CHECKPOINT SYSTEMS INC, S-3, 1996-02-20

CHECKPOINT SYSTEMS INC
S-3, 1996-02-20
COMMUNICATIONS EQUIPMENT, NEC

Previous: CHECKPOINT SYSTEMS INC, 8-K/A, 1996-02-20

Next: PETROLEUM & RESOURCES CORP, NSAR-B, 1996-02-20

As filed with the Securities and Exchange Commission on February 20, 1996
Registration No. 33-_________

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-3

REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------

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

PENNSYLVANIA 22-1895850
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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)
---------------
Copy to:

JAMES M. PAPADA, III, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, Pennsylvania 19103-7098
---------------

Approximate date of commencement of proposed sale to the public: As
soon as practicable after the effective date of this Registration Statement.
---------------

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. /x/

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

CALCULATION OF REGISTRATION FEE

===========================================================================================================================
Title of Each Proposed Maximum Proposed Maximum
Class of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered Share(1) Price(1) Registration Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.25% Convertible Subordinated
Debentures $47,250,000 100% $47,250,000 $16,293.10
- ---------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------
Common Stock, par value $0.10 per share (2) --- --- ---
===========================================================================================================================
</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee,
pursuant to Rule 457(i) of Regulation C under the Securities Act of
1933.
(2) Such presently indeterminable number of shares of Common Stock as shall
be issuable from time to time upon conversion of the Debentures.

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.

<PAGE>

CHECKPOINT SYSTEMS, INC.

Cross Reference Sheet required by Item 501 of Regulation S-K
showing location in the Prospectus of Information required by
Items 1 through 13, Part I of Form S-3

Form S-3 Registration Statement Location or
Item Number and Caption Caption in Prospectus
------------------------------- ---------------------
<S> <C> <C>

1. Forepart of the Registration Statement and Outside Front Cover Page
Outside Front Cover Page of Prospectus

2. Inside Front and Outside Back Cover Available information; Incorporation
Pages of Prospectus of Certain Documents by Reference; Table of
Contents

3. Summary Information, Risk Factors and Prospectus Summary; Ratio of Earnings to Fixed
Ratio of Earnings to Fixed Charges Charges; The Company; Investment Considerations

4. Use of Proceeds Inapplicable

5. Determination of Offering Price Plan of Distribution

6. Dilution Inapplicable

7. Selling Security Holders Selling Security Holders

8. Plan of Distribution Outside Front Cover Page; Plan of Distribution

9. Description of Securities to be Registered Outside Front Cover Page; Prospectus Summary;
Description of the Debentures; Description of
Capital Stock

10. Interest of Named Experts and Counsel Inapplicable

11. Information with Respect to the Registrant Outside Front Cover Page; Incorporation of
Certain Documents by Reference; Prospectus
Summary; Selected Financial Data; Capitalization;
The Company; Investment Considerations;
Description of Capital Stock; Experts

12. Incorporation of Certain Information by Incorporation of Certain Documents by
Reference Reference

13. Disclosure of Commission Position on Inapplicable
Indemnification for Securities Act Liabilities.
</TABLE>

<PAGE>

SUBJECT TO COMPLETION--DATED FEBRUARY 20, 1996

PROSPECTUS
$47,250,000
CHECKPOINT SYSTEMS, INC.
5.25% Convertible Subordinated Debentures
Due November 1, 2005
(Interest Payable May 1 and November 1)

This Prospectus relates to the public offering by the Selling Security
Holders (see "SELLING SECURITY HOLDERS") of up to $47,250,000 (aggregate
principal amount) of 5.25% Convertible Subordinated Debentures due November 1,
2005 (the "Debentures") of Checkpoint Systems, Inc. (the "Company") and the
shares of common stock, $.10 par value, of the Company (the "Common Stock" and,
together with the Debentures, the "Securities") that are issuable upon
conversion of the Debentures. The Debentures are convertible into shares of the
Common Stock at a conversion price of $18.375 per share (after giving effect to
the February 1996 Stock Dividend (as defined herein)), subject to adjustment in
certain circumstances, at any time prior to redemption and prior to the close of
business on the fifth business day immediately preceding the maturity date of
the Debentures. See "DESCRIPTION OF THE DEBENTURES." The Common Stock is traded
on the New York Stock Exchange (the "NYSE") under the symbol "CKP." The last
reported sale price of the Common Stock on the NYSE on February 16, 1996, was
$39 3/4 per share. See "DESCRIPTION OF CAPITAL STOCK."

Interest on the Debentures is payable semiannually on each May 1 and
November 1, commencing May 1, 1996, and the Debentures will mature on November
1, 2005, unless previously redeemed. See "DESCRIPTION OF THE DEBENTURES."

The Debentures are redeemable at the option of the Company, in whole or
in part at any time, on or after November 10, 1998, at the redemption prices set
forth in the Indenture (as defined herein) and described herein, plus accrued
interest to the redemption date. In the event of a Change of Control (as defined
herein), each holder of Debentures will have the right to cause the Company to
repurchase its Debentures, in whole but not in part, at a price equal to 100% of
the principal amount thereof plus accrued and unpaid interest to the repurchase
date. See "DESCRIPTION OF THE DEBENTURES - Redemption" and " - Change of
Control."

The Debentures are unsecured general obligations of the Company
subordinated to all existing and future Senior Indebtedness (as defined herein),
which at December 31, 1995 was approximately $40 million. See "DESCRIPTION OF
THE DEBENTURES."

The Company will not receive any proceeds from this offering. The
aggregate proceeds to the Selling Security Holders from the sale of the
Securities will be the offering price of the Securities sold, less applicable
agents' commissions and underwriters' discounts, if any. The Company will pay
all expenses incident to the preparation and filing of a registration statement
for the Securities under federal securities laws. The Selling Security Holders
may sell the Securities from time to time on terms to be determined at the time
of sale, either directly or through agents designated from time to time or
dealers or underwriters designated from time to time. To the extent required,
the principal amount of Debentures or the number of shares of Common Stock to be

<PAGE>

sold, the offering price thereof, the name of each Selling Security Holder and
each agent, dealer and underwriter, if any, and any applicable commissions or
discounts with respect to a particular offering will be set forth in an
accompanying Prospectus Supplement. See "PLAN OF DISTRIBUTION."

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

There is no public market for the Debentures. See "INVESTMENT
CONSIDERATIONS" for a discussion of certain information that should be carefully
considered by prospective purchasers of the Securities.

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

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.

The date of this Prospectus is ______________, 1996.

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL
PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH
JURISDICTION.

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance with the
Exchange Act, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Reports, proxy statements
and other information filed by the Company with the Commission may be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
the Commission's regional offices at 75 Park Place, New York, New York 10007,
and 500 West Madison Street, Chicago, Illinois 60661. Copies of such material
may be obtained at prescribed rates from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. If and for so long as the Company is not subject to the
informational requirements of the Exchange Act at any time after the date
hereof, the Company will be obligated to file with the Trustee for the
Debentures, upon request by the Trustee, (i) a brief statement of Company's
business and products and (ii) a balance sheet, profit and loss and retained
earnings statements, and similar financial statements for the two preceding
fiscal years, audited to the extent reasonably available.

The Company has filed with the Commission a Registration Statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933 (the
"Securities Act") for the offering of the Securities made by this Prospectus.
This Prospectus, filed as part of the Registration Statement, does not contain
all the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information about the Company and the Securities
offered pursuant to this Prospectus, refer to the Registration Statement and the
exhibits and schedules thereto, all of which may be inspected without charge or
copied at the Commission's offices (at the locations described in the preceding
paragraph) and copies of which may be obtained at prescribed rates from the
Public Reference Section of the Commission (at the location described in the
preceding paragraph). Statements made in this Prospectus about the contents of
any contract, agreement or document are not necessarily complete and in each
instance reference is made to the copy of such contract, agreement or document
filed as an exhibit to the Registration Statement and each such statement is
qualified in its entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents and information are hereby incorporated by
reference into this Prospectus:

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

(2) the Company's Report on Form 8-K filed on February 15, 1995.

(3) the Company's Report on Form 8-K/A filed on February 17, 1995.

(4) the Company's 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) the Company's Report on Form 8-K/A filed on March 16, 1995, amending
Report on Form 8-K filed February 15, 1995.

(6) Proxy Statement for the Company's Annual Meeting of Shareholders dated
March 22, 1995.

<PAGE>

(7) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 26, 1995, filed on May 10, 1995.

(8) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 25, 1995 filed on August 8, 1995.

(9) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 24, 1995 filed on November 8, 1995.

(10) the Company's Report on Form 10-Q/A filed on December 13, 1995,
amending Report on Form 10-Q filed on November 8, 1995.

(11) the Company's Report on Form 8-K filed on December 15, 1995.

(12) the Company's Report on Form 8-K/A filed on February 13, 1996, amending
Report on Form 8-K filed on December 15, 1995.

(13) the Company's Report on Form 8-K/A filed on February 15, 1996, further
amending Report on Form 8-K filed on December 15, 1995.

(14) the Company's Report on Form 8-K/A filed on February 20, 1996, further
amending Report on Form 8-K filed on December 15, 1995.

All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to
determination of the offering made hereunder shall be deemed to be incorporated
by reference into this Prospectus to be a part of this Prospectus from the
respective dates of the filing of such documents.

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

<PAGE>

The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon
written or oral request of such person, a copy of any or all information that
has been incorporated by reference in this Prospectus, other than exhibits to
such information that are not specifically incorporated by reference into such
information. Requests for information incorporated by reference in this
Prospectus should be made in writing or by telephone to Neil D. Austin, Esq.,
Vice President-General Counsel and Secretary, Checkpoint Systems, Inc., 101 Wolf
Drive, Thorofare, New Jersey 08086, telephone number (609) 848-1800.

<PAGE>

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 in this Prospectus. 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 1991, 1992, 1993, 1994 and 1995 are
to the fifty-two or fifty-three week periods ending on December 29, 1991,
December 27, 1992, December 26, 1993, December 25, 1994 and December 31, 1995,
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 and 32% for fiscal year 1995.

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. The Company's products also
help to reduce retailer 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, Eckerd's
and Walgreens in the U.S., and Dixons, All Sport, British Shoe, Corte Ingles,
FNAC and GB in the U.K. and Western Europe. 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

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

<PAGE>

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 approximate 65%
worldwide market share and total revenues of approximately $889 million in its
most recent fiscal year. Management estimates that the Company's market share in
the worldwide EAS industry is approximately 26%. 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.

Investment Considerations

Prospective purchasers of the Securities should carefully consider the
information set forth herein under the caption "INVESTMENT CONSIDERATIONS" and
the other information set forth herein.

The Offering

<TABLE>
<S> <C>
The Debentures

Securities Offered. . . . . . . . . . . . . . . . . . . . . . . . . . .Up to $47,250,000 of the Company's 5.25%
Convertible Subordinated Notes Due November 1,
2005.

Interest Payment Dates. . . . . . . . . . . . . . . . . . . . . . . . .May 1 and November 1, commencing May 1, 1996.

Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Notes are convertible into shares of the
Common Stock at a conversion price of $18.375
per share (after giving effect to the February 1996
Stock Dividend), subject to adjustment in certain
circumstances, at any time prior to redemption and
prior to the close of business on the fifth business
day immediately preceding the maturity date of the
Debentures.
</TABLE>

<PAGE>

<TABLE>
<S> <C>
Redemption at Option of Company. . . . . . . . . . . . . . . . . . . . The Debentures are redeemable for cash, at the
option of the Company, in whole or in part from
time to time, on or after November 10, 1998, at
the redemption prices set forth in the Indenture and
described herein plus accrued interest to the
redemption date.

Repurchase at Option of Holders. . . . . . . . . . . . . . . . . . . . In the event of a Change of Control (as defined
herein), each holder of Debentures will have the
right to cause the Company to repurchase its
Debentures, in whole but not in part, at a price
equal to 100% of the principal amount thereof plus
accrued and unpaid interest to the repurchase date.

Subordination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . The Debentures are subordinated to all existing and
future Senior Indebtedness (as defined herein). The
Indenture does not restrict the incurrence of
additional indebtedness, including Senior
Indebtedness, by the Company.

Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Chemical Bank.

The Common Stock

Common Stock Outstanding. . . . . . . . . . . . . . . . . . . . . . . .30,050,764 shares(1).

Trading Information. . . . . . . . . . . . . . . . . . . . . . . . . . The Common Stock is traded on the NYSE under
the symbol "CKP."
</TABLE>

- -----------------------------
(1) As of February 16, 1996, giving retroactive recognition to the 100%
stock dividend declared January 4, 1996, which is issuable on February
22, 1996, to holders of record on January 18, 1996 (the "February 1996
Stock Dividend"). Does not include 6,043,971 shares of Common
Stock issuable upon conversion of the Debentures and exercise of
presently outstanding options and warrants issued by the Company after
giving effect to the February 1996 Stock Dividend.

RECENT DEVELOPMENTS

Acquisition of Actron Group Limited

On November 30, 1995, the Company purchased from ADT (UK) Limited
("ADT") all of the capital stock of Actron Group Limited ("Actron"), a
wholly-owned subsidiary of ADT. The purchase price for the capital stock was $54
million in cash.

Actron manufactures, sells and distributes radio frequency electronic
security systems to the retail industry throughout Western Europe. For the year
ended December 31, 1994, Actron had revenues of approximately $50 million.

The Company believes that the acquisition of Actron will result in (i)
consolidation of critical mass in the Western European market leading eventually
to more rational product offering and pricing, (ii) possible cost savings as
duplicative expenses are eliminated through consolidation, (iii) additional
patent protection and (iv) a lower cost structure. The acquisition of Actron was
dilutive to the extent of $.19 per share in 1995 and the Company believes that
it will be dilutive in the first nine months of 1996 but should be accretive for
1996 as a whole. The Company financed the acquisition of Actron with a portion
of the proceeds of the Debentures.

<PAGE>

Fourth Quarter and Fiscal Year 1995 Operating Results

On February 8, 1996, the Company announced its operating results for
the fourth quarter and fiscal year ended December 31, 1995:

<TABLE>
<CAPTION>
Operating Results (1)
Fourth Quarter(2) Fiscal Year
(Year Ended)
--------------------------------- ----------------------------------
Dec. 25, Dec. 31, Dec. 25, Dec. 31,
1994 1995 1994 1995
--------------- --------------- --------------- ----------------
(in thousands, except per share amounts)
----------------------------------------
<S> <C> <C> <C> <C>
Net revenues...................................... 39,524 64,835 128,331 204,741
Cost of revenues.................................. 20,390 36,942 66,360 114,044
------ ------ ------ -------
Gross profit.................................... 19,134 27,893 61,971 90,697
Selling, general and administrative
expenses........................................ 14,299 22,714 50,243 71,642
Operating income................................ 4,835 5,179 11,728 19,055
Interest expense, net............................. 946 256 2,589 2,259
Other expense (income)............................ 519 (70) 762 198
----- ------- ------ ------
Income before income taxes...................... 3,370 4,993 8,377 16,598
Income taxes...................................... 842 1,686 2,094 5,189
----- ----- ----- -----
Net earnings.................................... 2,528 3,307 6,283 11,409
===== ===== ===== ======

Net earnings per share(3)......................... 0.23 0.22 0.58 0.83
Weighted average number of common
and common equivalent shares(3)................. 11,063 15,069 10,806 13,687

<FN>
- ---------------------------
(1) Information with respect to the fourth quarter of 1994 and 1995 and for the
fiscal year ended December 31, 1995 is unaudited. Information with respect
to year ended December 25, 1994 has been derived from the audited financial
statements.

(2) Operating results for the fourth quarter of 1994 and 1995 were based on a
13-week period and a 14-week period, respectively.

(3) Does not give retroactive effect to the February 1996 Stock Dividend.

</FN>
</TABLE>
4

<PAGE>

RATIO OF EARNINGS TO FIXED CHARGES

The following table sets forth the Company's ratio of earnings to fixed
charges for each of the five fiscal years in the period ended December 31, 1995.
Earnings used in computing the ratio of earnings to fixed charges have been
calculated by adding fixed charges to income (loss) before taxes. Fixed charges
consist of interest costs, whether expensed or capitalized, the estimated
interest component of rental expenses, and amortization of debt discounts and
issue costs.

Fiscal Year
---------------------------------------

1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Ratio of Earnings to
Fixed Charges: 2.03 2.65 5.59 8.88 9.79

<PAGE>

CAPITALIZATION

The following table sets forth the short-term debt and total
capitalization of the Company at December 31, 1995 (based upon the Company's
unaudited financial statements at December 31, 1995), after giving
effect to the February 1996 Stock Dividend.

<TABLE>
<CAPTION>
December 31, 1995
Actual
(in thousands)
<S> <C>
Current portion of long-term debt....................................... 4,002
--------
Total short-term debt................................................. 4,002

Long-term debt (less current portion):
Term debt............................................................... 35,674
5 1/4% Convertible Subordinated Debentures due 2005....................... 120,000
-------
Total long-term debt.................................................... 155,674
Shareholders' equity:
Preferred stock, no par value, authorized 500,000 shares,
none issued........................................................... 0
Common Stock, par value, $.10 per share, 100,000,000
shares authorized, 30,019,758 shares issued........................... 3,002
Additional capital...................................................... 84,627
Retained earnings....................................................... 56,697
Common stock in treasury, at cost, 799,000 shares....................... (5,664)
Foreign currency adjustments............................................ (1,004)
--------
Total shareholders' equity............................................ 137,658
--------
Total capitalization................................................ 297,334
========
</TABLE>

<PAGE>

INVESTMENT CONSIDERATIONS

Prospective purchasers of the Debentures 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
Debentures.

Subordination

The Debentures are subordinated in right of payment to all existing and
future Senior Indebtedness and are structurally subordinated to all liabilities
(including trade payables) of the Company's subsidiaries. The Indenture does not
restrict the incurrence of additional Senior Indebtedness or other indebtedness
by the Company or its subsidiaries. At December 31, 1995, the Company had
approximately $40.0 million of additional Senior Indebtedness outstanding. By
reason of such subordination of the Debentures, in the event of insolvency,
bankruptcy, liquidation, reorganization, dissolution or winding up of the
business of the Company or upon a default in payment with respect to any
indebtedness of the Company or an event of default with respect to such
indebtedness resulting in the acceleration thereof, the assets of the Company
will be available to pay the amounts due on the Debentures only after all Senior
Indebtedness had been paid in full. The Debentures will rank pari passu in all
respects with other unsecured subordinated obligations of the Company.

The Company conducts a significant portion of its operations through
its subsidiaries. Accordingly, the Company's ability to meet its cash
obligations is dependent in part upon the ability of its subsidiaries to make
cash distributions to the Company. The ability of its subsidiaries to make
distributions to the Company is and will continue to be restricted by, among
other limitations, applicable provisions of the laws of national or state
governments and contractual provisions. The Indenture does not limit the ability
of the Company's subsidiaries to become bound by such restrictions in the
future. The right of the Company to participate in the assets of any subsidiary
(and thus the ability of holders of the Debentures to benefit indirectly from
such assets) are generally subject to the prior claims of creditors, including
trade creditors, of that subsidiary except to the extent that the Company is
recognized as a creditor of such subsidiary, in which case the Company's claims
would still be subject to any security interest of other creditors of such
subsidiary. The Debentures, therefore, will be structurally subordinated to
creditors, including trade creditors, of subsidiaries of the Company with
respect to the assets of the subsidiaries against which such creditors have a
claim.

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 65% of the global market for electronic security
systems. With total revenues of approximately $889 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, 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. On November 30, 1995, the Company acquired all of the stock of
Actron Group, Ltd. ("Actron") which had been a principal competitor of the
Company in Western Europe.

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.

<PAGE>

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 was exclusive licensee, which relate to the methods of deactivation of
the tags. On March 10, 1994, the ITC ruled that such anti-theft tags did not
infringe the subject patents. During the second quarter of 1995 the Company was
informed that its appeal relating to the ITC ruling had been denied. The Company
has capitalized approximately $1.8 million in patent defense costs which have
been included in Intangibles since the end of fiscal 1993.

In addition, a proceeding in the Court of Commerce of the canton of
Zurich, Switzerland involving some of the same parties and the Swiss counterpart
of the U.S. patent found that the defendant's tags do infringe the Company's
patents. The defendant's appeal of this ruling to the Supreme Court of
Switzerland was recently rejected.

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

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

Sales of the Company's products outside the United States accounted for
approximately 39.4% of net revenues during fiscal year 1994 and 38% during
fiscal year 1995. 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 and 71.8% for
fiscal year 1995, were made in local currencies. This decrease in sales
denominated in currencies other than U.S. dollars decreases the Company's
potential exposure to currency fluctuations, which can adversely affect results.
During fiscal year 1995, currency exchange losses amounted to $198,000 compared
to losses of $762,000 for fiscal year 1994. The primary reason for the decline
in currency exchange losses from 1994 to 1995 was the result of the less
volatile nature of the Mexican peso in 1995.

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 sale and resale gives rise to the risk of gains or losses as a result of
foreign currency exchange rate fluctuations.

<PAGE>

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 31, 1995, the Company had currency
exchange forward contracts totalling approximately $14 million. The contracts
are in the various local currencies covering six of the Company's Western
European operations and Canada. The Company's operations in Argentina, Mexico
and Australia were not covered by currency exchange forward contracts at
December 31, 1995.

The Company is considering a possible increase in the amount of
currencies covered by currency exchange forward contracts. 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.

Seasonality and Quarterly Fluctuations

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. Disposable tag sales, which accounted
for approximately 29% of net revenues in fiscal year 1994 and 26% of net
revenues in fiscal year 1995 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.

Acquisition Strategy

The Company has adopted a strategy of pursuing strategic acquisitions
and start-up opportunities. See "BUSINESS-Strategy." The Company's
acquisition strategy entails the potential risks inherent in assessing the
value, strengths, weaknesses, contingent or other liabilities and potential
profitability of acquisition candidates and in integrating the operations of
acquired companies. Although the Company generally has been successful in
pursuing these acquisitions, there can be no assurance that acquisition
opportunities will continue to be available, that the Company will have access
to the capital required to finance potential acquisitions, that the Company will
continue to acquire businesses or that any business acquired will be integrated
successfully or prove profitable. See "THE COMPANY-Recent Developments." The
acquisition of Actron was dilutive to the extent of $.19 per share in 1995 and
the Company believes that it will be dilutive in the first nine months of 1996
but should be accretive for 1996 as a whole.

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."

Proposed Tax Legislation

The Company currently derives significant benefits from Section 936 of
the Internal Revenue Code of 1986, as amended (the "Code"). Section 936
provides that certain U.S. corporations are entitled to a U.S. corporate
income tax credit for certain income from Puerto Rican sources. Any limitation
or reduction in the scope of Section 936 may increase the Company's effective
tax rate. In particular, investors should be aware that Section 11305 of the
Revenue Reconciliation Bill of 1995 would repeal Section 936 over a 10-year
period. It is impossible to predict whether legislation affecting Section 936
will be enacted into law or, if so, what form such legislation will take.

<PAGE>

Deductibility of the Company's Interest Payments

Section 279 of the Code disallows the deduction of interest paid or
accrued with respect to certain subordinated convertible debt which is issued to
provide consideration for the acquisition of stock or assets of another
corporation ("Section 279 Acquisition Debt"). Such a disallowance applies to the
extent interest paid or accrued with respect to Section 279 Acquisition Debt
plus interest paid or accrued on other debt incurred to provide consideration
for an acquisition of stock or assets exceeds a $5 million threshold. Section
279 Acquisition Debt does not include debt issued to provide consideration for
the acquisition of stock in, or the assets of, a foreign corporation that
derives substantially all of its income from foreign sources during the 3-year
period preceding the acquisition. The Company used a substantial portion of the
proceeds from the Debentures in a manner so that Section 279 will not apply to
disallow a deduction for interest paid or accrued with respect to the Debentures
to any material extent. However, there can be no assurance in this
regard, and, in any event, it is expected that interest paid or accrued with
respect to a portion of the Debentures will figure in the calculation of the $5
million threshold described above. As a result, the Company may be limited in
its ability to deduct interest paid or accrued with respect to any Section 279
Acquisition Debt that may be incurred by the Company in the future. If Section
279 were to disallow any portion of the interest paid or accrued with respect to
the Debentures or with respect to other debt of the Company, the Company's
effective tax rate would increase.

Absence of Existing Market for Debentures

The Debentures are a new issue of securities with no established
trading market. The Company does not intend to list the Debentures on any
national securities exchange or to seek the admission thereof to trading in the
National Association of Securities Dealers Automated Quotation system. Although
the Debentures have been designated for trading through PORTAL, no assurance
can be given that an active trading market for the Debentures will develop
or, if such market develops, as to the liquidity or sustainability of such
market. If a trading market does not develop or is not maintained, holders of
the Debentures may experience difficulty in reselling the Debentures or may be
unable to sell them at all. If a market for the Debentures develops, any such
market may be discontinued at any time. If a public trading market develops for
the Debentures, future trading prices of the Debentures will depend on many
factors, including, among other things, prevailing interest rates, the Company's
results of operations and the market for similar securities. Depending on
prevailing interest rates, the market for similar securities and other factors,
including the financial condition of the Company, the Debentures may trade at a
discount from their principal amount.

<PAGE>

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 and 32% for
fiscal year 1995.

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. The Company's products also
help to reduce retailer 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 the U.S. and
Dixons, All Sport, British Shoe, Corte Ingles, FNAC and GB in the U.K. and
Western Europe. 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.

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.

The Company has its principal executive offices at 101 Wolf Drive,
Thorofare, New Jersey 08086, (609) 848-1800. For a list of the Company's
subsidiaries, see Appendix A.

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. In February
1995, the Company acquired Alarmex, Inc. which designs and markets CCTV, POS
monitoring, burglar and fire alarm systems. Alarmex also provides related
central station monitoring services.

<PAGE>

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 (which does not
give retroactive effect for the February 1996 Stock Dividend) sets forth for the
periods indicated the high and low 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>
<CAPTION>
High Low
---- ---
<S> <C> <C>
Fiscal Year 1993

First Quarter.................................................... $20 1/8 $ 8 3/4

Second Quarter................................................... 12 7/8 8 3/4

Third Quarter.................................................... 11 3/4 8 1/8

Fourth Quarter................................................... 14 8 1/2

Fiscal Year 1994

First Quarter.................................................... 14 1/2 10 3/8

Second Quarter................................................... 17 1/4 12 3/4

Third Quarter.................................................... 18 7/8 14 7/8

Fourth Quarter................................................... 21 1/2 16 3/8

Fiscal Year 1995

First Quarter.................................................... 25 15 7/8

Second Quarter................................................... 23 3/4 16 3/8

Third Quarter.................................................... 26 7/8 20 1/8

Fourth Quarter................................................... 39 24

Calendar Year 1996

January.......................................................... 40 1/2 35 3/4

February (through February 16, 1996)............................. 44 36 1/2
</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.

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."

<PAGE>

SELECTED HISTORICAL FINANCIAL INFORMATION

The selected historical financial information presented below has been
derived from the consolidated financial statements of the Company.

<TABLE>
<CAPTION>
Fiscal Year
----------------------------------------------------------------
1991 1992 1993 1994 1995(1)
------------ ----------- ----------- ----------- -----------

<S> <C> <C> <C> <C> <C>
Statement of operations data:
Net revenues.................. $ 52,943 $ 72,166 $ 93,034 $128,331 $204,741
Cost of revenues.............. 28,479 38,650 54,421 66,360 114,044

-------- -------- -------- -------- --------
Gross profit................ 24,464 33,516 38,613 61,971 90,697
Selling, general and
administrative expenses..... 23,646 28,342 39,238 50,243 71,642
-------- -------- -------- -------- --------
Operating income (loss)..... 818 5,174 (625) 11,728 19,055
Contract settlement income.... -- -- 3,500 -- --
Interest expense, net......... 183 283 477 2,589 2,259
Other expense................. -- -- 327 762 198
-------- -------- -------- -------- --------
Income before income taxes.. 635 4,891 2,071 8,377 16,598
Income taxes.................. 127 463 456 2,094 5,189
-------- -------- -------- -------- --------
Net earnings................ $ 508 $ 4,428 $ 1,615 $ 6,283 $ 11,409
======== ======== ======== ======== ========
Net earnings per share(2).... $ .05 $ .45 $ .16 $ .58 $.83
Weighted average number of
common and common equivalent
shares (in thousands)(2).... 9,591 9,951 10,386 10,806 13,687
Selected operating data:
Disposable labels sold
(during period, in thousands) 537,833 691,494 733,530 959,249 1,371,000
Total deactivation systems
installed (at period end)... 30,003 43,771 61,417 91,549 140,590
Total sensors installed
(as period end)............. 58,859 70,256 91,648 107,068 170,341
Balance sheet data
(end of period):
Working capital............... $14,245 $ 25,792 $ 27,984 $ 39,427 $153,750
Total assets.................. 57,675 74,333 104,999 127,925 356,550
Long-term debt................ 783 9,322 24,302 35,556 155,674
Total debt.................... 7,005 10,614 28,399 42,262 159,676
Shareholders' equity.......... 42,087 51,061 53,779 61,303 137,658
<FN>
- ---------------------
(1) Selected historical financial information with respect to fiscal year
ended December 31, 1995 is unaudited.
(2) Does not give retroactive effect to the February 1996 Stock Dividend.
</FN>
</TABLE>

<PAGE>

BUSINESS

Overview

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 and 32% for
fiscal year 1995.

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, Eckerd's and Walgreens in the U.S., and Dixons, All
Sport, British Shoe, Corte Ingles, FNAC and GB in the U.K. and Western Europe.
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

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.

<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.

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 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 nonretail 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

<PAGE>

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 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 approximate 65% worldwide market share and total revenues of approximately
$889 million in its most recent fiscal year. Management estimates that the
Company's market share in the worldwide EAS industry is approximately 26%.
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.

More specifically, the Company is pursuing the following strategies:

o 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. Since September 1991, the Company has expanded
its direct sales force from approximately 47 to 267 at December 31, 1995.
The Company intends to continue to expand its international sales force
either through acquisitions or by

<PAGE>

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.

o 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.

o 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 1995, sales of
RF disposable targets and field service of their associated sensors and
deactivation units accounted for approximately 32% 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.

o 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.

o 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.

o 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.

o Structuring programs for national account prospects involving a variety of
leasing options which promote sales of disposable tags.

The Company has begun a program whereby national accounts (such as Walgreens
and Eckerd's) may choose one of several leasing options pursuant to which
they may lease equipment from the Company in

<PAGE>

exchange for a multi-year commitment to purchase a certain number of
disposable tags which varies depending upon the size and needs of the
account.

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 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 fourteen 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(R) is the latest evolution in the Company's
proven Quicksilver(TM) 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(R) 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.

<PAGE>

Also introduced in 1993, the QS1500(TM) and QS1600(R) 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(R) sensors, featuring an earlier generation of components, the
QS3000(R), 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(TM) 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(R), a non-contact 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 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 Cheklink(R) 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.

<PAGE>

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 price marking bar coding
printers. Checkpoints labels can be integrated with printers from Sato, Zebra,
Monarch, Printronix and Soabar. When used with electronic deactivation
equipment, they represent the Cheklink(R) 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(R) 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(R)) 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
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(R) 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.

<PAGE>

Access Control Systems

The electronic access control Threshold(R) 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(TM)
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(R) family of readers provides the fastest card
verification in the industry and the release of the Mirage SG(R) 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.

POS Monitoring Systems

In December 1991, the Company licensed the worldwide rights to a POS
monitoring system that is marketed under the name Viewpoint(R). 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.

<PAGE>

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

Fiscal Year
----------------------------------------------------------
1991 1992 1993 1994 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Surveillance Systems............................ 38% 45% 41% 39% 35%
Reusable tags used in EAS Systems............... 8 8 12 12 9
Disposable tags used in EAS Systems............. 37 32 30 29 26
Access Control Systems.......................... 7 6 5 5 3
Service and Installation........................ 8 6 8 8 6
CCTV/Viewpoint.................................. - - 1 2 16
Other........................................... 2 3 3 5 5
-------- -------- -------- -------- --------
Total 100% 100% 100% 100% 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 1995, EAS revenues from outside the
United States (principally Europe and Scandinavia) represented approximately 38%
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 1995. The Company, at December 31, 1995,
employed 90 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 31, 1995, the Company had 4 such
independent representatives. Four members of the Company's sales management
staff are assigned to manage and assist these independent representatives. Of
total EAS domestic revenues during fiscal year 1995, 95% 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 31, 1995, employed a total of 152 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. On November 30, 1995, the Company acquired all of the stock
of Actron, another competing EAS company in Western Europe.

<PAGE>

Independent distributors accounted for 28.2% of the Company's international
revenues during fiscal year 1995. 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 151 independent dealers. The Company
employs five salespeople who are compensated by salary plus 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. As of December 31, 1995, Checkpoint employed approximately 267
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.

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 1.3 billion disposable RF targets in 1995, 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.

<PAGE>

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 $5.4
million, $4.9 million, and $6.9 million in research and development activities
during fiscal years 1993, 1994 and 1995, respectively. The Company estimates
that it will expend approximately $10.4 million in fiscal year 1996. 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 December 31, 1995, and inclusive of the acquisition of Actron,
Checkpoint had 2,540 employees, including 13 officers, 62 persons engaged in
research and development activities and 285 persons engaged in sales and
marketing activities. Except for approximately 13 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

ITC Case

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. patents of which the Company was
the 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. During the second
quarter of 1995, the Company was informed that the Appeals Court had denied the
Company's appeal relating to the adverse International Trade Commission ("ITC")
ruling of March 10, 1994,

<PAGE>

involving certain domestic patents. The Company has capitalized approximately
$1.8 million in patent defense costs which have been included in Intangibles
since the end of fiscal 1993.

Cohen Litigation

The Company, along with several officers and a director, has been named as a
defendant in two actions entitled Milton Cohen, et al v. Checkpoint Systems,
Inc., et al USDC Case No. 95CV1042 (JHR) filed March 9, 1995 and Aron and Lisa
Derman, et al v. Checkpoint Systems, Inc., et al USDC Case No. 95CV1046 (JEI)
filed March 10, 1995, both of which were filed in the United States District
Court in New Jersey. The complaints, which are substantially identical, seek
class certification and allege 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.

Properties

The Company's headquarters and distribution center are leased facilities
located in Thorofare, New Jersey. Of the total 104,000 square feet,
approximately 64,000 square feet are used for office space and approximately
40,000 square feet are used for storage facilities. The Company has entered into
a twelve year lease for the facilities starting in 1995. The annual rent during
each year of the first five years starting in 1995 is $692,000.

The Company's principal manufacturing facility for the production of most of
its products is located in Ponce, Puerto Rico. This two-story building, which
was completed in 1990, is owned by the Company and contains approximately 95,000
square feet. Included in the 95,000 square feet is approximately 11,000 square
feet of office space and approximately 14,000 square feet of warehouse space. In
addition, the Company leases a manufacturing and development facility in Puerto
Rico near the manufacturing facility containing approximately 9,000 square feet.
The lease expires in 1997 with an annual rent of $31,000.

The Company also leases two manufacturing facilities in the Dominican
Republic. One facility, located in La Vega, contains approximately 33,000 square
feet. It includes approximately 3,900 square feet of office space and
approximately 3,000 feet of warehouse space. Certain components of the Company's
sensors, hard targets and proximity cards are assembled at this site. The lease
for this property expires in December 2005 with an annual rent of $17,550. The
other facility, located in Los Alcarrizos, contains approximately 34,000 square
feet. It includes approximately 1,800 square feet of office space and
approximately 10,000 square feet of warehouse space. This facility performs the
bending, chroming and wiring of antenna loops used in the Company's Quicksilver
sensor products. This facility also performs certain injection molding
production used in the assembly of the Company's reusable security targets. The
lease for the Los Alcarrizos property expires in December 2001 with an annual
rent of $30,000. The leases for both locations have been prepaid for their
entire terms.

Alarmex leases approximately 38,000 square feet of office and warehouse
space outside Minneapolis, Minnesota. This lease expires in 2005 with an annual
rent of approximately $183,000.

The Company's foreign subsidiaries maintain various sales and distribution
locations in Australia, Argentina, Belgium, Canada, France, Germany, Mexico, the
Netherlands, Sweden and United Kingdom. The locations have an average of 3,600
square feet of office space and an average of 1,800 square feet of warehouse
space. The lease terms of these foreign subsidiaries range from one to five
years with an average lease payment of $34,200 in 1995.

<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:

Officer
Name Age Since Positions with the Company
- ---- --- ----- --------------------------

<S> <C> <C> <C>
Kevin P. Dowd.............. 47 1988 President and Chief Executive Officer

Steven G. Selfridge........ 40 1988 Executive Vice President

Luis A. Aguilera........... 47 1982 Senior Vice President - Manufacturing

Mitchell T. Codkind........ 36 1992 Vice President - Corporate Controller and Chief Accounting Officer

Muns A. Farestad........... 47 1990 Vice President - Research and Development

William J. Reilly, Jr...... 47 1989 Senior Vice President

Michael E. Smith........... 40 1990 Senior Vice President

Neil D. Austin............. 49 1989 Vice President - General Counsel and Secretary

Lukas A. Geiges............ 57 1995 Senior Vice President - International Development
of Checkpoint Systems International B.V.

Jeffrey A. Reinhold........ 38 1995 Vice President - Chief Financial Officer and
Treasurer

David K. Shoemaker......... 39 1995 Vice President - Business Development

Nicholas Martino........... 40 1996 Vice President - Marketing

Dennis O'Malley............ 41 1996 Vice President - Worldwide Customer Service
</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. Selfridge has been Executive Vice President since January 1996. He was
Senior Vice President - Operations and Chief Financial Officer and Treasurer
from August 1993 to January 1996. 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.

<PAGE>

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. Codkind has been a Vice President since April 1995 and 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 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.

Mr. Smith has been Senior Vice President 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
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 and Chairman of the Board of Directors and
President of Actron AG from 1988 to 1993.

Mr. Reinhold has been Chief Financial Officer since January 1996 and has
been Vice President and Treasurer of the Company since April 1995. Prior to
joining the Company, Mr. Reinhold spent thirteen years at First Fidelity Bank,
N.A. where he held a variety of management positions in various lending
departments and loan workout. Mr. Reinhold was Senior Vice President and
Division Manager - Middle Market Lending from 1994 to March 1995.

Mr. Shoemaker has been Vice President - Business Development since August
1995 and has been employed by the Company in various sales, marketing and
development positions since 1988.

Mr. Martino has been Vice President - Marketing since January 1996. Prior
to joining the Company, Mr. Martino was Vice President - North American Sales
with Metrologic Instruments, Inc. from 1992 to 1995.

Mr. O'Malley has been Vice President - Worldwide Customer Service since
January 1996. Mr. O'Malley was Director of Customer Service from September
1993 to January 1996, and Manager of Credit and Collections from November
1991 to September 1993.

<PAGE>

DESCRIPTION OF THE DEBENTURES

General

On October 24, 1995, the Company issued and sold $47,250,000 (aggregate
principal amount) of the Debentures to "qualified institutional buyers" (as
defined in Rule 144A under the Securities Act) ("QIBs") and other "accredited
investors" (as defined in Rule 501(a) of Regulation D under the Securities Act)
("Accredited Investors") in a private placement. The Debentures are issued and
outstanding under an Indenture dated as of October 24, 1995 (the "Indenture"),
between the Company and Chemical Bank, as Trustee (the "Trustee"). Neither the
Trustee nor any of its affiliates is affiliated with or has any material
relationship with the Company or any of the Company's affiliates. The terms of
the Debentures and the Indenture are discussed in detail herein. The Indenture
is included as an exhibit to the Registration Statement of which this Prospectus
is a part. The following description of the Debentures and the Indenture is
qualified in its entirety by reference to the Indenture. Capitalized terms used
herein without definition have the meaning ascribed to them in the Indenture
and/or in "DESCRIPTION OF THE DEBENTURES - Certain Definitions" below.

Interest and Maturity

The Debentures bear interest on the principal amount outstanding from time
to time at the rate of 5.25% per annum. Interest on the Debentures began to
accrue on October 24, 1995, and is payable semi-annually on each May 1 and
November 1, commencing on May 1, 1996, until maturity or earlier redemption or
conversion, to the registered holder (each a "Holder" and collectively the
"Holders") of the Debentures at the close of business on the record date (April
15 or October 15) next preceding the interest payment date. Subject to earlier
redemption or conversion, the Debentures will mature on November 1, 2005.

Subordination

The Debentures are subordinated in right of payment to all existing and
future Senior Indebtedness of the Company and will rank pari passu in all
respects with other unsecured subordinated indebtedness of the Company. At
December 31, 1995, the Company's Senior Indebtedness was approximately $40.0
million. The rights of Holders is subordinated by operation of law to all
existing and future indebtedness of the Company's Subsidiaries, which as of
December 31, 1995, was approximately $10 million of trade payables and accrued
liabilities. The Indenture will not restrict the incurrence of Senior
Indebtedness or other indebtedness by the Company or its Subsidiaries.

The Indenture provides that no payment may be made by the Company on account
of the principal of, premium, if any, interest on, or Additional Amounts with
respect to, the Debentures, or to acquire any of the Debentures (including
repurchases of Debentures at the option of the Holder) for cash or property
(other than Junior Securities), or on account of the redemption provisions of
the Debentures, (i) upon the maturity of any Senior Indebtedness of the Company
by lapse of time, acceleration (unless waived) or otherwise, unless and until
all principal of, premium, if any, and interest on such Senior Indebtedness and
all other Obligations in respect thereof are first paid in full (or such payment
is duly provided for), or (ii) in the event of default in the payment of any
principal of, premium, if any, interest on or any other Obligation in respect of
any Senior Indebtedness of the Company when it becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration or otherwise (a
"Payment Default"), unless and until such Payment Default has been cured or
waived or otherwise has ceased to exist.

Upon (i) the happening of an event of default (other than a Payment Default)
that permits the holders of Designated Senior Indebtedness or their
representative immediately to accelerate its maturity and (ii) written notice of
such event of default given to the Company and the Trustee by the holders of
such Designated Senior Indebtedness or their representative (a "Payment
Notice"), then, unless and until such event of default has been

<PAGE>

cured or waived or otherwise has ceased to exist, no payment (by setoff or
otherwise) may be made by or on behalf of the Company on account of the
principal of, premium, if any, interest on, or Additional Amounts with respect
to, the Debentures, or to acquire or repurchase any of the Debentures for cash
or property, or on account of the redemption provisions of the Debentures, in
any such case other than payments made with Junior Securities of the Company.
Notwithstanding the foregoing, unless (i) the Designated Senior Indebtedness in
respect of which such event of default exists has been declared due and payable
in its entirety within 179 days after the Payment Notice is delivered as set
forth above (the "Payment Blockage Period"), and (ii) such declaration has not
been rescinded or waived, at the end of the Payment Blockage Period, the Company
shall be required to pay all sums not paid to the Holders of the Debentures
during the Payment Blockage Period due to the foregoing prohibitions and to
resume all other payments as and when due on the Debentures. Any number of
Payment Notices may be given; provided, however, that (i) not more than one
Payment Notice shall be given within a period of any 360 consecutive days, and
(ii) no default that existed upon the date of such Payment Notice or the
commencement of such Payment Blockage Period (whether or not such event of
default is on the same issue of Designated Senior Indebtedness) shall be made
the basis for the commencement of any other Payment Blockage Period.

In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company (other than Junior Securities) shall be
received by the Trustee or the Holders at a time when such payment or
distribution is prohibited by the foregoing provisions, such payment or
distribution shall be held in trust for the benefit of the holders of Senior
Indebtedness of the Company, and shall be paid or delivered by the Trustee or
such Holders, as the case may be, to the holders of the Senior Indebtedness of
the Company remaining unpaid or unprovided for or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing any of such Senior Indebtedness of the Company
may have been issued, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness of the Company held or represented
by each, for application to the payment of all Senior Indebtedness of the
Company remaining unpaid, to the extent necessary to pay or to provide for the
payment of all such Senior Indebtedness in full after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.

Upon any distribution of assets of the Company upon any dissolution, winding
up, total or partial liquidation or reorganization of the Company, whether
voluntary or involuntary, in bankruptcy, insolvency, receivership or a similar
proceeding or upon assignment for the benefit of creditors or any marshalling of
assets or liabilities, (i) the holders of all Senior Indebtedness of the Company
will first be entitled to receive payment in full (or have such payment duly
provided for) before the Holders are entitled to receive any payment on account
of the principal of, premium, if any, interest on, or Additional Amounts with
respect to, the Debentures (other than Junior Securities) and (ii) any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities (other than Junior Securities) to which the Holders
or the Trustee on behalf of the Holders would be entitled (by setoff or
otherwise), except for the subordination provisions contained in the Indenture,
will be paid by the liquidating trustee or agent or other person making such a
payment or distribution directly to the holders of Senior Indebtedness of the
Company or their representative to the extent necessary to make payment in full
of all such Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.

No provision contained in the Indenture or the Debentures will affect the
obligation of the Company, which is absolute and unconditional, to pay, when
due, principal of, premium, if any, interest on, and Additional Amounts with
respect to, the Debentures. The subordination provisions of the Indenture and
the Debentures will not prevent the occurrence of any Default or Event of
Default under the Indenture or limit the rights of the Trustee or any Holder,
subject to the two preceding previous paragraphs, to pursue any other rights or
remedies with respect to the Debentures.

<PAGE>

As a result of these subordination provisions, in the event of the
liquidation, bankruptcy, reorganization, insolvency, receivership or similar
proceeding or an assignment for the benefit of the creditors of the Company or
any of its Subsidiaries or a marshalling of assets or liabilities of the Company
and its Subsidiaries, Holders of the Debentures may receive ratably less than
other creditors.

The Debentures are obligations exclusively of the Company and not of its
Subsidiaries. Because a significant portion of the operations of the Company are
currently conducted through its Subsidiaries, the cash flow and the consequent
ability to service debt of the Company, including the Debentures, are dependent,
in part, upon the ability of its Subsidiaries to make cash distributions to the
Company. The Subsidiaries are separate and distinct legal entities and have no
obligation, contingent or otherwise, to pay any amounts due pursuant to the
Debentures or to make any funds available therefor, whether by dividends, loans
or other payments. In addition, the payment of dividends and the making of loans
and advances to the Company by its Subsidiaries may be subject to statutory or
contractual restrictions, are contingent upon the earnings of those Subsidiaries
and are subject to various business considerations.

The Debentures are structurally subordinated in right of payment to all
indebtedness and other liabilities, including current liabilities and
commitments under leases, if any, of the Company's Subsidiaries. Any right of
the Company to receive assets of any of its Subsidiaries upon liquidation or
reorganization of the Subsidiary (and the consequent right of the holders of the
Debentures to participate in those assets) will be effectively subordinated to
the claims of that Subsidiary's creditors, except to the extent that the Company
is itself recognized as a creditor of such Subsidiary, in which case the claims
of the Company would still be subject to any security interests in the assets of
such Subsidiary and subordinated to any indebtedness of such Subsidiary senior
to that held by the Company.

Delivery and Form of Debentures

The Debentures that were sold to QIBs are represented by a single global
Debenture (the "Rule 144A Global Security"), which was deposited on the Closing
Date with, or on behalf of, the Depository and registered in the name of Cede &
Co., as nominee of the Depository (such nominee being referred to herein as the
"Rule 144A Global Security Holder"). The Debentures that were sold to Accredited
Investors (the "Accredited Investor Debentures") are in fully registered form.
The Rule 144A Global Security and the Accredited Investor Debentures were
delivered for the accounts of the purchasers thereof on the Closing Date. The
Debentures are eligible for trading on the Private Offerings, Resale and Trading
through Automatic Linkages ("PORTAL") System of the National Association of
Securities Dealers, Inc.

The Depository is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depository's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depository's
Participants include securities brokers and dealers, banks and trust companies,
clearing corporations and certain other organizations. Access to the
Depository's system is also available to other entities such as banks, brokers,
dealers and trust companies (collectively, the "Indirect Participants" or the
"Depository's Indirect Participants") that clear through or maintain a custodial
relationship with a Participant, either directly or indirectly. Persons who are
not Participants may beneficially own securities held by or on behalf of the
Depository only through the Depository's Participants or the Depository's
Indirect Participants.

So long as the Rule 144A Global Security Holder is the registered owner of
any Debentures, the Rule 144A Global Security Holder will be considered the sole
Holder under the Indenture of any Debentures evidenced by the Rule 144A Global
Security. Beneficial owners of Debentures evidenced by the Rule 144A Global
Security will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee. Neither the Company nor
the

<PAGE>

Trustee will have any responsibility or liability for any aspect of the records
of the Depository or for maintaining, supervising or reviewing any records of
the Depository relating to the Debentures.

Payments in respect of the principal of, premium, if any, interest on, and
Additional Amounts with respect to, any Debentures registered in the name of the
Rule 144A Global Security Holder on the applicable record date will be payable
by the Trustee to or at the direction of the Rule 144A Global Security Holder in
its capacity as the registered holder under the Indenture. Under the terms of
the Indenture, the Company and the Trustee may treat the persons in whose names
the Debentures, including the Rule 144A Global Security, are registered as the
owners thereof for the purpose of receiving such payments. Consequently, neither
the Company nor the Trustee has or will have any responsibility or liability for
the payment of such amounts to beneficial owners of Debentures. The Company
believes, however, that it is currently the policy of the Depository immediately
to credit the accounts of the relevant Participants with such payments, in
amounts proportionate to their respective holdings of beneficial interests in
the relevant security as shown on the records of the Depository. Payments by the
Depository's Participants and the Depository's Indirect Participants to the
beneficial owners of Debentures will be governed by standing instructions and
customary practice and will be the responsibility of the Depository's
Participants or the Depository's Indirect Participants.

Exchange and Transfer

At the option of the Holder and subject to the terms of the Debentures and
of the Indenture, Debentures will be exchangeable for an equal aggregate
principal amount of Debentures of different authorized denominations, in each
case without service charge (other than the cost of delivery) and upon payment
of any taxes and other governmental charges. Debentures shall be registered as
provided in the Indenture. The Holder of a Debenture will be treated by the
Company, the Trustee and their respective agents for all purposes as the owner
of such Debenture.

The transfer of Debentures may be registered, and Debentures may be
presented in exchange for other Debentures of different authorized
denominations, at the office of the Trustee in New York City, without service
charge (other than the cost of delivery) and upon payment of any taxes or other
governmental charges.

In the event of a redemption in part, the Company will not be required (i)
to register the transfer of Debentures for a period of 15 days immediately
preceding the date notice is given identifying the serial numbers of the
Debentures called for such redemption; or (ii) to register the transfer or
exchange of any such Debenture, or portion thereof, called for redemption.

Subject to certain conditions, any person having a beneficial interest in
the Rule 144A Global Security may, upon request to the Trustee, exchange such
beneficial interest for Debentures in the form of certificated Debentures. Upon
any such issuance, the Trustee is required to register such certificated
Debentures in the name of, and cause the same to be delivered to, such person or
persons (or the nominee of any thereof). If (i) the Company notifies the Trustee
in writing that the Depository is no longer willing or able to act as a
depository and the Company is unable to locate a qualified successor within 90
days or (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of Debentures in the form of certificated
Debentures under the Indenture, then, upon surrender by the Rule 144A Global
Security Holder of the Rule 144A Global Security, Debentures in certificated
form will be issued to each person that the Rule 144A Global Security Holder and
the Depository identify as being the beneficial owner of the related Debentures.

Neither the Company nor the Trustee will be liable for any delay by the Rule
144A Global Security Holder or the Depository in identifying the beneficial
owners of Debentures, and the Company and the Trustee may conclusively rely on,
and will be protected in relying on, instructions from the Rule 144A Global
Security Holder or the Depository for all purposes.

<PAGE>

Conversion Rights

The Debentures are convertible into shares of common stock of the Company,
$.10 par value per share (the "Common Stock"), at the conversion price of
$18.375 per share (after giving effect to the February 1996 Stock Dividend), at
any time on and after the Exchange Date and prior to redemption or maturity. The
right to convert a Debenture called for redemption or delivered for repurchase
will terminate at the close of business on the fifth day next preceding the
redemption date for such Debenture (or if such date is not a Business Day, on
the next succeeding Business Day).

The right of conversion attaching to any Debenture may be exercised by the
Holder by delivering the Debenture at the specified office of a conversion agent
accompanied by a duly signed and completed notice of conversion. The conversion
date shall be the date on which the Debenture and the duly signed and completed
notice of conversion shall have been so delivered. A Holder delivering a
Debenture for conversion will not be required to pay any taxes or duties payable
in respect of the issuance or delivery of Common Stock on conversion but will be
required to pay any tax or duty which may be payable in respect of any transfer
involved in the issuance or delivery of the Common Stock in a name other than
that of the Holder of the Debenture. Certificates representing shares of Common
Stock will not be issued or delivered unless all taxes and duties, if any,
payable by the Holder have been paid. Such certificates will be delivered to the
address specified by the Holder in its completed notice of conversion.

In the case of any Debenture that has been converted after any Interest
Record Date, but on or before the next Interest Payment Date, interest, the
stated due date of which is on such Interest Payment Date, shall be payable on
such Interest Payment Date notwithstanding such conversion, and such interest
shall be paid to the Holder of such Debenture who is a Holder on such Interest
Record Date. Any Debenture so converted must be accompanied by payment of an
amount equal to the interest payable on such Interest Payment Date on the
principal amount of Debentures being surrendered for conversion.

The conversion price will be subject to adjustment in certain events,
including (a) dividends (and other distributions) payable in Common Stock on any
class of capital stock of the Company, (b) the issuance to all holders of Common
Stock of rights, options or warrants entitling them to subscribe for or purchase
Common Stock at less than the then current market price (as determined in
accordance with the Debentures) unless holders of Debentures are entitled to
receive the same upon conversion, (c) subdivisions, combinations and
reclassifications of Common Stock and (d) distributions to all holders of Common
Stock of evidences of indebtedness of the Company or assets (including
securities, but excluding those rights, options, warrants, dividends and
distributions referred to above, dividends and distributions paid in cash out of
the retained earnings of the Company and regular quarterly dividends consistent
with past practice). In addition to the foregoing adjustments, the Company will
be permitted to make such downward adjustments in the conversion price as it
considers to be advisable in order that any event treated for United States
Federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the holders of the Common Stock. Adjustments in the conversion price
of less than $0.25 will not be required, but any adjustment that would otherwise
be required to be made will be taken into account in the computation of any
subsequent adjustment. Fractional shares of Common Stock are not to be issued or
delivered upon conversion, but, in lieu thereof, a cash adjustment will be paid
based upon the then current market price of Common Stock. Subject to the
foregoing, no payments or adjustments will be made upon conversion on account of
accrued interest on the Debentures or for any dividends or distributions on any
shares of Common Stock delivered upon such conversion. Notice of any adjustment
of the conversion price will be given in the manner set forth herein under
"DESCRIPTION OF THE DEBENTURES - Notices."

If at any time the Company makes a distribution of property to its
stockholders that would be taxable to such stockholders as a dividend for United
States Federal income tax purposes (e.g., distribution of evidences of
indebtedness or assets of the Company, but generally not stock dividends or
rights to subscribe for Common Stock) and, pursuant to the antidilution
provisions of the Debentures, the conversion price of the Debentures is

<PAGE>

reduced, such reduction may be deemed to be the payment of a taxable dividend to
Holders of Debentures. Such a deemed dividend might be subject to a 30% or then
applicable United States withholding tax unless the holder is entitled to a
reduction of the tax under a tax treaty and provides appropriate evidence
thereof to the Company and the dividend disbursing agent.

In the event that the Company should merge with another company, become a
party to a consolidation or sell or transfer all or substantially all of its
assets to another company, each Debenture then outstanding would, without the
consent of any Holder, become convertible only into the kind and amount of
securities, cash and other property receivable upon the merger, consolidation or
transfer by a Holder of the number of shares of Common Stock into which such
Debenture might have been converted immediately prior to such merger,
consolidation or transfer.

Redemption

Unless previously redeemed, converted or purchased and canceled by the
Company, the Debentures will mature on November 1, 2005 and shall be redeemed at
their principal amount.

Optional Redemption

The Debentures may be redeemed, at the option of the Company, in whole or in
part, at any time on and after November 10, 1998, upon notice as described in
"DESCRIPTION OF THE DEBENTURES - Notices" below, at a redemption price equal to
103% of their principal amount if redeemed during the period commencing November
10, 1998 up to and including October 31, 1999, 102% of their principal amount if
redeemed during the 12-month period commencing November 1, 1999, 101% of their
principal amount if redeemed during the 12-month period commencing November 1,
2000, and 100% of their principal amount if redeemed on or after November 1,
2001, in each case together with accrued and unpaid interest to the date fixed
for redemption. In the event of a partial redemption, the Debentures to be
redeemed will be selected by the Trustee not more than 75 days before the date
fixed for redemption, by such method as the Trustee shall deem fair and
appropriate.

Debentures may be redeemed, as a whole but not in part, upon notice as
described in "DESCRIPTION OF THE DEBENTURES - Notices" below, at the option of
the Company at any time, if the Company shall determine that as a result of any
change in or amendment to the laws or any regulations or rulings of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, or any amendment to, or change in, an official application
or interpretation of such laws, regulations or rulings, which amendment or
change is announced or becomes effective on or after October 17, 1995, the
Company has or will become obligated to pay Additional Amounts on the
Debentures, as described below under "DESCRIPTION OF THE DEBENTURES - Payment of
Additional Amounts," and such obligation cannot be avoided by the Company taking
reasonable measures available to it; provided that no such notice of redemption
shall be given earlier than 90 days prior to the earliest date on which the
Company would be obligated to pay such Additional Amounts were a payment in
respect of the Debentures then due; and provided further, that at the time such
notice is given, such obligation to pay such Additional Amounts remains in
effect. In case of any such redemption, the redemption price will be 100% of the
principal amount of the Debentures, together in each case with accrued and
unpaid interest to the date fixed for redemption. The Company is required to
deliver to the Trustee a certificate stating that the Company is entitled to
effect such redemption and that the conditions precedent to the right of the
Company to redeem the Debentures have occurred and an opinion of counsel stating
that the legal conditions precedent to the right of the Company to effect such
redemption have occurred.

Mandatory Redemption

Upon a Change of Control (as defined in the Indenture and herinafter
described) with respect to the Company, then each Holder shall have the right,
at such Holder's option, to require the Company to purchase such Holder's
Debentures, in whole but not in part, at a redemption price equal to 100% of the
principal amount, together with accrued and unpaid interest to the date fixed
for redemption.

<PAGE>

Notices of Redemption

Notice of intention to redeem Debentures will be given as described under
"DESCRIPTION OF THE DEBENTURES - Notices" below. In the case of redemption of
all Debentures, notice will be given once not more than 60 nor less than 30 days
prior to the date fixed for redemption. In the case of a partial redemption,
notice will be given twice, the first such notice to be given not more than 60
nor less than 45 days prior to the date fixed for redemption and the second such
notice to be given not more than 45 nor less than 30 days prior to the date
fixed for redemption.

Notices of redemption will specify the date fixed for redemption, the
applicable redemption price, the date the conversion privilege expires and, in
the case of a partial redemption, the aggregate principal amount of Debentures
to be redeemed and the aggregate principal amount of the Debentures which will
be outstanding after such partial redemption. In addition, in the case of a
partial redemption, the first notice will specify the last date on which
exchanges or transfers of Debentures may be made pursuant to the provisions of
"DESCRIPTION OF THE DEBENTURES - Exchange and Transfer" above and the second
notice will specify the serial numbers of the Debentures and the portions
thereof called for redemption.

As used herein, "United States" means the United States of America
(including the states and the District of Columbia), its territories, its
possessions and other areas subject to its jurisdiction. The term "United States
Alien" means any person who, for United States Federal income tax purposes, is
(i) a foreign corporation, (ii) a foreign partnership one or more of the members
of which are, for United States federal income tax purposes, foreign
corporations, non-resident alien individuals or a nonresident alien fiduciaries
of a foreign estate or trust, (iii) a non-resident alien individual or (iv) a
nonresident alien fiduciary of a foreign estate or trust.

In addition, the Company may at any time and from time to time repurchase
the Debentures in the open market or in private transactions at prices it
considers attractive. Debentures repurchased by the Company will be canceled.

Change of Control

Each Holder of a Debenture has the right, at such Holder's option, to cause
the Company to purchase such Debenture, in whole but not in part, for a cash
amount equal to 100% of the principal amount, together with accrued and unpaid
interest to the repurchase date, if a Change of Control occurs or has occurred.
Notice with respect to the occurrence of a Change of Control will be given as
described under "DESCRIPTION OF THE DEBENTURES - Notices" below and not later
than 30 days after the occurrence of such Change of Control. The date fixed for
such purchase will be a date not less than 30 nor more than 60 days after notice
of the occurrence of a Change of Control is given (except as otherwise required
by law). To be purchased, a Debenture must be received with a duly executed
written notice, substantially in the form provided on the reverse side of such
Debenture, at the office of a paying agent not later than the fifth day prior to
the date fixed for such purchase. All Debentures purchased by the Company will
be canceled. Holders who have tendered a notice of purchase will be entitled to
revoke their election by delivering a written notice of such revocation to a
paying agent on or prior to the date fixed for such purchase. In addition,
Holders of Debentures will retain the right to require such Debentures to be
converted into Common Stock (or other securities, property or cash, payable in
lieu thereof by reference to the adjustment price as provided under the
adjustment provision, see "DESCRIPTION OF THE DEBENTURES - Conversion Rights")
prior to the purchase date, so long as notice to that effect, including the
Holder's nontransferable receipt for the Debentures from a paying agent, is
delivered to a paying agent on or prior to the close of business on the fifth
day next preceding the applicable Redemption Date.

The Indenture provides that a "Change of Control" occurs (i) upon any merger
or consolidation of the Company with or into any person or any sale, transfer or
other conveyance, whether direct or indirect, of all or substantially all of the
assets of the Company, on a consolidated basis, in one transaction or a series
of related transactions, if, immediately after giving effect to such
transaction, any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and

<PAGE>

14(d) of the Exchange Act, whether or not applicable) is or becomes the
"beneficial owner," directly or indirectly, of more than 50% of the total voting
power in the aggregate normally entitled to vote in the election of directors,
managers, or trustees, as applicable, of the transferee or surviving entity,
(ii) when any "person" or "group" (as such terms are used for purposes of
Sections 13(d) and 14(d) of the Exchange Act, whether or not applicable) is or
becomes the "beneficial owner," directly or indirectly, of more than 50% of the
total voting power in the aggregate normally entitled to vote in the election of
directors of the Company, or (iii) when, during any period of 12 consecutive
months after the Closing Date, individuals who at the beginning of any such
12-month period constituted the Board of Directors of the Company (together with
any new directors whose election by such Board or whose nomination for election
by the shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved), cease for any reason to constitute a majority of the Board of
Directors of the Company then in office.

The phrase "all or substantially all" of the assets of the Company is likely
to be interpreted by reference to applicable state law at the relevant time, and
will be dependent on the facts and circumstances existing at such time. As a
result, there may be a degree of uncertainty in ascertaining whether a sale or
transfer of "all or substantially all" of the assets of the Company has
occurred. For purposes of this definition, (i) the terms "person" and "group"
shall have the meaning used for purposes of Rules 13d-3 and 13d-5 of the
Exchange Act as in effect on the Closing Date, whether or not applicable; and
(ii) the term "beneficial owner" shall have the meaning used in Rules 13d-3 and
13d-5 under the Exchange Act as in effect on the Closing Date, whether or not
applicable, except that a "person" shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time or upon
the occurrence of certain events.

The Change of Control provisions described above may make more difficult or
discourage a takeover of the Company, and, thus, the removal of incumbent
management. The Change of Control provisions will not prevent a leveraged buyout
led by Company management, a recapitalization of the Company or change in a
majority of the members of the Board of Directors which is approved by the
then-present Board of Directors and may not afford the Holders of Debentures
protection in the event of a highly leveraged transaction, reorganization,
restructuring, merger, spin-off or similar transaction that may adversely affect
such Holders, if such transaction does not constitute a Change of Control, as
set forth above.

The Company will comply with the provisions of Rule 13e-4 and any other
tender offer rules under the Exchange Act which may then be applicable and will
file a Schedule 13E-4 or any other schedule required thereunder in connection
with any offer by the Company to purchase Debentures at the option of Holders
upon a Change of Control. The Change of Control purchase feature is not,
however, the result of management's knowledge of any specific efforts to
accumulate shares of Common Stock or to obtain control of the Company by means
of a merger, tender offer, solicitation of proxies or consents or otherwise, or
part of a plan to implement a series of anti-takeover measures.

The Company, could, in the future, enter into certain transactions,
including certain recapitalizations of the Company, that would not constitute a
Change of Control under the Debentures, but that would increase the amount of
Senior Indebtedness (or any other indebtedness) outstanding at such time. There
are no restrictions in the Debentures or the Indenture on the creation of
additional Senior Indebtedness (or any other indebtedness), and, under certain
circumstances, the incurrence of significant amounts of additional indebtedness
could have an adverse effect on the Company's ability to service its
indebtedness, including the Debentures. If such a Change of Control were to
occur, there can be no assurance that the Company would have sufficient funds at
the time of such event to pay the Change of Control purchase price for all
Debentures tendered by the Holders thereof. A default by the Company on its
obligation to pay the Change of Control purchase price could, pursuant to

<PAGE>

cross-default provisions, result in acceleration of the payment of other
indebtedness of the Company outstanding at that time.

Certain of the Company's existing and future agreements relating to their
indebtedness could prohibit the purchase by the Company of the Debentures
pursuant to the exercise by a Holder of the foregoing option, depending on the
financial circumstances of the Company at the time any such purchase may occur,
because such purchase could cause a breach of certain covenants contained in
such agreements. Such a breach may constitute an event of default under such
indebtedness as a result of which any repurchase could, absent a waiver, be
blocked by the subordination provision of the Debentures. See "DESCRIPTION OF
THE DEBENTURES - Subordination" above. Failure of the Company to repurchase the
Debentures when required would result in an Event of Default with respect to the
Debentures whether or not such repurchase is permitted by the subordination
provisions.

Payments, Paying Agents and Conversion Agents

The principal of and premium, if any, and interest on Debentures will be
payable in United States dollars. Payments of such principal and premium, if
any, will be made against surrender of such Debentures at the corporate trust
office of the Trustee in New York City by United States dollar check drawn on,
or wire transfer to a United States dollar account maintained by the Holder
with, a bank located in New York City. Payments of any installment of interest
on Debentures will be made by a United States dollar check drawn on a bank in
New York City mailed to the Holder at such Holder's registered address or (if
arrangements satisfactory to the Company and the Trustee are made) by wire
transfer to a dollar account maintained by the Holder with a bank in New York
City. Payment of such interest on any Interest Payment Date will be made to the
person in whose name such Debenture is registered at the close of business on
the Interest Record Date prior to the relevant Interest Payment Date. Accrued
interest payable on any Debenture that is redeemed will be payable against
surrender of such Debenture in the manner described above with respect to
payments of principal on Debentures, except Debentures that are redeemed on a
date after the close of business on the Interest Record Date immediately
preceding such Interest Payment Date and on or before the Interest Payment Date,
on which interest will be paid to the Holder of record on the Interest Record
Date.

The Debentures may be surrendered for conversion or exchange at the
corporate trust office of the Trustee in New York City.

The Company has initially appointed the Trustee as paying agent and
conversion agent. This appointment may be terminated at any time and additional
or other paying and conversion agents may be appointed, provided that until the
Debentures have been delivered for cancellation, or monies sufficient to pay the
principal of and premium, if any, and interest on the Debentures have been made
available for payment and either paid or returned to the Company as provided in
the Indenture, a paying, conversion and transfer agent will be maintained in New
York City for the payment of the principal of and premium, if any, and interest
on Debentures only and for the surrender of Debentures for conversion. Notice of
any such termination or appointment and of any change in the office through
which any paying, conversion, or transfer agent will act will be given in
accordance with "DESCRIPTION OF THE DEBENTURES - Notices" below.

All monies paid by the Company to a paying agent for the payment of
principal of and premium, if any, or interest on any Debenture that remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will be repaid to the Company, and the Holder
of such Debenture will thereafter look only to the Company for payment thereof.

Payment of Additional Amounts

The Company will pay to the Holder of any Debenture who is a United States
Alien such Additional Amounts as may be necessary in order that every net
payment of the principal of, premium, if any, and interest on such Debenture,
and any cash payments made in lieu of issuing shares of Common Stock upon
conversion of a Debenture, after withholding for or on account of any present or
future tax, assessment or governmental charge imposed upon or as a result of
such payment by the United States or any political subdivision or taxing
authority thereof or therein, will not be less than the amount provided for in
such Debenture to be then due and payable; provided, however, that the foregoing
obligations to pay Additional Amounts shall not apply to any one or more of the
following:

<PAGE>

(a) any tax, assessment or other governmental charge which would not
have been so imposed but for (i) the existence of any present or former
connection between such Holder (or between a fiduciary, settlor,
beneficiary, member or stockholder of, or a person holding a power over,
such Holder, if such Holder is an estate, trust, partnership or corporation)
and the United States, including, without limitation, such Holder (or such
fiduciary, settlor, beneficiary, member, stockholder or person holding a
power) being or having been a citizen or resident or treated as a resident
thereof or being or having been engaged in a trade or business therein or
being or having been present therein or having or having had a permanent
establishment therein, (ii) such Holder's present or former status as a
personal holding company, foreign personal holding company, passive foreign
investment company, foreign private foundation or other foreign tax-exempt
entity, or controlled foreign corporation for United States tax purposes or
a corporation which accumulates earnings to avoid United States Federal
income tax, or (iii) such Holder's status as a bank extending credit
pursuant to a loan agreement entered into in the ordinary course of
business;

(b) any tax, assessment or other governmental charge which would not
have been so imposed but for the presentation by the Holder of such
Debenture for payment on a date more than 10 days after the date on which
such payment became due and payable or on the date on which payment thereof
is duly provided, whichever occurs later;

(c) any estate, inheritance, gift, sales, transfer or personal or
intangible property tax or any similar tax, assessment or other governmental
charge;

(d) any tax, assessment or other governmental charge which would not
have been imposed but for the failure to comply with certification,
information, documentation or other reporting requirements concerning the
nationality, residence, identity or present or former connection with the
United States of the Holder or beneficial owner of such Debenture if such
compliance is required by statute, regulation or ruling of the United States
or any political subdivision or taxing authority thereof or therein as a
precondition to relief or exemption from such tax, assessment or other
governmental charge;

(e) any tax, assessment or other governmental charge which is payable
otherwise than by deduction or withholding from payments of principal of and
premium, if any, or interest on such Debenture;

(f) any tax, assessment or other governmental charge imposed on
interest received by a person holding, actually or constructively, 10
percent or more of the total combined voting power of all classes of stock
of the Company entitled to vote; or

(g) any tax, assessment or other governmental charge required to be
withheld by any paying agent from any payment of principal of, or premium,
if any, or interest on any Debenture or interest appertaining thereto if
such payment can be made without such withholding by any other paying agent;

nor will Additional Amounts be paid with respect to payment of the principal of,
premium, if any, or interest on any such Debenture (or cash in lieu of issuance
of shares of Common Stock upon conversion) to a person other than the sole
beneficial owner of such payment, or that is a partnership or a fiduciary to the
extent such beneficial owner, member of such partnership or beneficiary or
settlor with respect to such fiduciary would not have been entitled to the
Additional Amounts had such beneficial owner, member, beneficiary or settlor
been the Holder of such Debenture.

<PAGE>

Events of Default

The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on, or Additional Amounts with respect to,
the Debentures as and when due and payable and the continuance of any such
failure for 30 days, (ii) the failure by the Company to pay all or any part of
the principal of, or premium, if any, on the Debentures when and as the same
becomes due and payable at maturity, redemption, by acceleration or otherwise,
including, without limitation, default in the payment of the Redemption Price on
the Redemption Date, (iii) the failure of the Company to perform any conversion
of Debentures required under the Indenture and the continuance of any such
failure for 30 days, (iv) the failure by the Company to observe or perform any
other covenant or agreement contained in the Debentures or the Indenture and,
subject to certain exceptions, the continuance of such failure for a period of
60 days after written notice is given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Debentures outstanding, (v) certain events of bankruptcy,
insolvency or reorganization in respect of the Company or any of its Significant
Subsidiaries, (vi) a default in the payment of principal, premium or interest
when due that extends beyond any stated period of grace applicable thereto or an
acceleration for any other reason of the maturity of any Indebtedness of the
Company or any of its Significant Subsidiaries with an aggregate principal
amount in excess of $10 million, and (vii) final judgments not covered by
insurance aggregating in excess of $2 million, at any one time tendered against
the Company or any of its Significant Subsidiaries and not satisfied, stayed,
bonded or discharged within 75 days. The Indenture provides that if a Default
occurs and is continuing, the Trustee must, within 90 days after the occurrence
of such default, give to the Holders notice of such default.

The Indenture provides that if an Event of Default occurs and is continuing
(other than an Event of Default specified in clause (v) above), then in every
such case, unless the principal of all of the Debentures shall have already
become due and payable, either the Trustee or the Holders of 25% in aggregate
principal amount of the Debentures then outstanding, by notice in writing to the
Company (and to the Trustee if given by Holders) (an "Acceleration Notice"), may
declare all principal and accrued interest thereon to be due and payable
immediately. If an Event of Default specified in clause (v) above occurs, all
principal and accrued interest thereon will be immediately due and payable on
all outstanding Debentures without any declaration or other act on the part of
the Trustee or the Holders. The Holders of no less than a majority in aggregate
principal amount of Debentures generally are authorized to rescind such
acceleration if all existing Events of Default, other than the non-payment of
the principal of, premium, if any, and interest on the Debentures that have
become due solely by such acceleration, have been cured or waived.

Prior to the declaration of acceleration of the maturity of the Debentures,
the Holders of a majority in aggregate principal amount of the Debentures at the
time outstanding may waive on behalf of all the Holders any default, except a
default in the payment of principal of or interest on any Debenture yet cured,
or a default with respect to any covenant or provision that cannot be modified
or amended without the consent of the Holder of each outstanding Debenture
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
of the Holders, unless such Holders have offered to the Trustee reasonable
security or indemnity. Subject to all provisions of the Indenture and applicable
law, the Holders of a majority in aggregate principal amount of the Debentures
at the time outstanding will have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee.

<PAGE>

Limitation on Merger, Sale or Consolidation

The Indenture provides that the Company may not, directly or indirectly,
consolidate with or merge with or into another person or sell, lease, convey or
transfer all or substantially all of its assets (computed on a consolidated
basis), whether in a single transaction or a series of related transactions, to
another Person or group of affiliated Persons, unless (i) either (a) in the case
of a merger or consolidation the Company is the surviving entity or (b) the
resulting, surviving or transferee entity is a corporation organized under the
laws of the United States, any state thereof or the District of Columbia and
expressly assumes by supplemental indenture all of the obligations of the
Company in connection with the Debentures and the Indenture; and (ii) no Default
or Event of Default shall exist or shall occur immediately after giving effect
on a pro forma basis to such transaction.

Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under the Indenture with the
same effect as if such successor corporation had been named therein as the
Company, and the Company will be released from its obligations under the
Indenture and the Debentures, except as to any obligations that arise from or as
a result of such transaction.

Amendments and Supplements

The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Debentures at the time
outstanding, the Company and the Trustee are permitted to amend or supplement
the Indenture or any supplemental indenture or modify the rights of the Holders;
provided, that no such modification may, without the consent of each Holder
affected thereby: (i) change the Stated Maturity of any Debenture or reduce the
principal amount thereof or the rate (or extend the time for payment) of
interest thereon or any premium payable upon the redemption thereof, or change
the place of payment where, or the coin or currency in which, any Debenture or
any premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment or the conversion of any Debenture
on or after the due date thereof (including, in the case of redemption, on or
after the redemption date), or reduce the redemption price, or alter the
redemption or Change of Control provisions in a manner adverse to the Holders,
or (ii) reduce the percentage in principal amount of the outstanding Debentures,
the consent of whose Holders is required for any such amendment, supplemental
indenture or waiver provided for in the Indenture, or (iii) adversely affect the
right of such Holder to convert Debentures, or (iv) modify any of the waiver
provisions, except to increase any required percentage or to provide that
certain other provisions of the Indenture cannot be modified or waived without
the consent of the Holder of each outstanding Debenture affected thereby.

Rule 144A Information Requirement

The Company has agreed to furnish to the Holders or beneficial holders of
the Debentures or the underlying Common Stock and prospective purchasers of the
Debentures or the underlying Common Stock designated by the Holders of the
Debentures or the underlying Common Stock, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act
until such time as such securities are no longer "restricted securities" within
the meaning of Rule 144 under the Securities Act.

<PAGE>

Reports

Whether or not the Company is subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act, the Company shall deliver to the
Trustee and to each Holder, within 15 days after it is or would have been
required to file such with the Securities and Exchange Commission (the "SEC"),
annual and quarterly consolidated financial statements substantially equivalent
to financial statements that would have been included in reports filed with the
SEC if the Company was subject to the requirements of Section 13 or 15(d) of the
Exchange Act, including, with respect to annual information only, a report
thereon by the Company's certified independent public accountants as such would
be required in such reports to the SEC and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations as such would be so required.

Notices

Notices to Holders of the Debentures will be given by publication in a
leading daily newspaper of general circulation in New York City, which
publication is expected to be The Wall Street Journal (Eastern Edition). In
addition, notices to Holders will be given by mail to the addresses of such
Holders as they appear in the register maintained by the Trustee on the
fifteenth day prior to such mailing. Such notices will be deemed to have been
given on the date of such publication or mailing.

Replacement of Debentures and Related Coupons

Debentures that become mutilated, destroyed, stolen or lost will be replaced
by the Company at the expense of the Holder upon delivery to the Trustee of the
Debentures or evidence of the loss, theft or destruction thereof satisfactory to
the Company and the Trustee. In the case of a lost, stolen or destroyed
Debenture an indemnity satisfactory to the Company and the Trustee may be
required at the expense of the Holder of such Debenture before a replacement
Debenture will be issued.

Governing Law

The Debentures and the Indenture will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to its
conflicts of law rules.

Certain Definitions

"Business Day" means, with respect to any act to be performed pursuant to
the Indenture or the terms of the Debentures, each Monday, Tuesday, Wednesday,
Thursday or Friday that is not a day on which banking institutions in the place
where such act is to occur are authorized or obligated by applicable law,
regulation or executive order to close.

"Capital Stock" means, with respect to any corporation, any and all shares,
interests, rights to purchase (other than convertible or exchangeable
indebtedness), warrants, options, participations or other equivalents of or
interests (however designated) in stock issued by that corporation.

"Designated Senior Indebtedness" means (i) the Indebtedness outstanding
under (x) the Second Amended and Restated Loan and Agency Agreement among First
Fidelity Bank, National Association, as Agent, the banks party thereto and the
Company (including but not limited to the Existing Term Indebtedness as defined
therein), (y) the Note Agreement dated as of March 1, 1994, and as amended as of
January 15, 1995, pursuant to which the Company issued its 8.27% Series A Senior
Notes due 2002 and (z) the Terms Agreement dated as of January 15, 1995,
pursuant to which the Company issued its 9.35% Series B Senior Notes due 2003
and (ii) any

<PAGE>

other Senior Indebtedness having a principal amount of at least $5.0 million
that is designated as "Designated Senior Indebtedness" by written notice from
the Company to the Trustee.

"Indebtedness" of any person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of any such person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of such person or only to a portion thereof), (ii) evidenced by bonds,
notes, debentures or similar instruments, (iii) representing the balance
deferred and unpaid of the purchase price of any property or services, except
such as would constitute trade payables to trade creditors in the ordinary
course of business that are not more than 90 days past their original due date,
(iv) evidenced by bankers' acceptances or similar instruments issued or accepted
by banks, (v) for the payment of money relating to a Capitalized Lease
Obligation, or (vi) evidenced by a letter of credit or a reimbursement
obligation of such person with respect to any letter of credit; (b) all net
obligations of such person under Interest Swap and Hedging Obligations; (c) all
liabilities of others of the kind described in the preceding clauses (a) or (b)
that such person has guaranteed or that is otherwise its legal liability and all
obligations to purchase, redeem or acquire any Capital Stock; and (d) any and
all deferrals, renewals, extensions, refinancings and refundings (whether direct
or indirect) of any liability of the kind described in any of the preceding
clauses (a), (b) or (c), or this clause (d), whether or not between or among the
same parties.

"Junior Securities" of any Person means any Qualified Capital Stock and any
Indebtedness of such Person that is (i) subordinated in right of payment to the
Debentures and has no scheduled installment of principal due, by redemption,
sinking fund payment or otherwise, on or prior to the Stated Maturity of the
Debentures and (ii) subordinated in right of payment to all Senior Indebtedness
at least to the same extent as the Debentures.

"Obligations" means any principal, premium, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Senior Indebtedness.

"Senior Indebtedness" of the Company means any Indebtedness of the Company,
whether outstanding on the date of the Indenture or thereafter created,
incurred, assumed, guaranteed or in effect guaranteed by the Company, unless the
instrument creating or evidencing such Indebtedness provides that such
Indebtedness is not senior or superior in right of payment to the Debentures or
to other Indebtedness which is pari passu with, or subordinated to, the
Debentures; provided that in no event shall Senior Indebtedness include (a)
Indebtedness of the Company owed or owing to any Subsidiary of the Company or
any officer, director or employee of the Company or any Subsidiary of the
Company, (b) Indebtedness to trade creditors, or (c) any liability for taxes
owed or owing by the Company.

"Stated Maturity" when used with respect to any Debenture, means November 1,
2005.

"Subsidiary," with respect to any person, means (i) a corporation a majority
of whose Capital Stock with voting power normally entitled to vote in the
election of directors is at the time, directly or indirectly, owned by such
person, by such person and one or more Subsidiaries of such person or by one or
more Subsidiaries of such person, (ii) a partnership in which such Person or a
subsidiary of such person is, at the time, a general partner, or (iii) any other
person (other than a corporation) in which such person, one or more Subsidiaries
of such person, or such person and one or more subsidiaries of such person,
directly or indirectly, at the date of determination thereof has at least
majority ownership interest.

<PAGE>

DESCRIPTION OF CAPITAL STOCK

Authorized Capital Stock

The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.10 per share, and 500,000 shares of Class A
Preferred Stock, without par value. At February 16, 1996, 30,050,764 shares of
Common Stock were issued and outstanding (after giving effect to the February
1996 Stock Dividend) and no shares of Preferred Stock were issued and
outstanding. In addition, at February 16, 1996, there were outstanding options
to purchase 3,472,542 (after giving effect to the February 1996 Stock Dividend)
shares of Common Stock held by certain of its directors, officers, employees and
consultants pursuant to the terms of various Company-sponsored stock option
plans and other agreements.

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 shareholders receive notice of the Annual Meeting of
Shareholders, which is held in April of each year, not less than 30 days prior
to such meeting. Such notice is accompanied by a proxy statement setting forth
the matters for consideration at such meeting and other information concerning
the Company.

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 "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

<PAGE>

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.

Pursuant to the Company's various stock option plans, the Company issued to
certain of its directors, officers, employees and consultants 598,000, 978,000,
397,000 and 1,974,848 options (after giving effect to the February 1996 Stock
Dividend) to purchase Common Stock in 1992, 1993, 1994 and 1995, respectively.
In February 1995, the Company issued 401,434 shares (after giving effect to the
February 1996 Stock Dividend) of Common Stock as consideration for the
acquisition of Alarmex, Inc. In April 1995, the Company issued approximately 6.2
million shares (after giving effect to the February 1996 Stock Dividend) of
Common Stock in an underwritten public offering.

There are no persons known to the Company to beneficially own more than ten
percent of the outstanding Common Stock.

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.

<PAGE>

SELLING SECURITY HOLDERS

The Debentures were issued by the Company on October 24, 1995, in a private
placement pursuant to Rule 144A and Regulation D under the Securities Act. The
following table sets forth, as of January 29, 1996, the name of each beneficial
owner of the Debentures identified to the Company and the principal amount of
the Debentures owned, and that may be sold, by each such beneficial owner as of
the date hereof, based upon information furnished to the Company:

Principal Amount Principal Amount of Percentage of
Name of Debentures Owned Debentures That May Be Sold Outstanding Debentures
- ---- ------------------- --------------------------- ----------------------

<S> <C> <C> <C>
Bank of NY 3,965,000 3,965,000 8.39%
Bankers Tr 700,000 700,000 1.48
Bear Stern 121,000 121,000 .25
Bankers/Natn 179,000 179,000 .38
DOS SAFE 20,000 20,000 .04
Brown Bros 1,950,000 1,950,000 4.12
Chase Mann 4,300,000 4,300,000 9.1
Chse Trust 500,000 500,000 1.05
Custdl Tr 4,350,000 4,350,000 9.2
Deut MG/CJ 100,000 100,000 .21
INV BK/MF 1,500,000 1,500,000 3.1
LHMPD (LBI) 1,250,000 1,250,000 2.6
MLPFS/DS 50,000 50,000 .1
Morgan Gty 6,000,000 6,000,000 12.70
RBC/DOMN 500,000 500,000 1.05
Republic NY 825,000 825,000 1.74
SSB Cust 6,350,000 6,350,000 13.43
UBS SEC 850,000 850,000 1.8
Wagner S 13,650,000 13,650,000 28.89
</TABLE>

Additional Selling Security Holders may be identified and other information
concerning Selling Security Holders may be set forth in Prospectus Supplements
from time to time.

Other than by ownership of the Debentures or Common Stock, none of the
Selling Security Holders has had any material relationship with the Company
within the past three years, except for Deutsche Morgan Grenfell/CJ Lawrence,
Inc., which has provided investment banking services to the Company from time to
time during the past year.

Because the Selling Security Holders may offer all or only some of the
Debentures that they now hold and/or shares of Common Stock issued upon
conversion thereof in the offering contemplated by this Prospectus and because
there are presently no agreements, arrangements or understandings concerning the
sale of any of the Debentures or shares of Common Stock issuable upon conversion
thereof, no estimate can be given about the principal amount of Debentures or
shares of Common Stock that will be held by the Selling Security Holders after
completion of this offering. See "PLAN OF DISTRIBUTION" herein.

<PAGE>

PLAN OF DISTRIBUTION

The Company will not receive any of the proceeds from this offering. The
Selling Security Holders may sell all or a portion of the Debentures and shares
of Common Stock issuable upon conversion thereof from time to time directly to
purchasers or through agents, dealers (who may act as principals for their own
account) or underwriters on terms to be determined at the times of such sales.
Any agent, dealer or underwriter through whom Debentures or shares of Common
Stock are sold may receive compensation in the form of underwriting discounts,
commissions or concessions from the Selling Security Holders and/or the
purchasers of the Debentures or shares of Common Stock for whom they act as
agent. To the extent required, the principal amount of the Debentures or the
number of shares of Common Stock to be sold, the offering price thereof, the
name of each Selling Security Holder and each agent, dealer and underwriter, if
any, and any applicable discounts or commissions concerning a particular
offering will be set forth in an accompanying Prospectus Supplement. The
aggregate proceeds to the Selling Security Holders from the Debentures and
shares of Common Stock offered by the Selling Security Holders hereby will be
the offering price of such Debentures and shares of Common Stock less applicable
commissions or discounts.

There is no assurance that the Selling Security Holders will sell any of the
Debentures or shares of Common Stock offered hereby.

In order to comply with the securities laws of certain States or other
jurisdictions, if applicable, the Debentures and shares of Common Stock will be
sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain States or other jurisdictions the Debentures
and shares of Common Stock may not be sold unless they have been registered or
qualified for sale under the securities laws of such jurisdictions or an
exemption from the registration and qualification requirements of such laws is
available and the conditions of such exemption are satisfied.

The Selling Security Holders and any broker-dealers, agents or underwriters
that participate with the Selling Security Holders in the distribution of the
Debentures or shares of Common Stock may be deemed to be "underwriters" within
the meaning of the Securities Act, in which case any commissions received by
such broker-dealers, agents or underwriters and any profit on the resale of the
Debentures or shares of Common Stock purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act.

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Debentures or shares of Common Stock offered
hereby may not simultaneously engage in market making activities for either the
Debentures or the Common Stock for a period of nine business days (in the case
of the Debentures) or two business days (in the case of the Common Stock) prior
to the commencement of such distribution. In addition, each Selling Security
Holder and any other person who participates in a distribution of the Debentures
or shares of Common Stock will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including Rules 10b-2,
10b-6 and 10b-7, which provisions may limit the timing of purchases and sales of
Debentures or shares of Common Stock by the Selling Security Holders. The
applicable provisions of the Exchange Act and the rules and regulations
thereunder may affect the marketability of the Debentures and shares of Common
Stock and the ability of any person to engage in market making activities for
the Debentures or shares of Common Stock.

To the Company's knowledge, no person presently intends to make a market in
the Debentures.

Pursuant to the Indenture, the Company will pay all expenses incident to the
preparation and filing of the Registration Statement.

<PAGE>

LEGAL OPINIONS

The validity of the Securities offered hereby has been passed upon for the
Company by Stradley, Ronon, Stevens & Young, LLP, 2600 One Commerce Square,
Philadelphia, Pennsylvania.

EXPERTS

The consolidated balance sheets 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 Decemer 25, 1994 incorporated by reference in this Prospectus,
have been incorporated 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.

The consolidated balance sheet of Actron Group Limited as of December 31,
1994 and the related consolidated statements of income, cash flows, and changes
in shareholders' equity for the year then ended incorporated by reference in
this Prospectus, have been incorporated herein in reliance on the report of
Coopers & Lybrand, independent accountants, given the authority of that firm as
experts in accounting and auditing.

The financial statements of Actron Group Limited incorporated by reference
herein have been incorporated by reference herein in reliance upon the report of
KPMG, independent accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.

<PAGE>

APPENDIX A

SUBSIDIARIES OF CHECKPOINT SYSTEMS, INC.

Set forth below is a list of the Company's subsidiaries, each of which
is wholly-owned by the Company except for directors qualifying shares.

Checkpoint Systems of Puerto Rico, Inc. - Delaware
Checkpoint Caribbean, Inc. - Delaware
Checkpoint FSC, Inc. - Virgin Islands
Electronic Signatures, Inc. - Delaware
Checkpoint International, Inc. - Delaware
Checkpoint Newco Limited - Canada
Checkpoint Canada, Inc. - Canada
Checkpoint Systems, S.A. - Argentina
Neil Acquisition, S.A. - Argentina
Checkpoint de Mexico, S.A. de C.V. - Mexico
Checkpoint Systems Belgium N.V. - Belgium
Checkpoint Systems France SARL - France
Checkpoint Systems Deutschland - Germany
Checkpoint Systems Nederland B.V. - The Netherlands
Checkpoint Holland Holding B.V. - The Netherlands
Checkpoint Holland Trading B.V. - The Netherlands
Checkpoint Systems Europe B.V. - The Netherlands
Checkpoint Systems International B.V. - The Netherlands
ID Systems Productie B.V. - The Netherlands
Checkpoint Systems Scandinavia A.B. - Sweden
Checkpoint Systems U.K. Limited - United Kingdom
Checkpoint Systems Australia PTY LTD - Australia
Punto De Control Checkpoint, S.A. - Spain
Checkpoint AG Switzerland - Switzerland
Alarmex, Inc. - Minnesota

A-1

<PAGE>

No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus
and, if given or made, such information or representations must not be relied
upon. This Prospectus does not constitute an offer to sell or the solicitation
of an offer to buy any of the Securities offered hereby in any jurisdiction in
which such offer would be unlawful. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information......................................................................................................
Incorporation of Certain Documents by Reference............................................................................
Prospectus Summary.........................................................................................................
Ratio of Earnings to Fixed Charges.........................................................................................
Capitalization.............................................................................................................
Investment Considerations..................................................................................................
The Company................................................................................................................
Common Stock Price Range and Dividends.....................................................................................
Selected Historical Financial Information..................................................................................
Business...................................................................................................................
Management.................................................................................................................
Description of the Debentures..............................................................................................
Description of Capital Stock...............................................................................................
Selling Security Holders...................................................................................................
Plan of Distribution.......................................................................................................
Legal Opinions.............................................................................................................
Experts....................................................................................................................
Appendix A -- Subsidiaries of Checkpoint Systems, Inc. ....................................................................
</TABLE>

$47,250,000
5.25% Convertible Subordinated Debentures
Due November 1, 2005

Checkpoint Systems, Inc.

PROSPECTUS

______________________, 1996

(Outside Back Cover)

<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.
All amounts are estimated except the Securities and Exchange Commission
Registration Fee.

<TABLE>
<S> <C>
Registration Fee............................................................................................... $16,293.10
Legal Fees and Expenses........................................................................................ 20,000.00
Accounting Fees and Expenses................................................................................... 5,000.00
----------
Total.......................................................................................................... $41,293.10
</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 (Section 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>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4(1) Indenture dated as of October 24, 1995 by and between the Registrant and
Chemical Bank, as Trustee
5 Opinion of Stradley, Ronon, Stevens & Young, LLP
23.1 Consent of Coopers & Lybrand LLP
23.2 Consent of Coopers & Lybrand
23.3 Consent of KPMG
23.4 Consent of Stradley, Ronon, Stevens & Young, LLP (see Exhibit 5 above)
25 Statement of Eligibility of Trustee
</TABLE>

- ----------------
(1) Incorporated by reference from Registrant's Form 10-Q/A filed on
December 13, 1995.

II-1

<PAGE>

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.

(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 purpose 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 provision, 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
int he Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expense 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 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 February 20, 1996.

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 Jeffrey A. Reinhold 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>
<CAPTION>
Signatures Title Date
---------- ----- ----

<S> <C> <C>
/s/ Albert E. Wolf Chairman of the Board February 20, 1996
- ------------------------------------
Albert E. Wolf

/s/ Kevin P. Dowd President, Chief Executive Officer February 20, 1996
- ------------------------------------- and Director (Principal Executive
Kevin P. Dowd Officer)

/s/ Jeffrey A. Reinhold Vice President - Chief Financial Officer February 20, 1996
- ------------------------------------ and Treasurer
Jeffrey A. Reinhold

/s/ Mitchell T. Codkind Vice President - Corporate February 20, 1996
- ------------------------------------ Controller and Chief
Mitchell T. Codkind Accounting Officer

/s/ Robert O. Aders Director February 20, 1996
- ------------------------------------
Robert O. Aders

/s/ Roger D. Blackwell Director February 20, 1996
- ------------------------------------
Roger D. Blackwell
</TABLE>

II-3

<PAGE>

<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----

<S> <C> <C>
/s/ Richard J. Censits Director February 20, 1996
- ------------------------------------
Richard J. Censits

/s/ David W. Clark, Jr. Director February 20, 1996
- ------------------------------------
David W. Clark, Jr.

/s/ Allan S. Kalish Director February 20, 1996
- ------------------------------------
Allan S. Kalish

/s/ Jermain B. Porter Director February 20, 1996
- ------------------------------------
Jermain B. Porter

/s/ Albert Soffa Director February 20, 1996
- ------------------------------------
Albert Soffa
</TABLE>

II-4

<PAGE>

FORM S-3 EXHIBITS
CHECKPOINT SYSTEMS, INC.
INDEX TO EXHIBITS

Sequentially
Numbered
Exhibit No. Exhibits Pages
- ----------- -------- ------------
<S> <C> <C>
4(1) Indenture dated as of October 24, 1995 by and between the Registrant
and Chemical Bank, as Trustee

5 Opinion of Stradley, Ronon, Stevens & Young, LLP

23.1 Consent of Coopers & Lybrand LLP

23.2 Consent of Coopers & Lybrand

23.3 Consent of KPMG

23.4 Consent of Stradley, Ronon, Stevens & Young, LLP (see Exhibit 5 above)

25 Statement of Eligibility of Trustee

- ---------------
(1) Incorporated by reference from Registrant's form 10-Q/A filed on December 13, 1995.
</TABLE>

<PAGE>

February 20, 1996

Checkpoint Systems, Inc.
101 Wolf Drive
Thorofare, NJ 08086

Re: $47,250,000 (Aggregate Principal Amount) of
5.25% Convertible Subordinated Debentures Due
November 1, 2005

Ladies and Gentlemen:

We have acted as counsel to Checkpoint Systems, Inc., a
Pennsylvania corporation (the "Company") in the preparation and filing with the
Securities and Exchange Commission of a registration statement on Form S-3 (the
"Registration Statement") registering $47,250,000 aggregate principal amount of
5.25% Convertible Subordinated Debentures Due November 1, 2005 of the Company
(the "Debentures") and (ii) the shares of common stock, $.10 par value per
share, of the Company that are issuable upon conversion of the Debentures (the
"Shares") for sale by the holders thereof.

For the purpose of rendering the opinions contained herein we
have examined the Company's Articles of Incorporation, as amended, Amended and
Restated Bylaws, a specimen of the Debentures and corporate minutes and other
proceedings and records relating to the authorization, issuance and sale by the
Company of the Debentures and the authorization and issuance of the Shares by
the Company and such other documents as we have deemed necessary or appropriate
in order to render the opinions contained herein.

In rendering this opinion, we have assumed and relied upon,
without independent investigation, other than the inquiry referred to above, (i)
the authenticity, completeness, truth and

<PAGE>

Checkpoint Systems, Inc.
February 20, 1996
Page 2

due authorization, execution and delivery of all documents submitted to us as
originals, (ii) the genuineness of all signatures on all documents submitted to
us as originals and (iii) the conformity to original documents submitted to us
as certified or photostatic copies.

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 laws or regulations 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 (i) the
Debentures have been legally issued and are binding obligations of the Company
and (ii) the Shares will, when issued as contemplated by the Registration
Statement, 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 Debentures and the Shares
offered thereby.

Very truly yours,

STRADLEY, RONON, STEVENS & YOUNG, LLP

By: /s/ James M. Papada, III
--------------------------------
James M. Papada, III, a Partner

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Checkpoint Systems, Inc. on Form S-3 (File No. 33-_____) of our report 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 each of the three years in the period ended December 25, 1994,
which report is included in the 1994 Annual Report of Checkpoint Systems, Inc.
on Form 10-K. We also consent to the reference to our firm under the caption
"Experts."

Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
February 20, 1996

<PAGE>

CONSENT OF INDENPENDENT ACCOUNTANTS

We consent to the incorporation by reference in the registration statement of
Checkpoint Systems, Inc. on Form S-3 (File No. 33-_____) of our report dated
April 27, 1995, on our audit of the consolidated financial statements of Actron
Group Limited as at and for the year ended December 31, 1994, which report is
included in Form 8-K/A filed by Checkpoint Systems, Inc. on February 15, 1996.
We also consent to the reference to our firm under the caption "Experts".

Coopers & Lybrand
London, United Kingdom
February 20, 1996

<PAGE>

The Board of Directors
Checkpoint Systems, Inc.

We consent to the incorporation by reference in the registration statement dated
February 20, 1996 on Form S-3 of Checkpoint Systems, Inc. of our report dated
February 13, 1996, with respect to the consolidated balance sheet of Actron
Group Limited and subsidiaries as of November 30, 1995, and the related
consolidated statements of income, stockholders' equity, and cash flows for the
eleven-month period ended November 30, 1995, which report appears in the Form
8-K/A of Checkpoint Systems, Inc. dated February 15, 1996.

KPMG

London, England
February 20, 1996

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

SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
-------------------------

FORM T-1

STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-------------------------------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2)
----------------------------------------

CHEMICAL BANK
(Exact name of trustee as specified in its charter)

New York 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)

270 Park Avenue
New York, New York 10017
(Address of principal executive offices) (Zip Code)

William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
---------------------------------------------
CHECKPOINT SYSTEMS, INC.
(Exact name of obligor as specified in its charter)

Pennsylvania 22-1895850
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)

101 Wolf Drive
P.O. Box 188
Thorofare, New Jersey 08086
(Address of principal executive offices) (Zip Code)

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

5 1/4% Convertible Subordinated Debentures due 2005
(Title of the indenture securities)

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

GENERAL

Item 1. General Information.

Furnish the following information as to the trustee:
<TABLE>

<S> <C>
(a) Name and address of each examining or supervising authority to which it is subject.

New York State Banking Department, State House, Albany, New York 12110.

Board of Governors of the Federal Reserve System, Washington, D.C., 20551

Federal Reserve Bank of New York, District No. 2, 33 Liberty Street, New York, N.Y.

Federal Deposit Insurance Corporation, Washington, D.C., 20429.

(b) Whether it is authorized to exercise corporate trust powers.

Yes.
</TABLE>

Item 2. Affiliations with the Obligor.

If the obligor is an affiliate of the trustee, describe each such
affiliation.

None.

- 2 -

Item 16. List of Exhibits

List below all exhibits filed as a part of this Statement of
Eligibility.

1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is incorporated by
reference).

2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference).

3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.

4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 33-84460, which is
incorporated by reference).

5. Not applicable.

6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference).

7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.

8. Not applicable.

9. Not applicable.

SIGNATURE

Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Chemical Bank, a corporation organized and existing under the laws of
the State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York and State of New York, on the 15th day of February, 1996.

CHEMICAL BANK

By /s/ David G. Safer
--------------------------
David G. Safer
Senior Trust Officer

- 3 -

Exhibit 7 to Form T-1

Bank Call Notice

RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF

Chemical Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,

at the close of business September 30, 1995, in accordance
with a call made by the Federal Reserve Bank of this District
pursuant to the provisions of the Federal Reserve Act.

Dollar Amounts
ASSETS in Millions
--------------
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin .......................................... $ 5,319
Interest-bearing balances .................................. 3,591
Securities:
Held to maturity securities ..................................... 6,402
Available for sale securities ................................... 22,966
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold ......................................... 1,088
Securities purchased under agreements to resell ............ 1,015
Loans and lease financing receivables:
Loans and leases, net of unearned income ....... $ 76,064
Less: Allowance for loan and lease losses ...... 1,878
Less: Allocated transfer risk reserve .......... 104
--------
Loans and leases, net of unearned income,
allowance, and reserve ..................................... 74,082
Trading Assets .................................................. 28,967
Premises and fixed assets (including capitalized
leases) .................................................... 1,380
Other real estate owned ......................................... 65
Investments in unconsolidated subsidiaries and
associated companies ....................................... 160
Customer's liability to this bank on acceptances
outstanding ................................................ 1,187
Intangible assets ............................................... 467
Other assets .................................................... 6,418
--------

TOTAL ASSETS .................................................... $153,107
========

- 4 -

LIABILITIES

Deposits
In domestic offices ........................................ $ 44,067
Noninterest-bearing .............................. $ 14,227
Interest-bearing ................................. 29,840
---------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's .................................................. 37,004
Noninterest-bearing ................................... $ 173
Interest-bearing ................................. 36,831
---------
Federal funds purchased and securities sold under
agreements to repurchase in
domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased .................................... 16,136
Securities sold under agreements to repurchase ............. 1,274
Demand notes issued to the U.S. Treasury ........................ 903
Trading liabilities ............................................. 22,513
Other Borrowed money:
With original maturity of one year or less ................. 11,674
With original maturity of more than one year .................... 613
Mortgage indebtedness and obligations under capitalized
leases ..................................................... 16
Bank's liability on acceptances executed and outstanding ........ 1,190
Subordinated notes and debentures ............................... 3,411
Other liabilities ............................................... 6,333

TOTAL LIABILITIES ............................................... 145,134
---------

EQUITY CAPITAL

Common stock .................................................... 620
Surplus ......................................................... 4,611
Undivided profits and capital reserves .......................... 2,890
Net unrealized holding gains (Losses)
on available-for-sale securities ................................ (156)
Cumulative foreign currency translation adjustments ............. 8

TOTAL EQUITY CAPITAL ............................................ 7,973
---------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL ................................... $ 153,107
=========
</TABLE>

I, Joseph L. Sclafani, S.V.P. & Controller of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the appropriate Federal regulatory authority and is true
to the best of my knowledge and belief.

JOSEPH L. SCLAFANI

We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us, and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the appropriate Federal regulatory authority and is true and correct.

WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
WILLIAM B. HARRISON )

- 5 -