 1993,
and the related consolidated earnings statements, statements of shareholders'
equity, and cash flows for each of the years in the three year period ended
December 25, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of Checkpoint
Systems, Inc. and subsidiaries as of December 25, 1994 and December 26, 1993,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 25, 1994 in conformity with
generally accepted accounting principles.

As discussed in Note 1 to the financial statements, in 1993, the Company changed
its method of accounting for income taxes.

COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 15, 1995, except
as to Note 16, for which
the date is March 3, 1995

F-2

<PAGE>
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<S> <C> <C>
DECEMBER 25, DECEMBER 26,
1994 1993
------------ ------------
(THOUSANDS)
ASSETS
CURRENT ASSETS
Cash............................................................................... $ 944 $ --
Accounts receivable, net of allowances of $1,570,000 and
$2,237,000...................................................................... 33,290 24,239
Inventories........................................................................ 29,486 25,450
Other current assets............................................................... 4,385 5,213
Deferred income taxes.............................................................. 1,117 --
------------ ------------
Total current assets............................................................ 69,222 54,902
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation and amortization...... 36,799 30,862
EXCESS OF PURCHASE PRICE OVER FAIR VALUE OF NET ASSETS ACQUIRED...................... 10,120 8,919
INTANGIBLES.......................................................................... 5,826 5,098
DEFERRED TAXES, net of valuation allowance........................................... -- 479
OTHER ASSETS......................................................................... 5,958 4,739
------------ ------------
TOTAL ASSETS......................................................................... $ 127,925 $ 104,999
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................................................... $ 10,064 $ 9,716
Accrued compensation and related taxes............................................. 2,635 1,907
Income taxes....................................................................... 2,223 792
Unearned revenues.................................................................. 3,357 2,645
Other current liabilities.......................................................... 4,810 7,761
Short-term borrowings and current portion of long-term debt........................ 6,706 4,097
------------ ------------
Total current liabilities....................................................... 29,795 26,918
LONG-TERM DEBT, LESS CURRENT MATURITIES.............................................. 35,556 24,302
DEFERRED INCOME TAXES................................................................ 1,271 --
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred Stock, no par value, authorized 500,000 shares, none issued Common Stock,
par value $.10 per share, authorized 100,000,000 shares, issued 11,278,511 and
10,979,198...................................................................... 1,128 1,097
Additional capital................................................................. 21,592 18,346
Retained earnings.................................................................. 46,789 40,506
Common stock in treasury, at cost, 799,000 shares.................................. (5,664) (5,664)
Foreign currency adjustments....................................................... (2,542) (506)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY........................................................... 61,303 53,779
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................................... $ 127,925 $ 104,999
------------ ------------
------------ ------------
</TABLE>

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED EARNINGS STATEMENTS

<TABLE>
<S> <C> <C> <C>
1994 1993 1992
----------- --------- ---------
(THOUSANDS, EXCEPT PER SHARE
DATA)
Net Revenues................................................................. $ 128,331 $ 93,034 $ 72,166
Cost of Revenues............................................................. 66,360 54,421 38,650
----------- --------- ---------
Gross Profit............................................................... 61,971 38,613 33,516
Selling, General and Administrative Expenses................................. 50,243 39,238 28,342
----------- --------- ---------
Operating Income (loss)...................................................... 11,728 (625) 5,174
Contract Settlement Income................................................... -- 3,500 --
Interest Income.............................................................. 529 476 140
Interest Expense............................................................. 3,118 953 423
Foreign Exchange Loss........................................................ 762 327 --
----------- --------- ---------
Earnings Before Income Taxes................................................. 8,377 2,071 4,891
Income Taxes................................................................. 2,094 456 463
----------- --------- ---------
Net Earnings................................................................. $ 6,283 $ 1,615 $ 4,428
----------- --------- ---------
----------- --------- ---------
Net Earnings Per Share....................................................... $ .58 $ .16 $ .45
----------- --------- ---------
----------- --------- ---------
</TABLE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
FOREIGN
COMMON ADDITIONAL RETAINED TREASURY CURRENCY
STOCK CAPITAL EARNINGS STOCK ADJUST. TOTAL
----------- ----------- ----------- --------- --------- ---------
(THOUSANDS)
Balance, December 29, 1991.................. $ 1,026 $ 12,262 $ 34,463 $ (5,664) $ -- $ 42,087
Net Earnings.............................. 4,428 4,428
Exercise of Stock Options................. 54 4,492 4,546
----------- ----------- ----------- --------- --------- ---------
Balance, December 27, 1992.................. 1,080 16,754 38,891 (5,664) -- 51,061
Net Earnings.............................. 1,615 1,615
Exercise of Stock Options................. 17 1,592 1,609
Foreign Currency Adjustments................ (506) (506)
----------- ----------- ----------- --------- --------- ---------
Balance, December 26, 1993.................. 1,097 18,346 40,506 (5,664) (506) 53,779
Net Earnings.............................. 6,283 6,283
Exercise of Stock Options................. 31 3,246 3,277
Foreign Currency Adjustments................ (2,036) (2,036)
----------- ----------- ----------- --------- --------- ---------
Balance, December 25, 1994.................. $ 1,128 $ 21,592 $ 46,789 $ (5,664) $ (2,542) $ 61,303
----------- ----------- ----------- --------- --------- ---------
----------- ----------- ----------- --------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
(THOUSANDS)
Cash inflow (outflow) from operating activities:
Net earnings................................................................. $ 6,283 $ 1,615 $ 4,428
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Net book value of rented equipment sold................................... 1,652 1,268 452
Long-term customer contracts.............................................. (919) 421 (1,111)
Depreciation and amortization............................................. 8,023 6,476 3,993
Deferred Taxes............................................................ 633 (479) --
Provision for losses on accounts receivable............................... 1,221 520 88
(Increase) decrease in current assets:
Accounts receivable.................................................... (11,289) (2,716) (1,445)
Inventories............................................................ (13,095) (10,792) (7,169)
Other current assets................................................... 828 (2,024) (833)
Increase (decrease) in current liabilities:
Accounts payable....................................................... (669) 2,062 1,284
Accrued compensation and related taxes................................. 728 (269) 727
Income taxes........................................................... 1,431 (385) 819
Unearned revenues...................................................... 712 (7) 220
Other current liabilities.............................................. (3,151) (2,007) 79
--------- --------- ---------
Net cash provided (used) by operating activities....................... (7,612) (6,317) 1,532
--------- --------- ---------
Cash inflow (outflow) from investing activities:
Acquisition of property, plant and equipment................................. (4,532) (4,600) (6,143)
Proceeds of investment securities............................................ -- -- 825
Acquisitions, net of cash acquired........................................... (1,786) (3,184) (1,030)
Patent defense costs......................................................... -- (1,998) --
Other investing activities................................................... (2,266) (1,662) (1,147)
--------- --------- ---------
Net cash used by investing activities.................................. (8,584) (11,444) (7,495)
--------- --------- ---------
Cash inflow (outflow) from financing activities:
Proceeds from stock options.................................................. 3,277 1,609 4,546
Proceeds of debt............................................................. 28,306 14,774 3,830
Payment of debt.............................................................. (14,443) (942) (609)
--------- --------- ---------
Net cash provided by financing activities.............................. 17,140 15,441 7,767
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........................... 944 (2,320) 1,804
Cash and cash equivalents:
Beginning of year............................................................ -- 2,320 516
--------- --------- ---------
End of Year.................................................................. $ 944 $ -- $ 2,320
========= ========= =========
</TABLE>

See accompanying notes to consolidated financial statements.

F-5
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Checkpoint
Systems, Inc. and its wholly-owned subsidiaries ('Company'). All material
intercompany transactions are eliminated in consolidation.

Fiscal Year

The Company's fiscal year is the 52 or 53 week period ending the last
Sunday of December. References to 1994, 1993 and 1992 are for: the 52 weeks
ended December 25, 1994, the 52 weeks ended December 26, 1993, and the 52 weeks
ended December 27, 1992.

Reclassifications

Certain reclassifications have been made to the 1993 and 1992 financial
statements and related footnotes to conform to the 1994 presentation.

Revenue Recognition

Revenue from the sale of equipment is recognized upon shipment of equipment
or the acceptance of a customer order to purchase equipment currently rented.
Equipment leased to customers under sales-type leases is accounted for as the
equivalent of a sale. The present value of such lease revenues is recorded as
net revenues, and the related cost of the equipment is charged to cost of
revenues. The deferred finance charges applicable to these leases are recognized
over the terms of the leases using the effective interest method. Rental revenue
from equipment under operating leases is recognized over the term of the lease.
Service revenue is recognized over the contractual period or as services are
performed. Sales to third party leasing companies are recognized as the
equivalent of a sale. These sales were all made on a non-recourse basis.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or
market. Cost includes material, labor and applicable overhead.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. Depreciation and
amortization generally are provided on a straight-line basis over the estimated
useful lives of the assets; for certain manufacturing equipment, the
units-of-production method is used. Maintenance, repairs and minor renewals are
expensed as incurred. Additions, improvements and major renewals are
capitalized. The cost and accumulated depreciation applicable to assets retired
are removed from the accounts and the gain or loss on disposition is included in
income.

Excess of Purchase Price Over Fair Value of Net Assets Acquired

The excess of purchase price over the fair value of net assets acquired is
amortized on a straight-line basis over their economic useful lives which is
considered to be 20 years. Accumulated amortization approximated $2,437,000 and
$1,852,000 at December 25, 1994 and December 26, 1993, respectively.

F-6
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Research and Development Costs

Research and development costs are expensed as incurred, and approximated
$4,877,000, $5,392,000, and $4,498,000 in 1994, 1993 and 1992, respectively.

Royalty Expense

Royalty expenses incurred approximated $2,227,000, $1,619,000 and
$1,279,000 in 1994, 1993, and 1992, respectively.

Per Share Data

Per share data is based on the weighted average number of common and common
equivalent shares (stock options) outstanding during the year. The number of
shares used in the per share computations were 10,806,000 (1994), 10,386,000
(1993), and 9,951,000 (1992).

Intangibles

Intangibles consist of patents, rights, customer lists and software
development costs. The costs relating to the acquisition of patents, rights and
customer lists are amortized on a straight-line basis over their useful lives of
ten years or legal life, whichever is shorter. Accumulated amortization
approximated $1,027,000 and $473,000 at December 25, 1994 and December 26, 1993,
respectively.

The costs of internally developed software are expensed until the
technological feasibility of the software has been established. Thereafter, all
software development costs are capitalized and subsequently reported at the
lower of unamortized cost or net realizable value. The costs of capitalized
software are amortized over the products' estimated useful lives or five years,
whichever is shorter. During 1994 and 1993, $743,000 and $575,000 of software
development costs were capitalized. Accumulated amortization of these costs
approximated $965,000 and $444,000 at December 25, 1994 and December 26, 1993,
respectively.

Taxes on Income

In 1993, Statement of Financial Accounting Standards (SFAS) No. 109,
'Accounting for Income Taxes' was adopted. Under this method, deferred tax
liabilities and assets are determined based on the difference between financial
statement and tax basis of assets and liabilities using enacted statutory tax
rates in effect at the balance sheet date. The adoption of this new standard did
not have a material effect on the Company's financial statements. For 1992,
taxes on income are determined under Accounting Principles Board Opinion 11 (APB
11) whereby the income tax provision is calculated under the deferred method.
Generally, the deferred method recognizes income taxes on financial statement
income and the tax effect of differences with taxable income are deferred at tax
rates in effect during the period.

Accounting for Foreign Currency Translation and Transactions

The Company's balance sheet accounts of foreign subsidiaries are translated
into U.S. dollars at the rate of exchange in effect at the balance sheet dates.
Revenues, costs and expenses of the Company's foreign subsidiaries are
translated into U.S. dollars at the average rate of exchange in effect during
each reporting period. The resulting translation adjustment is recorded as a
separate component of stockholders' equity. In addition, gains or losses on
long-term intercompany transactions are excluded from the results of operations
and accumulated in the aforementioned separate component of

F-7
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
consolidated stockholders' equity. All other foreign transaction gains and
losses are included in the results of operations.

Aggregate foreign currency transaction losses in 1994, 1993 and 1992 were
$762,000, $327,000 and zero, respectively, and are included in 'Foreign Exchange
Loss' in the Consolidated Earnings Statement.

2. INVENTORIES

Inventories consist of the following:

<TABLE>
<S> <C> <C>
1994 1993
---------- ----------
(THOUSANDS)
Raw materials...................................................... $ 6,078 $ 8,256
Work-in-process.................................................... 193 705
Finished goods..................................................... 23,215 16,489
---------- ----------
Totals........................................................ $ 29,486 $ 25,450
---------- ----------
---------- ----------
</TABLE>

3. PROPERTY, PLANT AND EQUIPMENT

The major classes are:

<TABLE>
<S> <C> <C>
1994 1993
---------- ----------
(THOUSANDS)
Land............................................................... $ 892 $ 892
Building........................................................... 9,751 9,733
Equipment rented to customers...................................... 10,364 3,736
Machinery and equipment............................................ 35,162 31,434
Leasehold improvements............................................. 1,129 1,949
Leased equipment under capital leases.............................. 15 15
---------- ----------
57,313 47,759
Accumulated depreciation and amortization.......................... (20,514) (16,897)
---------- ----------
$ 36,799 $ 30,862
---------- ----------
---------- ----------
</TABLE>

4. SHORT-TERM DEBT AND CURRENT PORTION OF LONG-TERM DEBT

The short-term debt and current portion of long-term debt at December 25,
1994 and at December 26, 1993 consisted of the following:

<TABLE>
<S> <C> <C>
DECEMBER 25, DECEMBER 26,
1994 1993
------------- -------------
(THOUSANDS)
Current portion of Long-term Debt.............................. $ 3,277 $ 1,733
$2 million credit line held by Puerto Rico subsidiary with
interest at 8.5%............................................. 2,000 1,000
Line of credit held by Argentine subsidiary with interest at
13.0%........................................................ 1,429 1,215
Various loans obtained by the Company's
subsidiaries................................................. -- 149
------------- -------------
Total short-term debt and current portion long-term debt....... $ 6,706 $ 4,097
------------- -------------
------------- -------------
</TABLE>

F-8
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT

The long-term debt at December 25, 1994 and December 26, 1993 consisted of
the following:

<TABLE>
<S> <C> <C>
DECEMBER 25, DECEMBER 26,
1994 1993
------------ ------------
(THOUSANDS)
$13 million credit line with interest at 8.5%............................. $ 12,880 $ 17,830
Seven year $7 million term note with interest at 4.9%..................... 5,250 6,300
Six year $8 million term note with interest at 6.5%....................... 7,059 --
Eight year $12 million private placement note with interest at 8.27%...... 12,000 --
Acquisition of rights in a point of sale monitoring system with interest
imputed at 6%........................................................... 281 542
Note payable for the purchase of licensing agreement...................... 300 --
Three year $1.4 million term note held by Canadian subsidiary with
interest at 7.868%...................................................... 823 1,288
Various loans obtained by the Company's subsidiaries...................... 240 75
------------ ------------
Total................................................................ 38,833 26,035
Less current portion...................................................... (3,277) (1,733)
------------ ------------
Total long-term portion................................................... $ 35,556 $ 24,302
------------ ------------
------------ ------------
</TABLE>

The Company has a Revolving Credit Agreement with its principal lending
bank which currently provides a line of credit of up to $13,000,000 through May
1, 1996. At December 25, 1994, borrowings at $12,880,000 under this credit
agreement were outstanding with an interest rate of 8.5%.

In December 1992, the Company entered into a $7,000,000 seven year loan
agreement at a fixed rate of 4.9% with its principal lending bank. Three equal
installments of $350,000 are due during each year for a total of $1,050,000 per
year with interest due monthly. At December 25, 1994, $5,250,000 was
outstanding.

In February 1994, the Company entered into a $8,000,000 six year loan
agreement at a fixed rate of 6.5% with its principal lending bank. Three equal
installments of $470,588 are due during each year for a total of $1,411,764 per
year with interest due monthly. At December 25, 1994, $7,058,824 was
outstanding.

In March 1994, the Company entered into a $12,000,000 private placement
debt funding agreement at a fixed rate of 8.27%. Principal payments of
$4,000,000 annually are to be made starting in year 2000 with interest due
semi-annually.

The above loan agreements contain certain restrictive covenants which,
among other things, requires maintenance of specified minimum financial ratios
including debt to capitalization, interest coverage and tangible net worth. In
addition, these agreements limit the Company's ability to pay dividends.

Long-term debt also relates to the acquisition of a licensing agreement.
Remaining payments of $100,000 under this note are due February 1995, February
1996 and February 1997.

Long-term debt also relates to the acquisition of rights in a point-of-sale
monitoring system being marketed under the name Viewpoint. One remaining payment
of $280,500 under this note is due December 24, 1995. Interest has been imputed
using a 6.5% annual rate. The amount due on December 24, 1995 is classified as a
current portion of long-term debt.

In October 1993, the Company's Canadian subsidiary entered into a three
year $1.4 million term note to finance certain sales-type leases. Payments are
due monthly with a fixed interest rate of 7.87%.

F-9
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT (CONTINUED)
The aggregate maturities on all long-term debt are:

<TABLE>
<S> <C>
(THOUSANDS)
1995................................................................ $ 3,277
1996................................................................ 16,070
1997................................................................ 2,562
1998................................................................ 2,462
1999................................................................ 2,462
Thereafter.......................................................... 12,000
-----------
Total............................................................... $ 38,833
-----------
-----------
</TABLE>

6. STOCK OPTIONS

Under a stock option plan for all employees adopted by the shareholders of
the Company in 1987 ('1987 Plan'), the Company granted either incentive stock
options ('ISOs') or non-incentive stock options to purchase up to 2,000,000
shares of Common Stock (amended in 1990 from a previous level of 1,000,000).

The Company amended, restated and renamed the 1987 plan in 1992 ('1992
Plan') allowing the Company to grant either ISOs or non-incentive stock options
to purchase up to 3,000,000 shares of Common Stock (amended in 1992 from a
previous level of 2,000,000 shares). Under the 1992 Plan, only employees are
eligible to receive ISOs and both employees and non-employee directors of the
Company are eligible to receive non-incentive stock options. Non-incentive stock
options issued under the 1992 Plan through December 25, 1994 total 817,247
shares. At December 25, 1994, December 26, 1993 and December 27, 1992 a total of
208,500, 364,500 and 845,500 shares, respectively, were available for grant.

All ISO's under the 1992 Plan expire not more than 10 years (plus six
months in the case of non-incentive options) from the date of grant. Both ISO's
and non-incentive options require a purchase price of not less than 100% of the
fair market value of the stock at the date of grant.

The 1992 Plan is administered by the Company's Compensation and Stock
Option Committee of the Board of Directors. Of the options outstanding at
December 25, 1994, options for 38,351 shares were not part of any plans and did
not qualify as ISOs. Options that were fully vested and exercisable totaled
1,446,151 as of December 25, 1994.

The following schedule summarizes stock option activity and status:

<TABLE>
<S> <C> <C> <C>
1994 1993 1992
----------- ----------- -----------
Outstanding at beginning of year............................. 1,593,464 1,281,114 1,639,500
Granted...................................................... 198,500 489,000 299,000
Exercised.................................................... (298,313) (168,650) (548,334)
Cancelled.................................................... (47,500) (8,000) (109,052)
----------- ----------- -----------
Outstanding at end of year................................... 1,446,151 1,593,464 1,281,114
----------- ----------- -----------
----------- ----------- -----------
Price range of options outstanding at end of year............ $4.88 to $4.88 to $4.88 to
$17.25 $16.50 $13.50
Price range of options exercised during the year............. $4.88 to $4.88 to $4.88 to
$16.50 $13.50 $13.50
</TABLE>

F-10
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments in 1994, 1993 and 1992, respectively, included payments for
interest of $2,410,000, $860,000 and $423,000 and income taxes of $375,000,
$638,000 and $123,000.

Excluded from the 1994 Consolidated Statements of Cash Flows is a non-cash
activity of $200,000 relating to the purchase of a licensing agreement in which
the Company recorded the full cost of the agreement and the associated
liability. Also excluded from investing activities in the Consolidated
Statements of Cash Flows are net transfers from inventory to property, plant and
equipment of $9,059,000, $3,976,000 and $1,188,000 in 1994, 1993 and 1992,
respectively, relating to equipment rented to customers.

In March 1993, the Company purchased all of the capital stock of its
Argentinean distributor for $2,103,000. In conjunction with the acquisition,
liabilities were assumed as follows:

<TABLE>
<S> <C>
Fair value of assets acquired............................................... $ 3,690,000
Cash paid and direct costs incurred for the capital stock................... $ 2,103,000
--------------
Liabilities assumed......................................................... $ 1,587,000
--------------
--------------
</TABLE>

In July 1993, the Company purchased all of the capital stock of ID Systems
International B.V. and ID Systems Europe B.V. In conjunction with the
acquisition, liabilities were assumed as follows:

<TABLE>
<S> <C>
Fair value of assets acquired............................................... $ 14,575,000
Cash paid and direct costs incurred for the capital stock including
advances.................................................................. $ 1,690,000
--------------
Liabilities assumed......................................................... $ 12,885,000
--------------
--------------
</TABLE>

8. SHAREHOLDERS' EQUITY

In December 1988, the Company's Board of Directors approved a Shareholders'
Rights Plan (the 'Plan'), and declared a dividend distribution of one common
share purchase right ('Right') for each outstanding share of the Company's
Common Stock to shareholders of record on December 29, 1988. The Rights are
designed to ensure all Company shareholders fair and equal treatment in the
event of a proposed takeover of the Company, and to guard against partial tender
offers and other abusive tactics to gain control of the Company without paying
all shareholders a fair price.

The Rights are exercisable only as a result of certain actions (defined by
the Plan) of an Acquiring Person or Adverse Person, as defined. Initially, upon
payment of the exercise price (currently $40), each Right will be exercisable
for one share of Common Stock. Upon the occurrence of certain events as
specified in the Plan, each Right will entitle its holder (other than an
Acquiring Person or an Adverse Person) to purchase a number of the Company's or
Acquiring Person's common shares having a market value of twice the Right's
exercise price. The Rights expire on December 28, 1998. Generally, within ten
days after a person becomes an Acquiring Person or is determined to be an
Adverse Person, the Company can redeem the Rights.

9. INCOME TAXES

The Company's net earnings generated by the operations of its Puerto Rican
subsidiary are exempt from Federal income taxes under Section 936 of the
Internal Revenue Code and substantially exempt from Puerto Rican income taxes.

In 1991, the Company was granted a new local tax exemption agreement with a
twenty year 90% local tax exemption retroactive to 1988 on both the target and
sensor manufacturing operations.

F-11
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES (CONTINUED)

Repatriation of the Puerto Rico subsidiary's unremitted earnings could
result in the assessment of Puerto Rico 'tollgate' taxes at a maximum rate of
3.5% of the amount repatriated. During 1994 and 1993, a provision was made for
tollgate taxes and during 1992, no provision was made for tollgate taxes. The
Company has not provided for tollgate taxes on $24,321,000 of its subsidiary's
unremitted earnings since they are expected to be reinvested indefinitely.

The domestic and foreign components of earnings before income taxes are:

<TABLE>
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
Domestic..................................................... $ 6,931 $ 1,720 $ 4,891
Foreign...................................................... 1,446 351 --
--------- --------- ---------
Total........................................................ $ 8,377 $ 2,071 $ 4,891
--------- --------- ---------
--------- --------- ---------
</TABLE>

The related provision for income taxes consist of:

<TABLE>
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
(THOUSANDS)
Currently Payable
Federal.................................................... $ 914 $ 369 $ 632
State...................................................... -- 5 94
Puerto Rico................................................ 444 186 (263)
Foreign.................................................... 103 375 --
Deferred
Federal.................................................... 176 (509) --
State...................................................... (33) 30 --
Puerto Rico................................................ -- -- --
Foreign.................................................... 490 -- --
--------- --------- ---------
Total Provision.............................................. $ 2,094 $ 456 $ 463
--------- --------- ---------
--------- --------- ---------
</TABLE>

Deferred tax liabilities (assets) at December 25, 1994 and December 26,
1993 consist of:

<TABLE>
<S> <C> <C>
1994 1993
--------- ---------
(THOUSANDS)
Depreciation................................................. $ 856 $ 805
Deferred maintenance......................................... 260 318
Unbilled receivable.......................................... 155 138
--------- ---------
Gross deferred tax liabilities............................... 1,271 1,261
--------- ---------
R & E credit carryforward.................................... -- (982)
Inventory.................................................... (332) (277)
Alternative minimum tax...................................... (513) (258)
Accounts receivable.......................................... (117) (100)
Net operating loss carryforwards............................. (4,668) (4,494)
Warranty..................................................... (52) (41)
Other........................................................ (103) (82)
--------- ---------
Gross deferred tax assets.................................... (5,785) (6,234)
--------- ---------
Valuation allowance.......................................... 4,668 4,494
--------- ---------
Net deferred tax liability (asset)........................... $ 154 $ (479)
--------- ---------
--------- ---------
</TABLE>

Included in net operating loss carryforwards of $13,874,000 is $11,794,000
that were acquired in connection with the acquisition of the ID Systems Group.
If realization of the benefit of such

F-12
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

9. INCOME TAXES (CONTINUED)
carryforwards occur, the Company will apply such benefit to goodwill in
connection with the acquisition.

Of the total foreign net operating loss carryforwards available, $500,000
expire beginning January 1999 whereas the remaining portion may be carried
forward indefinitely.

The valuation allowance in 1993 totaling $4,494,000 relates to the net
operation losses acquired in connection with the ID Systems Group along with
subsequent losses. The increase of the valuation allowance by $174,000 from 1993
to 1994, primarily relates to the incurrence of certain state net operating
losses during fiscal year 1994.

A reconciliation of the statutory U.S. Federal income tax rate with the
effective income tax rate follows:

<TABLE>
<S> <C> <C> <C>
1994 1993 1992
--------- --------- ---------
Statutory federal income tax rate........................................... 34.0% 34.0% 34.0%
Tax exempt earnings of subsidiary in Puerto Rico............................ (13.3) (14.0) (23.8)
Change in tax exempt earnings of subsidiary in Puerto Rico.................. -- -- (8.5)
Research and Experimentation tax credit..................................... (0.8) (17.2) --
Foreign losses with no benefit.............................................. -- 8.4 --
State and local income taxes, net of federal benefit........................ 3.5 9.1 5.7
Other....................................................................... 1.6 1.7 2.1
--------- --------- ---------
Effective tax rate.......................................................... 25.0% 22.0% 9.5%
--------- --------- ---------
--------- --------- ---------
</TABLE>

During 1992, the effective tax rate was favorably impacted by a refinement
of an estimate relating to tax exempt earnings of the Puerto Rico subsidiary.

10. EMPLOYEE BENEFIT PLANS

Under the Company's defined contribution savings plans, eligible employees
(see below) may make basic (up to 6% of an employee's earnings) and supplemental
contributions to a trust. The Company matches 50% of participant's basic
contributions. Company contributions vest to participants in increasing
percentages over three to six years of service. The Company's contributions
under the plans approximated $628,000, $478,000, and $323,000 in 1994, 1993 and
1992, respectively.

Generally, any full-time, non-union employee of the Company (other than
someone holding the position of Vice President or higher) who has completed one
month of service, and any part-time non-union employee of the Company who has
completed one year of service, other than employees of the Company's
subsidiaries, may participate in the Company's United States Savings Plan. All
full-time employees of the Puerto Rico subsidiary who have completed three
months of service may participate in the Company's Puerto Rico Savings Plan.
Part-time employees are not entitled to participate in the Company's Puerto Rico
Savings Plan.

Under the Company's non-qualified Employee Stock Purchase Plan, employees,
other than employees of the Company's subsidiaries in Australia, Argentina,
Europe and Mexico may contribute up to $60 per week to a trust for the purchase
of Company Common Stock at fair market value. The Company matches employee
contributions up to a maximum of $17 per week. The Company's contributions under
this plan approximated $110,000, $94,000 and $76,000 in 1994, 1993 and 1992,
respectively.

Under the Company's Profit Incentive Plan, bonuses are provided for certain
executives based on a percentage of the amount by which consolidated net
earnings exceed a specified portion of

F-13
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. EMPLOYEE BENEFIT PLANS (CONTINUED)
shareholders' equity at the beginning of the year. During the last three years
net earnings did not exceed this criteria and, accordingly, no bonuses were
provided.

11. COMMITMENTS AND CONTINGENCIES

The Company leases its offices, distribution center and certain production
facilities. Rental expense for all operating leases approximated $2,307,000,
$1,424,000 and $811,000 in 1994, 1993 and 1992, respectively. Future minimum
payments for operating leases having non-cancellable terms in excess of one year
at December 25 1994 are: $1,611,000 (1995), $1,495,000 (1996), $1,052,000
(1997), $778,000 (1998), $720,000 (1999) and $5,440,000 thereafter.

The Company has entered into a twelve year lease agreement for a newly
constructed facility in 1994 which will be the Company's new headquarters for
administrative offices, research and development and warehouse distribution.
These lease payments have been included in the future minimum payments for
operating leases above.

The Company, in order to reduce its exposure to fluctuations in foreign
currency exchange rates, has entered into currency exchange forward contracts.
These agreements involve the exchange of various foreign currencies for U.S.
dollars at some future date. The Company makes settlement of foreign currencies
for U.S. dollars at maturity, at exchange rates agreed to at inception of the
contract. Counterparties to these agreements are major financial institutions.
As of December 25, 1994 and December 26, 1993, the U.S. dollar equivalent of
currency exchange forward contracts outstanding approximated $8,800,000 and
$2,803,000, respectively. These agreements have various maturities through 1995.

The Company is the exclusive worldwide licensee of Arthur D. Little, Inc.
('ADL') for certain patents and improvements thereon related to EAM products and
manufacturing processes. The Company pays a royalty to ADL ranging from 2% to 5%
of net revenues generated by the sale and lease of the licensed products, with
the actual amount of the royalty depending upon revenue volume.

The Company is the worldwide licensee of certain patents and technical
knowledge related to proximity card and card reader products. It pays a royalty
equal to 2% of the net revenues from the licensed products. Such royalties are
payable through January 29, 2000, or until all of the subject patents have been
adjudicated invalid.

The Company has a worldwide license to distribute a point-of-sale front-end
monitoring system being marketed under the name Viewpoint. Marketing of this
product began during 1992. The Company pays a one time site license fee for each
site installed.

On March 10, 1993, the United States International Trade Commission
('Commission') instituted an investigation of a complaint filed by the Company
under Section 337 of the Tariff Act of 1930. The complaint, as amended, alleged
that six respondents imported, sold for importation, or sold in the United
States after importation certain anti-theft deactivatable resonant tags and
components thereof that infringed certain U.S. Letters Patents of which the
Company is exclusive licensee. The Commission's notice of investigation named
six respondents, each of whom was alleged to have committed one or more unfair
acts in the importation or sale of components or finished tags that infringe the
asserted patent claims. Those respondents are: Actron AG; Tokai Denshi Co. Ltd.;
ADT, Limited; All Tag Security AG; Toyo Aluminum Ltd.; and Custom Security
Industries, Inc.

On March 10, 1994 the United States International Trade Commission issued a
Notice of Commission Determination Not to Review an Initial Determination
Finding No Violation of Section 337 of the Tariff Act of 1930. The Company has
capitalized approximately $1.9 million in patent defense costs, which is
included in 'Intangibles' as of December 25, 1994. The ultimate resolution is

F-14
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

undetermined at this time due to the various courses of action available to
management. The Company has appealed this determination to the appropriate
United States Court of Appeals. Although the Company's management ultimately
expects a favorable outcome, should resolution of this matter result in a less
than successful defense of the patents in question the deferred patent costs
will be written off as a charge to earnings at the time of such resolution.

Effective January 1, 1995, A.E. Wolf, former Chief Executive Officer, and
current Chairman of the Board of Directors entered into an agreement with the
Company to provide consulting services on an as-needed basis. As compensation,
Mr. Wolf will receive $530,014 per year for five years, of which $255,014 will
be deferred annually. In addition, the Company will pay the sum of $125,000 in
five equal installments of $25,000 each commencing January 1, 1995 to Mr. Wolf
for his agreement not to compete.

12. EXPORT SALES

The Company's export sales to foreign distributors which are principally in
Europe and Scandinavia approximated $10,430,000, $12,163,000, and $22,732,000 in
1994, 1993, and 1992, respectively. Sales of the Company's foreign subsidiaries
in Argentina, Australia, Canada, Western Europe and Mexico totalled $40,120,000
in 1994 and $21,200,000 in 1993. Sales to one foreign distributor of the
Company's products amounted to $2,786,000, $5,000,000 and $13,147,000 in 1994,
1993 and 1992 respectively.

13. CONCENTRATION OF CREDIT RISK

Prior to 1993, most of the Company's export sales were to one foreign
distributor. Currently, the Company's foreign subsidiaries, along with many
foreign distributors, provide diversified international sales thus minimizing
credit risk to one or a few distributors. In addition, the Company maintains
foreign credit insurance to provide coverage for potential foreign political or
economic risks. Domestically, the Company's sales are well diversified among
numerous retailers in the apparel, shoe, drug, mass merchandise, video, music,
supermarket and home entertainment market. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral from its customers.

14. ACQUISITIONS

On March 3, 1993, the Company purchased all of the capital stock of its
Argentinean distributor for $2,103,000 plus a contingent amount to be determined
equal to fifty percent of the Argentinean subsidiary's annual profits for the
four year period ending on November 30, 1996. The Company paid $564,000 pursuant
to this contingent purchase price arrangement during 1994. The total purchase
price shall not exceed $5,000,000. This acquisition was accounted for under the
purchase method, and accordingly the results of operations of this business have
been included with those of the Company since the date of acquisition. The
purchase price resulted in an excess of acquisition cost over net assets
acquired of $2,926,000. Such excess (which will increase for any future
contingent cash payments), is being amortized over twenty years.

On March 8, 1993, the Company purchased a customers list from the Company's
former Mexican distributor for $560,000 in connection with the Company
establishing direct operations in Mexico. The cost related to this customers
list is included in 'Intangibles' and is being amortized on a straight line
basis over ten years.

On July 8, 1993, the Company purchased all of the capital stock of ID
Systems International B.V. and ID Systems Europe B.V. ('The ID Systems Group'),
related Dutch companies engaged in the

F-15
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

14. ACQUISITIONS (CONTINUED)
manufacture, distribution and sale of security products and services. The
Company advanced the ID Systems Group $1,290,000 during the period in which the
Company held an option to purchase all the outstanding capital stock. The
purchase price of the capital stock, exclusive of such advances, was $60 plus
direct acquisition cost of approximately $400,000. This acquisition was
accounted for under the purchase method and, accordingly, the results of
operations of this business have been included with those of the Company since
the date of acquisition. The purchase price resulted in an excess of acquisition
cost over net assets acquired of approximately $5,510,000 which is being
amortized over twenty years.

The Company acquired three production units in connection with the purchase
of the capital stock of the ID Systems Group. The Company shut down all three of
these facilities during 1994. Accordingly, the estimated operating losses and
shut down costs of these facilities amounting to $3,434,000 were accrued for in
the purchase price allocation. As a part of the purchase price allocation, the
values assigned to these assets were based upon estimated residual values upon
ulimate disposition which represents a nominal amount.

The following unaudited summary of operations presents the consolidated
results of operations as if the acquisition of the ID Systems Group had occurred
at the beginning of the years presented. Other acquisitions made during the year
were not material to results of operations and thus are not presented. The
following results are not necessarily indicative of what would have occurred had
the acquisition been consummated as of that date or of future results.

<TABLE>
<S> <C> <C>
1993 1992
---------------- ----------------
(THOUSANDS, EXCEPT PER SHARE DATA)
Net revenues............................................ $ 99,426 $ 92,334
Earnings (loss) before income taxes..................... $ (4,059) $ (2,270)
Net earnings (loss)..................................... $ (4,410) $ (2,271)
Earnings (loss) per share............................... $ (.41) $ (.23)
</TABLE>

15. GEOGRAPHIC SEGMENTS

The following tables shows sales, operating earnings and other financial
information by geographic area for the fiscal years 1994 and 1993.

<TABLE>
<S> <C> <C> <C>
UNITED STATES
AND PUERTO RICO EUROPE OTHER(1)
--------------- --------- ---------
(THOUSANDS)
1994
Net Revenues from Unaffiliated Customers...................... $ 88,211 $ 23,009 $ 17,111
Operating Income.............................................. $ 9,930 $ 587 $ 1,211
Identifiable Assets........................................... $ 92,285 $ 18,987 $ 16,653
UNITED STATES
AND PUERTO RICO EUROPE OTHER(1)
--------------- --------- ---------
(THOUSANDS)
1993
Net revenues from Unaffiliated Customers...................... $ 71,834 $ 7,994 $ 13,206
Operating Income (loss)....................................... $ (1,224) $ (357) $ 956
Identifiable Assets........................................... $ 78,982 $ 15,707 $ 10,310
</TABLE>

- ------------------

(1) Other includes the Company's operations in Canada, Mexico, Argentina and
Australia.

F-16
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. SUBSEQUENT EVENTS

Legal

In this action, Actron AG, one of the Company's principal European
competitors, alleges that the Company, in violation of certain common laws and
contractual obligations (1) unlawfully employed in Europe three former employees
of Actron who allegedly are in possession of, and have disclosed to the Company,
certain of Actron's confidential information, (2) has attempted to employ in
Europe certain other of Actron's current employees, (3) has interfered with
certain contractual relationships between Actron, its former employees, and the
supplier of Actron's disposable EAS tags and (4) has, in allegedly engaging in
the activities complained of, committed acts of unfair competition. The Court
has set a date in early April 1995 to hear arguments on the Company's motion to
dismiss the complaint and has also set a date in mid-April 1995 to hear
testimony and arguments on the parties' allegations and defendants relating to
Actron's motion to enjoin the Company from allegedly using Actron's confidential
information. Discovery by both parties has commenced. The Company intends to
defend itself vigorously. While the outcome of litigation can never be predicted
with certainty and the lawsuit is still in its very preliminary stages, the
Company does not anticipate that its ultimate outcome will have a material
effect on its operations or financial condition.

Financing

On January 25, 1995, the Company filed a registration statement with the
Securities and Exchange Commission seeking to register 3,450,000 shares of its
common stock (including an underwriters' overallotment option of 450,000
shares).

This offering is expected to become effective during the first half of
1995. The net proceeds to be received by the Company from this offering are
expected to approximate $62.2 million. The expected use of proceeds which are
discussed more fully in the Company's S-3 registration is for general corporate
purposes including (i) funding of strategic acquisitions or start-up
opportunities ($22.2 million), (ii) repaying certain indebtedness ($20 million)
and (iii) funding the Company's leasing programs ($20 million).

On January 26, 1995, the Company completed a $15,000,000 private placement
debt funding at a fixed rate of 9.35%. Principal payments of $5,000,000 are to
be made annually on January 30 of each year starting in year 1999 with interest
due semi-annually. This funding was used principally to finance the Company's
acquisition of Alarmex, Inc.

F-17
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

16. SUBSEQUENT EVENTS (CONTINUED)

On February 15, 1995, the Company entered into a new $25 million Revolving
Credit Agreement which replaces the Company's Revolving Credit Agreements that
were in existence at year end. Proceeds of approximately $15 million were used
to pay off borrowings under two existing Revolving Credit Lines. This new
agreement expires on May 1, 1996.

Acquisition

On February 1, 1995 the Company purchased Alarmex, Inc. for approximately
$13.5 million ($10 million in cash and the balance in 200,717 shares of Common
Stock of the Company). Alarmex designs and provides CCTV, POS monitoring,
burglar and fire alarm systems and also provides related central station
monitoring services to over 9,000 retail sites in the United States.

F-18
<PAGE>
PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following is a list of the expenses the Registrant expects to pay in
connection with the issuance and distribution of the Shares registered hereby.

<TABLE>
<S> <C>
Filing and Registration Fees................................................ $ 28,998.05
Legal Fees and Expenses*.................................................... $ 200,000.00
Cost of Printing*........................................................... $ 110,000.00
Accounting Fees and Expenses*............................................... $ 70,000.00
New York Stock Exchange Listing Fees*....................................... $ 15,750.00
Blue Sky Fees and Expenses*................................................. $ 20,000.00
NASD Fees................................................................... $ 8,909.38
Miscellaneous Expenses*..................................................... $ 50,000.00
--------------
Total............................................................ $ 503,657.43
--------------
--------------
</TABLE>

- ------------------

<TABLE>
<S> <C>
* Estimated
</TABLE>

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 7.2 of the Registrant's By-laws permits the indemnification of
officers and directors under certain circumstances to the full extent that such
indemnification may be permitted by law.

Such rights of indemnification are in addition to, and not in limitation
of, any rights to indemnification to which any officer or director of the
Registrant is entitled under the Business Corporation Law of the Commonwealth of
Pennsylvania (Sections 1741 through 1750), which provides for indemnification by
a corporation of its officers and directors under certain circumstances as
stated in the Business Corporation Law and subject to specified limitations set
forth in the Business Corporation Law.

The Registrant also maintains directors' and officers' liability insurance
coverage which insures directors and officers of the Registrant against certain
losses arising from claims made, and for which the Registrant has not provided
reimbursement, by reason of their being directors and officers of the Registrant
or its subsidiaries.

ITEM 16. EXHIBITS

<TABLE>
<S> <C>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
1* Form of Underwriting Agreement
5 Opinion of Stradley, Ronon, Stevens & Young
23.1 Consents of Coopers & Lybrand L.L.P.
23.2 Consent of Stradley, Ronon, Stevens & Young (see Exhibit 5 above)
</TABLE>

- ------------------

* Previously filed with Form S-3 Registration Statement.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

II-1
<PAGE>
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(3) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement,
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant, pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

II-2
<PAGE>
SIGNATURES AND POWER OF ATTORNEY

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Amendment No. 1 to Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in Thorofare, New Jersey, on March 17, 1995.

CHECKPOINT SYSTEMS, INC.

By:_/S/__KEVIN P. DOWD________________
Kevin P. Dowd

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kevin P. Dowd and Steven G. Selfridge and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<S> <C> <C>
SIGNATURES TITLE DATE
- ------------------------------------------ ------------------------------------------ --------------------
/S/ALBERT E. WOLF Chairman of the Board, Chairman of the January 24, 1995
Albert E. Wolf Executive Committee and Director

/S/KEVIN P. DOWD President, Chief Executive Officer and January 24, 1995
Kevin P. Dowd Director (Principal Executive Officer)

/S/STEVEN G. SELFRIDGE Senior Vice President -- Operations Chief January 24, 1995
Steven G. Selfridge Financial Officer & Treasurer

/S/MITCHELL T. CODKIND Corporate Controller and Chief Accounting January 24, 1995
Mitchell T. Codkind Officer

/S/ROBERT O. ADERS Director January 24, 1995
Robert O. Aders

/S/ROGER D. BLACKWELL Director January 24, 1995
Roger D. Blackwell

/S/RICHARD J. CENSITS Director January 24, 1995
Richard J. Censits

/S/DAVID W. CLARK, JR. Director January 24, 1995
David W. Clark, Jr.

/S/ALLAN S. KALISH Director January 24, 1995
Allan S. Kalish

/S/JERMAIN B. PORTER Director January 24, 1995
Jermain B. Porter

/S/ALBERT SOFFA Director January 24, 1995
Albert Soffa
</TABLE>

II-3
<PAGE>

AMENDMENT NO. 1 TO FORM S-3 EXHIBITS

CHECKPOINT SYSTEMS, INC.
INDEX TO EXHIBITS

<TABLE>
<S> <C> <C>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBITS PAGES
- ------------- -------------------------------------------------------------------------------------- ---------------
1 Form of Underwriting Agreement (1)
5 Opinion of Stradley, Ronon, Stevens & Young
23.1 Consents of Coopers & Lybrand L.L.P.
23.2 Consent of Stradley, Ronon, Stevens & Young (2)
</TABLE>

- ------------------

(1) Previously filed with Form S-3 Registration Statement.

(2) See Exhibit No. 5.
<PAGE>

<PAGE>
March 17, 1995

Checkpoint Systems, Inc.
101 Wolf Drive
Thorofare, New Jersey 08086

Re: REGISTRATION STATEMENT ON FORM S-3
(REGISTRATION NO. 33-57415)

Ladies and Gentlemen:

We have acted as counsel to Checkpoint Systems, Inc. (the 'Company') in the
preparation and filing with the Securities and Exchange Commission of a
registration statement on Form S-3 (Registration No. 33-57415) (the
'Registration Statement'), for the purpose of registering under the Securities
Act of 1933, as amended, up to 3,450,000 shares of the Company's Common Stock,
par value $.10 per share (the 'Common Stock'). Each capitalized term used but
not defined in this opinion letter has the meaning ascribed to it in the
Registration Statement.

For the purpose of rendering the opinions contained herein, we have
examined such matters of law as we deemed necessary or appropriate and have
examined and relied (without independent investigation) on only the following
documents, records and certificates:

1. a Subsistence certificate with respect to the Company issued by the
Secretary of State of the Commonwealth of Pennsylvania on January 25, 1995.

2. the Articles of Incorporation, as amended, of the Company,
certified by an officer of the Company;

3. the amended and restated By-laws of the Company, certified by an
officer of the Company;

4. certain minutes of proceedings of the Company's Board of Directors,
certified by an officer of the Company, relating to the offer and sale by
the Company of the Common Stock offered pursuant to the Prospectus; and

5. the Registration Statement.

The law covered by the opinions expressed herein is limited to the Federal
statutes, judicial decisions and rules and regulations of the governmental
agencies of the United States and the statutes, judicial and administrative
decisions and rules and regulations of the governmental agencies of the
Commonwealth of Pennsylvania.

This opinion letter is given only with respect to laws and regulations
presently in effect. We assume no obligation to advise you of any changes in law
or regulation which may hereafter occur, whether the same are retroactively or
prospectively applied, or to update or supplement this letter in any fashion to
reflect any facts or circumstances which hereafter come to our attention.

Based upon the foregoing, it is our opinion that the Common Stock to be
offered and sold pursuant to the Prospectus has been duly authorized and, when
issued and sold as described in the Registration Statement, will be legally
issued, fully paid and non-assessable.

We hereby consent to (i) the filing of this opinion letter as an exhibit to
the Registration Statement and (ii) to the reference in the Prospectus contained
within the Registration Statement to our firm as the legal counsel that has
passed upon the legality of the Common Stock to be offered pursuant to the
Prospectus.

Very truly yours,
STRADLEY, RONON, STEVENS & YOUNG

By: /S/__JAMES M. PAPADA, III_________
James M. Papada, III, Esq.
a Partner

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion and incorporation by reference in this
registration statement on Amendment No. 1 to Form S-3 (File No. 33-57415)
of our reports dated February 15, 1995, except as to Note 16 for which the
date is March 3, 1995, on our audits of the consolidated financial
statements and financial statement schedule of Checkpoint Systems, Inc.
as of December 25, 1994 and December 26, 1993, and for the three years in
the period ended December 25, 1994. We also consent to the reference to
our firm under the caption 'Experts.'

/s_/__Coopers & Lybrand L.L.P.____________

Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 16, 1995

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Checkpoint Systems, Inc. on Amendment No. 1 to Form S-3 (File No. 33-57415) of
our report, which includes an explanatory paragraph related to uncertainties
pertaining to certain partnership investments and related tax credit utilization
and an uncertainty related to Internal Revenue Service inquiries related to
defined benefit plan filings, dated February 28, 1995, on our audit of the
combined financial statements of Alarmex, Inc. and Subsidiary and Bayport
Controls, Inc. as of December 31, 1994 and for the year ended December 31, 1994,
which report is included in the Form 8-K/A Current Report. We also consent to
the reference to our firm under the caption 'Experts.'

/s_/__Coopers & Lybrand L.L.P.____________

COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
March 16, 1995