CHECKPOINT SYSTEMS INC, S-3, 1996-05-03

CHECKPOINT SYSTEMS INC
S-3, 1996-05-03
COMMUNICATIONS EQUIPMENT, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 3, 1996

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------

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

REGISTRATION STATEMENT
ON
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 NUMBER)

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)
------------------------

Copies to:

DAVID E. BEAVERS, Esq. MARK C. SMITH, Esq.
Stradley, Ronon, Stevens & Young, LLP Skadden, Arps, Slate, Meagher & Flom
2600 One Commerce Square 919 Third Avenue
Philadelphia, Pennsylvania 19103-7098 New York, New York 10022

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

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. / /
------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED (1) PER SHARE (2) PRICE (2) REGISTRATION FEE
Common Stock, par value $0.10 per
share............................. 4,025,000 $29.175 $117,429,370 $40,492.89
</TABLE>

(1) Including 525,000 shares subject to the over-allotment option granted to the
Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of Regulation C under the Securities Act of 1933 and
based on the average of the high and low prices of the registrant's Common
Stock on the New York Stock Exchange on May 2, 1996.
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>

SUBJECT TO COMPLETION, DATED MAY __, 1996
PROSPECTUS

3,500,000 SHARES

CHECKPOINT SYSTEMS, INC.

COMMON STOCK

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All of the shares of common stock, par value $0.10 per share (the 'Common
Stock') offered hereby are being sold by Checkpoint Systems, Inc. (the
'Company'). The Common Stock of the Company is listed on the New York Stock
Exchange (the 'NYSE') under the symbol 'CKP.' On May 2, 1996, the last reported
sale price of the Common Stock on the NYSE was $28 3/4 per share.

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

THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE 'RISK
FACTORS' BEGINNING ON PAGE 8.

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

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.

<TABLE>
<S> <C> <C> <C>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS (1) COMPANY (2)
Per share...................................................... $ $ $
Total (3)...................................................... $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See 'Underwriting.'

(2) Before deducting expenses payable by the Company estimated at $______.

(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 525,000 additional shares of Common Stock at the price to
public less underwriting discounts and commissions, for the purpose of
covering over-allotments, if any. If the Underwriters exercise such option
in full, the total price to public, underwriting discounts and commissions
and proceeds to Company will be $_____,000, $_____,000 and $____,000,
respectively. See 'Underwriting.'

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

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares of
Common Stock offered hereby will be made in New York, New York on or about May
, 1996

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

NATWEST SECURITIES LIMITED
ALEX. BROWN & SONS
INCORPORATED
DEUTSCHE MORGAN GRENFELL
PAINEWEBBER INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
HD BROUS & CO., INC.

The Date of this Prospectus is , 1996

<PAGE>

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

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

FOR UNITED KINGDOM PURCHASERS: THE COMMON STOCK MAY NOT BE OFFERED OR SOLD
IN THE UNITED KINGDOM OTHER THAN TO PERSONS WHOSE ORDINARY ACTIVITIES INVOLVE
THEM IN ACQUIRING, HOLDING, MANAGING OR DISPOSING OF INVESTMENTS, WHETHER AS
PRINCIPAL OR AGENT (EXCEPT IN CIRCUMSTANCES THAT DO NOT CONSTITUTE AN OFFER TO
THE PUBLIC WITHIN THE MEANING OF THE PUBLIC OFFERS OF SECURITIES REGULATIONS
1995 OR THE FINANCIAL SERVICES ACT 1986), AND THIS PROSPECTUS MAY ONLY BE ISSUED
OR PASSED ON TO ANY PERSON IN THE UNITED KINGDOM IF THAT PERSON IS OF A KIND
DESCRIBED IN ARTICLE 11(3) OF THE FINANCIAL SERVICES ACT 1986 (INVESTMENT
ADVERTISEMENTS) (EXEMPTIONS) ORDER 1995 OR IS A PERSON TO WHOM THE PROSPECTUS
MAY OTHERWISE LAWFULLY BE PASSED ON.

<PAGE>

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

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

(1) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on October 8, 1993.

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

(3) 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.

(4) 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.

(5) 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.

(6) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 filed on March 22, 1996.

(7) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 filed on May 3, 1996.

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.

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 and related notes 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 consolidated 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. Except as otherwise noted herein, all
information in this Prospectus gives effect to the sale by the Company of
3,500,000 shares of Common Stock offered hereby at an estimated offering price
of $28.75 per share (based on the closing price on May 2, 1996) and assumes no
exercise of the Underwriter's over-allotment option. See 'Capitalization' and
'Underwriting.'

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, 32% for
fiscal year 1995 and 34% for the first quarter of fiscal year 1996. The
Company's manufacturing facilities have the current capacity to produce up to
three billion disposable RF targets per year at a low cost.

The Company'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.

The Retail Opportunity

4
<PAGE>

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

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: (i) enhanced protection from theft, (ii) activation and
deactivation without the need for special training of store employees, (iii)
more open display of merchandise resulting in increased sales for manufacturers
and (iv) 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.

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. The Company intends to attain
these objectives by continually enhancing and expanding its RF technologies and
products, providing superior service to its customers and expending 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, in order to interact more closely with retailers and
better understand and respond to their needs (including reducing shrinkage and
providing retailers with enhanced sales opportunities through more open display
of merchandise), the Company is pursuing the following strategies:

5
<PAGE>

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

o Broadening its product lines;

o Increasing its penetration of the hard goods retail market (currently
estimated to be approximately 16% penetrated by the EAS industry);

o Continuing to promote source tagging;

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

o Continuing to explore strategic acquisitions or start-up opportunities;
and

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

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered.................................... 3,500,000 shares
Common Stock to be outstanding after the Offering(1).... 32,793,514 shares
Use of Proceeds......................................... For general corporate purposes including (i) funding
strategic acquisitions or start-up opportunities and
(ii) funding the Company's leasing programs. See 'Risk
Factors' and 'Use of Proceeds.'
NYSE Symbol............................................. CKP
</TABLE>

- ------------------
(1) As at May 3, 1996. Excludes 3,441,792 shares subject to options to purchase
granted to certain of the Company's directors, officers, employees and
consultants pursuant to various Company-sponsored stock option plans and
other agreements, and 2,571,428 shares issuable upon conversion of $120
million aggregate principal amount of the Company's 5 1/4% Convertible
Subordinated Notes Due November 1, 2005 (the 'Debentures').

RISK FACTORS

Prospective purchasers of the Common Stock offered hereby should carefully
consider the information set forth herein under the caption 'Risk Factors' and
the other information set forth herein.

<PAGE>

SUMMARY FINANCIAL INFORMATION

The summary historical financial information presented below has been
derived from the consolidated financial statements of the Company appearing
elsewhere, or incorporated by reference, in this Prospectus and should be read
in conjunction with 'Use of Proceeds,' 'Selected Historical Financial
Information,' 'Management's Discussion and Analysis of Results of Operations and
Financial Condition' and the consolidated financial statements and related notes
of the Company appearing elsewhere, or incorporated by reference, in this
Prospectus. The summary as adjusted balance sheet data presented below give
effect to the sale of the shares of Common Stock offered hereby, and the
application of net proceeds therefrom, as if it had occurred on March 31, 1996.

<TABLE>
<CAPTION>
FISCAL YEAR 13 WEEKS
------------------------------- ----------------------------
(UNAUDITED)
MARCH 26, MARCH 31,
1993 1994 1995 1995 1996
--------- --------- --------- ------------- -------------
(IN THOUSANDS, EXCEPT (IN THOUSANDS, EXCEPT
PER SHARE DATA) PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues....................................... $ 93,034 $ 128,331 $ 204,741 $ 37,360 $ 66,994
Cost of revenues................................... 54,421 66,360 114,044 21,269 39,556
--------- --------- --------- ------------- -------------
Gross profit..................................... 38,613 61,971 90,697 16,091 27,438
Selling, general and administrative expenses....... 39,238 50,243 71,642 14,627 22,259
--------- --------- --------- ------------- -------------
Operating income (loss).......................... (625) 11,728 19,055 1,464 5,179
Contract settlement income......................... 3,500 -- -- -- --
Interest expense, net.............................. 477 2,589 2,259 887 1,324
Other income (expense)............................. (327) (762) (198) (286) 478
--------- --------- --------- ------------- -------------
Income before income taxes....................... 2,071 8,377 16,598 291 4,333
Income taxes....................................... 456 2,094 5,189 87 1,387
--------- --------- --------- ------------- -------------
Net earnings..................................... $ 1,615 $ 6,283 $ 11,409 $ 204 $ 2,946
Net earnings per share (1)......................... $ .08 $ .29 $ .42 $ .01 $ .10
========= ========= ========= ========= ===========
Weighted average number of common and common
equivalent shares (1)............................ 20,772 21,612 27,374 22,604 30,957
========= ========= ========= ========= ===========
</TABLE>

<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS, EXCEPT TOTAL
DEACTIVATION SYSTEMS INSTALLED
AND TOTAL SENSORS INSTALLED)
<S> <C> <C> <C>
SELECTED OPERATING DATA (unaudited):
Disposable labels sold (during period)............................................ 733,530 959,249 1,371,000
Total deactivation systems installed (at period end).............................. 61,417 91,549 140,590
Total sensors installed (at period end)........................................... 91,648 107,068 170,341
</TABLE>

<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA (unaudited):
Working capital............................................................................ $ 145,709 $ 240,803
Total assets............................................................................... 355,063 450,157
Long-term debt............................................................................. 154,369 154,369
Total debt................................................................................. 208,104 208,104
Shareholders' equity....................................................................... 144,725 239,819
</TABLE>

- ------------------
(1) After giving effect to the February 1996 Stock Dividend.

7
<PAGE>
RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Accordingly, the following factors should be carefully
considered in evaluating the Company and its business before purchasing any of
such shares.

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.

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.
Although the Company is not aware of any significant existing or threatened
patent infringement claims asserted against it and does not believe that its
products (including products and technologies licensed from others) infringe the
proprietary rights of any third parties, there can be no assurance that
infringement or invalidity claims (or claims for indemnification resulting from
such claims) will not be asserted against the Company or its customers. The cost
to the Company to resolve or settle any such claims could be material.

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 has entered into a supply agreement with Tokai
Aluminum Foil Co., Ltd. of Japan ('Tokai'), pursuant to which Tokai agrees to
supply to the Company a minimum of 15 million targets per month at the Company's
request. The Company is currently exploring development of alternative sources
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, 38% during fiscal
year 1995 and 55.2% in the first quarter of fiscal year 1996. As a result of
continued penetration of international markets through internal growth and
acquisitions, the Company anticipates that international sales will account for
more than 50% of net revenues during fiscal year 1996. Substantial dependence on
foreign markets increases the risks associated with economic and other
developments in other jurisdictions. In 1993, due to the

8
<PAGE>

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. Approximately
79.4% of the Company's international sales for fiscal year 1994, 71.8% for
fiscal year 1995, and 73.7% in the first quarter of fiscal year 1996, were made
in local currencies. Sales denominated in currencies other than U.S. dollars
exposes the Company to the risk of 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. Currency gains for
the quarter ended March 31, 1996 amounted to approximately $500,000. 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.

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 March 31, 1996, the Company had currency
exchange forward contracts totalling approximately $11.7 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, Brazil,
Mexico and Australia were not covered by currency exchange forward contracts at
March 31, 1996.

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.

9
<PAGE>

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
('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. The Revenue Reconciliation Bill of 1995, which has been
proposed in the U.S. House of Representatives, would repeal Section 936 over a
10-year period. Likewise, the Senate Finance Committee is considering a bill
which would repeal Section 936 over a 7-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. The Company anticipates that its effective
tax rate may increase in fiscal year 1996 and beyond due to (i) increased
charges of goodwill amortization which are not deductible for federal tax
purposes, (ii) a change in U.S. tax laws resulting in the repeal of Section 936
and (iii) additional taxable income attributable to foreign jurisdictions where
tax rates may be marginally higher than in the U.S.

DEDUCTIBILITY OF THE COMPANY'S INTEREST PAYMENTS

Section 279 ('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 $5 million. 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 sale of the Debentures in 1995 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.

FEDERAL TRADE COMMISSION INVESTIGATION

On February 14, 1996, the United States Federal Trade Commission ('FTC')
began an investigation of the retail security systems industry. The probe was
launched under the premise of anticompetitive practices within the industry
whereby certain retail-trade groups limited the autonomy of smaller retailers by
supporting specific security systems. The Company along with Sensormatic
Electronics Corporation, Minnesota Mining and Manufacturing, and other industry
participants, received subpoenas requesting certain documents and communications
necessary for the investigation. There can be no assurance that the FTC will
reach the conclusion that the Company had not engaged in anticompetitive
practices; however the Company does not believe that any legal or regulatory
infraction will be found on its part.

10
<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, 32% for
fiscal year 1995, and 34% for the first quarter of fiscal year 1996. The
Company's manufacturing facilities have the current capacity to produce up to
three billion disposable RF targets per year at a low cost. The Company believes
that the net proceeds from the sale of the shares of Common Stock offered hereby
will provide it with the additional capital resources necessary to continue to
implement the Company's business strategy, which focuses on capitalizing on
retailers' increasing attention to theft prevention through use of the Company's
proprietary RF technology-based products. See 'Use of Proceeds.'

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, 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.

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.

11
<PAGE>

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. ('Alarmex') which designs and markets
CCTV, POS monitoring, burglar and fire alarm systems. Alarmex also provides
related central station monitoring services. In November 1995, the Company
acquired Actron which manufactures, sells and distributes radio frequency
electronic security systems to the retail industry throughout Western Europe. In
March 1996, the Company acquired Mercatec Sistemas e Comercio de Equipamentos
Electronicos Ltda. ('Mercatec') a leading supplier of EAS systems and CCTV
systems to retailers in Brazil.

USE OF PROCEEDS

The net proceeds from the sale of shares of Common Stock offered hereby are
estimated to be approximately $___ million ($___ million if the Underwriter's
over-allotment option is exercised in full). These proceeds are expected to be
used for general corporate purposes including the following: (i) for potential
strategic acquisitions and related start-up operations to enhance both product
line diversification within the Company's core business and greater distribution
opportunities and alliances and (ii) to provide the necessary capital to enable
the Company to finance internally the leasing of equipment to retailers under
long-term leases.

The Company continues to explore strategic acquisitions in the areas
described in the preceding paragraph. 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. The
Company is not currently engaged in any material negotiations with respect to
any particular acquisition. If the Company is unable to consummate any
particular acquisition, the proceeds will be applied to alternative start-up
operations or capital expenditures.

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

12
<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and total capitalization
of the Company at March 31, 1996, and as adjusted to give effect to the sale of
the shares of the Common Stock offered hereby and the application of the net
proceeds therefrom as described under 'Use of Proceeds.' This table should be
read in conjunction with 'Use of Proceeds,' 'Selected Historical Financial
Information,' and the consolidated financial statements of the Company appearing
elsewhere, or incorporated by reference, in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1996
------------------------
ACTUAL AS ADJUSTED
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt................................................... $ 2,970 $ 2,970
=========== ==========
Long-term debt (less current portion):
Term Debt......................................................................... $ 34,369 $ 34,369
5 1/4% Convertible Subordinated Debentures due 2005............................... $ 120,000 $ 120,000
----------- -----------
Total long-term debt (less current portion).................................... $ 154,369 $ 154,369
----------- -----------
Shareholders' equity:
Preferred stock, no par value, authorized 500,000 shares, none issued............. -- --
Common Stock, par value $.10 per share, 100,000,000 shares authorized, 30,838,014
shares issued and outstanding; 34,338,014 shares issued and outstanding (as
adjusted)...................................................................... $ 3,084 $ 3,434(1)
Additional capital................................................................ 88,172 182,916(1)
Retained earnings................................................................. 61,144 61,144
Common stock in treasury, at cost, 1,598,000...................................... (5,664) (5,664)
Foreign currency adjustments...................................................... (2,011) (2,011)
----------- -----------
Total shareholders' equity..................................................... $ 144,725 $ 239,819
----------- -----------
Total capitalization........................................................ $ 299,094 $ 394,188
========================
</TABLE>

- ------------------
(1) Reflects the issuance and sale of 3,500,000 shares of the Common Stock
offered hereby (assuming an offering price of $28.75 per share based upon
the closing price on May 2, 1996) less underwriting discounts and offering
expenses.

<PAGE>

COMMON STOCK PRICE RANGE AND DIVIDENDS

Checkpoint's Common Stock is listed on the 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 under the
symbol CHEK. The following table sets forth for the periods indicated the high
and low sale prices for the Company's Common Stock as reported on the NYSE
Composite Tape commencing October 29, 1993 after giving retroactive effect to
the 100% stock dividend declared January 4, 1996, which was issued on February
22, 1996, to the holders of record on January 18, 1996 ( the 'February 1996
Stock Dividend').

<TABLE>
<CAPTION>
HIGH LOW
---------- ----------
<S> <C> <C>
Fiscal Year 1994
First Quarter......................................................... 7 1/4 5 3/16
Second Quarter........................................................ 8 5/8 6 3/8
Third Quarter......................................................... 9 7/16 7 7/16
Fourth Quarter........................................................ 10 3/4 8 3/16

Fiscal Year 1995
First Quarter......................................................... 12 1/2 7 15/16
Second Quarter........................................................ 11 7/8 8 3/16
Third Quarter......................................................... 13 7/16 10 1/16
Fourth Quarter........................................................ 19 1/2 12

Fiscal Year 1996
First Quarter......................................................... 25 1/8 17 7/8
Second Quarter (through May __, 1996)................................. -- 24 7/8
</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' and 'Risk Factors -- Dividends.'

14
<PAGE>

SELECTED HISTORICAL FINANCIAL INFORMATION

The selected historical financial information presented below has been
derived from the consolidated financial statements of the Company. The
consolidated financial statements of the Company as of December 25, 1994 and
December 31, 1995, and for each of the three fiscal years in the period ended
December 31, 1995 are included elsewhere in this Prospectus, or incorporated
herein by reference, and have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants, whose report thereon is also included
herein. The historical consolidated financial data for the thirteen week periods
ended March 26, 1995 and March 31, 1996 have been derived from unaudited
consolidated financial statements. In the opinion of Company management, the
unaudited consolidated financial statements reflect all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the financial
position of the Company at March 26, 1995 and March 31, 1996 and the results of
operations for the thirteen week periods then ended. The results of operations
for the thirteen weeks ended March 31, 1996 should not necessarily be taken as
indicative of the results of operations that may be expected for the entire
year, 1996. The information presented below should be read in conjunction with,
and is qualified by, 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the Company's consolidated financial
statements and related notes included elsewhere in this Prospectus, or
incorporated herein by reference.

<TABLE>
<CAPTION>
FISCAL YEAR 13 WEEKS
----------------------------------------------------- ------------------------
MARCH 26, MARCH 31,
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- ----------- -----------
(IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ 52,943 $ 72,166 $ 93,034 $ 128,331 $ 204,741 $ 37,360 $ 66,994
Cost of revenues................. 28,479 38,650 54,421 66,360 114,044 21,269 39,556
--------- --------- --------- --------- --------- ----------- -----------
Gross profit..................... 24,464 33,516 38,613 61,971 90,697 16,091 27,438
Selling, general and
administrative expenses........ 23,646 28,342 39,238 50,243 71,642 14,627 22,259
--------- --------- --------- --------- --------- ----------- -----------
Operating income (loss)........ 818 5,174 (625) 11,728 19,055 1,464 5,179
Contract settlement income....... -- -- 3,500 -- -- -- --
Interest expense, net............ 183 283 477 2,589 2,259 887 1,324
Other income (expense)........... -- -- (327) (762) (198) (286) 478
--------- --------- --------- --------- --------- ----------- -----------
Income before income taxes..... 635 4,891 2,071 8,377 16,598 291 4,333
Income taxes..................... 127 463 456 2,094 5,189 87 1,387
--------- --------- --------- --------- --------- ----------- -----------
Net earnings................... $ 508 $ 4,428 $ 1,615 $ 6,283 $ 11,409 $ 204 $ 2,946
========= ========= ========= ========= ========= =========== ===========
Net earnings per share(1)........ $ .03 $ .23 $ .08 $ .29 $ .42 $ .01 $ .10
Weighted average number of common
and common equivalent shares
(in thousands)(1).............. 19,182 19,902 20,772 21,612 27,374 22,604 30,957
SELECTED OPERATING DATA (unaudited):
Disposable labels sold (during
period, in thousands).......... 537,833 691,494 733,530 959,249 1,371,000 238,449 458,851
Total deactivation systems
installed (at period end)...... 30,003 43,771 61,417 91,549 140,590 101,519 160,128
Total sensors installed (at
period end).................... 58,859 70,256 91,648 107,068 170,341 112,346 178,950
BALANCE SHEET DATA (unaudited)
(END OF PERIOD):
Working capital.................. $ 14,245 $ 25,792 $ 27,984 $ 39,427 $ 148,074 $ 51,597 $ 145,709
Total assets..................... 57,675 74,333 104,999 127,925 362,151 154,485 355,063
Long-term debt................... 783 9,322 24,302 35,556 155,674 59,758 154,369
Total debt....................... 7,005 10,614 28,399 42,262 222,259 88,641 208,104
Shareholders' equity............. 42,087 51,061 53,779 61,303 137,658 64,573 144,725
</TABLE>

- ------------------
(1) After giving effect to the February 1996 Stock Dividend

15
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION

OVERVIEW

The Company 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.
Beginning in September 1991, the Company's current management adopted a strategy
which focused on introducing new products to meet retailers' needs, moving to
direct distribution internationally through strategic acquisitions increasing
the number of direct sales and service personnel and making substantial
investments in its manufacturing facilities in the Caribbean to increase its
manufacturing capacity and further integrate the manufacturing of its disposable
targets. As a result of this strategy the Company has experienced a compound
annual revenue growth of approximately 40% since 1991. During 1995, two
strategic acquisitions were made: (i) the acquisition of Alarmex on February 1,
1995 which allowed the Company to increase its product offerings of CCTV
equipment along with burglar and fire alarm systems to retailers and (ii) the
purchase of Actron on November 30, 1995 which had been a principal competitor to
the Company's EAS operations in Western Europe over the last several years.

NET REVENUES

The Company's unit volume is driven by product offerings, number of direct
sales personnel, recurring revenues and, to some extent, prices. Since 1991, the
Company's unit volume of sales has increased dramatically. During that time the
Company has introduced approximately 60 new products. Increases in the Company's
U.S. direct sales personnel and, through various acquisitions, the establishment
of a direct sales force in thirteen other countries, have resulted in the
Company's total sales force growing to approximately 267 as of December 1995 as
compared to 47 as of September 1991. In addition, sales of the Company's
disposable targets and field service revenues related to sensors and
deactivation units provide a significant and growing source of recurring
revenues. The Company's increasing base of installed systems also results in
additional unit volume. For fiscal year 1995, approximately 32% of the Company's
net revenues were attributable to sales of disposable targets and service to its
installed base of customers.

The Company's unique and proprietary product line has enabled it to
increase its domestic prices over the past four years. These price increases,
however, have been substantially offset by volume discounts offered to national
retailers. Internationally, in fiscal year 1993 prices were favorably impacted
by moving to direct sales in various countries. In fiscal years 1994 and 1995,
however, intense price competition in Western Europe significantly impacted
selling prices as competitors moved to protect market share. This price
sensitivity in Western Europe may be reduced as a result of the Company's recent
acquisition of Actron, a major competitor to the Company during the last several
years.

COST OF REVENUES

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

Across all of the Company's product lines, product costs average
approximately 45% of net revenues. The components of cost of revenues are as
follows: 71% -- material, 15% -- labor, and 14% -- manufacturing overhead. The
primary raw materials used in the manufacture of the Company's products include
(i) electronic components for its systems, (ii) aluminum foil, resins, and paper
used for its disposable tags, and (iii) ferric chloride solutions for the
Company's etching operation of disposable tags and printed circuit boards.
Although aluminum, resins and paper are subject to some commodity pricing, in
recent years the Company has generally been able to offset price increases
through volume purchasing and manufacturing efficiencies.

16
<PAGE>

The Company believes that its manufacturing know-how and efficiencies
relating to disposable and reusable tags give it a significant cost advantage
over its competitors. The Company expects volume increases to result in a
decrease of product cost as a percentage of net revenues because the Company's
substantial available manufacturing capacity allows it to distribute its fixed
manufacturing costs over more units.

For fiscal year 1995, field service and installation costs approximated 8%
of net revenues and include ongoing product service costs and installation
costs. The Company believes that it has and will continue to make product design
changes which improve product performance and result in easier installation,
thereby reducing these costs as a percentage of net revenues over time.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

For fiscal year 1995, sales, marketing and customer service comprised
approximately 60% of all selling, general and administrative expenses. Selling,
general and administrative ('SG&A') expenses have increased significantly due to
an expansion of the Company's sales force both domestically and internationally
(through acquisitions) from a September 1991 sales force of 47 people to a
December 1995 sales force of approximately 267. During this same period,
significant investment was also made in the establishment of a multidisciplined
product management team and a professional customer service organization.

TAXES

The Company's net earnings generated by the operations of its Puerto Rican
subsidiary are exempt from Federal income taxes under Section 936 of the Code
and are substantially exempt from Puerto Rican income taxes. As a result, the
Company's effective tax rate for fiscal 1995 was 31%. The Revenue Reconciliation
Bill of 1995, which has been proposed in the U.S. House of Representatives,
would repeal Section 936 over a 10-year period. Likewise, the Senate Finance
Committee is considering a bill which would repeal Section 936 over a 7-year
period. The Company anticipates that its effective tax rate may increase in
fiscal year 1996 and beyond due to (i) increased charges of goodwill
amortization which are not deductible for federal tax purposes, (ii) a change in
U.S. tax laws resulting in the repeal of Section 936 and (iii) additional
taxable income attributable to foreign jurisdictions where tax rates may be
marginally higher than in the U.S.

EXPOSURE TO INTERNATIONAL OPERATIONS

Prior to fiscal year 1993, substantially all the Company's international
sales were made to distributors and were paid in U.S. dollars. As a result of
the Company's strategy to increase its direct sales to customers (as opposed to
sales through independent distributors), approximately 72% of the Company's
international sales for fiscal year 1995 were made in local currencies. This
increase in sales denominated in currencies other than U.S. dollars increases
the Company's potential exposure to currency fluctuations which can adversely
affect results. During fiscal year 1995, currency exchange losses amounted to
$198,000 compared to losses of $762,000 for fiscal year 1994.

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

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 March 31, 1996 the Company had currency
exchange forward contracts totaling approximately $11.7 million. The contracts
are in the various local currencies covering the Company's Western European
operations and Canada. The Company's operations in Argentina, Brazil, Mexico and
Australia were not covered by forward exchange contracts at March 31, 1996.

17
<PAGE>

The Company is considering increasing the amount of currencies covered by
forward exchange contracts during fiscal year 1996. 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 forward exchange
contracts and currency options should result in reducing the Company's risks
associated with significant exchange rate fluctuations. The Company had no
currency options outstanding as of March 31, 1996.

SEASONALITY

ACQUISITION OF ACTRON GROUP LIMITED

On November 30, 1995 the Company completed the purchase from ADT (UK)
Limited all capital stock of Actron. The purchase price was $54 million cash,
subject to certain possible downward adjustments. 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 a 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. Management expects that the acquisition of Actron will be dilutive
for the first six months of 1996 but should be accretive for 1996 as a whole. In
April 1996, the purchase price was reduced by $2.5 million to $51.5 million
resulting from adjustments pursuant to the purchase agreement.

In connection with the acquisition of Actron, an accrual was established to
integrate Actron's operations with the Company's existing sales and production
locations. Included in this accrual of $10.4 million are: (i) costs associated
with the elimination of approximately 70 manufacturing and field service
positions from the Actron operation (approximately $7.7 million), (ii) costs
related to the elimination of redundant sales locations (approximately $1.8
million), and (iii) ancillary costs (approximately $0.9 million). This accrual
is included as part of the purchase price and is included in the 'Other Current
Liabilities' section of the Company's 1995 consolidated balance sheet. The
integration of Actron's operations is anticipated to be completed in the second
quarter of 1996. Actual charges to complete the integration may exceed the
estimates. Any additional charges in excess of the accrual will be charged to
excess of acquisition cost over net assets acquired.

RESULTS OF OPERATIONS
FIRST QUARTER 1996 COMPARED TO FIRST QUARTER 1995

OVERVIEW

During the first quarter of 1996 revenues increased by approximately $29.6
million (or 79.3%) over the first quarter of 1995. Cost of revenues were higher
than in the first quarter of 1995 as a percentage of sales (from 56.9% to
59.0%). The increase in cost of revenues was primarily the result of sales of
Actron products which carry a lower gross margin. SG&A expenses increased $7.7
million but declined as a percentage of revenues by 6.0% (from 39.2% to 33.2%).
Income from operations increased $3.7 million (from $1.5 million to $5.2
million). Net earnings for the first quarter of 1996 increased by $2.7 million
(from $0.2 million to $2.9 million) resulting in earnings per share of $0.10 for
the first quarter of 1996 versus $0.01 achieved in last year's first quarter.

18
<PAGE>

NET REVENUES

Net revenues for the first quarter of 1996 increased approximately $29.6
million (or 79.3%) over the first quarter of 1995 (from $37.4 million to $67.0
million). Domestic and international net revenues accounted for approximately
44.8% and 55.2%, respectively, of total net revenues compared to 63.1% and 36.9%
for last year's similar quarter. Domestic retail EAS net revenues increased $6.1
million (or 41.4%) primarily as a result of increased unit sales resulting from
various chain wide installations. International EAS net revenues increased $22.7
million (or 166.5%) primarily as a result of: higher unit sales volume generated
by the Company's operations in Europe ($17.4 million) which was positively
impacted by the Company's recent acquisition of Actron (approximately $12.0
million) and increased sales to a major customer in Spain ($4.1 million). In
addition, the Company's Canadian operations realized a significant sales
increase ($4.0 million). Sales of the Company's Alarmex and CCTV product lines
increased by 13.3% (from $6.4 million to $7.2 million) over the prior year's
quarter. The Company's Access Control product line had sales growth of 3.8%
(from $1.5 million to $1.6 million) compared to the prior year's first quarter.

COST OF REVENUE

Cost of revenues increased approximately $18.3 million (or 85.9%) over the
first quarter of 1995 (from $21.3 million to $39.6 million). As a percentage of
net revenues, costs of revenues increased 2.1% (from 56.9% to 59.0%) compared to
the prior year's first quarter. This increase was primarily due to the
significant amount of Actron inventory which was sold by the Company during the
quarter which had been originally produced or purchased at a greater cost than
the Company's other EAS products. The Company is in the process of closing
Actron's high cost European manufacturing facility and moving production to the
Company's lower cost Caribbean based facilities. The Company expects this
relocation of production to be substantially complete by the end of the second
quarter of fiscal year 1996.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses increased $7.7 million (or 52.2%) over the first quarter of
1995 (from $14.6 million to $22.3 million). As a percentage of net revenues,
however, SG&A expenses decreased by 6.0% (from 39.2% to 33.2%). The higher
expenses (in dollars) were due to: (i) approximately $3.5 million increase in
variable selling costs to support the increase in revenues, (ii) approximately
$3.5 million increase in general and administrative costs, and (iii)
approximately $0.7 million related to the amortization of goodwill and
intangibles generated from the Actron acquisition.

INTEREST EXPENSE

Interest expense for the first quarter of 1996 increased $1.2 million (from
$1.1 million to $2.3 million) primarily as a result of interest on the
Debentures.

INCOME TAXES

The effective tax rate of 32.0% is higher than the effective tax rate
during the first quarter of 1995 of 29.9%. This is primarily due to (i) higher
taxable income attributable to foreign jurisdictions where tax rates are
marginally higher than the U.S., and (ii) higher charges for amortization of
goodwill and intangibles resulting from the Actron acquisition which are not tax
deductible.

NET EARNINGS

Net earnings were $2.9 million or $0.10 per share versus $.2 million or
$0.01 per share for the prior year's first quarter. The weighted average number
of common and common equivalent shares used in the earnings per share
computation (adjusted for the February 1996 Stock Dividend) for the first
quarter of 1996 has increased substantially compared to the prior year's quarter
(from 22.6 million to 31.0 million) primarily due to (i) shares issued as part
of the Alarmex acquisition (401,434) and (ii) shares issued during the second
quarter of 1995 in connection with the Company's secondary

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<PAGE>

equity offering (6,173,200). The balance of the increase was attributable to the
exercise of stock options and an increase in common stock equivalents (stock
options outstanding).

EXPOSURE TO INTERNATIONAL OPERATIONS

Approximately 73.7% of the Company's international sales during the first
quarter of 1996 were made in local currencies. Sales denominated in currencies
other than U.S. dollars increase the Company's potential exposure to currency
fluctuations which can affect results. During the first quarter of 1996,
currency exchange gains amounted to approximately $0.5 million compared to
losses of $0.3 million in the first quarter of 1995. Management cannot predict
with any degree of certainty the future impact that changes in currency exchange
rates will have on its operations.

FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994

OVERVIEW

In fiscal year 1995 revenues increased by approximately $76.4 million (or
59.6%) over fiscal year 1994. For the year, cost of revenues in the Company's
operations (excluding Alarmex and Actron) were slightly lower than in 1994 as a
percentage of sales (from 51.7% to 50.8%). Including the Alarmex operations and
the one month of operations for Actron, cost of revenues increased by 4.0% (from
51.7% to 55.7%). SG&A expenses increased $21.4 million but declined as a
percentage of revenues by 4.2% (from 39.2% to 35.0%). Income from operations
increased $7.4 million (from $11.7 million to $19.1 million). Net earnings for
fiscal year 1995 increased by $5.1 million (from $6.3 million to $11.4 million)
resulting in earnings per share of $0.42 for fiscal year 1995 versus $0.29
achieved in fiscal year 1994.

NET REVENUES

Net revenues increased approximately $76.4 million (or 59.6%) over fiscal
year 1994 (from $128.3 million to $204.7 million). Domestic and international
net revenues accounted for approximately 62.3% and 37.7%, respectively, of total
net revenues compared to 60.6% and 39.4% in fiscal year 1994. Domestic retail
EAS net revenues increased $16.2 million (or 24.6%) primarily as a result of
increased unit sales resulting from several chain wide installations.
International EAS net revenues increased $26.7 million (or 52.7%) primarily as a
result of higher unit sales volume generated by the Company's operations in
Europe ($24.8 million) including sales to a major customer in Spain ($10.7
million) and one month of sales of Actron ($2.6 million). Sales by the Company's
Alarmex subsidiary, which was acquired during the first quarter of 1995,
contributed $33.2 million in revenues. The Company's Access Control product line
had sales growth of 16% (from $6.1 million to $7.1 million) compared to fiscal
year 1994.

COST OF REVENUES

Cost of revenues increased approximately $47.6 million (or 71.8%) over
fiscal year 1994 (from $66.4 million to $114.0 million). As a percentage of net
revenues, cost of revenues increased 4.0% (from 51.7% to 55.7%) compared to
fiscal year 1994. This increase was primarily due to lower gross margins
generally associated with the Alarmex operations and to a lesser extent the one
month of operating results from Actron. Cost of revenues related to the
Company's traditional EAS product lines decreased by 0.9% (from 51.7% to 50.8%)
primarily resulting from increased production volumes and manufacturing
efficiencies offset partially by volume pricing to significant customers which
are implementing EAS systems chain wide combined with pricing pressure on the
Company's Western European operations.

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<PAGE>

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

SG&A expenses increased $21.4 million (or 42.6%) over fiscal year 1994
(from $50.2 million to $71.6 million). As a percentage of net revenues, however,
SG&A expenses decreased by 4.2% (from 39.2% to 35.0%). The higher expenses (in
dollars), were due to: (i) approximately $13.3 million increase in expenditures
supporting the Company's EAS business, (ii) approximately $6.4 million of SG&A
expenses related to the Alarmex operations, including amortization of goodwill
and (iii) approximately $1.7 million related to the one month of operations and
restructuring charges from the Actron acquisition.

INTEREST EXPENSE

Interest expense for fiscal year 1995 increased $2.0 million (from $3.1
million to $5.1 million) primarily as a result of interest on the issuance of a
$15.0 million note in connection with the Alarmex acquisition which was
completed in February of 1995 combined with interest expense generated from the
issuance of the Debentures.

INCOME TAXES

The effective tax rate of 31.3% is higher than the effective tax rate used
in fiscal year 1994 of 25.0%. This is primarily due to (i) higher taxable income
attributable to foreign jurisdictions where tax rates are marginally higher than
the U.S., (ii) a marginally higher tax rate on the earnings generated by the
Company's Alarmex subsidiary versus the Company's domestic EAS operations and
(iii) losses resulting from the one month operations of Actron which did not
generate any tax benefit.

NET EARNINGS

Net earnings were $11.4 million or $0.42 per share versus $6.3 million or
$0.29 per share for fiscal year 1994. The weighted average number of common and
common equivalent shares used in the earnings per share computation (adjusted
for the two-for-one stock split of February 1996 Stock Dividend) for fiscal year
1995 has increased substantially compared to the prior year (from 21.6 million
to 27.4 million) primarily from: (i) Company shares issued as part of the
Alarmex acquisition (401,434) and (ii) shares issued during the second quarter
in connection with the Company's recent equity offering (6,173,200) which is
further discussed in 'Liquidity and Capital Resources'.

EXPOSURE TO INTERNATIONAL OPERATIONS

Approximately 72% of the Company's international sales during fiscal year
1995 were made in local currencies. Sales denominated in currencies other than
U.S. dollars increased the Company's potential exposure to currency fluctuations
which can affect results. For fiscal year 1995, currency exchange losses
amounted to approximately $0.2 million compared to losses of $0.8 million for
fiscal year 1994.

FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993

OVERVIEW

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

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<PAGE>

approximately $11.7 million during fiscal year 1994 compared to an operating
loss of $0.6 million in fiscal year 1993.

NET REVENUES

Net revenues increased $35.3 million (or 37.9%) over fiscal year 1993 (from
$93.0 million to $128.3 million). Domestic and international net revenues
accounted for approximately 60.6% and 39.4%, respectively, of total net revenues
compared to 64.1% and 35.9% in fiscal year 1993. Domestic EAS net revenues
increased $17.1 million (or 31.3%) primarily as a result of increased unit
sales. In addition, higher prices in certain product offerings and increases in
recurring service revenues also contributed to the increase. International EAS
net revenues increased $17.2 million (or 51.5%) primarily as a result of higher
prices received by the Company as a result of direct sales as compared to
selling through distributors. However, during fiscal year 1994 the Company's
operations in Western Europe were significantly impacted by severe price
competition as a result of ongoing efforts by competitors in that area to retain
their respective market shares. These price reductions negatively impacted the
Company's earnings from its international operations by approximately $3.0
million.

COST OF REVENUES

Cost of revenues increased approximately $12.0 million (or 21.9%) over
fiscal year 1993 (from $54.4 million to $66.4 million). As a percentage of net
revenues, however, cost of revenues decreased 6.8% (from 58.5% to 51.7%)
compared to fiscal year 1993 primarily due to (i) increased production volumes
resulting in favorable overhead absorption combined with greater manufacturing
efficiencies, (ii) the relocation of European production into lower cost
Caribbean based facilities and (iii) increased manufacturing efficiencies of
existing as well as newer generation products introduced in fiscal year 1993.
Combined, these items resulted in lowering production cost as a percentage of
revenues by 1.8% (from 41.7% to 39.9%). Lower spending on research and
development from the prior year (from $5.4 million to $4.9 million) as a result
of the completion of new products during the past several years also contributed
to reducing costs as a percentage of revenues by 2.0%. In addition, the
Company's service costs were positively impacted by the introduction of new
deactivation products, Counterpoint IV and V, with their increased deactivation
heights thereby reducing the frequency of customers' failure to deactivate
disposable labels. Increased service revenues without the cost for
proportionately greater service personnel resulted in reducing service costs as
a percentage of revenues by 3.0%.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

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

NET EARNINGS

Net earnings were $6.3 million or $0.29 per share versus $1.6 million or
$0.08 per share for fiscal year 1993. The results for fiscal year 1993, however,
include a one-time benefit of $3.5 million ($2.7 million after tax) from a
settlement of a contract dispute with the Company's former exclusive distributor
for Western Europe.

LIQUIDITY AND CAPITAL RESOURCES

The Company's liquidity needs have related to, and are expected to continue
to relate to, capital investments, acquisitions and working capital
requirements. The Company has met its liquidity needs over the last three years
primarily through funds provided by long-term borrowings and in fiscal 1995,
through the issuance of common stock in an underwritten public offering and the
issuance of the Debentures.

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<PAGE>

The Company's operating activities during the first quarter of 1996
consumed approximately $4.0 million compared to $7.6 million during the first
quarter of 1995. This use of cash was primarily the result of (i) an increase in
long term customer contracts made under the Company's comprehensive target
program and sales type leases, (ii) payments made on accounts payable acquired
as part of the Actron transaction and (iii) restructuring costs that the Company
initiated as part of the integration of its European operations.

The Company's operating activities consumed approximately $14.8 million
during fiscal year 1995 compared to $7.6 million in fiscal year 1994. This use
of cash was primarily the result of (i) an increase in accounts receivable
levels related to greater sales volumes, and (ii) an increase in finished goods
inventories in order to place equipment at customer's locations under operating
lease agreements and to meet anticipated product demand.

During fiscal year 1995 the Company also completed a private placement of
debt totaling $15.0 million. A significant portion of the proceeds,
approximately $13.0 million, was used for the acquisition of Alarmex (see Note
17 of the Notes to Consolidated Financial Statements) and the repayment of
existing debt owed by Alarmex at the time of acquisition. The balance of the
proceeds, approximately $2.0 million, was used for general corporate purposes.
During the third quarter of 1995, the Company entered into an amended and
restated $60.0 million revolving credit agreement with a group of banks to
replace the existing $25.0 million in revolving credit indebtedness which had
been established during the first quarter of 1995. This amended and restated
agreement is a three year agreement which expires on June 1, 1998 (see Note 5 of
the Notes to Consolidated Financial Statements).

The Company also completed the sale of approximately 6.2 million shares of
Common Stock during the second quarter of fiscal year 1995 pursuant to an
underwritten public offering. The net proceeds received by the Company from this
offering approximated $54.7 million. Of these proceeds, $25 million was used to
reduce in its entirety the amount outstanding under the Company's revolving
credit line. The balance of the proceeds were allocated for general corporate
purposes including (i) funding strategic acquisitions or start-up opportunities,
and (ii) funding the Company's leasing programs.

The Company capital expenditures during the first quarter of 1996 totalled
$2.2 million compared to $2.3 million during the first quarter of 1995. The
Company's capital expenditures during fiscal year 1995 totaled $9.4 million
compared to $4.5 million during fiscal year 1994. Notwithstanding the slight
quarter-to-quarter reduction, the Company expects to continue to make
investments in property, plant and equipment at levels higher than the last
several years. These capital expenditures will generally relate to expanding,
improving and maintaining plant efficiency at the Company's various production
facilities located in the Caribbean and enhancing distribution capabilities and
efficiencies worldwide. As part of this expansion, the Company plans to increase
the current annual production capacity of disposable labels from approximately
three billion to approximately five billion by the second half of 1997. In
addition, and as part of its continuing strategy to expand international direct
distribution, the Company is currently in the process of establishing its own
centralized Western European distribution center. Total capital expenditures in
1996 is expected to approximate $14.0 million.

During fiscal year 1995 the Company generated approximately $116.0 million
from the issuance of the Debentures (see Note 6 of the Notes to Consolidated
Financial Statements). These proceeds were allocated by the Company in the
following manner: (i) approximately $55 million was used for the completed
acquisition of Actron and related transaction costs; (ii) approximately $25
million for potential strategic acquisitions and related start-up operations and
capital expenditures in the following areas: international direct distribution,
expanded manufacturing capacity and product line diversification within the
Company's core business; and (iii) the balance to provide capital to enable the
Company to lease equipment to retailers under long-term leases (in order to
promote sales of disposable tags) and for general corporate purposes.

The Company has never paid a cash dividend and has no plans to do so in the
foreseeable future. Certain covenants in the Company's debt instruments limit
the amounts available for cash dividends.

<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, 32% for
fiscal year 1995 and 34% for the first quarter of fiscal year 1996. The
Company's manufacturing facilities have the current capacity to produce up to
three billion disposable RF targets per year at a low cost.

The Company believes that the net proceeds from the sale of the shares of
Common Stock offered hereby will provide it with the additional capital
resources necessary to continue to implement the Company's business strategy,
which focuses on capitalizing on retailers' increasing attention to theft
prevention through use of the Company's proprietary RF technology-based
products.

The Company's diversified product lines are designed to help retailers
prevent losses caused by theft (both by customers and employees) while at the
same time enabling retailers to capitalize on consumer impulse buying by openly
displaying higher volume, higher margin merchandise, and to reduce associated
selling costs through lower staff requirements. The Company's broad and flexible
product lines, marketed and serviced by its extensive sales and service
organization, have helped the Company emerge as the preferred supplier to such
hard goods retail chains as Caldor, Circuit City, Eckerd's, 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.

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.

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<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, environmentally
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
approximately 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

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<PAGE>

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

Checkpoint's principal global competitor in the EAS industry is
Sensormatic. Sensormatic is a fully integrated supplier of electronic security
systems with an 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. The Company intends to attain
these objectives 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 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

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<PAGE>

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 approximately 16% 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. The Company is in the process of
implementing plans to increase production capacity in its Puerto Rico
facilities substantially, and has also entered into a supply agreement with
Tokai pursuant to which Tokai agrees to supply the Company with 15 million
disposable targets per month at the Company's request. 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 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

27
<PAGE>

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

Also introduced in 1993, the QS1500(Trademark) and QS1600(Registered) 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 12 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(Registered) sensors, featuring an earlier generation of components,
the QS3000(Registered), 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(Trademark) 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(Registered), a non-contact deactivation unit which
eliminated the need to search for and remove or manually detune disposable
targets. Since 1989, the

28
<PAGE>

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 12 inches and improves
the rate of product deactivation. In 1994, the Company increased the
deactivation height beyond 12 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(Registered) targets in a single step. Ideal for high-volume
environments, these scanners mount easily at POS, and can deactivate multiple
targets on a single item.

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

Targets

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

Disposable Targets. Disposable security targets are affixed to merchandise
by pressure sensitive adhesive or other means. These range in size from 1.125' x
1.5' to 2.0' x 3.0', enabling retailers to protect smaller, frequently-pilfered
items. Disposable targets must be deactivated at the point-of-sale, either
manually or electronically, or passed around the sensors. Checkpoint provides
labels compatible with a wide variety of standard 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(Registered) 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(Registered) 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(Registered)) 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.

29
<PAGE>

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.

The Company has also entered into a supply agreement with Tokai, pursuant
to which Tokai agrees to supply the Company with 15 million targets per month at
the Company's request during the first two years of the term of the supply
agreement. After the expiration of such initial two year period, Tokai is
obligated to supply monthly an increasing number of targets through the year
2008. The Company also entered into a license agreement which provides the
Company with a royalty based on the sales of Tokai. Tokai is one-third owned by
a wholly-owned subsidiary of the Company.

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

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

Access Control Systems

The electronic access control Threshold(Registered) 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(Trademark) 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(Registered) family of readers provides the
fastest card verification in the industry and the

30
<PAGE>

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

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

Net Revenues by Product

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

NET REVENUES BY PRODUCT
<TABLE>
<CAPTION>

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, Circuit City, Eckerd's, Lucky's Grocery, Ralph's, Rite-Aid,
Ross, Target and Walgreens.

31
<PAGE>

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. 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, Brazil 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.

Independent distributors accounted for 28% 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 products 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).

32
<PAGE>

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. It is in the process of implementing plans to install an
additional production line at an estimated cost of $2.0 million, which will
increase capacity to five billion disposable RF targets per year. This line is
to be operational in the second half of 1997. In addition, with the expenditure
of approximately $5.5 million in facility construction and $5.2 million in
machinery and equipment, the Company could increase its capacity to produce as
many as eight billion disposable RF targets annually.

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

RAW MATERIALS

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

RESEARCH AND DEVELOPMENT

Checkpoint has increased its research and development expenditures during
the past three years over prior levels. The Company expended approximately $5.4
million, $4.9 million, and $6.9 million in research and development activities
during fiscal years 1993, 1994 and 1995, respectively. 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 60 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

33
<PAGE>

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

The Company is involved in certain legal and regulatory actions all of
which have arisen in the ordinary course of business. While the Company is
unable to predict the outcome of these matters, it does not believe that the
ultimate resolution of such matters will have a material adverse effect on its
consolidated financial position or results of operation.

On February 14, 1996, the United States Federal Trade Commission began an
investigation of the retail security industry. The probe was launched under the
premise of anticompetitive practices within the industry whereby certain
retail-trade groups limited the autonomy of smaller retailers by supporting
specific security systems. The Company, along with Sensormatic Electronics
Corporation, Minnesota Mining and Manufacturing Company, and other industry
participants, received subpoenas requesting certain documents and communications
necessary for the investigation. The Company does not believe that any legal or
regulatory infraction will be found on its part.

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 34,000 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 63,000 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 40,000 square feet of office and warehouse
space outside Minneapolis, Minnesota. This lease expires in 2005 with an annual
rent of approximately $292,000.

The Company's foreign subsidiaries maintain various sales and distribution
locations in Australia, Argentina, Belgium, Brazil, 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.

34
<PAGE>
MANAGEMENT

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

<TABLE>
<CAPTION>
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.

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.

35
<PAGE>

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.

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 May 2, 1996, 29,293,514 shares of Common
Stock were issued and outstanding and no shares of Preferred Stock were issued
and outstanding. In addition, at May 2, 1996, there were outstanding options to
purchase 3,441,792 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, and 2,571,428 shares
of Common Stock reserved for issuances upon conversion of the Debentures.

36
<PAGE>

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 presently consisting of two 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
('Shareholder Rights Agreement') intended to discourage hostile 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 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, 1,974,848 and 88,500 options (after giving effect to the February 1996
Stock Dividend) to purchase Common Stock in 1992, 1993, 1994, 1995 and 1996
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. 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.

37
<PAGE>
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.

UNDERWRITING

The underwriters named below (the 'Underwriters') have severally agreed,
subject to the terms and conditions of the Underwriting Agreement, to purchase
from the Company the number of shares of Common Stock set forth opposite their
respective names at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this Prospectus:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- ------------------------------------------------------------------------------ -----------
<S> <C>
NatWest Securities Limited....................................................
Alex. Brown & Sons Incorporated...............................................
Deutsche Morgan Grenfell/C. J. Lawrence Inc...................................
PaineWebber Incorporated......................................................
Raymond James & Associates Inc................................................
HD Brous & Co., Inc...........................................................
-----------
Total....................................................................... 3,500,000
</TABLE>

The Underwriters are committed to purchase all of the shares of Common
Stock offered hereby, if any shares are purchased.

The Underwriters propose to offer the shares directly to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain selected dealers at such price less a selling concession not in excess
of $ per share. The Underwriters may allow, and such selected dealers
may re-allow, a concession not in excess of $ per share to certain
brokers and dealers.

The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase at the public
offering price, less the underwriting discount, as set forth on the cover page
of this Prospectus, up to 525,000 additional shares of Common Stock. If the
Underwriters exercise their option to purchase any of the additional shares,
each of the Underwriters will have a firm commitment, subject to certain
conditions, to purchase approximately the same percentage thereof which the
number of shares to be purchased by each of them as shown in the above table
bears to the 3,500,000 shares of Common Stock offered hereby. The Underwriters
may exercise such option only to cover over-allotments in connection with the
sale of the 3,500,000 shares of Common Stock offered hereby.

The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.

The Company, its directors and certain of its executive officers, have
agreed that, until 90 days after the date of this Prospectus, they will not,
without the consent of NatWest Securities Limited, sell, offer to sell, issue,
distribute or otherwise dispose of any shares of Common Stock or any securities
or interests convertible into, or exercisable or exchangeable therefor, other
than (a) the shares of Common

38
<PAGE>

Stock offered hereby, (b) shares of Common Stock issuable upon the conversion of
the Debentures or upon the exercise of outstanding stock options, (c) grants to
employees for compensation purposes, or (d) shares of Common Stock issuable
pursuant to the Shareholder Rights Agreement.

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

NatWest Securities Limited has also represented and agreed that (i) it has
not offered or sold and will not offer or sell any Common Stock to persons in
the United Kingdom prior to admission of the Common Stock to listing in
accordance with Part IV of the Financial Services Act 1986 (the 'Act') except to
persons whose ordinary activities involve them in acquiring, managing, holding
or disposing of investments (as principal or agent) for the purpose of their
businesses or otherwise in circumstances which have not resulted and will not
result in an offer to the public in the United Kingdom within the meaning of the
Public Offers of Securities Regulations 1995 or the Act; (ii) it has complied
and will comply with all applicable provisions of the Act with respect to
anything done by it in relation to the Common Stock in, from or otherwise
involving the United Kingdom; and (iii) it has only issued or passed on and will
only issue or pass on, in the United Kingdom any document received by it in
connection with the issue of the Common Stock, other than any document which
consists of or any part of listing particulars, supplementary listing
particulars or any other document or instrument required or permitted to be
published by listing rules under Part IV of the Act, to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to whom the document may
otherwise be lawfully issued or passed on.

Certain of the Underwriters or their affiliates have provided, and expect
in the future to provide, services to the Company.

LEGAL OPINIONS

Stradley, Ronon, Stevens & Young, LLP, Philadelphia, Pennsylvania, will
pass upon certain legal matters with respect to the shares offered hereby for
the Company. Skadden, Arps, Slate, Meagher & Flom, New York, New York, will pass
upon certain legal matters for the Underwriters.

EXPERTS

The consolidated balance sheets as of December 31, 1995 and December 24,
1994 and the related consolidated earnings statements, statements of
shareholders' equity and cash flows for each of the years in the three year
period, ended December 31, 1995 included herein or incorporated by reference in
this Prospectus, have been included or 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 consolidated balance sheet of Actron Group Limited as of November 30,
1995 and the related consolidated statements of income, cash flows, and changes
in shareholders' equity for the eleven-month period ended November 30, 1995
incorporated by reference in this Prospectus, have been incorporated herein in
reliance on the report of KPMG, independent accountants, given the authority of
that firm as experts in accounting and auditing.

39
<PAGE>
AVAILABLE INFORMATION

The Company is subject to the informational requirements of the 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 7 World Trade Center, Suite 1300, New York, New
York 10048, and 500 West Madison Street, Suite 1400 Chicago, Illinois 60661.
Copies of such material should be available on-line through EDGAR and 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.

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.

<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
FIRST QUARTER INFORMATION (UNAUDITED)

Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995..................................... F-2

Consolidated Statements of Operations for 13 weeks ended March 31, 1996 and
March 26, 1995........................................................................................... F-3

Consolidated Statement of Shareholders' Equity for 13 weeks ended March 31, 1996........................... F-3

Consolidated Statement of Cash Flows for 13 weeks ended March 31, 1996..................................... F-4

Notes to Unaudited Consolidated Financial Statements....................................................... F-5

YEAR END FINANCIAL INFORMATION

Report of Independent Accountants.......................................................................... F-9

Consolidated Balance Sheets as of December 31, 1995 and December 25, 1994.................................. F-10

Consolidated Earnings Statements for each of the years in the three-year period ended December 31, 1995.... F-11

Consolidated Statement of Shareholders' Equity for each of the years in the
three-year period ended December 31, 1995................................................................ F-11

Consolidated Statements of Cash Flows for each of the years in the
three-year period ended December 31, 1995................................................................ F-12

Notes to Consolidated Financial Statements................................................................. F-13
</TABLE>

F-1
<PAGE>
CHECKPOINT SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------

(THOUSANDS)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents........................................................ $ 70,882 $ 77,456
Accounts receivable, net of allowances of $2,199,000 and
$1,906,000.................................................................... 70,284 73,065
Inventories...................................................................... 49,254 54,941
Other current assets............................................................. 7,306 7,479
Deferred income taxes............................................................ 1,718 1,718
----------- -----------
Total current assets.......................................................... 199,444 214,659
REVENUE EQUIPMENT ON OPERATING LEASE, net............................................. 18,193 15,280
PROPERTY, PLANT AND EQUIPMENT, net.................................................... 36,977 40,745
EXCESS OF PURCHASE PRICE OVER FAIR VALUE OF
NET ASSETS ACQUIRED................................................................. 61,630 61,456
INTANGIBLES........................................................................... 15,220 14,930
OTHER ASSETS.......................................................................... 23,599 15,081
----------- -----------
TOTAL ASSETS.......................................................................... $ 355,063 $ 362,151
----------- -----------
----------- -----------

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................................................. $ 10,889 $ 16,643
Accrued compensation and related taxes........................................... 4,087 5,762
Income taxes..................................................................... 3,053 4,921
Unearned revenues................................................................ 9,262 8,155
Other current liabilities........................................................ 23,474 27,102
Short-term borrowings and current portion of long-term debt...................... 2,970 4,002
----------- -----------
Total current liabilities..................................................... 53,735 66,585
LONG-TERM DEBT, LESS CURRENT MATURITIES............................................... 34,369 35,674
5 1/4% CONVERTIBLE SUBORDINATED DEBENTURES WITH A SCHEDULED MATURITY IN 2005.......... 120,000 120,000
DEFERRED INCOME TAXES................................................................. 2,234 2,234
SHAREHOLDERS' EQUITY
Preferred stock, no par value, authorized 500,000 shares, none issued
Common stock, par value $.10 per share, authorized 100,000,000 shares, issued
30,838,014 and 30,019,758...................................................... 3,084 3,002
Additional capital............................................................... 88,172 83,126
Retained earnings................................................................ 61,144 58,198
Common stock in treasury, at cost, 1,598,000 shares.............................. (5,664) (5,664)
Foreign currency adjustments..................................................... (2,011) (1,004)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY............................................................ 144,725 137,658
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................................ $ 355,063 $ 362,151
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-2
<PAGE>
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED EARNINGS STATEMENTS
(UNAUDITED)

<TABLE>
<CAPTION>
QUARTER (13 WEEKS) ENDED
------------------------
MARCH 31, MARCH 26,
1996 1995
----------- -----------
(THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net Revenues......................................................................... $ 66,994 $ 37,360
Cost of Revenues..................................................................... 39,556 21,269
---------- ----------
Gross Profit......................................................................... 27,438 16,091
Selling, General and Administrative Expenses......................................... 22,259 14,627
---------- ----------
Operating Income..................................................................... 5,179 1,464
Interest Income...................................................................... 1,019 169
Interest Expense..................................................................... (2,343) (1,056)
Foreign Exchange Gain (Loss)......................................................... 478 (286)
---------- ----------
Earnings Before Income Taxes......................................................... 4,333 291
Income Taxes......................................................................... 1,387 87
---------- ----------
Net Earnings......................................................................... $ 2,946 $ 204
---------- ----------
---------- ----------
Net Earnings Per Share............................................................... $ .10 $ .01
---------- ----------
---------- ----------
</TABLE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS (13 WEEKS) ENDED MARCH 31, 1996
----------------------------------------------------------------------
FOREIGN
COMMON ADDITIONAL RETAINED TREASURY CURRENCY
STOCK CAPITAL EARNINGS STOCK ADJUST. TOTAL
----------- ----------- --------- --------- --------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 (1)............. $ 3,002 $ 83,126 $ 58,198 $ (5,664) $ (1,004) $ 137,658
Net Earnings............................... 2,946 2,946
Exercise of Stock Options.................. 82 5,046 5,128
Foreign Currency Adjustments............... (1,007) (1,007)
----------- ----------- --------- --------- --------- -----------
Balance, March 31, 1996.................... $ 3,084 $ 88,172 $ 61,144 $ (5,664) $ (2,011) 144,725
----------- ----------- --------- --------- --------- -----------
----------- ----------- --------- --------- --------- -----------
</TABLE>

- ------------------
(1) After giving retroactive effect to the February 1996 Stock Split.

See accompanying notes to consolidated financial statements.

F-3
<PAGE>
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
(13 WEEKS) ENDED
-------------------------
MARCH 31, MARCH 26,
1996 1995
----------- ------------
(THOUSANDS)
<S> <C> <C>
Cash inflow (outflow) from operating activities:
Net earnings....................................................................... $ 2,946 $ 204
Adjustments to reconcile net earnings to net cash provided by operating activities:
Net book value of rented equipment sold......................................... 210 168
Long-term customer contracts.................................................... (3,124) (196)
Depreciation and amortization................................................... 4,291 2,737
Provision for losses on accounts receivable..................................... 432 251
(Increase) decrease in current assets:
Accounts receivable.......................................................... 2,174 (1,470)
Inventories.................................................................. 970 (4,341)
Other current assets......................................................... 153 580
Increase (decrease) in current liabilities:
Accounts payable............................................................. (5,786) (4,140)
Accrued compensation and related taxes....................................... (1,687) 145
Income taxes................................................................. (1,877) (1,402)
Unearned revenues............................................................ 1,080 469
Other current liabilities.................................................... (3,795) (581)
---------- -----------
Net cash used by operating activities........................................ (4,013) (7,576)
---------- -----------
Cash inflow (outflow) from investing activities:
Acquisition of property, plant and equipment....................................... (2,168) (2,335)
Acquisitions, net of cash acquired................................................. -- (10,061)
Other investing activities......................................................... (3,686) (420)
---------- -----------
Net cash used by investing activities........................................ (5,854) (12,816)
---------- -----------
Cash inflow (outflow) from financing activities:
Proceeds from stock issuances...................................................... 5,128 795
Proceeds of debt................................................................... -- 38,000
Payment of debt.................................................................... (1,835) (18,998)
---------- -----------
Net cash provided by financing activities.................................... 3,293 19,797
---------- -----------
Net increase (decrease) in cash and cash equivalents................................. (6,574) (595)
Cash and cash equivalents:
Beginning of period................................................................ 77,456 944
---------- -----------
End of Period...................................................................... $ 70,882 $ 349
---------- -----------
---------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-4
<PAGE>
CHECKPOINT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF ACCOUNTING

The consolidated financial statements include the accounts of Checkpoint
Systems, Inc. and its wholly-owned subsidiaries ('Company'). All material
intercompany transactions are eliminated in consolidation. The consolidated
financial statements and related notes are unaudited and do not contain all
disclosures required by generally accepted accounting principles. Refer to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
for the most recent disclosure of the Company's accounting policies.

The consolidated financial statements include all adjustments, consisting
only of normal recurring accruals, necessary to present fairly the Company's
financial position at March 31, 1996 and December 31, 1995 and its results of
operations and changes in cash flows for the thirteen week periods ended March
31, 1996 and March 26, 1995.

2. INVENTORIES

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1996
----------- ------------
(THOUSANDS)
<S> <C> <C>
Raw materials............................................................... $ 7,725 $ 7,282
Work in process............................................................. 407 275
Finished goods.............................................................. 41,122 47,384
----------- ------------
$ 49,254 $ 54,941
----------- ------------
----------- ------------
</TABLE>

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

3. INCOME TAXES

Income taxes are provided for on an interim basis at an estimated effective
annual tax rate. The Company's net earnings generated by the operations of its
Puerto Rico subsidiary are exempt from Federal income taxes under Section 936 of
the Internal Revenue Code and substantially exempt from Puerto Rico income
taxes. Under Statement of Financial Accounting Standards (SFAS) No. 109,
'Accounting for Income Taxes', deferred tax liabilities and assets are
determined based on the difference between financial statement and tax basis of
assets and liabilities using enacted statutory tax rates in effect at the
balance sheet date.

4. PER SHARE DATA

Per share data is based on the weighted average number of common and common
equivalent shares (stock options) outstanding during the periods. The number of
shares used in the per share computations for the thirteen week periods were
30,957,000 (1996) and 22,604,000 (1995) after giving retroactive effect to the
February 22, 1996 stock split.

5. SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for the thirteen week period ended March 31, 1996 and March
26, 1995, respectively, included interest payments of $862,000 and $566,000 and
income taxes paid of $3,566,000 and $1,500,000.

Excluded from the investing activities in the Consolidated Statements of
Cash Flows are net transfers from inventory to property, plant and equipment of
$4,493,000 and $2,690,000 for the

F-5
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

5. SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)
thirteen week periods ended March 31, 1996 and March 26, 1995, respectively,
relating to equipment rented to customers.

6. INTANGIBLES

Intangibles consist of patents, licenses, customer lists, and software
development costs. The costs relating to the acquisition of patents and licenses
are amortized on a straight-line basis over their economic/legal useful lives,
which range from five to ten years. Accumulated amortization approximated
$2,308,000 and $1,806,000 at March 31, 1996 and December 31, 1995, respectively.

The costs of internally developed software are expensed until the
technological feasibility of the software has been established. Thereafter, all
software development costs are capitalized and subsequently reported at the
lower of unamortized cost or net realizable value. The costs of capitalized
software are amortized over the products' estimated useful lives or five years,
whichever is shorter. Capitalized software development costs, net of accumulated
amortization, totaled $1,834,000 and $1,519,000 as of March 31, 1996 and
December 31, 1995, respectively.

7. ACQUISITION

In March 21, 1996, the Company acquired Mercatec Sistemas e Comercio de
Equipamentos Electronicos Ltds. ('Mercatec'). Mercatec is a leading supplier of
EAS systems and CCTV systems to retailers in Brazil with approximately
$3,000,000 in annual sales.

On November 30, 1995, the Company purchased all of the capital stock of
Actron Group Limited ('Actron') which is engaged in the manufacture,
distribution and sale of security products and services. The purchase price of
the capital stock was approximately $54,000,000. This acquisition was accounted
for under the purchase method and, accordingly, the results of operations of
this business have been included with those of the Company since the date of
acquisition. The purchase price resulted in an excess of acquisition cost over
net assets acquired of approximately $40,600,000 which is being amortized over
thirty years.

In connection with the acquisition of Actron accruals of $10,401,000 were
established to integrate Actron's operations with the Company's existing sales
and production locations. Included in this accrual are: (i) costs associated
with the elimination of approximately 70 manufacturing and field service
positions from the Actron operation (approximately $7.7 million), (ii) costs
related to the closure of redundant sales locations (approximately $1.8
million), and (iii) ancillary costs (approximately $.9 million). During the
first quarter of 1996, approximately $614,000 of the ancillary costs and
approximately $1,595,000 of the severance costs had been charged against the
accrual. The remaining portion of the accrual is included in the 'Other Current
Liabilities' section of the Company's consolidated balance sheet. The
integration of Actron's operations is expected to be completed in the second
quarter of 1996. Actual charges to complete the integration may differ from the
above estimates. Such differences will increase (decrease) the excess of
purchase price over net assets acquired.

The following table represents unaudited combined results of operations for
the first three months of 1996 (actual) and 1995 (as if the acquisition of
Actron had occurred at the beginning of fiscal year 1995). The following results
are not necessarily indicative of what would have occurred had the acquisition
been consummated as of that date or of future results:

F-6
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

7. ACQUISITION (CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS
(13 WEEKS) ENDED
------------------------
MARCH 31, MARCH 26,
1996 1995
----------- -----------
(THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net revenues............................................................. $ 66,994 $ 50,134
Net earnings............................................................. $ 2,946 $ (1,302)
Earnings per common share................................................ $ .10 $ (.06)
</TABLE>

8. ACCOUNTING FOR FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

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

The Company has purchased certain foreign currency forward contracts in
order to hedge anticipated rate fluctuations in Europe. Transaction gains or
losses resulting from these contracts are recognized over the contract period.

9. SUBORDINATED CONVERTIBLE DEBENTURES

On April 19, 1996, the Company completed its shelf Registration Statement
on Form S-3 covering the resale of $47,250,000 5.25% Convertible Subordinated
Debentures due 2005 ('Debentures') and 2,571,428 shares of the Company's common
stock, $.10 par value per share, issuable upon conversion of the Debentures. The
registration statement also covered the sale of 350,000 shares of the Company's
common stock issuable upon exercise of certain options granted by the Company.

10. RESTRUCTURING PLAN

In December 1995, as a result of the Actron acquisition, the Company
announced a restructuring plan to reorganize its workplace on an international
basis to eliminate redundancies. In connection with the restructuring, and in
addition to the elimination of the Actron positions referred to in Note 7
above, approximately 28 manufacturing, field service and selling and
administrative positions in the Company's international operations were
eliminated. The Company accrued approximately $1.3 million before tax in the
fourth quarter of 1995, consisting of employment severance costs of $697,000,
lease termination costs of $359,000, and ancillary and miscellaneous costs of
$244,000. During the first quarter of 1996 approximately $699,000 of severance
related payments were charged against the accrual. The plan is anticipated to be
completed in the second quarter of 1996.

11. CONTINGENCIES

F-7
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

11. CONTINGENCIES (CONTINUED)

of smaller retailers by supporting specific security systems. The Company, along
with Sensormatic Electronics Corporation, Minnesota Mining and Manufacturing,
and other industry participants, received subpoenas requesting certain documents
and communications necessary for the investigation. The Company does not believe
that any legal or regulatory infraction will be found on its part.

12. SUBSEQUENT EVENT

Pursuant to the October 11, 1995 purchase agreement for Actron Group
Limited, the Company received a $2.5 million reduction to the $54 million
purchase price resulting from certain net asset representations contained in the
Agreement. This purchase price adjustment will reduce the Excess of Purchase
Price Over Fair Value of Net Assets Acquired.

F-8
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

The Board of Directors and Shareholders
Checkpoint Systems, Inc.

We have audited the accompanying consolidated balance sheets of Checkpoint
Systems, Inc. and subsidiaries as of December 31, 1995 and December 25, 1994,
and the related consolidated earnings statements, statements of shareholder's
equity and cash flows for each of the years in the three year period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements, referred to above, present
fairly, in all material respects, the consolidated financial position of
Checkpoint Systems, Inc. and subsidiaries as of December 31, 1995 and December
25, 1994, and the consolidated results of their operations and their cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.

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

COOPERS & LYBRAND L.L.P.
Philadelphia, Pennsylvania
March 11, 1996

F-9
<PAGE>
CHECKPOINT SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 25,
1995 1994
------------ ------------
(THOUSANDS)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents....................................................... $ 77,456 $ 944
Accounts receivable, net of allowances of $1,906,000 and $1,570,000............. 73,065 33,290
Inventories net................................................................. 54,941 29,486
Other current assets............................................................ 7,479 4,385
Deferred income taxes........................................................... 1,718 1,117
----------- ----------
Total current assets......................................................... 214,659 69,222
PROPERTY, PLANT AND EQUIPMENT, net................................................... 56,025 36,799
EXCESS OF PURCHASE PRICE OVER FAIR VALUE OF
NET ASSETS ACQUIRED, net........................................................... 61,456 10,120
INTANGIBLES, net..................................................................... 14,930 5,826
OTHER ASSETS......................................................................... 15,081 5,958
----------- -----------
TOTAL ASSETS......................................................................... $ 362,151 $ 127,925
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable................................................................ $ 16,643 $ 10,064
Accrued compensation and related taxes.......................................... 5,762 2,635
Income taxes.................................................................... 4,921 2,223
Unearned revenues............................................................... 8,155 3,357
Other current liabilities....................................................... 27,102 4,810
Short-term borrowings and current portion of long-term debt..................... 4,002 6,706
----------- -----------
Total current liabilities.................................................... 66,585 29,795
LONG-TERM DEBT, LESS CURRENT MATURITIES.............................................. 35,674 35,556
CONVERTIBLE SUBORDINATED DEBENTURES.................................................. 120,000 --
DEFERRED INCOME TAXES................................................................ 2,234 1,271
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, no par value, authorized 500,000 shares, none issued
Common stock, par value $.10 per share, authorized 100,000,000 shares, issued
30,019,758 and 22,557,022..................................................... 3,002 2,256
Additional capital.............................................................. 83,126 21,592
Retained earnings............................................................... 58,198 45,661
Common stock in treasury, at cost, 1,598,000 shares............................. (5,664) (5,664)
Foreign currency adjustments.................................................... (1,004) (2,542)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY........................................................... 137,658 61,303
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........................................... $ 362,151 $ 127,925
----------- -----------
----------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE>
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED EARNINGS STATEMENTS

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- ---------
(THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Net Revenues........................................................... $ 204,741 $ 128,331 $ 93,034
Cost of Revenues....................................................... 114,044 66,360 54,421
----------- ----------- ---------
Gross Profit...................................................... 90,697 61,971 38,613
Selling, General and Administrative Expenses........................... 71,642 50,243 39,238
----------- ----------- ---------
Operating Income (loss)................................................ 19,055 11,728 (625)
Contract Settlement Income............................................. -- -- 3,500
Interest Income........................................................ 2,791 529 476
Interest Expense....................................................... 5,050 3,118 953
Foreign Exchange Loss.................................................. 198 762 327
----------- ----------- ---------
Earnings Before Income Taxes........................................... 16,598 8,377 2,071
Income Taxes........................................................... 5,189 2,094 456
----------- ----------- ---------
Net Earnings........................................................... $ 11,409 $ 6,283 $ 1,615
----------- ----------- ---------
----------- ----------- ---------
Net Earnings Per Share (1)............................................. $ .42 $ .29 $ .08
----------- ----------- ---------
----------- ----------- ---------
</TABLE>

- ------------------
(1) After giving retroactive effect to the February 1996 Stock Split.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
FOREIGN
COMMON ADDITIONAL RETAINED TREASURY CURRENCY
STOCK CAPITAL EARNINGS STOCK ADJUST. TOTAL
----------- ----------- --------- --------- --------- -----------
(THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Balance, December 27, 1992................. $ 1,080 $ 16,754 $ 38,891 $ (5,664) $ -- $ 51,061
Net Earnings............................... 1,615 1,615
Exercise of Stock Options.................. 17 1,592 1,609
Foreign Currency Adjustments............... (506) (506)
--------- --------- --------- --------- --------- -----------
Balance, December 26, 1993................. 1,097 18,346 40,506 (5,664) (506) 53,779
Net Earnings............................... 6,283 6,283
Exercise of Stock Options.................. 31 3,246 3,277
Foreign Currency Adjustments............... (2,036) (2,036)
--------- --------- --------- --------- --------- -----------
Balance, December 25, 1994................. 1,128 21,592 46,789 (5,664) (2,542) 61,303
Net Earnings............................... 11,409 11,409
Exercise of Stock Options.................. 44 5,200 5,244
Stock Issuances............................ 329 57,835 58,164
Stock Split, Effective February 22, 1996... 1,501 (1,501) --
Foreign Currency Adjustments............... 1,538 1,538
--------- --------- --------- --------- --------- -----------
Balance, December 31, 1995................. $ 3,002 $ 83,126 $ 58,198 $ (5,664) $ (1,004) $ 137,658
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
</TABLE>

See accompanying notes to consolidated financial statements.

F-11
<PAGE>
CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
1995 1994 1993
----------- --------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Cash inflow (outflow) from operating activities:
Net earnings............................................................... $ 11,409 $ 6,283 $ 1,615
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Net book value of rented equipment sold................................. 1,502 1,652 1,268
Long-term customer contracts............................................ (2,017) (919) 421
Depreciation and amortization........................................... 12,178 8,023 6,476
Deferred Taxes.......................................................... 362 633 (479)
Provision for losses on accounts receivable............................. 1,188 1,221 520
Restructuring charge.................................................... 1,254 -- --
(Increase) decrease in current assets:
Accounts receivable.................................................. (25,600) (11,289) (2,716)
Inventories.......................................................... (23,418) (13,095) (10,792)
Other current assets................................................. 1,706 828 (2,024)
Increase (decrease) in current liabilities:
Accounts payable..................................................... (1,820) (669) 2,062
Accrued compensation and related taxes............................... 2,460 728 (269)
Income taxes......................................................... 2,256 1,431 (385)
Unearned revenues.................................................... 1,612 712 (7)
Other current liabilities............................................ 2,175 (3,151) (2,007)
----------- --------- ---------
Net cash provided (used) by operating activities..................... (14,753) (7,612) (6,317)
----------- --------- ---------
Cash inflow (outflow) from investing activities:
Acquisition of property, plant and equipment............................... (9,379) (4,532) (4,600)
Acquisitions, net of cash acquired......................................... (65,997) (1,786) (3,184)
Patent defense costs....................................................... (136) -- (1,998)
Other investing activities................................................. (4,140) (2,266) (1,662)
----------- --------- ---------
Net cash used by investing activities................................ (79,652) (8,584) (11,444)
----------- --------- ---------
Cash inflow (outflow) from financing activities:
Proceeds from stock issuances.............................................. 59,910 3,277 1,609
Proceeds of debt........................................................... 157,281 28,306 14,774
Payment of debt............................................................ (46,274) (14,443) (942)
----------- --------- ---------
Net cash provided by financing activities............................ 170,917 17,140 15,441
----------- --------- ---------
Net increase (decrease) in cash and cash equivalents......................... 76,512 944 (2,320)
Cash and cash equivalents:
Beginning of year.......................................................... 944 -- 2,320
----------- --------- ---------
End of Year................................................................ $ 77,456 $ 944 $ --
----------- --------- ---------
----------- --------- ---------
</TABLE>

See accompanying notes to consolidated financial statements.

F-12
<PAGE>
CHECKPOINT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS

The Company is a multinational 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,
primarily to retailers in the following market segments: hard goods
(supermarkets, drug stores, mass merchandising and music/electronics) and soft
goods (apparel).

PRINCIPLES OF CONSOLIDATION

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

FISCAL YEAR

The Company's fiscal year is the 52 or 53 week period ending the last
Sunday of December. References to 1995, 1994, and 1993 are for: the 53 weeks
ended December 31, 1995, the 52 weeks ended December 25, 1994, and the 52 weeks
ended December 26, 1993.

RECLASSIFICATIONS

Certain reclassifications have been made to the 1994 and 1993 financial
statements and related footnotes to conform to the 1995 presentation.

STOCK SPLIT
On January 4, 1996, the Company's Board of Directors authorized a
two-for-one stock split effected in the form of a 100% tax-free stock dividend
distributed on February 22, 1996 to stockholders of record as of January 18,
1996. Stockholders' equity at December 31, 1995 has been adjusted to give
retroactive effect to the stock split by reclassifying from additional capital
to common stock the par value of the additional shares arising from the split.
All share and per share amounts have been restated to retroactively reflect the
stock split.

REVENUE RECOGNITION

Revenue from the sale of equipment is recognized upon shipment of equipment
or the acceptance of a customer order to purchase equipment currently rented.
Revenue from the sale of point-of-sale monitoring systems is recognized on a
percentage of completion basis. Equipment leased to customers under sales-type
leases is accounted for as the equivalent of a sale. The present value of such
lease revenues is recorded as net revenues, and the related cost of the
equipment is charged to cost of

F-13
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

revenues. The deferred finance charges applicable to these leases are recognized
over the terms of the leases using the effective interest method. Rental revenue
from equipment under operating leases is recognized over the term of the lease.
Service revenue is recognized on a straight-line basis over the contractual
period or as services are performed. Sales to third party leasing companies are
recognized as the equivalent of a sale. These sales were all made on a
non-recourse basis.

CASH AND CASH EQUIVALENTS

Cash in excess of operating requirements is invested in short-term, income
producing instruments. Cash equivalents include commercial paper and other
securities with original maturities of 90 days or less. Book value approximates
fair value because of the short maturity of those instruments.

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are carried at cost. Depreciation and
amortization generally are provided on a straight-line basis over the estimated
useful lives of the assets; for certain manufacturing equipment, the
units-of-production method is used. Buildings, equipment rented to customers,
leasehold improvements, and leased equipment under capitalized leases use the
following estimated useful lives of 27.5 years, 5 years, 7 years, and 5 years,
respectively. Machinery and equipment estimated useful life ranges from 5 to 10
years. Maintenance, repairs and minor renewals are expensed as incurred.
Additions, improvements and major renewals are capitalized. The cost and
accumulated depreciation applicable to assets retired are removed from the
accounts and the gain or loss on disposition is included in income.

EXCESS OF PURCHASE PRICE OVER FAIR VALUE OF NET ASSETS ACQUIRED

The excess of purchase price over the fair value of net assets acquired is
amortized on a straight-line basis over their economic useful lives which is
considered to range between 20 and 30 years. The Company's policy is to record
an impairment loss against the net unamortized cost in excess of net assets of
businesses acquired in the period when it is determined that the carrying amount
of the asset may not be recoverable. An evaluation is made at each balance sheet
date (quarterly) and it is based on such factors as the occurrence of a
significant event, a significant change in the environment in which the business
operates or if the expected future net cash flows (undiscounted and without
interest) would become less than the carrying amount of the asset. Accumulated
amortization approximated $3,756,000 and $2,437,000 at December 31, 1995 and
December 25, 1994, respectively.

RESEARCH AND DEVELOPMENT COSTS

Research and development costs are expensed as incurred, and approximated
$6,862,000, $4,877,000, and $5,392,000 in 1995, 1994, and 1993, respectively.

F-14
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ROYALTY EXPENSE

Royalty expenses incurred approximated $2,863,000, $2,227,000, and
$1,619,000 in 1995, 1994, and 1993, respectively.

PER SHARE DATA

Per share data is based on the weighted average number of common and common
equivalent shares (stock options) outstanding during the year. The number of
shares used in the per share computations were 27,374,000 (1995), 21,612,000
(1994), and 20,772,000 (1993) after giving retroactive effect to the February
1996 stock split.

INTANGIBLES

Intangibles consist of patents, rights, customer lists and software
development costs. The costs relating to the acquisition of patents, rights and
customer lists are amortized on a straight-line basis over their useful lives
which range between seven and ten years, or legal life, whichever is shorter.
Accumulated amortization approximated $1,806,000, $1,027,000, and $473,000 at
December 31, 1995, December 25, 1994, and December 26, 1993, respectively.

The costs of internally developed software are expensed until the
technological feasibility of the software has been established. Thereafter, all
software development costs are capitalized and subsequently reported at the
lower of unamortized cost or net realizable value. The costs of capitalized
software are amortized over the products' estimated useful lives or five years,
whichever is shorter. Capitalized software development costs were $2,842,000 and
$1,957,000 at December 31, 1995 and December 25, 1994, respectively, net of
accumulated amortization costs of $1,323,000 and $965,000 at December 31, 1995
and December 25, 1994, respectively.

TAXES ON INCOME

Income taxes for 1995, 1994 and 1993 are determined in accordance with
Statement of Financial Accounting Standards (SFAS) No. 109. Under this method,
deferred tax liabilities and assets are determined based on the difference
between financial statement and tax basis of assets and liabilities using
enacted statutory tax rates in effect at the balance sheet date. Changes in
enacted tax rates are reflected in the tax provision as they occur. A valuation
allowance is recorded to reduce deferred tax assets when realization of a tax
benefit is unlikely. Prior to 1993, taxes on income were determined under
Accounting Principles Board Opinion 11 (APB 11) whereby the income tax provision
was calculated under the deferred method.

ACCOUNTING FOR FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

F-15
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Aggregate foreign currency transaction losses in 1995, 1994, and 1993 were
$198,000, $762,000, and $327,000, respectively, and are included in 'Foreign
Exchange Loss' in the Consolidated Earnings Statement.

STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS NOT YET ADOPTED

In October 1995, the FASB issued SFAS No. 123, 'Accounting for Stock-Based
Compensation,' for fiscal years beginning after December 15, 1995. SFAS No. 123
allows companies to recognize compensation expense for grants of stock, stock
options, and other equity instruments to employees based upon fair value or
permits them to continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees' (APB No. 25). Companies choosing to continue on APB No. 25 are
required to disclose pro forma net income and earnings per share data based on
fair value. The Company anticipates continuing to account for stock-based
compensation in accordance with APB No. 25 and therefore the adoption of SFAS
123 will not have an impact on the Company's financial position or results of
operations.

In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 121, 'Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,'
for fiscal years beginning after December 15, 1995. The provisions of SFAS No.
121 require the Company to review its long-lived assets for impairment on an
exception basis whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be recoverable through future cash flows.
Any loss will be recognized in the income statement and certain disclosures
regarding the impairment are to be made in the financial statements. The company
is evaluating the provisions of SFAS No. 121 and does not anticipate adoption to
have a material effect on its financial position or results of operations.

2. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
1995 1994
--------- ---------
(THOUSANDS)
<S> <C> <C>
Raw materials............................................................... $ 7,282 $ 6,078
Work-in-process............................................................. 275 193
Finished goods.............................................................. 47,384 23,215
--------- ---------
Totals $ 54,941 $ 29,486
--------- ---------
--------- ---------
</TABLE>

F-16
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. PROPERTY, PLANT AND EQUIPMENT

The major classes are:

<TABLE>
<CAPTION>
1995 1994
--------- ---------
(THOUSANDS)
<S> <C> <C>
Land........................................................................ $ 892 $ 892
Building.................................................................... 9,784 9,751
Equipment rented to customers............................................... 19,793 10,364
Machinery and equipment..................................................... 51,610 35,162
Leasehold improvements...................................................... 1,956 1,129
Leased equipment under capital leases....................................... 15 15
--------- ---------
$ 84,050 $ 57,313
Accumulated depreciation and amortization................................... (28,025) (20,514)
--------- ---------
$ 56,025 $ 36,799
--------- ---------
--------- ---------
</TABLE>

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

The short-term debt and current portion of long-term debt at December 31,
1995 and at December 25, 1994 consisted of the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 25,
1995 1994
------------- -------------
(THOUSANDS)
<S> <C> <C>
Current portion of Long-term debt...................................... $ 3,310 $ 3,277
$2 million credit line held by Puerto Rico subsidiary with interest at
8.5%................................................................. -- 2,000
Line of credit held by Argentine subsidiary with interest at 13.0%..... 692 1,429
----------- -----------
Total short-term debt and current portion long-term debt............... $ 4,002 $ 6,706
----------- -----------
----------- -----------
</TABLE>

F-17
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT

The long-term debt at December 31, 1995 and December 25, 1994 consisted of
the following:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 25,
1995 1994
------------ ------------
(THOUSANDS)
<S> <C> <C>
Revolving Credit Agreement with interest at 8.5%.......................... $ -- $ 12,880
Seven year $7 million term note with interest at 4.9%..................... 4,200 5,250
Six year $8 million term note with interest at 6.5%....................... 5,647 7,059
Eight year $12 million private placement note with interest at 8.27%...... 12,000 12,000
Eight year $15 million private placement note with interest at 9.35%...... 15,000 --
Other loans with interest rates ranging from 6.5% to 7.87% and maturity
dates through January 2000.............................................. 2,137 1,644
----------- -----------
Total..................................................................... 38,984 38,833
Less current portion...................................................... (3,310) (3,277)
----------- -----------
Total long-term portion................................................... $ 35,674 $ 35,556
----------- -----------
----------- -----------
</TABLE>

The Company has a Revolving Credit Agreement with its principal lending
bank which currently provides a line of credit of up to $60,000,000 with a
floating interest rate (which equaled 8.5% at December 31, 1995) through June 1,
1998. At December 31, 1995, there were no outstanding borrowings under this
credit agreement.

In December 1992, the Company entered into a $7,000,000 seven year loan
agreement at a fixed rate of 4.9% with its principal lending bank. Three equal
installments of $350,000 are due during each year for a total of $1,050,000 per
year with interest due monthly. At December 31, 1995, $4,200,000 was
outstanding.

In February 1994, the Company entered into a $8,000,000 six year loan
agreement at a fixed rate of 6.5% with its principal lending bank. Three equal
installments of $470,588 are due during each year for a total of $1,411,764 per
year with interest due monthly. At December 31, 1995, $5,647,000 was
outstanding.

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

In February 1995, the Company issued and sold $15,000,000 aggregate
principal amount of 9.35% series B Notes (the notes) pursuant to a Note
Agreement dated as of January 15, 1995, among the Company and Principal Mutual
Life Insurance Company. The Notes are due January 30, 2003 and bear interest
from the issue date (computed on the basis of a 360 day year) payable
semi-annually on January 30 and July 30 of each year commencing July 30, 1995.
Notes of $3,000,000 are due on each January 30 commencing January 30, 1999 and
ending January 30, 2002, with the remaining principal payable on January 30,
2003. The Notes are uncollateralized and rank pari passu with the Company's
other funded debt.

The above loan agreements contain certain restrictive covenants which,
among other things, requires maintenance of specified minimum financial ratios
including debt to capitalization, interest

F-18
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. LONG-TERM DEBT (CONTINUED)

coverage and tangible net worth. In addition, these agreements limit the
Company's ability to pay cash dividends.

The aggregate maturities on all long-term debt are:

<TABLE>
<CAPTION>
(THOUSANDS)
<S> <C>
1996........................................................................... $ 3,310
1997........................................................................... 2,562
1998........................................................................... 2,462
1999........................................................................... 5,462
2000........................................................................... 7,000
Thereafter..................................................................... 18,188
-----------
Total.......................................................................... $ 38,984
-----------
-----------
</TABLE>

6. SUBORDINATED DEBENTURES

In November 1995, the Company completed the private placement of
$120,000,000 of Convertible Subordinated Debentures with an annual interest rate
of 5.25%. The debentures are uncollateralized, subordinated to all senior
indebtedness and convertible at any time into shares of the Company's stock at a
conversion price of $18.38 per share (equivalent to approximately 54.4 shares of
Common Stock for each $1,000 principal amount of Debentures). The debentures
will mature on November 1, 2005 and are redeemable, in whole or in part, at the
option of the Company on or after November 1, 1998. The net proceeds generated
to the Company from this transaction approximated $116,000,000. The conversion
price reflects the February 1996 Stock Split.

7. STOCK OPTIONS

Under a stock option plan for all employees adopted by the shareholders of
the Company in 1987 ('1987 Plan'), the Company granted either incentive stock
options ('ISOs') or non-incentive stock options to purchase up to 4,000,000
shares of Common Stock (amended in 1990 from a previous level of 2,000,000)
after giving effect to the February 1996 stock split.

The Company amended, restated and renamed the 1987 plan in 1992 ('1992
Plan') allowing the Company to grant either ISOs or non-incentive stock options
to purchase up to 6,000,000 shares of Common Stock (amended in 1992 from a
previous level of 4,000,000 shares) after giving effect to the February 1996
stock split. Under the 1992 Plan, only employees are eligible to receive ISOs
and both employees and non-employee directors of the Company are eligible to
receive non-incentive stock options. Non-incentive stock options issued under
the 1992 Plan through December 31, 1995 total 1,275,256 shares after giving
effect to the February 1996 stock split. At December 31, 1995, December 25, 1994
and December 26, 1993 a total of 1,592,152, 417,000, and 729,000 shares,
respectively, were available for grant after giving effect to the February 1996
stock split.

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

The 1992 Plan is administered by the Compensation and Stock Option
Committee of the Company's Board of Directors. All of the options outstanding at
December 31, 1995 were issued pursuant to the 1987 Plan or the 1992 Plan.
Options that were fully vested and exercisable totaled 3,835,048 as of December
31, 1995 after giving effect to the February 1996 stock split.

F-19
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

7. STOCK OPTIONS (CONTINUED)

The following schedule summarizes stock option activity and status, after
giving retroactive effect to the February 1996 Stock Split:

<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Outstanding at beginning of year......................... 2,892,302 3,186,928 2,562,228
Granted.................................................. 1,824,848 397,000 978,000
Exercised................................................ (882,102) (596,626) (337,300)
Canceled................................................. 0 (95,000) (16,000)
----------- ----------- -----------
Outstanding at end of year............................... 3,835,048 2,892,302 3,186,928
----------- ----------- -----------
----------- ----------- -----------

$ 2.44 to $ 2.44 to $ 2.44 to
Price range of options outstanding at end of year........ $17.75 $8.63 $8.25

$ 2.44 to $ 2.44 to $ 2.44 to
Price range of options exercised during the year......... $10.19 $8.25 $6.75

Weighted average exercise price of currently exercisable
options................................................ $ 6.98 $ 5.54 $ 5.44

Weighted average exercise price of exercisable options
outstanding(1)......................................... $ 6.98 $ 5.54 $ 5.44
</TABLE>

- ------------------
(1) The Company does not provide any vesting privileges on stock options.

8. SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments in 1995, 1994, and 1993, respectively, included payments for
interest of $2,970,761, $2,410,000, and $860,000 and income taxes of $1,806,000,
$375,000, and $638,000.

Excluded from the 1994 Consolidated Statements of Cash Flows is a non-cash
activity of $100,000 relating to the purchase of a licensing agreement in which
the Company recorded the full cost of the agreement and the associated
liability. Also excluded from investing activities in the Consolidated
Statements of Cash Flows are net transfers from inventory to property, plant and
equipment of $11,680,000, $9,059,000, and $3,976,000 in 1995, 1994, and 1993
respectively, relating to equipment rented to customers.

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

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

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

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

F-20
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8. SUPPLEMENTAL CASH FLOW INFORMATION (CONTINUED)

In February 1995, the Company purchased all of the capital stock of
Alarmex, Inc. together with a related company, Bayport Controls, Inc.
(collectively 'Alarmex'), for $13,498,000. In conjunction with the acquisition,
liabilities were assumed as follows:

<TABLE>
<S> <C>
Fair value of assets acquired............................................... $21,595,000
Cash paid and direct costs incurred for the capital stock................... $13,498,000
--------------
Liabilities assumed......................................................... $ 8,097,000
--------------
--------------
</TABLE>

In November 1995, the Company purchased all of the capital stock of Actron
Group Limited. In conjunction with the acquisition, liabilities were assumed as
follows:

<TABLE>
<S> <C>
Fair value of assets acquired............................................... $81,000,000
Cash paid and direct costs incurred for the capital stock................... $54,000,000
--------------
Liabilities assumed......................................................... $27,000,000
--------------
--------------
</TABLE>

9. SHAREHOLDERS' EQUITY

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

The Rights are exercisable only as a result of certain actions (defined by
the Plan) of an Acquiring Person or Adverse Person, as defined. Initially, upon
payment of the exercise price (currently $20, reflective of the February 1996
Stock Split), each Right will be exercisable for one share of Common Stock. Upon
the occurrence of certain events as specified in the Plan, each Right will
entitle its holder (other than an Acquiring Person or an Adverse Person) to
purchase a number of the Company's or Acquiring Person's common shares having a
market value of twice the Right's exercise price. The Rights expire on December
28, 1998. Generally, within ten days after a person becomes an Acquiring Person
or is determined to be an Adverse Person, the Company can redeem the Rights.

The Company completed the sale of approximately 6.2 million shares of
Common Stock during the second quarter of 1995 pursuant to an underwritten
public offering. The net proceeds received by the Company from this offering
were approximately $54.7 million. Of these proceeds, $25 million was used to
reduce the amount outstanding under the Company's revolving credit line. The
balance of the proceeds are expected to be used for general corporate purposes
including (i) funding strategic acquisitions or start-up opportunities, and (ii)
funding the Company's leasing program.

10. INCOME TAXES

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

The Company has a local tax exemption agreement with Puerto Rico granting a
90% local tax exemption on both the target and sensor manufacturing operations
through 2008.

Repatriation of the Puerto Rico subsidiary's unremitted earnings could
result in the assessment of Puerto Rico 'tollgate' taxes at a maximum rate of
3.5% of the amount repatriated. During 1995, 1994

F-21
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES (CONTINUED)

and 1993, a provision was made for tollgate taxes. The Company has not provided
for tollgate taxes on $20,882,000 of its subsidiary's unremitted earnings since
they are expected to be reinvested indefinitely.

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

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Domestic.......................................................... $ 17,626 $ 6,931 $ 1,720
Foreign........................................................... (1,028) 1,446 351
--------- --------- ---------
Total............................................................. $ 16,598 $ 8,377 $ 2,071
--------- --------- ---------
--------- --------- ---------
</TABLE>

The related provision for income taxes consist of:

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
(THOUSANDS)
<S> <C> <C> <C>
Currently Payable...................................................
Federal........................................................... $ 4,003 $ 914 $ 369
State............................................................. 335 -- 5
Puerto Rico....................................................... 319 444 186
Foreign........................................................... 170 103 375
Deferred............................................................
Federal........................................................... (81) 176 (509)
State............................................................. (71) (33) 30
Puerto Rico....................................................... 136 -- --
Foreign........................................................... 378 490 --
--------- --------- ---------
Total Provision..................................................... $ 5,189 $ 2,094 $ 456
--------- --------- ---------
--------- --------- ---------
</TABLE>

Deferred tax liabilities (assets) at December 31, 1995 and December 25,
1994 and consist of:

<TABLE>
<CAPTION>
1995 1994
--------- ---------
(THOUSANDS)
<S> <C> <C>
Depreciation................................................................. $ 1,398 $ 856
Deferred maintenance......................................................... 220 260
Other........................................................................ 616 155
--------- ---------
Gross deferred tax liabilities............................................... 2,234 1,271
--------- ---------
Inventory.................................................................... (1,104) (332)
Alternative minimum tax...................................................... -- (513)
Accounts receivable.......................................................... (245) (117)
Net operating loss carryforwards............................................. (15,788) (4,668)
Warranty..................................................................... (35) (52)
Other........................................................................ (334) (103)
--------- ---------
Gross deferred tax assets.................................................... (17,506) (5,785)
--------- ---------
Valuation allowance.......................................................... 15,788 4,668
--------- ---------
Net deferred tax liability (asset)........................................... $ 516 $ 154
--------- ---------
--------- ---------
</TABLE>

Included in net operating loss carryforwards of $80,038,000 is $11,369,000
that were acquired in connection with the acquisition of the ID Systems Group
and $66,700,000 that were acquired in

F-22
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

10. INCOME TAXES (CONTINUED)

connection with the acquisition of Actron. If realization of the benefit of such
carryforwards occur, the Company will apply such benefit to goodwill in
connection with the acquisition.

Of the total foreign net operating loss carryforwards available,
$60,800,000 expire beginning January 1997 through December 2002 and the
remaining portion may be carried forward indefinitely.

The valuation allowance of $15,788,000 in 1995 relate primarily to the net
operating losses acquired in connection with the Actron and the ID Systems Group
acquisitions, and subsequent losses.

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

<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Statutory federal income tax rate........................................ 35.0% 34.0% 34.0%
Tax exempt earnings of subsidiary in Puerto Rico......................... (18.0) (13.3) (14.0)
Non-deductible goodwill.................................................. 2.1 2.1 3.4
Research and Experimentation tax credit.................................. -- (0.8) (17.2)
Foreign losses with no benefit........................................... 7.4 -- 8.4
State and local income taxes, net of federal benefit..................... 4.3 3.5 9.1
Other.................................................................... .5 (.5) (1.7)
--------- --------- ---------
Effective tax rate....................................................... 31.3% 25.0% 22.0%
--------- --------- ---------
--------- --------- ---------
</TABLE>

11. EMPLOYEE BENEFIT PLANS

Under the Company's defined contribution savings plans, eligible employees
(see below) may make basic (up to 6% of an employee's earnings) and supplemental
contributions to a trust. The Company matches 50% of participant's basic
contributions. Company contributions vest to participants in increasing
percentages over three to six years of service. The Company's contributions
under the plans approximated $626,000, $628,000, and $478,000, in 1995, 1994,
and 1993, respectively.

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

Under the Company's non-qualified Employee Stock Purchase Plan, employees,
other than employees of the Company's subsidiaries in Australia, Argentina,
Europe and Mexico may contribute up to $60 per week to a trust for the purchase
of Company Common Stock at fair market value. The Company matches employee
contributions up to a maximum of $17 per week. The Company's contributions under
this plan approximated $107,891, $110,000, and $94,000 in 1995, 1994, and 1993,
respectively.

Under the Company's Profit Incentive Plan, bonuses are provided for certain
executives based on a percentage of the amount by which consolidated net
earnings exceed a specified portion of shareholders' equity at the beginning of
the year. During 1995, bonuses were provided for certain executives in the
amount of $614,000. In 1994 and 1993, net earnings did not exceed this criteria
and, accordingly, no bonuses were provided.

F-23
<PAGE>

CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company operates internationally, giving rise to significant exposure
to market risks from changes in foreign exchange rates. Derivative financial
instruments are utilized by the Company to reduce the risk, as explained in this
note. The Company does not hold or issue financial instruments for trading
purposes.

NOTIONAL AMOUNTS OF DERIVATIVES

The notional amounts of derivatives are not a complete measure of the
Company's exposure to foreign exchange fluctuation. The amounts exchanged are
calculated on the basis of the notional amounts and the other terms of the
derivatives, which relate to exchange rates.

FOREIGN EXCHANGE RISK MANAGEMENT

The Company enters into currency exchange forward contracts to hedge
certain firm sale commitments denominated in currencies other than the U.S.
dollar (principally pound sterling, Dutch guilder, Belgian franc, French franc,
German mark, and Canadian dollar). The term of the currency exchange forward
contracts is rarely more than one year. Unrealized and realized gains and losses
on these contracts are included in net income. Notional amounts of currency
exchange forward contracts outstanding were $14,040,000 at December 31, 1995,
with various maturity dates ranging through the end of 1996. At December 25,
1994, the notional amounts of currency exchange forward contracts outstanding
were $8,805,000. Counterparties to these contracts are major financial
institutions, and credit loss from counterparty nonperformance is not
anticipated. Additionally, there were no deferrals of gains or losses on
currency exchange forward contracts at December 31, 1995.

FAIR VALUES

The following table presents the carrying amounts and fair values of the
Company's financial instruments at December 31, 1995.

<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- ----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term debt (including* current maturities)................. ($ 39,676) ($ 43,188) ($ 42,262) ($ 42,959)
Subordinated debentures*....................................... (120,000) (142,200) -- --
Currency exchange forward contracts**.......................... (33) (33) 136 136
</TABLE>

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

* The carrying amounts are reported on the balance sheet under the indicated
captions.
** The carrying amounts represent the net unrealized gain (loss) associated with
the contracts at the end of the period. Such amounts are included in 'Other
Current Liabilities.'

Long-term debt is carried at the original offering price, less any payments
of principal. The Company entered into its outstanding loan agreements at a
fixed rate of interest. Rates currently available to the Company for long-term
borrowings with similar terms and remaining maturities are used to estimate the
fair value of existing borrowings as the present value of expected cash flows.
The long-term debt agreements have various due dates with none of the agreements
extending beyond the year 2003.

Convertible subordinated debentures are carried at the original offering
price, less any payments of principal. The debentures are unsecured,
subordinated to all senior indebtedness and are convertible

F-24
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (CONTINUED)

at any time into shares of the Company's stock. The debentures will mature on
November 1, 2005 and are redeemable, in whole or in part, at the option of the
Company on or after November 1, 1998. In order to estimate the fair value of
these debentures, the Company used currently quoted market prices.

13. RESTRUCTURING PLAN

In December 1995, as a result of the Actron acquisition, the Company
announced a restructuring plan to reorganize its workplace on an international
basis to eliminate redundancies. In connection with the restructuring,
approximately 28 manufacturing and field service positions in the Company's
international operations were eliminated. The Company accrued approximately $1.3
million before tax in the fourth quarter of 1995, consisting of employment
severance costs of $697,000, lease termination costs of $359,000, and ancillary
and miscellaneous costs of $244,000. The plan is anticipated to be completed in
the second quarter of 1996.

14. COMMITMENTS AND CONTINGENCIES

The Company leases its offices, distribution center and certain production
facilities. Rental expense for all operating leases approximated $4,211,000,
$2,307,000, and $1,424,000 in 1995, 1994, and 1993, respectively. Future minimum
payments for operating leases having non-cancelable terms in excess of one year
at December 31 1995 are: $4,237,000 (1996), $3,146,000 (1997), $2,492,000
(1998), $1,677,000 (1999) and $5,566,000 thereafter.

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

Until October, 1995, the Company was the exclusive worldwide licensee of
Arthur D. Little, Inc. ('ADL') for certain patents and improvements thereon
related to EAS products and manufacturing processes. On October 1, 1995, the
Company acquired these patents for $1.9 million plus a percent ranging from 1%
to 1.5% of future EAS RF products sold through 2008. Prior to October 1, 1995,
the Company paid a royalty to ADL of approximately 2% of net revenues generated
by the sale and lease of the licensed products, with the actual amount of the
royalty depending upon revenue volume.

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

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

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

F-25
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15. EXPORT SALES

The Company's export sales to foreign distributors which are principally in
Europe and Scandinavia approximated $21,785,000, $10,430,000, and $12,163,000 in
1995, 1994, and 1993, respectively. Sales by the Company's foreign subsidiaries
in Argentina, Australia, Canada, Western Europe and Mexico totaled $55,422,000
in 1995 and $40,120,000 in 1994. Sales to one foreign distributor of the
Company's products amounted to $10,721,000, $287,000, and $0 in 1995, 1994, and
1993 respectively.

16. CONCENTRATION OF CREDIT RISK

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

17. ACQUISITIONS

On March 3, 1993, the Company purchased all of the capital stock of its
Argentinean distributor for $2,103,000 (which includes $103,000 of direct
acquisition costs) plus a contingent amount to be determined equal to fifty
percent of the Argentinean subsidiary's annual profits for the four year period
ending on November 30, 1996, subject to a maximum purchase price of $5,000,000.
The Company paid $564,000 and $2,436,000 pursuant to this contingent purchase
price arrangement during 1994 and 1995, respectively. No further contingent
payments are required under this purchase arrangement. The total purchase price
including direct acquisition costs was $5,103,000. This acquisition was
accounted for under the purchase method, and accordingly the results of
operations of this business have been included with those of the Company since
the date of acquisition. The purchase price resulted in an excess of acquisition
cost over net assets acquired of $4,844,000 which is being amortized over twenty
years.

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

On July 8, 1993, the Company purchased all of the capital stock of ID
Systems International B.V. and ID Systems Europe B.V. ('The ID Systems Group'),
related Dutch companies engaged in the manufacture, distribution and sale of
security products and services. The Company advanced the ID Systems Group
$1,290,000 during the period in which the Company held an option to purchase all
the outstanding capital stock. The purchase price of the capital stock,
exclusive of such advances, was $60 plus direct acquisition cost of
approximately $400,000. This acquisition was accounted for under the purchase
method and, accordingly, the results of operations of this business have been
included with those of the Company since the date of acquisition. The purchase
price resulted in an excess of acquisition cost over net assets acquired of
approximately $5,510,000 which is being amortized over twenty years.

The Company acquired three production units in connection with the purchase
of the capital stock of the ID Systems Group. The Company shut down all three of
these facilities during 1994. Accordingly, the estimated operating losses and
shut down costs of these facilities amounting to

F-26
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

17. ACQUISITIONS (CONTINUED)

$3,434,000 were accrued for in the purchase price allocation. As a part of the
purchase price allocation, the values assigned to these assets were based upon
estimated residual values upon ultimate disposition which represents a nominal
amount.

On February 1, 1995 the Company purchased Alarmex, Inc. for approximately
$13.5 million ($10 million in cash and the balance in 401,434 shares of
restricted Common Stock of the Company). Alarmex designs and provides CCTV, POS
monitoring, burglar and fire alarm systems and also provides related central
station monitoring services to over 9,000 retail sites in the United States.
Acquired research and development costs of approximately $92,000 were expensed
as a result of the acquisition. The purchase price resulted in an excess of
acquisition cost over net assets acquired of approximately $10,400,000, which is
being amortized over twenty years.

In connection with the acquisition of Actron, accruals were established to
integrate Actron's operations with the Company's existing sales and production
locations. Included in this accrual of $10,401,000 are: (i) costs associated
with the elimination of approximately 70 manufacturing and field service
positions from the Actron operation (approximately $7.7 million), (ii) costs
related to the closure of redundant sales locations (approximately $1.8
million), and (iii) ancillary costs (approximately $.9 million). This accrual is
included as part of the purchase price and is included in the 'Other Current
Liabilities' section of the Company's 1995 consolidated balance sheet. The
integration of Actron's operations is estimated to be complete in the second
quarter of 1996. Actual charges to complete the integration may differ from the
above estimates. Such differences will increase (decrease) the excess of
acquisition cost over net assets acquired.

The following unaudited summary of operations presents the consolidated
results of operations as if the acquisition of Alarmex, Inc. and the Actron
Group had occurred at the beginning of the years presented. The following
results are not necessarily indicative of what would have occurred had the
acquisition been consummated as of that date or of future results. The earnings
(loss) per share reflect the retroactive effect of the February 1996 Stock
Split.

<TABLE>
<CAPTION>
1995 1994
----------- -----------
(THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
Net revenues.............................................................. $ 251,136 $ 201,108
Earnings (loss) before income taxes....................................... $ 726 $ 1,251
Net earnings (loss)....................................................... $ (4,341) $ (715)
Earnings (loss) per share................................................. $ (.16) $ (.03)
</TABLE>

F-27
<PAGE>
CHECKPOINT SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18. GEOGRAPHIC SEGMENTS

The following tables show sales, operating earnings and other financial
information by geographic area for the years 1995 and 1994.

<TABLE>
<CAPTION>
UNITED STATES
AND PUERTO RICO EUROPE OTHER (1)
--------------- ----------- ---------
(THOUSANDS)
<S> <C> <C> <C>
1995
Net Revenues from Unaffiliated Customers..................... $ 149,319 $ 36,669 $ 18,753
Operating Income............................................. $ 20,024 $ (1,877) $ 908
Identifiable Assets.......................................... $ 225,877 $ 118,076 $ 18,198
</TABLE>

<TABLE>
<CAPTION>
UNITED STATES
AND PUERTO RICO EUROPE OTHER (1)
--------------- ----------- ---------
(THOUSANDS)
<S> <C> <C> <C>
1994
Net Revenues from Unaffiliated Customers..................... $ 88,211 $ 23,009 $ 17,111
Operating Income............................................. $ 9,930 $ 587 $ 1,211
Identifiable Assets.......................................... $ 92,285 $ 18,987 $ 16,653
</TABLE>

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

19. SUBSEQUENT EVENTS

On January 11, 1996, the Company signed a letter of intent to acquire
Mercatec Sistemas e Comercio de Equipamentos Electronicos Ltds. ('Mercatec').
Mercatec is a leading privately-held Brazilian supplier of EAS systems and CCTV
systems to retailers with approximately $3,000,000 in annual sales.

On February 12, 1996, the Company announced that it has granted a
non-exclusive world-wide license to Tokai Electronics Co., Ltd. of Japan to
manufacture and distribute its radio frequency disposable tags. The Company also
announced a supply agreement with Knogo North America, Inc., whereby Knogo will
purchase 50 million disposable tags annually for resale to its customers in the
United States and Canada. These two agreements offer the Company's customers
alternate sources of disposable tags.

On February 14, 1996, the United States Federal Trade Commission ('FTC')
began an investigation of the retail security industry. The probe was launched
under the premise of anticompetitive practices within the industry whereby
certain retail-trade groups limited the autonomy of smaller retailers by
supporting specific security systems. The Company, along with Sensormatic
Electronics Corporation, Minnesota Mining and Manufacturing, and other industry
participants, received subpoenas requesting certain documents and communications
necessary for the investigation. The Company does not believe that any legal or
regulatory infraction will be found on its part.

F-28
<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>
Incorporation of Certain Documents by
Reference.................................... 3
Prospectus Summary............................. 4
Risk Factors................................... 8
The Company.................................... 11
Use of Proceeds................................ 12
Capitalization................................. 13
Common Stock Price Range
and Dividends................................ 14
Selected Historical Financial Information...... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 16
Business....................................... 24
Management..................................... 35
Description of Capital Stock................... 36
Underwriting................................... 38
Legal Opinions................................. 39
Experts........................................ 39
Available Information.......................... 40
Index to Consolidated Financial
Statements................................... F-1
</TABLE>

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

UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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

3,500,000 SHARES

CHECKPOINT SYSTEMS, INC.

COMMON STOCK

------------------------
PROSPECTUS

MAY , 1996
------------------------

NATWEST SECURITIES LIMITED

ALEX. BROWN & SONS
INCORPORATED

DEUTSCHE MORGAN GRENFELL

PAINEWEBBER INCORPORATED

RAYMOND JAMES & ASSOCIATES, INC.

HD BROUS & CO., INC.

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

<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>
Filing and Registration Fees...................................................................... $ 40,492.89
Legal Fees and Expenses........................................................................... $ (1)
Cost of Printing.................................................................................. $ (1)
Accounting Fees and Expenses...................................................................... $ 40,000
New York Stock Exchange Listing Fees.............................................................. $ (1)
Blue Sky Fees and Expenses........................................................................ $ 15,000
NASD Fees......................................................................................... $ 12,243
Miscellaneous Expenses............................................................................ $ (1)
-------------

Total........................................................................................... $
-------------
</TABLE>

- ------------------
(1) To be filed by amendment.

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

EXHIBIT NO. DESCRIPTION
- ------------- -----------------------------------------------------------------
1 Form of Underwriting Agreement(1)
4 Form of Stock Certificate for Common Stock(1)
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)
24 Power of Attorney (included on Signature Page)

- ------------------
(1) To be filed by amendment.

II-1
<PAGE>
ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) That, 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.

(2) That, for the purpose 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.

(3) That, for the 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 in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of 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 May __, 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 May ___, 1996
- -----------------------------------------
Albert E. Wolf

/s/Kevin P. Dowd* President, Chief Executive Officer and May ___, 1996
- ----------------------------------------- Director (Principal Executive Officer)
Kevin P. Dowd

/s/Steven G. Selfridge Executive Vice President May ___, 1996
- -----------------------------------------
Steven G. Selfridge

/s/Jeffrey A. Reinhold* Vice President -- Chief Financial Officer and May ___, 1996
- ----------------------------------------- Treasurer
Jeffrey A. Reinhold

/s/Mitchell T. Codkind* Vice President -- Corporate Controller and May ___, 1996
- ----------------------------------------- Chief Accounting Officer
Mitchell T. Codkind

/s/Robert O. Aders* Director May ___, 1996
- -----------------------------------------
Robert O. Aders

/s/Roger D. Blackwell* Director May ___, 1996
- -----------------------------------------
Roger D. Blackwell

/s/Richard J. Censits* Director May ___, 1996
- -----------------------------------------
Richard J. Censits

/s/David W. Clark, Jr.* Director May ___, 1996
- -----------------------------------------
David W. Clark, Jr.

/s/Allan S. Kalish* Director May ___, 1996
- -----------------------------------------
Allan S. Kalish

/s/Jermain B. Porter* Director May ___, 1996
- -----------------------------------------
Jermain B. Porter

*By: /s/Kevin P. Dowd
------------------------------------
Kevin P. Dowd

</TABLE>

II-3
<PAGE>

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

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGES
- ---------- ---------------------------------------------------------------------------------------- -----------
<S> <C> <C>
1 Form of Underwriting Agreement(1)

4 Form of Stock Certificate for Common Stock(1)

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)

24 Power of Attorney (included on Signature Page)
</TABLE>

- ------------------
(1) To be filed by amendment.

<PAGE>

Exhibit 5

Checkpoint Systems, Inc. May 3, 1996
101 Wolf Drive
Thorofare, New Jersey 08086

Re: Registration Statement on Form S-3,
Dated May 3, 1996

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, dated May 3,
1996 (the "Registration Statement"), for the purpose of registering under the
Securities Act of 1933, as amended, up to 4,025,000 shares of the Company's
Common Stock, par value $.10 per share (the "Common Stock"). Each capitalized
term used but not defined in this opinion letter has the meaning ascribed to it
in the Registration Statement.

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

1. a Subsistence certificate with respect to the Company issued by
the Secretary of State of the Commonwealth of Pennsylvania on May 2, 1996;

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

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

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

5. the Registration Statement.

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

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

Based upon the foregoing, it is our opinion that the Common Stock to be
offered and sold pursuant to the Registration Statement has been duly authorized
and, when issued and sold as described in the Registration Statement, will be
validly 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 validly of the Common Stock to be offered
pursuant to the Registration Statement.

Very truly yours,

STRADLEY, RONON, STEVENS & YOUNG, LLP

By: /s/ David E. Beavers
--------------------------------------
David E. Beavers, Esq., a Partner

<PAGE>

Exhibit 23.1
Consent

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion and incorporation by reference in the Registration
Statement of Checkpoint Systems, Inc. on Form S-3 (File No. 333- ______) of our
report dated March 11, 1996, on our audits of the consolidated financial
statements and financial statement schedule of Checkpoint Systems, Inc. as of
December 31, 1995 and December 25, 1994, and for each of the three years in the
period ended December 31, 1995, which report is included in the 1995 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.
2400 Eleven Penn Center
Philadelphia, Pennsylvania 19103
May 3, 1996

<PAGE>

Exhibit 23.2
Consent

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. 333- ______) 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
May , 1996

<PAGE>

Exhibit 23.3
Consent

CONSENT OF INDEPENDENT ACCOUNTANTS

The Board of Directors
Checkpoint Systems, Inc.
101 Wolf Drive
P.O. Box 188
Thorofare, NJ 08086 USA

3 May, 1996

Dear Sirs:

We consent to the incorporation by reference in the Registration Statement dated
May 3, 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 of 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.

Yours faithfully,

KPMG

<PAGE>