10-Q

FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 26, 2006

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from      to

Commission File No. 1-11257

CHECKPOINT SYSTEMS, INC.
(Exact name of Registrant as specified in its Articles of Incorporation)

Pennsylvania	22-1895850
(State of Incorporation)	(IRS Employer Identification No.)
101 Wolf Drive, PO Box 188, Thorofare, New Jersey	08086
(Address of principal executive offices)	(Zip Code)

856-848-1800

(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes       No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer      Accelerated filer           Non-accelerated filer

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes      No

As of May 2, 2006, there were 39,172,672 shares of the Company’s Common Stock outstanding.

CHECKPOINT SYSTEMS, INC.
FORM 10-Q

Table of Contents

PART I. FINANCIAL INFORMATION			Page
	Item 1.	Condensed Consolidated Financial Statements (Unaudited)
		Consolidated Balance Sheets	3
		Consolidated Statements of Operations	4
		Consolidated Statements of Shareholders’ Equity	5
		Consolidated Statements of Comprehensive Income (Loss)	6
		Consolidated Statements of Cash Flows	7
		Notes to Consolidated Financial Statements	8–18
	Item 2.	Management Discussion and Analysis of Financial Condition and Results of Operations	19–26
	Item 3.	Quantitative and Qualitative Disclosure about Market Risk	26
	Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
Item 1.		Legal Proceedings	26–27
Item 1A.		Risk Factors	28
Item 6.		Exhibits	28
SIGNATURES			29
INDEX TO EXHIBITS			30

CHECKPOINT SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

(amounts in thousands)
		March 26, 2006			December 25, 2005*
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	123,738		$	113,223
Restricted cash		2,025			—
Accounts receivable, net of allowance of $11,323 and $11,823		131,736			138,871
Inventories		85,722			79,528
Other current assets		38,520			38,344
Deferred income taxes		12,719			11,747
Assets of discontinued operations held for sale		—			34,254
Total Current Assets		394,460			415,967
REVENUE EQUIPMENT ON OPERATING LEASE, net		4,732			4,699
PROPERTY, PLANT, AND EQUIPMENT, net		71,571			72,377
GOODWILL		167,405			165,313
OTHER INTANGIBLES, net		32,915			33,263
DEFERRED INCOME TAXES		32,246			31,509
OTHER ASSETS		12,797			13,240
TOTAL ASSETS	$	716,126		$	736,368
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Short-term borrowings and current portion of long term debt	$	4,768		$	1,776
Accounts payable		42,245			61,006
Accrued compensation and related taxes		28,402			34,547
Other accrued expenses		26,417			27,294
Income taxes		23,736			25,567
Unearned revenues		19,095			22,047
Restructuring reserve		7,012			11,715
Other current liabilities		18,527			16,031
Liabilities of discontinued operations held for sale		—			6,458
Total Current Liabilities		170,202			206,441
LONG-TERM DEBT, LESS CURRENT MATURITIES		35,331			35,354
ACCRUED PENSIONS		72,768			71,194
OTHER LONG-TERM LIABILITIES		4,076			4,349
DEFERRED INCOME TAXES		19,865			19,588
MINORITY INTEREST		965			1,120
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ 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 41,162,607 and 40,737,110		4,116			4,073
Additional capital		337,114			326,950
Retained earnings		115,120			112,635
Common stock in treasury, at cost, 2,035,912 shares and 2,035,912 shares		(20,621	)		(20,621	)
Accumulated other comprehensive income (loss)		(22,810	)		(24,715	)
TOTAL STOCKHOLDERS’ EQUITY		412,919			398,322
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	716,126		$	736,368

* Taken from the Company’s audited consolidated financial statements at December 25, 2005.

See accompanying notes to the consolidated financial statements.

3

CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

(dollar amounts in thousands, except per share data)
Quarter ended		March 26, 2006		March 27, 2005
Net revenues	$	142,219	$	156,388
Cost of revenues		84,963		88,263
Gross profit		57,256		68,125
Selling, general, and administrative expenses		52,871		60,786
Research and development		4,009		4,779
Restructuring expense		247		—
Operating income		129		2,560
Interest income		1,125		586
Interest expense		403		973
Other income, net		372		178
Earnings from continuing operations before income taxes and minority interest		1,223		2,351
Income taxes		289		539
Minority interest		22		23
Earnings from continuing operations		912		1,789
Earnings from discontinued operations, net of tax		1,573		2,042
Net earnings	$	2,485	$	3,831
Basic earnings per share:
Earnings from continuing operations	$	.02	$	.05
Earnings from discontinued operations, net of tax		.04		.05
Basic earnings per share	$	.06	$	.10
Diluted earnings per share:
Earnings from continuing operations	$	.02	$	.05
Earnings from discontinued operations, net of tax		.04		.05
Diluted earnings per share	$	.06	$	.10

See accompanying notes to the consolidated financial statements.

4

CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

(amounts in thousands)													Accumulated
													Other			Total
	Common Stock				Additional	Retained		Treasury Stock					Comprehensive			Stockholders’
	Shares	Amount			Capital	Earnings		Shares	Amount				Income (Loss)			Equity
Balance, December 25, 2005	40,737	$	4,073	$	326,950	$	112,635	2,036	$	(20,621	)	$	(24,715	)	$	398,322
Net income							2,485									2,485
Exercise of stock-based compensation	426		43		6,446											6,489
Tax benefit on stock-based compensation					1,069											1,069
Stock-based compensation expense					1,472											1,472
Deferred compensation plan					1,177											1,177
Foreign currency translation adjustment													1,905			1,905
Balance, March 26, 2006	41,163	$	4,116	$	337,114	$	115,120	2,036	$	(20,621	)	$	(22,810	)	$	412,919

See accompanying notes to the consolidated financial statements.

5

CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME
(Unaudited)

(dollar amounts in thousands)
Quarter ended		March 26, 2006		March 27, 2005
Net earnings	$	2,485	$	3,831
Foreign currency translation adjustment		1,905		(10,171	)
Comprehensive income (loss)	$	4,390	$	(6,340	)

See accompanying notes to the consolidated financial statements.

6

CHECKPOINT SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

(dollar amounts in thousands)

Quarter ended		March 26, 2006			March 27, 2005
Cash flows from operating activities:
Net earnings	$	2,485		$	3,831
Adjustments to reconcile net earnings to net cash used by operating activities:
Depreciation and amortization		4,642			6,322
Provision for losses on accounts receivable		612			362
Stock-based compensation expense		1,472			110
Excess tax benefit on stock based compensation		(969	)		—
Gain on sale of discontinued operations		(1,299	)		—
(Gain)/loss on disposal of fixed assets		(4	)		42
(Increased) decrease in current assets, net of the effects of acquired companies:
Accounts receivable		8,700			(2,370	)
Inventories		(6,370	)		(6,533	)
Other current assets		(153	)		(1,503	)
Increase (decrease) in current liabilities, net of the effects of acquired companies:
Accounts payable		(19,003	)		(17,520	)
Income taxes		(2,504	)		(2,709	)
Unearned revenues		(3,175	)		2,091
Restructuring reserve		(4,848	)		(951	)
Other current and accrued liabilities		(11,305	)		(6,891	)
Net cash used in operating activities		(31,718	)		(25,719	)
Cash flows from investing activities:
Acquisition of property, plant, and equipment		(2,189	)		(3,458	)
Acquisitions, net of cash acquired		(31	)		—
Proceeds from sale of discontinued operations		33,466			—
Other investing activities		—			235
Net cash provided by (used in) investing activities		31,246			(3,223	)
Cash flows from financing activities:
Proceeds from stock based compensation		6,489			364
Excess tax benefit on stock based compensation		969			—
Net change in short-term debt		2,979			3,102
Increase in overdraft borrowings		795			—
Proceeds of long-term debt		—			35,000
Payment of long-term debt		(218	)		(32,804	)
Net cash provided by financing activities		11,014			5,662
Effect of foreign currency rate fluctuations on cash and cash equivalents		(27	)		(3,161	)
Net increase (decrease) in cash and cash equivalents		10,515			(26,441	)
Cash and cash equivalents:
Beginning of period		113,223			102,694
End of period	$	123,738		$	76,253

See accompanying notes to consolidated financial statements.

7

CHECKPOINT SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

Note 1. BASIS OF ACCOUNTING

The consolidated financial statements include the accounts of Checkpoint Systems, Inc. and its majority-owned subsidiaries (Company). All inter-company 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 in annual financial statements. Refer to our Annual Report on Form 10-K for the fiscal year ended December 25, 2005 for the most recent disclosure of the Company’s accounting policies.

The consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to state fairly our financial position at March 26, 2006 and December 25, 2005 and its results of operations and changes in cash flows for the thirteen-week periods ended March 26, 2006 and March 27, 2005.

Certain reclassifications to the financial statements have been made to conform to the current year presentation. For the thirteen-week period ended March 25, 2005, the financial statements and related footnotes have been reclassified to reflect discontinued operations.

Restricted Cash

At March 26, 2006, the Company has $2.0 million in restricted cash related to cash received from the divestiture of our barcode businesses and the U.S. hand-held labeling and Turn-O-Matic® businesses. This cash is restricted for working capital adjustments related to the divestiture. These adjustments should be finalized in the first quarter 2007.

Stock Options

Effective December 26, 2005, we adopted the fair value recognition provision of Statement of Financial Accounting Standards (SFAS) 123R “Share-based Payment”, using the modified prospective transition method, and therefore have not restated prior period results. Under this method we recognize compensation expense for all share-based payments granted either after December 25, 2005 or prior to December 26, 2005 but not vested as of that date. Under the fair value recognition provisions of SFAS 123R, we recognize share-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest. For awards granted after the adoption date we recognize the expense on a straight-line basis over the requisite service period of the award. For non-vested awards granted prior to the adoption date, we continue to use the ratable expense allocation method. Prior to SFAS 123R adoption, we accounted for share-based payments under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and accordingly, generally recognized compensation expense only when we granted options with a discounted exercise price. Pro forma net earnings and earnings per share stated as if we applied the fair value method, were previously disclosed in our consolidated financial statement footnotes in accordance with SFAS 148 “Accounting for Stock-based Compensation – Transition and Disclosures.” See Note 2 to the Consolidated Condensed Financial Statements for a further discussion on stock-based compensation.

8

Warranty Reserves

We provide product warranties for our various products. These warranties vary in length depending on product and geographical region. We establish our warranty reserves based on historical data of warranty transactions.

The following table sets forth the movement in the warranty reserve:

(dollar amounts in thousands)
Quarter ended		March 26, 2006			March 27, 2005
Balance at beginning of year	$	5,211		$	5,171
Accruals for warranties issued		606			233
Settlement made		(747	)		(149	)
Foreign currency translation adjustment		(132	)		(78	)
Balance at end of period	$	4,938		$	5,177

New Accounting Pronouncements and Other Standards

There are no issued accounting pronouncements that have not yet been adopted that would have a material effect on the company’s financial position or results of operations. The expanded disclosure requirements of SFAS 123R are presented in Note 2.

Note 2. STOCK-BASED COMPENSATION

At March 26, 2006, the Company has stock-based employee compensation plans as described below. The total compensation expense related to these plans was $1.5 million ($1.1 million, net of tax) or $.03 per diluted share for the three months ended March 26, 2006. Prior to December 26, 2005, the Company accounted for those plans under the recognition and measurement provisions of APB 25. Accordingly, the Company generally recognized compensation expense only when it granted options with a discounted exercise price.

In 2006, we changed the method in which we issue share-based awards to our key employees. In prior years, share-based compensation for key employees consisted primarily of stock options. Upon consideration of several factors, we began in 2006 to award key employees a combination of stock options and restricted stock units. Therefore, this change resulted in an increase in restricted stock expense.

Stock Plans

On April 29, 2004, the shareholders approved the Checkpoint Systems, Inc. 2004 Omnibus Incentive Compensation Plan (2004 Plan). The initial shares available under the 2004 Plan were approximately 3,500,000, which represent the shares that were available under the 1992 Stock Option Plan (1992 Plan). All cancellations and forfeitures related to share units outstanding under the 1992 Plan will be added back to the shares available for grant of the 2004 Plan. The 2004 Plan is designed to provide incentives to employees, non-employee directors, and independent contractors through the award of stock options, stock appreciation rights, stock units, phantom shares, dividend equivalent rights and cash awards. The Compensation Committee (Committee) of our Board of Directors administers the 2004 Plan. The Committee at its discretion will determine the terms and conditions of each award. Stock options issued under the 2004 Plan primarily vest over a three year period and expire not more than 10 years from date of grant. Restricted stock units vest over three to five year periods from date of grant. As of March 26, 2006, there were 1,972,437 shares available for grant.

Our 1992 Stock Option Plan (1992 Plan) allowed us to grant either Incentive Stock Options (ISOs) or Non-Incentive Stock Options (NSOs) to purchase up to 16,000,000 shares of common stock. Only employees were eligible to receive ISOs and both employees and non-employee directors of the Company were eligible to receive NSOs. On February 17, 2004, the Plan was amended to allow an independent consultant to receive NSOs. All ISOs under the 1992 Plan expire not more than ten years (plus six months in the case of NSOs) from the date of grant. Both ISOs and NSOs require a purchase price of not less than 100% of the fair market value of the stock at the date of grant. As of March 26, 2006, there were no shares available for grant under the 1992 Plan.

9

On July 1, 2004, we adopted a stand alone inducement stock option plan authorizing the issuance of options to purchase up to 200,000 shares of our common stock, which were granted to an officer in connection with his hire. The non-qualified stock options vest over a three year period with one-third vesting each anniversary date. Options cannot be exercised more than ten years after the grant date. As of March 26, 2006, there are no shares available for grant under this plan.

During fiscal 2005, we initiated a Long-Term Incentive Plan (LTIP). Under this plan, restricted stock units (RSUs) were awarded to eligible executives. The number of shares for these units vary based on the performance of the Company’s operating income and operating margin. These units cliff vest at the end of fiscal 2007. The final value of these units will be determined by the number of shares earned. The value of these units is charged to compensation expense on a straight-line basis over the vesting period with periodic adjustments to account for changes in anticipated number of shares to be awarded. The weighted average price for these RSUs was $17.87 per share. For the three months ended March 26, 2006, $0.1 million was charged to compensation expense and the total unamortized expense was $0.9 million. The maximum RSUs under this initial grant are 154,000 units. These RSUs reduce the shares available to grant under the 2004 Plan.

During fiscal 2006, we extended the Long-Term Incentive Plan (LTIP). Under the extended plan, restricted stock units (RSUs) were awarded to eligible key employees. The number of shares for these units vary based on the Company’s cash flow. These units cliff vest at the end of fiscal 2008. The final value of these units will be determined by the number of shares earned. The value of these units is charged to compensation expense on a straight-line basis over the vesting period with periodic adjustments to account for changes in anticipated award amounts and estimated forfeitures rates. The weighted average price for these RSUs was $28.89 per share. For the three months ended March 26, 2006, $0.2 million was charged to compensation expense and the total unamortized expense was $4.2 million. The maximum RSUs under this initial grant are 327,629 units. These RSUs reduce the shares available to grant under the 2004 Plan.

Stock Options

Option activity under the principal option plans as of March 26, 2006 and changes during the three months ended March 26, 2006 were as follows:

					Weighted
					Average
				Weighted-	Remaining		Aggregate
				Average	Contractual		Intrinsic
				Exercise	Term		Value
	Shares			Price	(in years)		(in thousands)
Outstanding at December 25, 2005	3,693,361		$	15.68
Granted	301,262			28.89
Exercised	(404,862	)		15.28
Forfeited or expired	(7,844	)		18.93
Outstanding at March 26, 2006	3,581,917		$	16.83	7.06	$	37,805
Vested and expected to vest at March 26, 2006	3,482,150		$	16.67	7.01	$	37,234
Exercisable at March 26, 2006	2,381,383		$	15.23	6.12	$	28,691

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day of the first quarter of fiscal 2006 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 26, 2006. This amount changes based on the fair market value of the Company’s stock. Total intrinsic value of options exercised for the three months ended March 26, 2006 was $4.5 million.

10

As of March 2006, $4.3 million of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 2.4 years.

In light of new accounting guidance under SFAS 123R, the Company reevaluated its assumptions used in estimating the fair value of employee options granted. As part of its SFAS 123R adoption, the Company also examined its historical pattern of option exercises in an effort to determine if there were any discernable activity patterns based on certain employee populations. From this analysis, the Company identified that there were no discernable populations. The Company used the Black-Scholes option pricing model to value the options. The table below presents the weighted average expected life in years. The expected life computation is based on historical exercise patterns and post-vesting termination behavior. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of share-based payment units was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values as follows:

Three months ended,	Three months ended,
March 26, 2006	March 27, 2005
Weighted average fair value of grants	$	11.80		$	4.13
Valuation assumptions:
Expected dividend yield		0.00	%		0.00%
Expected volatility		41.64	%		32.09%
Expected life (in years)		4.54			2.80
Risk-free interest rate		4.55 – 4.68	%		3.20 – 3.88%

In the first quarter 2005, the 125,000 stock option grants were primarily for non-employee directors. These options immediately vest and as a result the assumptions used to calculate fair value have lower expected terms.

The pro forma table below reflects net earnings and basic and diluted net earnings per share for the first quarter of fiscal 2005, had the Company applied the fair value recognition provisions of SFAS 123, as follows:

(dollar amounts in thousands, except per share amounts)

		Three months ended,
		March 27, 2005
Net earnings, as reported	$	3,831
Less: Stock-based compensation expenses determined under the fair-value-based method for all units, net of related tax effects		(705	)
Pro forma net earnings	$	3,126
Basic net earnings per share:
As reported	$	.10
Pro forma	$	.08
Diluted net earnings per share:
As reported	$	.10
Pro forma	$	.08

11

Prior to the adoption of SFAS 123R, the Company presented the tax benefit of stock option exercises as operating cash flows. Upon the adoption of SFAS 123R, tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options are classified as financing cash flows. Cash received from option exercises and purchases under the ESPP for the first three months ended March 26, 2006 was $6.5 million. The actual tax benefit realized for the tax deduction from option exercises of the share-based payment units totaled $1.1 million for the three months ended March 26, 2006. In adopting SFAS 123R, we have applied the “Short-cut” method in calculating the historical windfall tax benefits. All tax short falls will be applied against this windfall before being charged to earnings.

Restricted Stock Units

In 2006, we issued service based restricted stock units with vesting periods of three to five years. These awards are valued using their intrinsic value on the date of grant. The compensation expense is recognized straight-line over the vesting term.

Nonvested service based restricted stock units as of March 26, 2006 and changes during the three months ended March 26, 2006 were as follows:

	Number of	Weighted-		Weighted-
	Shares	Average Vest		Average Grant
	(in thousands)	Date		Date Fair Value
Nonvested at December 25, 2005	—		$	—
Granted	128,486		$	28.89
Vested	—		$	—
Forfeited	—		$	—
Nonvested at March 26, 2006	128,486	2.62	$	28.89
Vested and expected to vest at March 26, 2006	105,198	2.62
Vested at March 26, 2006	—	—

As of March 26, 2006, there was $2.9 million unrecognized stock-based compensation expense related to nonvested restricted stock units. That cost is expected to be recognized over a weighted-average period of 4.3 years.

Note 3. INVENTORIES

Inventories consist of the following:

(dollar amounts in thousands)
		March 26,		December 25,
		2006		2005
Raw materials	$	12,713	$	10,643
Work-in-process		5,171		4,351
Finished goods		67,838		64,534
Total	$	85,722	$	79,528

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Note 4. GOODWILL AND OTHER INTANGIBLE ASSETS

We had intangible assets with a net book value of $32.9 million and $33.3 million as of March 26, 2006 and December 25, 2005, respectively.

The following table reflects the components of intangible assets as of March 26, 2006 and December 25, 2005:

(dollar amounts in thousands)
		March 26, 2006				December 25, 2005
	Amortizable				Gross				Gross
	Life		Carrying		Accumulated		Carrying		Accumulated
	(years)		Amount		Amortization		Amount		Amortization
Customer lists	20	$	29,508	$	19,304	$	29,093	$	18,822
Trade name	30		26,459		12,881		26,106		11,936
Patents, license agreements	5 to 14		37,370		28,668		36,978		28,561
Other	3 to 6		898		467		902		497
Total		$	94,235	$	61,320	$	93,079	$	59,816

Estimated amortization expense for each of the five succeeding years is anticipated to be:

(dollar amounts in thousands)
2006	$	3,172
2007	$	2,941
2008	$	2,914
2009	$	2,579
2010	$	2,286

The changes in the carrying amount of goodwill for the quarter ended March 26, 2006, are as follows:

(dollar amounts in thousands)
				Labeling		Retail
		Security		Services		Merchandising		Total
Balance as of December 25, 2005	$	101,298	$	390	$	63,625	$	165,313
Acquired during the year		15		—		—		15
Translation adjustment		1,155		13		909		2,077
Balance as of March 26, 2006	$	102,468	$	403	$	64,534	$	167,405

Pursuant to SFAS 142 “Goodwill and Other Intangible Assets”, we perform an assessment of goodwill by comparing each individual reporting unit’s carrying amount of net assets, including goodwill, to their fair value at least annually during the fourth quarter of each fiscal year and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Future annual assessments could result in impairment charges, which would be accounted for as an operating expense.

13

Note 5. LONG-TERM DEBT

Long-term debt at March 26, 2006 and December 25, 2005 consisted of the following:

(dollar amounts in thousands)

		March 26,		December 25,
		2006		2005
Senior unsecured credit facility:
$150 million variable interest rate revolving credit facility maturing in 2010	$	25,488	$	25,421
€9.5 million capital lease maturing in 2021		9,637		9,590
€2.7 million capital lease maturing in 2007		739		831
Other capital leases with maturities through 2006		405		430
Total		36,269		36,272
Less current portion		938		918
Total long-term portion	$	35,331	$	35,354

The Senior unsecured credit facility contains certain covenants that include requirements for a maximum ratio of debt to EBITDA, a maximum ratio of interest to EBITDA, and a maximum threshold for capital expenditures. As of March 26, 2006, we were in compliance with all covenants.

Note 6. PER SHARE DATA

The following data shows the amounts used in computing earnings per share and the effect on income and the weighted average number of shares of dilutive potential common stock:

(amounts in thousands, except per share data)

Quarter ended		March 26,		March 27,
		2006		2005
Basic earnings available to common stockholders:
Earnings available to common stockholders from continuing operations	$	912	$	1,789
Diluted earnings available to common stockholders from continuing operations	$	912	$	1,789
Shares:
Weighted average number of common shares outstanding		38,834		37,806
Shares issuable under deferred compensation agreements		197		—
Basic weighted average number of common shares outstanding		39,031		37,806
Common shares assumed upon exercise of stock options		1,282		623
Shares issuable under deferred compensation arrangements		15		—
Dilutive weighted average number of common shares outstanding		40,328		38,429
Basic Earnings (Loss) per Share:
Earnings from continuing operations	$	.02	$	.05
Earnings from discontinued operations, net of tax		.04		.05
Basic earnings (loss) per share	$	.06	$	.10
Diluted Earnings (Loss) per Share:
Earnings from continuing operations	$	.02	$	.05
Earnings from discontinued operations, net of tax		.04		.05
Diluted earnings (loss) per share	$	.06	$	.10

14

The Long-term incentive plan restricted stock units have been excluded due to the performance of vesting criteria not being met. Anti-dilutive common share equivalents are not included in our earnings per share calculation. The number of anti-dilutive common share equivalents were as follows:

(share amounts in thousands)
	March 26,	March 27,
	2006	2005
Weighted average common share equivalents associated with anti-dilutive stock options and restricted stock units excluded from the computation of diluted EPS:	414	1,400

Note 7. DISCONTINUED OPERATIONS

On January 30, 2006 the Company completed the sale of its global barcode businesses included in our Labeling Services Segment, and the U.S. hand-held labeling and Turn-O-Matic® businesses included in the Retail Merchandising Segment for cash proceeds of $37 million, plus the assumption of $5 million in liabilities. The Company recorded a pre-tax gain of $2.8 million ($1.3 million, net of tax), included in discontinued operations, net of tax in the consolidated statement of operations. The recorded gain on sale is subject to certain post-closing working capital adjustments to be finalized by the first quarter of 2007.

The Company’s discontinued operations reflect the operating results for the disposal group through the date of disposition. The results for the thirteen weeks ended March 26, 2006 and March 27, 2005 have been reclassified to show the results of operations for the barcode labeling systems and US hand-held labeling and Turn-O-Matic ® businesses as discontinued operations. Below is a summary of these results:

(dollar amounts in thousands)

	Quarter
	(13 weeks) Ended
		March 26,		March 27,
		2006		2005
Net revenue	$	7,452	$	25,779
Gross profit		1,683		7,021
Selling, general, & administrative expense		1,302		3,855
Operating income		380		3,077
Gain on disposal		2,756		—
Earnings from discontinued operations before income taxes		3,136		3,077
Income tax		1,563		1,035
Earnings from discontinued operations, net of tax	$	1,573	$	2,042

Note 8. SUPPLEMENTAL CASH FLOW INFORMATION

Cash payments for interest and income taxes for the thirteen-week periods ended March 26, 2006 and March 27, 2005 were as follows:

(amounts in thousands)

Quarter ended		March 26,		March 27,
		2006		2005
Interest	$	381	$	1,124
Income tax payments	$	4,196	$	4,499

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Note 9. PROVISION FOR RESTRUCTURING

2005 Restructuring Plan

In the second quarter of 2005, we initiated actions focused on reducing our overall operating expenses in Europe. These actions included the implementation of a cost reduction plan designed to consolidate certain administrative functions in Europe. In addition, we have committed to a plan to restructure a portion of our supply chain staff as we transition our manufacturing to lower cost areas. A net charge of $0.6 million was recorded in the first quarter of 2006 in connection with this plan. The total employees affected by the restructuring were 342 of which 217 have been terminated. The anticipated total cost is expected to approximate $17 million to $19 million. These terminations are anticipated to be complete by the first half of 2006. Termination benefits are planned to be paid 1 month to 24 months after termination.

Restructuring accrual activity was as follows:

(dollar amounts are in thousands)

		Accrual at 12/25/2005		Charged to Earnings		Charge Reversed to Earnings		Cash Payments		Exchange Rate Changes		Accrual at 3/26/06
Severance and other employee-related charges	$	10,121	$	761	$	167	$	3,829	$	126	$	7,012

2003 Restructuring Plan

In the first quarter 2006, we reversed $0.4 million of our lease reserve to income as we have obtained a sublease for the property previously reserved.

Note 10. PENSION BENEFITS

The components of net periodic benefit cost for the thirteen-week periods ended March 26, 2006 and March 27, 2005 were as follows:

(dollar amounts in thousands)

Quarter ended		March 26,			March 27,
		2006			2005
Service cost	$	323		$	364
Interest cost		838			1,012
Expected return on plan assets		(35	)		(1	)
Amortization of actuarial loss		136			19
Amortization of transition obligation		28			31
Amortization of prior service costs		1			1
Net periodic pension cost	$	1,291		$	1,426

We expect the cash requirements for funding the pension benefits to be approximately $3.9 million during fiscal 2006, including $1.0 million which was funded during the quarter ended March 26, 2006.

Note 11. CONTINGENT LIABILITIES AND SETTLEMENTS

We are involved in certain legal and regulatory actions, all of which have arisen in the ordinary course of business, except for the matters described in the following paragraphs. Management believes it is remotely possible that the ultimate resolution of such matters will have a material adverse effect on our consolidated results of operations and/or financial condition, except as described below.

ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.

On August 1, 2004, the Company and ID Security Systems Canada Inc. entered into a settlement agreement effective July 30, 2004, pursuant to which the Company agreed to pay $19.95 million, in full and final settlement of the claims covered by the litigation. This settlement was accrued in the second quarter of 2004. Payment in full was made on August 5, 2004. The settlement did not cause the Company to be in default on any its debt covenants. The Company does not admit or acknowledge any wrongdoing or liability regarding the litigation. In connection with the settlement, the parties have mutually released each other from all other claims, except for any claims relating to existing contracts between the parties. A release in favor of the Company was also provided by various affiliates and associates of ID Security Systems Canada Inc. Management believes that the settlement was in the best interest of the Company to avoid the risks, burden, and expenses of continued litigation.

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Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.

A certain number of follow-on purported class action suits have arisen in connection with the ID Security Systems Canada Inc. litigation. The purported class action complaints generally allege a claim of monopolization and are substantially based upon the same allegations as contained in the ID Security Systems Canada Inc. case (Civil Action No. 99-CV-577) as discussed below.

On August 1, 2002, a civil action was filed in United States District Court for the Eastern District of Pennsylvania, designated as Civil Action No. 02-6379(ER) by plaintiff Diane Furs, Inc. t/a Diane Furs against Checkpoint Systems, Inc. and served on August 21, 2002. On August 21, 2002, a Notice of Substitution of Plaintiff and Filing of Amended Complaint was filed by the plaintiff, and the named plaintiff was changed to Medi-Care Pharmacy, Inc.

On August 2, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-3730(JEI) by plaintiff Club Sports International, Inc., d/b/a Soccer CSI against Checkpoint Systems, Inc. and served on August 26, 2002.

On October 2, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-4777(JBS) by plaintiff Baby Mika, Inc. against Checkpoint Systems, Inc. and served on October 7, 2002.

On October 23, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-5001(JEI) by plaintiff Washington Square Pharmacy, Inc. against Checkpoint Systems, Inc. and served on November 1, 2002.

On October 18, 2002, The United States District Court, District of New Jersey (Camden) entered an Order staying the proceedings in the Club Sports International, Inc. and Baby Mika, Inc. cases referred to above. In accordance with the Order, the Stay will also apply to the Washington Square Pharmacy, Inc. case referred to below. In addition, the Medi-Care Pharmacy, Inc. case, referred to below, will be voluntarily dismissed, and it has been re-filed in New Jersey and is included in the Stay Order. As a result of the settlement of the litigation with ID Security Systems Canada Inc. described above, an application can be made to the Court to dissolve the Stay Order at this time.

On November 13, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-5319(JEI) by plaintiff 1700 Pharmacy, Inc. against Checkpoint Systems, Inc. and served on November 15, 2002.

On December 30, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-6131(JEI) by plaintiff Medi-Care Pharmacy, Inc. against Checkpoint Systems, Inc. and served on January 3, 2003.

Both the 1700 Pharmacy, Inc. case and the Medi-Care Pharmacy, Inc. case were consolidated with the previously mentioned cases and are included in the October 18, 2002 Stay Order referred to above.

No liability has been recorded for any of the purported class action suits. Management is of the opinion that, based upon the advice of outside legal counsel, it is not probable that the purported class action suits will be successful. Management believes that the lower end of the reasonably possible range of the contingent liability is zero at this time. The high end of the range cannot be estimated at this time. The Company will evaluate settlement offers that will avoid the future cost of litigation.

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All-Tag Security S.A., et al.

The Company originally filed suit on May 1, 2001, alleging that the disposable, deactivatable radio frequency security tag manufactured by All-Tag Security S.A. and All-Tag Security Americas, Inc.'s (jointly "All-Tag") and sold by Sensormatic Electronics Corporation (Sensormatic) infringed on a U.S. Patent No. 4,876,555 (Patent) owned by the Company. On April 22, 2004, the United States District Court for the Eastern District of Pennsylvania granted summary judgment to defendants All-Tag and Sensormatic Electronics Corporation on the ground that the Company's Patent is invalid for incorrect inventorship. The Company appealed this decision. On June 20, 2005, the Company won an appeal when the Federal Circuit reversed the grant of summary judgment and remanded the case to the District Court for further proceedings. The case is now in the discovery phase and trial is set for September 2006. The original US application was filed in March 1988 and is scheduled to expire on March 17, 2007. The Company acquired the patent in 1995 when it acquired Actron AG.

Note 12. BUSINESS SEGMENTS

(dollar amounts in thousands)
Quarter ended		March 26,			March 27,
		2006			2005
Business segment net revenue:
Security	$	102,114		$	117,434
Labeling Services		20,725			15,775
Retail Merchandising		19,380			23,179
Total	$	142,219		$	156,388
Business segment gross profit:
Security	$	40,900		$	50,650
Labeling Services		6,331			5,847
Retail Merchandising		10,025			11,628
Total gross profit		57,256			68,125
Operating expenses		(57,127	)		(65,565	)
Interest income (expense), net		722			(387	)
Other gain, net		372			178
Earnings from continuing operations before      income taxes and minority interest	$	1,223		$	2,351

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Information relating to Forward-Looking Statements

This report includes forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Except for historical matters, the matters discussed are forward-looking statements, within the meaning of Section 27A of the Securities Act of 1933, as amended, that reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties which could cause actual results to differ materially from historical results or those anticipated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Information about potential factors that could affect our business and financial results is included in our Annual Report on Form
10-K for the year ended December 25, 2005, and our other Securities and Exchange Commission filings.

Critical Accounting Policies and Estimates

Except as noted below, there has been no change to our critical accounting policies and estimates, contained in Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K filed for the year ended December 25, 2005.

Effective December 26, 2005, we adopted the fair value recognition provision of Statement of Financial Accounting Standards (SFAS) 123R “Share-based Payment”, using the modified prospective transition method, and therefore have not restated prior period results. Under this method we recognize compensation expense for all share-based payments granted either after December 25, 2005 or prior to December 26, 2005 but not vested as of that date. Under the fair value recognition provisions of SFAS 123R, we recognize share-based compensation net of an estimated forfeiture rate and only recognize compensation cost for those shares expected to vest. For awards granted after the adoption date we recognize the expense on a straight-line basis over the requisite service period of the award. For non-vested awards granted prior to the adoption date, we continue to use the ratable expense allocation method. Prior to SFAS 123R adoption, we accounted for share-based payments under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and accordingly, generally recognized compensation expense only when we granted options with a discounted exercise price. Pro forma net earnings and earnings per share stated as if we applied the fair value method, were previously disclosed in our consolidated financial statement footnotes in accordance with SFAS 148 “Accounting for Stock-based Compensation – Transition and Disclosures.”

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires the input of highly subjective assumptions, including the expected life of the share-based payment awards and stock price volatility. The assumptions used in calculating the fair value of share-based payment awards represent management's best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the share-based compensation expense could be significantly different from what we have recorded in the current period. See Note 2 to the Consolidated Condensed Financial Statements for a further discussion on share-based compensation.

Overview

Checkpoint Systems, Inc. is a multinational manufacturer and marketer of integrated system solutions for retail security, labeling, and merchandising. We provide technology-driven integrated supply chain solutions to brand, track, and secure goods for retailers and consumer product manufacturers worldwide. We are a leading provider and earn revenues primarily from the sale of electronic article surveillance (EAS), closed-circuit television (CCTV), radio frequency identification (RFID) systems, hand-held labeling systems (HLS) and retail merchandising systems (RMS). Applications include automatic identification, retail security, and pricing and promotional labels and signage. Operating directly in 33 countries, we have a global network of subsidiaries and distributors, and provide customer service and technical support around the world.

19

Our results are heavily dependent upon sales to the retail market. Our customers are dependent upon retail sales which are susceptible to economic cycles and seasonal fluctuations. Furthermore, as approximately two-thirds of our revenues and operations are located outside the US, fluctuations in foreign currency exchange rates have a significant impact on reported results.

Our business plan is to generate sustained revenue growth through selected investments in product development and marketing. We intend to offset the cost of these investments through product cost and operating expense reductions.

On January 30, 2006, we completed the sale transaction for our barcode systems (BCS) businesses and US hand-held labeling and Turn-O-Matic® businesses (“disposal group”) and as a result recorded, in the first quarter of 2006, a pretax gain on sale of $2.8 million. The businesses included in the disposal group were highly integrated into the operations in many of our countries. In accordance with the guidance of SFAS 144, discontinued operations only includes revenues and expenses that are directly attributable to the businesses included in the disposal group. As a result, discontinued operations do not include any allocations for general and administrative expenses. It also does not include selling and marketing expenses for shared staff that will continue with the Company after the sale of the business.

To respond to the lower revenue base resulting from the sale of the disposal group and improve our operating margins, we have been taking action and are continuing to develop plans to rationalize the selling, general, and administrative structure that is not part of the disposal group. The two major cost savings initiatives are focused on our European region, where the BCS businesses were highly integrated into 14 countries, and on our global supply chain.

European cost reduction initiatives are focused on improving sales productivity by making better use of indirect sales channels and streamlining our field service operations. In certain regions of Europe, we are also using shared service centers to centralize our accounting and customer service operations.

For the global supply chain, we are currently conducting an evaluation to improve manufacturing operations, supply chain operations, and sourcing of materials. As a result, we are moving our EAS electronics manufacturing from Puerto Rico to the Dominican Republic during the first half of 2006. We have also closed our UK labeling plant and consolidated those operations into our main Service Bureau in Terborg, Netherlands.

We are currently evaluating changes in our supply chain to improve manufacturing utilization, and optimize freight and delivery time. These changes to our supply chain could have an impact on the recoverability of certain fixed assets within our manufacturing facilities, which may result in a future impairment as the evaluation is finalized and plans are approved.

As a direct result of these detailed plans, employee headcount is down by 668 or 16% over the last twelve months. This was accomplished through restructuring and attrition. We would expect these actions to generate approximately $17 million to $19 million in annual cost savings, with a substantial portion of these cost savings being realized in 2006. The sale of the BCS businesses on January 30, 2006 resulted in an additional reduction of 374 employees. While the actions we are taking may negatively impact sales and profits in the short term, we believe they will yield a positive, long-term impact on operating margins.

Revenue for the first quarter of 2006 was $142.2 million, a 9.1% decrease over the comparable periods in 2005. Foreign currency translation had a negative impact on revenue of approximately 4.4%, for the quarter ended March 26, 2006. The remaining decrease in sales was primarily due to large account roll outs of EAS in the first quarter of 2005 that did not repeat in 2006. We also experienced a decline in Europe Security segment sales. The declines in sales were partially offset by increases in US and Europe CheckNet^® service bureau and Asia Security.

The net income for the first quarter of 2006 was $2.5 million compared to $3.8 million in 2005. Share-based compensation added $0.9 million to expense in 2006 over 2005. Gross margins were impacted by unfavorable manufacturing variances, higher raw material costs and lower EAS sales volumes. We expect the margins to improve as we progress through 2006. Changes resulting from strategic initiatives including the transition of the barcode systems business to SATO, restructuring activities in Europe, new EAS label manufacturing processes, the transfer of antennae assembly operations to low costs regions, and the magnitude of the headcount reductions, also impacted net income.

20

Future financial results will be dependent upon our ability to expand the functionality of our existing product lines, develop or acquire new products for sale through our global distribution channels, convert new large chain retailers to RF-EAS, and reduce the cost of our products and infrastructure to respond to competitive pricing pressures.

Our strong base of recurring revenue (revenues from the sale of consumables into the installed base of security systems, and hand-held labeling tools), repeat customer business, and our borrowing capacity should provide us with adequate cash flow and liquidity to execute our business plan.

Results of Operations

(All comparisons are with the prior year period, unless otherwise stated.)

Net Revenues

Our unit volume is driven by product offerings, number of direct sales personnel, recurring sales and, to some extent, pricing. Our base of installed systems and hand held tools provides a source of recurring revenues from the sale of disposable tags, labels and service revenues.

Our customers are substantially dependent on retail sales, which are seasonal, subject to significant fluctuations, and difficult to predict. Such seasonality and fluctuations impact our sales. Historically, we have experienced lower sales in the first half of each year.

21

Analysis of Statement of Operations

Thirteen Weeks ended March 26, 2006 Compared to Thirteen Weeks ended March 27, 2005

The following table presents for the periods indicated certain items in the Consolidated Statement of Operations as a percentage of total revenues and the percentage change in dollar amounts of such items compared to the indicated prior period:

	Percentage of Total Revenues				Percentage Change in Dollar Amount
Quarter ended	March 26		March 27
	2006		2005		Fiscal 2006 vs.
	(Fiscal 2006)		(Fiscal 2005)		Fiscal 2005
Net revenues
Security	71.8	%	75.1	%	(13.0%	)
Labeling services	14.6		10.1		31.4
Retail merchandising	13.6		14.8		(16.4	)
Net revenues	100.0		100.0		(9.1	)
Cost of revenues	59.7		56.4		(3.7	)
Total gross profit	40.3		43.6		(16.0	)
Selling, general and administrative expenses	37.2		38.9		(13.0	)
Research and development	2.8		3.1		(16.1	)
Restructuring expense	0.2		0.0		N/A
Operating income	0.1		1.6		(95.0	)
Interest income	0.8		0.4		92.0
Interest expense	0.3		0.6		(58.6	)
Other income, net	0.3		0.1		109.0
Earnings from continuing operations
before income taxes and minority interest	0.9		1.5		(48.0	)
Income taxes	0.2		0.3		(46.4	)
Minority interest	0.0		0.0		(4.3	)
Earnings from continuing operations	0.7		1.2		(49.0	)
Earnings from discontinued operations, net of tax	1.0		1.2		(23.0	)
Net earnings	1.7	%	2.4	%	(35.1%	)

22

Net Revenues

Revenues for the first quarter 2006 compared to the first quarter 2005 decreased by $14.2 million or 9.1% from $156.4 million to $142.2 million. Foreign currency translation had a negative impact on revenues of approximately $7.2 million or 4.4% in the first quarter of 2006 as compared to the first quarter of 2005.

(dollar amounts in millions)

Quarter ended		March 26, 2006 (Fiscal 2006)		March 27, 2005 (Fiscal 2005)		Dollar Amount Change Fiscal 2006 vs. Fiscal 2005		Percentage Change Fiscal 2006 vs. Fiscal 2005
Net Revenues:
Security	$	102.1	$	117.4	$	(15.3	)	(13.0%	)
Labeling Services		20.7		15.8		4.9		31.4
Retail Merchandising		19.4		23.2		(3.8	)	(16.4	)
Net Revenues	$	142.2	$	156.4	$	(14.2	)	(9.1%	)

Security revenues decreased by $15.3 million or 13.0% in the first quarter 2006 as compared to the first quarter 2005. Foreign currency translation had a negative impact of approximately $4.6 million. The remaining decrease was primarily due to decreases in EAS revenues in the US ($6.0) million and Europe ($3.5) million partially offset by an increase in Asia Pacific EAS revenues of $1.9 million. The decrease in the US EAS revenues can be primarily attributed to large account chain-wide installations during 2005 that did not continue in the first quarter of 2006. In Asia Pacific, the increase was primarily the result of large account chain-wide installations in the current period, which did not occur in the first quarter of 2005.

Labeling services revenues increased by $4.9 million or 31.4%. The negative impact of foreign currency translation was approximately $1.0 million. The increase was primarily due to increases in CheckNet® and intelligent library system revenues of $5.6 million and $1.0 million, respectively.

Retail merchandising revenues decreased by $3.8 million or 16.4%. The negative impact of foreign currency translation was approximately $1.6 million. The remaining decrease was primarily due to the continued decline in HLS revenues. The transition to an indirect sales model in Europe plus the continuing transition by retailers from hand-held price labeling to automated bar-coding and scanning caused the decline in HLS revenues.

Gross Profit

Gross profit for the first quarter 2006 was $57.3 million, or 40.3% of revenues, compared to $68.1 million, or 43.6% of revenues, for the first quarter 2005. Foreign currency translation had a negative impact on gross profit of approximately $2.5 million in the first quarter of 2006.

Security gross profit as a percentage of security revenues decreased to 40.1% in the first quarter 2006 from 43.1% in the first quarter 2005. Security gross profit percentage was negatively impacted by unfavorable manufacturing variances due to higher raw material costs, the implementation of a new manufacturing process for our RF-EAS labels, and costs to move our systems assembly operations from Puerto Rico to the Dominican Republic.

Labeling services gross profit as a percentage of labeling revenues for labeling services decreased to 30.5% in the first quarter 2006 from 37.1% in the first quarter 2005. The decrease in labeling gross profit percentage was primarily due to higher manufacturing costs and a new manufacturing process during the quarter. This margin percentage decrease was offset by higher volumes.

The retail merchandising gross profit as a percentage of retail merchandising revenues increased to 51.7% in the first quarter 2006 from 50.2% in the first quarter of 2005. This increase was mainly due to a shift in sales mix.

Field service and installation costs for the first quarter 2006 and 2005 were 11.3% and 11.9% of net revenues, respectively. The decrease was due primarily to large account chain-wide installations of our EAS products in 2005 which did not continue in the first quarter of 2006.

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Selling, General, and Administrative Expenses

Selling, general and administrative expenses decreased, as a percentage of revenues, from 38.9% in 2005 to 37.2% in 2006. This was a decrease of $7.9 million, or 13.0% over the first quarter 2005. Foreign currency translation decreased selling, general and administrative expenses by approximately $2.6 million. The remaining decrease was primarily due to the impact of our restructuring initiatives coupled with 2005 expenses not incurred in 2006. These 2005 expenses included consulting associated with the evaluation of our business and write offs of unamortized bank fees associated with the term loan and the secured revolving credit facility refinancing. The decreases were offset, in part, by $1.3 million of stock-based compensation recognized in 2006 with the adoption of SFAS 123R.

Research and Development Expenses

Research and development (R&D) costs were $4.0 million, or 2.8% of revenues in the first quarter 2006 and $4.8 million, or 3.1% in the first quarter 2005.

Restructuring Expense

Restructuring expenses were $0.2 million, or 0.2% of revenues in the first quarter 2006. There were no such expenses in the first quarter 2005.

Interest Income

Interest income for the first quarter 2006 increased $0.5 million from the comparable quarter in 2005 due primarily to an increase in invested cash.

Interest Expense

Interest expense for the first quarter 2006 decreased $0.6 million from the comparable quarter in 2005 due primarily to lower overall debt levels.

Income Taxes

The effective tax rates were 23.6% and 22.9% for the first quarters of 2006 and 2005, respectively.The 2006 first quarter effective tax rate is positively impacted by foreign rate differentials and the legal restructuring of our Puerto Rico and Dominican Republic manufacturing operations. The 2005 first quarter effective tax rate is positively impacted by foreign rate differentials and the section 936 tax exemption in Puerto Rico that expired at the end of that year.

Discontinued Operations

Discontinued operations were $1.6 million, or $.04 per diluted share, in the first quarter 2006 compared to $2.0 million, or $.05 per diluted share, in the first quarter 2005. In 2006, Discontinued operations includes the results of the operations through the divestiture on January 30, 2006 and a $1.3 million gain, net of tax, on the divestiture.

Net Earnings

Net earnings were $2.5 million, or $.06 per diluted share, in the first quarter 2006 compared to $3.8 million, or $.10 per diluted share, in the first quarter 2005. The weighted average number of shares used in the diluted earnings per share computation were 40.3 million and 38.4 million for the first quarters of 2006 and 2005, respectively.

Financial Condition

Liquidity and Capital Resources

Our liquidity needs have related to, and are expected to continue to relate to, capital investments, product development costs, future restructurings related to the rationalization of the business, acquisitions, and working capital requirements. We believe that cash provided from operating activities and funding available under our current credit agreement should be adequate for the foreseeable future to service debt and meet our anticipated cash requirements.

As of March 26, 2006, our cash and cash equivalents were $123.7 million compared to $113.2 million as of December 25, 2005. Our operating activities during the first quarter of 2006 used approximately $31.7 million compared to a use of $25.7 million during the first quarter of 2005. In 2006, our cash from operating activities was impacted negatively by a decrease in accounts payable and other current and accrued liabilities coupled with an increase in inventory. The decrease in accounts payable and the increase in inventory are primarily seasonal changes in our business. The decrease in other current and accrued liabilities is primarily attributed to the payment of annual bonuses.

24

On January 30, 2006, we completed the sale transaction for our barcode systems (BCS) businesses and US hand-held labeling and Turn-O-Matic® businesses for gross cash proceeds of $37 million ($33.5 million net of costs to sell and restricted cash) plus the assumption of $5 million in liabilities.

We continue to reinvest in the Company through our investment in technology and process improvement. In the first quarter of 2006, our investment in research and development amounted to $4.0 million. We estimate the investment in research and development during the remainder of 2006 will be approximately $13 million.

Our capital expenditures during the first quarter of 2006 totaled $2.2 million, compared to $3.5 million during the first quarter of 2005. We anticipate our capital expenditures, used primarily to upgrade technology and improve our production capabilities, to approximate $12 million for the remainder 2006.

As of March 26, 2006, our working capital was $224.3 million compared to $209.5 million as of December 25, 2005. At the end of the first quarter 2006, our percentage of total debt to total stockholders’ equity increased to 9.7% from 9.3% as of December 25, 2005. As of March 26, 2006, we had an available line of credit totaling approximately $122.8 million.

We do not anticipate paying any cash dividend on our common stock in the near future.

Provisions for Restructuring

2005 Restructuring Plan

In the second quarter of 2005, we initiated actions focused on reducing our overall operating expenses in Europe. These actions included the implementation of a cost reduction plan designed to consolidate certain administrative functions in Europe. In addition, we have committed to a plan to restructure a portion of our supply chain staff as we transition our manufacturing to lower cost areas. A net charge of $0.6 million was recorded in the first quarter of 2006 in connection with this plan. The total employees affected by the restructuring were 342 of which 217 have been terminated. The anticipated total cost is expected to approximate $17 million to $19 million. These terminations are anticipated to be complete by the first half of 2006. Termination benefits are planned to be paid 1 month to 24 months after termination. Upon completion, the annual savings are anticipated to be approximately $17 million to $19 million.

Restructuring accrual activity was as follows:

(dollar amounts are in thousands)

		Accrual at Beginning of Year		Charged to Earnings		Charge Reversed to Earnings		Cash Payments		Exchange Rate Changes		Accrual at 3/26/06
Severance and other employee-related charges	$	10,121	$	761	$	167	$	3,829	$	126	$	7,012

2003 Restructuring Plan

In the first quarter 2006, we reversed $0.4 million of our lease reserve to income as we have obtained a sublease for the property previously reserved.

Exposure to Foreign Currency

We manufacture products in the USA, the Caribbean, Europe, and the Asia Pacific region for both the local marketplace, as well as for export to our foreign subsidiaries. The subsidiaries, in turn, sell these products to customers in their respective geographic areas of operation, generally in local currencies. This method of sale and resale gives rise to the risk of gains or losses as a result of currency exchange rate fluctuations on the inter-company receivables and payables. Additionally, the sourcing of product in one currency and the sales of product in a different currency can cause gross margin fluctuations due to changes in currency exchange rates.

25

We have historically not used financial instruments to minimize our exposure to currency fluctuations on our net investments in and cash flows derived from our foreign subsidiaries. We have used third party borrowings in foreign currencies to hedge a portion of our net investments in and cash flows derived from our foreign subsidiaries. As we reduce our third party foreign currency borrowings, the effect of foreign currency fluctuations on our net investments in and cash flows derived from our foreign subsidiaries increases.

We selectively purchase currency forward exchange contracts to reduce the risks of currency fluctuations on short-term inter-company receivables and payables. These contracts guarantee a predetermined exchange rate at the time the contract is purchased. This allows us to shift the effect of positive or negative currency fluctuations to a third party. As of March 26, 2006, we had currency forward exchange contracts totaling approximately $13.8 million. The contracts are in the various local currencies covering primarily our Western European, Canadian, and Australian operations. Historically, we have not purchased currency forward exchange contracts where it is not economically efficient, specifically for our operations in South America and Asia.

Off-balance Sheet Arrangements and Contractual Obligations

Our significant contractual obligations and off-balance sheet arrangements have not changed materially from those disclosed in our Annual Report on Form 10-K for the year ended December 25, 2005.

New Accounting Pronouncements and Other Standards

There are no issued accounting pronouncements that have not yet been adopted that would have a material effect on the company’s financial position or results of operations.

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no significant changes to the market risks as disclosed in Item 7a. “Quantitative And Qualitative Disclosures About Market Risk” of our Annual Report on Form 10-K filed for the year ended December 25, 2005.

Item 4. DISCLOSURE CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective.

There has been no change in our internal control over financial reporting that occurred during the three months ended March 26, 2006 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS

We are involved in certain legal and regulatory actions, all of which have arisen in the ordinary course of business, except for the matters described in the following paragraphs. Management believes it is remotely possible that the ultimate resolution of such matters will have a material adverse effect on our consolidated results of operations and/or financial condition, except as described below.

ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.

On August 1, 2004, the Company and ID Security Systems Canada Inc. entered into a settlement agreement effective July 30, 2004, pursuant to which the Company agreed to pay $19.95 million, in full and final settlement of the claims covered by the litigation. This settlement was accrued in the second quarter of 2004. Payment in full was made on August 5, 2004. The settlement did not cause the Company to be in default on any its debt covenants. The Company does not admit or acknowledge any wrongdoing or liability regarding the litigation. In connection with the settlement, the parties have mutually released each other from all other claims, except for any claims relating to existing contracts between the parties. A release in favor of the Company was also provided by various affiliates and associates of ID Security Systems Canada Inc. Management believes that the settlement was in the best interest of the Company to avoid the risks, burden, and expenses of continued litigation.

26

Matters related to ID Security Systems Canada Inc. versus Checkpoint Systems, Inc.

A certain number of follow-on purported class action suits have arisen in connection with the ID Security Systems Canada Inc. litigation. The purported class action complaints generally allege a claim of monopolization and are substantially based upon the same allegations as contained in the ID Security Systems Canada Inc. case (Civil Action No. 99-CV-577) as discussed below.

On August 1, 2002, a civil action was filed in United States District Court for the Eastern District of Pennsylvania, designated as Civil Action No. 02-6379(ER) by plaintiff Diane Furs, Inc. t/a Diane Furs against Checkpoint Systems, Inc. and served on August 21, 2002. On August 21, 2002, a Notice of Substitution of Plaintiff and Filing of Amended Complaint was filed by the plaintiff, and the named plaintiff was changed to Medi-Care Pharmacy, Inc.

On August 2, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-3730(JEI) by plaintiff Club Sports International, Inc., d/b/a Soccer CSI against Checkpoint Systems, Inc. and served on August 26, 2002.

On October 2, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-4777(JBS) by plaintiff Baby Mika, Inc. against Checkpoint Systems, Inc. and served on October 7, 2002.

On October 23, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-5001(JEI) by plaintiff Washington Square Pharmacy, Inc. against Checkpoint Systems, Inc. and served on November 1, 2002.

On October 18, 2002, the United States District Court, District of New Jersey (Camden) entered an Order staying the proceedings in the Club Sports International, Inc. and Baby Mika, Inc. cases referred to above. In accordance with the Order, the Stay will also apply to the Washington Square Pharmacy, Inc. case referred to below. In addition, the Medi-Care Pharmacy, Inc. case, referred to below, will be voluntarily dismissed, and it has been re-filed in New Jersey and is included in the Stay Order. As a result of the settlement of the litigation with ID Security Systems Canada Inc. described above, an application can be made to the Court to dissolve the Stay Order at this time.

On November 13, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-5319(JEI) by plaintiff 1700 Pharmacy, Inc. against Checkpoint Systems, Inc. and served on November 15, 2002.

On December 30, 2002, a civil action was filed in the United States District Court, District of New Jersey (Camden) designated as Docket No. 02-CV-6131(JEI) by plaintiff Medi-Care Pharmacy, Inc. against Checkpoint Systems, Inc. and served on January 3, 2003.

Both the 1700 Pharmacy, Inc. case and the Medi-Care Pharmacy, Inc. case were consolidated with the previously mentioned cases and are included in the October 18, 2002 Stay Order referred to above.

No liability has been recorded for any of the purported class action suits. Management is of the opinion that, based upon the advice of outside legal counsel, it is not probable that the purported class action suits will be successful. Management believes that the lower end of the reasonably possible range of the contingent liability is zero at this time. The high end of the range cannot be estimated at this time. The Company will evaluate settlement offers that will avoid the future cost of litigation.

All-Tag Security S.A., et al.

The Company originally filed suit on May 1, 2001, alleging that the disposable, deactivatable radio frequency security tag manufactured by All-Tag Security S.A. and All-Tag Security Americas, Inc.'s (jointly “All-Tag”) and sold by Sensormatic Electronics Corporation (Sensormatic) infringed on a U.S. Patent No. 4,876,555 (Patent) owned by the Company. On April 22, 2004, the United States District Court for the Eastern District of Pennsylvania granted summary judgment to defendants All-Tag and Sensormatic Electronics Corporation on the ground that the Company's Patent is invalid for incorrect inventorship. The Company appealed this decision. On June 20, 2005, the Company won an appeal when the Federal Circuit reversed the grant of summary judgment and remanded the case to the District Court for further proceedings. The case is now in the discovery phase and trial is set for September 2006. The original US application was filed in March 1988 and is scheduled to expire on March 17, 2007. The Company acquired the patent in 1995 when it acquired Actron AG.

27

Item 1A. RISK FACTORS

There have been no material changes from December 25, 2005 to the significant risk factors and uncertainties known to the Company that, if they were to occur, could materially adversely affect the Company's business, financial condition, operating results and/or cash flow. For a discussion of the Company's risk factors, refer to Item 1A. "Risk Factors", contained in the Company's Annual Report on Form 10-K for the year ended December 25, 2005.

Item 6. EXHIBITS

Exhibit 2.1	Asset Purchase Agreement, dated December 22, 2005 between Sato International Pte. Ltd. and Checkpoint Systems, Inc.
Exhibit 2.2	Amendment to Asset Purchase Agreement, dated January 29, 2005 between Sato International Pte. Ltd. and Checkpoint Systems, Inc.
Exhibit 3.1	Articles of Incorporation, as amended, are hereby incorporated by reference to Item 14(a), Exhibit 3(i) of the Registrant’s 1990 Form 10-K, filed with the SEC on March 14, 1991.
Exhibit 3.2	By-Laws, as Amended and Restated, are hereby incorporated by reference to Item 15(c), Exhibit 3.2 of the Registrant’s 2004 10-K, filed with the SEC on March 11, 2005.
Exhibit 31.1	Rule 13a-14(a) Certification of George W. Off, Chairman of the Board, President and Chief Executive Officer.
Exhibit 31.2	Rule 13a-a4(a) Certification of W. Craig Burns, Executive Vice President, Chief Financial Officer and Treasurer.
Exhibit 32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CHECKPOINT SYSTEMS, INC.
/s/W. Craig Burns	May 5, 2006
W. Craig Burns
Executive Vice President,
Chief Financial Officer and Treasurer
/s/Raymond Andrews	May 5, 2006
Raymond Andrews
Vice President, Chief Accounting Officer

29

INDEX TO EXHIBITS

EXHIBIT	DESCRIPTION
EXHIBIT 2.1	Asset Purchase Agreement, dated December 22, 2005 between Sato International Pte. Ltd. and Checkpoint Systems, Inc.
EXHIBIT 2.2	Amendment to Asset Purchase Agreement, dated January 29, 2005 between Sato International Pte. Ltd. and Checkpoint Systems, Inc.
EXHIBIT 31.1	Rule 13a-14(a)/15d-14(a) Certification of George W. Off, Chairman of the Board, President and Chief Executive Officer
EXHIBIT 31.2	Rule 13a-4(a)/15d-14(a) Certification of W. Craig Burns, Executive Vice President, Chief Financial Officer and Treasurer
EXHIBIT 32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 936 of the Sarbanes-Oxley Act of 2002

30

EX-2.1

                                                                     Exhibit 2.1

                                 EXECUTION COPY



                            ASSET PURCHASE AGREEMENT

         This Asset Purchase Agreement ("AGREEMENT") dated December 22, 2005 is
by and among Sato International Pte. Ltd., an entity organized under the laws of
the Republic of Singapore (and, as applicable, together with any assignees or
designees, jointly and severally "BUYER"), and Checkpoint Systems, Inc., a
Pennsylvania corporation ("SELLER").

                                    RECITALS

         Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, the Acquired Business (as defined below) as a going concern.

         The parties, in consideration of the foregoing premises and the
following agreed upon terms and conditions, intending to be legally bound, agree
as follows:

1.       DEFINITIONS AND USAGE

         1.1      DEFINITIONS

                  "ACCOUNTS RECEIVABLE" - the accounts receivable reflected on
Final Statement of Net Operating Assets (as defined below in Section 2.3(e)),
consisting of the trade accounts receivable and other rights to payment from
customers of Acquired Business and the full benefit of all security for such
accounts or rights to payment, including all trade accounts receivable
representing amounts receivable in respect of goods shipped or products sold or
services rendered to customers of Acquired Business.

                  "ACQUIRED ASSETS - as defined in Section 2.1.

                  "ACQUIRED BUSINESS" - means the design, manufacture and/or
sales of: (i) with respect to North America, label converting for laser
printers, horticultural identification labeling solutions, (ii) with respect to
the United States of America, laser solutions/printers, thermal
solutions/printers, hand-held labeling solutions and the "Turn-O-Matic" ticket
dispensing systems, (iii) with respect to Europe, laser solutions/printers,
thermal barcode printers and associated thermal hardware (including track and
trace devices) and consumables (including stock/customized labels, tags and
tickets for retail, manufacturing, logistics, industrial and horticultural
applications), and (iv) with respect to the Asia Pacific region, thermal
solutions/printers, custom labels to the courier industry, prime labels to the
foodservice industry, white labels, and other specialized thermal barcode
printing applications; provided, however, that the Acquired Business shall not
include any labels or labels solutions that incorporate EAS, EM, RF or RFID
technology and Service Bureau Products. The definition of Acquired Business
shall not include the business of Checkpoint Meto Benelux B.V., Kimball Systems
B.V. and Checkpoint Systems France, S.A. with respect to which the Parties
intend to enter into a separate, but similar agreement (as far as possible under
Dutch and French law) after the necessary consultation procedures with the
workers' representation has been conducted, and the Purchase Price shall be
adjusted accordingly to reflect the exclusion of the assets of such businesses
from the Assets to be sold hereunder.


                  "APPURTENANCES" - all privileges, rights, easements,
hereditaments and appurtenances belonging to or for the benefit of the Land,
including all easements appurtenant to and for the benefit of any Land (a
"DOMINANT PARCEL") for, and as the primary means of access between, the Dominant
Parcel and a public way, or for any other use upon which lawful use of the
Dominant Parcel for the purposes for which it is presently being used is
dependent, and all rights existing in and to any streets, alleys, passages and
other rights-of-way included thereon or adjacent thereto (before or after
vacation thereof) and vaults beneath any such streets.

                  "ASSUMED EMPLOYEES" - as defined in Section 10.1(a)(ii).

                  "ASSUMED LIABILITIES" - as defined in Section 2.4(a).

                  "BREACH" - any breach of, or any inaccuracy in, any
representation or warranty or any breach of, or failure to perform or comply
with, any covenant or obligation, in or of this Agreement or any other Contract,
or any event which with the passing of time or the giving of notice, or both,
would constitute such a breach, inaccuracy or failure.

                  "BUSINESS DAY" - any day other than (a) Saturday or Sunday or
(b) any other day on which banks in the State of Delaware, U.S.A. are permitted
or required to be closed.

                  "BUYER" - as defined in the first paragraph of this Agreement.

                  "BUYER PARTIES" - as defined in Section 11.2(a).

                  "RETAINED ASSETS" - as defined in Section 2.2.

                  "CLOSING" - as defined in Section 2.7.

                  "CLOSING DATE" - the date on which the Closing actually takes
place.

                  "COBRA - means Section 49808B of the Code (as well as its
predecessor provision, Section 162(k) of the Code) and Sections 601 through 608,
inclusive of ERISA.

                  "CODE" - the Internal Revenue Code of 1986, as amended.

                  "COMMERCIALLY REASONABLE EFFORTS" - for purposes of this
Agreement, "commercially reasonable efforts" will not be deemed to require a
Person to undertake extraordinary or unreasonable measures, including the
payment of amounts in excess of normal and usual filing fees and processing
fees, if any.

                  "CONFIDENTIAL INFORMATION" - as defined in Section 12.1.

                  "CONSENT" - any approval, consent, ratification, waiver or
other authorization.

                  "CONVEYANCE DOCUMENTS" - as defined in Section 2.8(a)(i).

                  "CONTEMPLATED TRANSACTIONS" - all of the transactions
contemplated by this Agreement.

                                       2


                  "CONTRACT" - any written agreement, contract, lease, promise
or undertaking.

                  "DISCLOSURE SCHEDULES" - all of the disclosure schedules
identified in this Agreement delivered by Seller to Buyer concurrently with the
execution and delivery of this Agreement, except as otherwise specified herein.

                  "EAS" - Electronic Article Surveillance.

                  "EM" - means electromagnetic technology.

                  "EMPLOYEE PLANS" - as defined in Section 3.16(a).

                  "EMPLOYEES RECEIVING AN OFFER" - as defined in Section
10.1(a)(i).

                  "ENCUMBRANCE" - any charge, claim, condition, equitable
interest, lien, right of way, easement, encroachment, right of first option,
right of first refusal, restriction on use, transfer, receipt of income or
exercise of any other attribute of ownership.

                  "ENVIRONMENT" - soil, land surface or subsurface strata,
surface waters (including navigable waters and ocean waters), groundwater,
drinking water supply, stream sediments, ambient air (including indoor air),
plant and animal life and any other environmental medium or natural resource.

                  "ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" - any cost,
damages, expense, liability, obligation or other responsibility arising from or
under any Environmental Law or Occupational Safety and Health Law.

                  "ENVIRONMENTAL LAW" - any Legal Requirement that requires or
relates to: (a) advising appropriate authorities of actual Releases of
pollutants or hazardous substances or materials, violations of discharge limits
or other prohibitions; (b) preventing or reducing to acceptable levels the
Release of pollutants or hazardous substances or materials into the Environment;
(c) reducing the quantities, preventing the Release or minimizing the hazardous
characteristics of wastes that are generated; (d) reducing to acceptable levels
the risks inherent in the transportation of hazardous substances, pollutants,
oil or other potentially harmful substances; or (e) cleaning up pollutants that
have been Released or paying the costs of such clean up or prevention.

                  "ERISA" - the Employee Retirement Income Security Act of 1974,
as amended.

                  "GOVERNING DOCUMENTS" - with respect to any particular entity,
(a) if a corporation, the articles or certificate of incorporation and the
bylaws; (b) if a general partnership, the partnership agreement and any
statement of partnership; (c) if a limited partnership, the limited partnership
agreement and the certificate of limited partnership; (d) if a limited liability
company, the articles of organization and operating agreement; (e) if another
type of Person, any other charter or similar document adopted or filed in
connection with the creation, formation or organization of the Person; (f) all
equity holders' agreements, voting agreements, voting trust agreements, joint
venture agreements, registration rights agreements or other agreements or
documents relating to the organization, management or operation of any Person or
relating to the rights, duties and obligations of the equity holders of any
Person; and (g) any amendment or supplement to any of the foregoing.

                                       3


                  "GOVERNMENTAL AUTHORIZATION" - any Consent, license,
registration or permit issued, granted, given or otherwise made available by or
under the authority of any Governmental Body or pursuant to any Legal
Requirement.

                  "GOVERNMENTAL BODY" - any: (a) nation, state, county, city,
town, borough, village, district or other jurisdiction; (b) federal, state,
local, municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any agency, branch,
department, board, commission, court, tribunal or other entity exercising
governmental or quasi-governmental powers); (d) multinational organization or
body; (e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; or (f) official of any of the foregoing.

                  "HAZARDOUS ACTIVITY" - the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
Release, storage, transfer, transportation, treatment or use (including any
withdrawal or other use of groundwater) of Hazardous Material in, on, under,
about or from any of the Leased Real Property or any part thereof into the
Environment and any other act, business, operation or thing that increases the
danger, or risk of danger, or poses an unreasonable risk of harm, to persons or
property on or off the Leased Real Property.

                  "HAZARDOUS MATERIAL" - any substance, material or waste which
is regulated by Environmental Laws enacted by any Governmental Body.

                  "INDEMNIFIED PARTY" - as defined in Section 11.4.

                  "INDEMNIFYING PARTY" - as defined in Section 11.4.

                  "INTELLECTUAL PROPERTY ASSETS" - means generally, the
intellectual property in which Seller has a proprietary interest that is used in
the Acquired Business, such Intellectual Property Assets being the Meto IP
Rights and the intellectual property set forth on Schedule 2.1(f).

                  "INVENTORIES" - all inventories of the Acquired Business
reflected on Final Statement of Net Operating Assets (as defined below in
Section 2.3(e)), wherever located, including all finished goods, work in
process, raw materials, spare parts and all other materials and supplies to be
used or consumed by Acquired Business in the production of finished goods.

                  "IRS" - the United States Internal Revenue Service and, to the
extent relevant, the United States Department of the Treasury.


                                       4


                  "KNOWLEDGE" means:

                  (a) With respect to Seller: the Knowledge of Seller, or words
         of similar import, mean the actual knowledge and the knowledge that
         such individuals should have had in the performance of their normal
         duties on behalf of the respective employing entity in a reasonably
         prudent manner, without inquiry or investigation, of the following
         individuals: (i) George Off (Chairman and Chief Executive Officer),
         (ii) W. Craig Burns (Executive Vice President, Chief Financial Officer
         and Treasurer), (iii) John E. Davies, Jr. (President of Asia Pacific
         and Latin America), (iv) David C. Donnan (President of North America),
         (v) Per H. Levin (President of Europe), (vi) John R. Van Zile (Senior
         Vice President, General Counsel and Secretary, (vii) Arthur W. Todd
         (Vice President, Corporate Controller and Chief Accounting Officer,
         (viii) Mark Gentle (General Manager, Label Solutions Europe), (ix)
         Edmund Trossen (Director of Marketing and Sales, Checkpoint Systems
         GmbH, (x) Mark Lenhauser (Managing Director of Hirschhorn Facility),
         (xi) John Saccameno (Vice President and General Manager - North
         America), (xii) Joseph Podsedly (General Manager of Romeoville
         Facility), (xiii) Richard Wescott (Director of Sales Bar Code
         Solutions), (xiv) Shawn Baer (Vice President and General Manager of
         Horticulture Printing Facility), (xv) Badi Ala'i (Managing Director,
         Checkpoint Australia and New Zealand), (xvi) Michael Champness
         (Director of Supply Chain Solutions, Checkpoint Meto Limited), (xvii)
         Barry Lim (Managing Director, Checkpoint Malaysia), and (xviii)
         Christopher Powell (Director of Manufacturing, Checkpoint Meto
         Australia), or

                  (b) With respect to Buyer: the Knowledge of Buyer, or words of
         similar import, mean the actual knowledge, without investigation, of
         the following individuals: (i) Mr. Masonori Otsuka (President and COO
         of Sato Corporation), Mr. Toshihiro Waki (Managing Director of Sato
         International Pte. Ltd.), Mr. Kazuo Matsuyama (Director and General
         Manager of Sato International Pte. Ltd., and Mr. Kiyohiko Yoshii
         (Director and Senior Manager of Sato International Pte. Ltd.).

                  "LAND" - all parcels and tracts of land in which Seller has an
ownership interest.

                  "LEASE" - any Leased Real Property agreement or any other
lease or rental agreement, license, right to use or installment and conditional
sale agreement to which a Seller is a party and any other Seller Contract
pertaining to the leasing or use of any Tangible Personal Property.

                  "LEASED REAL PROPERTY" - any land, improvements and
Appurtenances subject to a Lease to which Seller is a party.

                  "LEGAL REQUIREMENT" - any legally binding federal, state,
local, municipal, foreign, international, multinational or other constitution,
law, ordinance, principle of common law, code, regulation, statute or treaty.

                  "LIABILITY" - with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether known
or unknown, absolute or contingent, accrued or unaccrued, disputed or
undisputed, liquidated or unliquidated, secured or unsecured, joint or several,
due or to become due, vested or unvested, executory, determined, determinable or
otherwise, and whether or not the same is required to be accrued on the
financial statements of such Person.

                                       5


                  "LOSSES" - defined in section 11.2(a).

                  "MATERIAL ADVERSE CHANGE" - means a change in (or effect on)
the condition (financial or otherwise), of the properties, assets, liabilities,
rights, obligations, operations or business of the Acquired Business, taken as a
whole, which change (or effect) individually or in the aggregate, is materially
adverse to such condition, properties, assets, liabilities, rights, obligations,
operations or business of the Acquired Business taken as a whole (it being
understood that changes in generally prevailing economic conditions or
conditions which affect all companies in the Acquired Business' industry in a
similar fashion do not constitute a Material Adverse Change).

                  "MATERIAL CONSENTS" - as defined in Section 7.3.

                  "MATERIAL CONTRACT" - Each Contract that relates solely to the
Acquired Business that (i) represents One Hundred Thousand Dollars ($100,000) or
more of revenues or expenses; or (ii) contains a material covenant not to
compete or otherwise significantly restricts the Seller's ability to conduct the
Business; or (iii) provides for the extension of credit to a customer other than
consistent with normal credit terms; or (iv) provides for a material guaranty or
indemnity by Seller; (v) contains a right of first refusal for any of the
Acquired Assets; or (vi) requires Seller to buy or sell goods or services with
respect to which there will be material losses or will be costs and expenses
materially in excess of expected receipts (other than as provided for or
otherwise reserved against on the most recent of the balance sheets); or (vii)
is otherwise material to the Acquired Business.

                  "NET OPERATING ASSETS" - shall mean those asset line items set
forth on Schedule 2.3(b) net of the liability line items set forth on Schedule
2.3(b), all as set forth on the Most Recent Balance Sheet (as defined in Section
2.3).

                  "OCCUPATIONAL SAFETY AND HEALTH LAW" - any Legal Requirement
designed to provide safe and healthful working conditions and to reduce
occupational safety and health hazards, including the Occupational Safety and
Health Act, and any program, whether governmental or private (such as those
promulgated or sponsored by industry associations and insurance companies),
designed to provide safe and healthful working conditions.

                  "ORDER" - any order, injunction, judgment, decree, ruling,
assessment or arbitration award of any Governmental Body or arbitrator.

                  "ORDINARY COURSE OF BUSINESS" - an action taken by a Person
will be deemed to have been taken in the ordinary course of the Acquired
Business only if that action is consistent in nature, scope and magnitude with
the past practices of Seller.

                  "PERMITTED ENCUMBRANCES" - as defined in Section 3.6.

                                       6


                  "PERSON" - an individual, partnership, corporation, business
trust, limited liability company, limited liability partnership, joint stock
company, trust, unincorporated association, joint venture or other entity or a
Governmental Body.

                  "PROCEEDING" - any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
judicial or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted or heard by or before any Governmental
Body or arbitrator.

                  "PURCHASE PRICE" - as defined in Section 2.3.

                  "RECORD" - information that is inscribed on a tangible medium
or that is stored in an electronic or other medium and is retrievable in
perceivable form.

                  "RELEASE" - any release, spill, emission, leaking, pumping,
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching or migration on or into the Environment or into or out of any property.

                  "REPRESENTATIVE" - with respect to a particular Person, any
director, officer, manager, employee, agent, consultant, advisor, accountant,
financial advisor, legal counsel or other representative of that Person.

                  "RETAINED LIABILITIES" - as defined in Section 2.4(b).

                  "RF" - radio frequency.

                  "RFID" - means a radio frequency identification circuit.

                  "SCHEDULE" - a schedule contained in the Disclosure Schedules.

                  "SELLER" - means CHECKPOINT SYSTEMS, INC. or, with respect to
certain Acquired Assets owned by or vested in a Seller Local Entity, A SELLER
LOCAL ENTITY, as required by the context of this Agreement depending on the
actual ownership with respect to a specific Acquired Asset.

                  "SELLER CONTRACT" - any Contract related solely to the
Acquired Business.

                  "SELLER LOCAL ENTITY" - as defined in Section 2.1.4

                  "SERVICE BUREAU PRODUCTS" - sales, brokering, order processing
and/or production anywhere in the world, not limited to current sales by Seller
under Check-Net(R), of the following: tags and labels with either static and/or
dynamically changing variable data, graphic tags and labels, woven labels, care
labels, and other retail and/or apparel trim items, excluding EM, RF and RFID,
where customers, products, and orders are setup, received, parsed, transmitted,
shipped, and updated by electronic means or otherwise, for sales to the retail
and apparel markets.

                  "TANGIBLE PERSONAL PROPERTY" - as defined in Section 2.1(a).

                                       7


                  "TAX" - any income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental, customs, vehicle, or other title or registration, capital stock,
franchise, employees' income withholding, foreign or domestic withholding,
social security, unemployment, disability, real property, personal property,
sales, use, transfer, value added, alternative, add-on minimum and other tax,
fee, assessment, levy, tariff, charge or duty of any kind whatsoever and any
interest, penalty, addition or additional amount thereon imposed, assessed or
collected by or under the authority of any Governmental Body or payable under
any tax-sharing agreement or any other Contract.

                  "TAX RETURN" - any return (including any information return),
report, statement, schedule, notice, form, declaration, claim for refund or
other document or information filed with or submitted to, or required to be
filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.

                  "THIRD PARTY" - a Person that is not a party to this
Agreement.

                  "THIRD PARTY CLAIM" - any claim against any Indemnified Person
by a Third Party, whether or not involving a Proceeding.

                  "TRANSFERABLE EMPLOYEES" - as defined in Section 3.15.

                  "TRANSFERRED EMPLOYEES - as defined in Section 10.1(a)(ii).

2        SALE AND TRANSFER OF ACQUIRED ASSETS; CLOSING

         2.1      ASSETS TO BE SOLD

                  2.1.1 Upon the terms and subject to the conditions set forth
in this Agreement (including the conditions listed in this Section 2.1 below),
at the Closing, Seller shall, or Seller shall cause a Seller Local Entity
(defined below in this Section 2.1) to, sell, convey, assign, transfer and
deliver to Buyer or Buyer's nominee, and Buyer or Buyer's nominee shall purchase
and acquire from Seller, free and clear of any Encumbrances other than Permitted
Encumbrances, all of Seller's, or all of Seller Local Entity's, right, title and
interest in and to the following assets of the Acquired Business as a going
concern (but excluding the Retained Assets):

                  (a) the tangible personal property items listed or described
         in Schedule 2.1.1(a), which Schedule shall be updated at Closing
         ("TANGIBLE PERSONAL PROPERTY");

                  (b) the Inventories reflected on the Final Statement of Net
         Operating Assets;

                  (c) the Accounts Receivable reflected on the Final Statement
         of Net Operating Assets;

                  (d) the Seller Contracts (including the Leased Real Property)
         listed or described in Schedule 2.1.1(d);

                                       8


                  (e) the data and Records related to the operations of the
         Acquired Business, excluding all personnel Records and other Records
         that Seller is required by law to retain in its possession (copies of
         which shall be made available to Buyer on request);

                  (f) the Intellectual Property Assets of the Acquired Business
         listed in Schedule 2.1.1(f); and

                  (g) pre-payments relating to the Acquired Business and other
         miscellaneous assets of the Acquired Business listed on Schedule
         2.1.1(g).

                  2.1.2 All of the property and assets to be transferred to
Buyer under this Section 2.1 shall be herein referred to collectively as the
"ACQUIRED ASSETS." With respect to the Schedules referenced in this Section 2.1
("ASSET SCHEDULES"), Seller hereby provides to Buyer on the date hereof a
current schedule of such Assets. Not later than five (5) days prior to the
Closing Date, Seller shall deliver to Buyer final updated Asset Schedules. Buyer
shall have an opportunity to review all such updated asset schedules and request
that Seller provide an explanation and/or support that any assets added to such
schedules are part of the Acquired Business. The final disposition of the
Acquired Assets may be adjusted by the Final Statement of Net Operating Assets
(as defined in Section 2.3(e)).

                  2.1.3 Notwithstanding the foregoing, the transfer of the
Acquired Assets pursuant to this Agreement shall not include the assumption of
any Liability related to the Acquired Assets unless Buyer expressly assumes that
Liability pursuant to Section 2.4(a).

                  2.1.4 Seller shall cause each applicable local subsidiary of
Seller (a "SELLER LOCAL ENTITY") in each of the jurisdictions where the Acquired
Assets are being transferred to transfer those Acquired Assets owned by such
Seller Local Entity to Buyer or Buyer's nominee. Seller shall cause each Seller
Local Entity to enter into a separate written agreement (each a "LOCAL
AGREEMENT") for the sale and transfer of the portion of the Acquired Assets
which are being transferred from the respective Seller Local Entity to Buyer or
a local entity of Buyer in the jurisdiction in which the assets are being
transferred. Except for modifications required pursuant to applicable laws of a
local jurisdiction, each Local European Agreement shall be substantially in the
form of the German Local Agreement unless otherwise agreed upon by the parties.
The parties agree that each Local entity shall be a third party beneficiary
under this agreement and shall have standing to enforce any rights and remedies
that it may have under this Agreement. To the extent this Asset Purchase
Agreement provides for remedies of either party, the parties acknowledge that
either party can seek remedies not only for their own damages but also for
damages of the Seller Local Entity (with respect to the Seller) or the Buyer
Local Entity (with respect to the Buyer).

                  2.1.5 In the event that the transfer of any non-material
assets from a Seller Local Entity to a nominee of Buyer cannot occur prior to
Closing due to the need for a notice or other waiting period to expire (such
assets not sold at Closing shall be referred to herein as the "PENDING ASSETS"),
the parties, in their sole discretion, shall Close on all of the transferable
Acquired Assets; provided, however, that neither party shall be required to
Close if the waiting period applies to the Acquired Assets located in Germany.
To the extent that there are Pending Assets at the end of Closing, the parties
agree that the Pending Assets shall be transferred to Buyer as soon as
practicable after such transfer is permissible under applicable local law, and
payment by Buyer will deferred until, and until such time Seller shall hold the
Pending Assets in escrow and the risk of loss therefor will not pass to Buyer
until the parties execute and deliver to the other the Local Transfer Agreement.

                                       9


                  2.1.6 The Local Agreements for Germany shall be in a form as
set out in Schedule 2.1.6 ("GERMAN LOCAL AGREEMENTS"). The Local Agreements in
the remaining jurisdictions shall be as far as possible (taking into account the
particularities of the respective jurisdiction) similar to the German Local
Agreement. The precise nature and conditions of the Local Agreements will depend
on the laws, regulations and practices applying within each of the jurisdictions
concerned. Where appropriate, the Parties to this Agreement will cause their
local subsidiaries to comply with any applicable legal requirement prior to
entering into the Local Agreements and, in particular, any obligation that may
exist to consult with relevant employee representation.

                  2.1.7 The Local Agreement of Checkpoint Systems Italia SPA
("ITALIAN LOCAL AGREEMENT") shall be based in the German Local Agreement but
shall include the following provision:

         "The respective obligations of each of the transferor/seller and
transferee/purchaser to effect the Local Agreement shall be subject to the
satisfaction at or prior to the Closing Date of the following condition:

         Each of the transferor/seller and transferee/purchaser shall have (i)
duly completed the procedure of information and consultation with trade
unions/works council set forth by Section 47 of Law No. 428 of December 29, 1990
and (ii) duly accomplished any obligations set forth by the applicable National
Bargaining Collective Agreement or any union agreements currently applied in
connection with the transactions contemplated by this Agreement."

                  2.1.8 The remaining Local Agreements shall be concluded as
soon as possible under the local Legal Requirements, in particular under the
applicable local labour law regulations.

         2.2      RETAINED ASSETS

         Notwithstanding anything to the contrary contained in Section 2.1 or
elsewhere in this Agreement, for purposes of clarity the following assets of
Seller (collectively, "RETAINED ASSETS"), together with all other assets owned
by Seller not listed as an Acquired Asset, are not part of the sale and purchase
contemplated hereunder, are excluded from the Acquired Assets and shall remain
the property of Seller after the Closing:

                  (a) all cash, cash equivalents and short-term investments
         related to the Acquired Business, except for cash attributable to any
         prepaid deposits or other items of deferred revenue set forth as an
         asset on the Statement of Estimated Net Operating Assets, as adjusted
         by the Final Statement of Net Operating Assets;

                  (b) all minute books, stock Records and corporate seals of the
         Sellers;

                  (c) all intellectual property rights in the name Meto,
         including, without limitation, all trade name, trademark, and service
         name rights ("METO IP RIGHTS");

                                       10


                  (d) all claims for refund of Taxes and other governmental
         charges of whatever nature; and

                  (e) all rights, including intellectual property, associated
         with sale of Service Bureau Products. RFID labels, tags and tickets and
         all processes associated with the design, fabrication, testing and
         implementation of RFID into consumer product, commercial and industrial
         solutions.

         2.3      CONSIDERATION

                  (a) Purchase Price. The aggregate consideration, subject to
         the application of Sections 2.6(a), 2.6(b) and 10.2 below, for the
         Acquired Assets (the "PURCHASE PRICE") shall be determined as follows:

                           (i) the Estimated Net Operating Assets Amount, as
                  determined in Section 2.3(b), paid by Buyer to Seller on the
                  Closing Date, plus

                           (ii) the Additional Cash Purchase Price, as set forth
                  in Section 2.3(c), paid by Buyer to Seller on the Closing Date
                  net of the payment of the Escrow Amount (as defined in Section
                  2.3(d) below) (the Additional Cash Purchase Price together
                  with the Estimated Net Operating Assets Amount is referred to
                  herein as the "INITIAL PURCHASE PRICE"), plus or minus

                           (iii) the Final Net Operating Assets Adjustment (as
                  determined pursuant to either Section 2.3(f) or Section
                  2.3(g)), paid in accordance with Section 2.3(h).

                  (b) Estimated Net Operating Assets Amount. The "ESTIMATED NET
         OPERATING ASSETS AMOUNT" shall be the amount designated as such on the
         Statement of Estimated Net Operating Assets (as defined in this Section
         2.3(b)). On the date hereof, Seller has prepared and delivered to Buyer
         the most recently internally prepared, un-audited, month-end balance
         sheet for the Acquired Business, attached hereto as Schedule 2.3(b),
         which will also contain an initial statement of Net Operating Assets
         amount as of such date ("MOST RECENT BALANCE SHEET"). Not later than
         5:00 p.m. eastern United States standard time on the day immediately
         preceding the Closing Date, the Seller shall deliver to Buyer an
         internally prepared, un-audited, balance sheet as of the Closing Date
         and a statement of estimated Net Operating Assets as of the Closing
         Date ("STATEMENT OF ESTIMATED NET OPERATING ASSETS"), prepared in a
         manner consistent with the Most Recent Balance Sheet and also made a
         part of Schedule 2.3(b). The Statement of Estimated Net Operating
         Assets shall include a calculation of the Estimated Net Operating
         Assets Amount. Not later than three (3) days prior to the Closing Date,
         the Seller shall provide Buyer a preliminary pro forma calculation of
         the Statement of Estimated Net Operating Assets.

                  (c) Additional Cash Purchase Price. The "ADDITIONAL CASH
         PURCHASE PRICE" is equal to US$8,579,000.

                  (d) Escrow. On the date hereof, Buyer shall initialize a wire
         transfer of US$2,025,000 (an amount equal to five percent (5%) of the
         sum of: (i) the initial statement of Net Operating Assets amount as
         shown on the Most Recent Balance Sheet plus (ii) the Additional Cash
         Purchase Price) (the "ESCROW AMOUNT") to an escrow account established
         by Chicago Title and Trust Company ("ESCROW AGENT"). The balance of the
         Initial Purchase Price will be paid by Buyer to Seller on the Closing
         Date via wire transfer of immediately available funds. The Escrow
         Amount will be held and distributed by the Escrow Agent in accordance
         with the terms and provisions of an escrow agreement which will be
         executed and delivered by the parties hereof concurrently with the
         execution and delivery of this Agreement.

                                       11


                  (e) Seller's Preparation of Final Statement of Net Operating
         Assets. As promptly as possible following the close of business on the
         Closing Date, but in no event later than forty-five (45) days after the
         Closing Date, the Seller shall prepare, at the expense of Seller, a
         final statement of Net Operating Assets ("FINAL STATEMENT OF NET
         OPERATING ASSETS"). Seller shall prepare the Final Statement of Net
         Operating Assets in a manner consistent with the Most Recent Balance
         Sheet, the Estimate Statement of Net Operating Assets and shall include
         a calculation, based upon the Final Statement of Net Operating Assets,
         of either: (i) an increase to the Estimated Net Operating Assets Amount
         or (ii) a decrease to the Estimated Net Operating Assets Amount ("FINAL
         NET OPERATING ASSETS ADJUSTMENT") as part of the Final Statement of Net
         Operating Assets.

                  (f) Buyer's Review. Buyer shall have a period of forty-five
         (45) days following delivery to it of the Final Statement of Net
         Operating Assets to review, at the expense of the Buyer, the Final
         Statement of Net Operating Assets and the calculation of the Final Net
         Operating Assets Adjustment. Seller agrees to provide to Buyer
         materials or information in its possession reasonably required by Buyer
         to review the preparation of the Final Statement of Net Operating
         Assets and the calculation of the Final Net Operating Assets
         Adjustment. In the event that Buyer does not provide written notice to
         Seller within such forty-five (45) day period that Buyer disagrees with
         the Final Statement of Net Operating Assets and/or the calculation of
         the Final Net Operating Assets Adjustment ("NOTICE OF DISAGREEMENT"),
         then such Final Statement of Net Operating Assets shall be deemed
         final.

                  (g) Independent Review. In the event Buyer provides Seller
         with a Notice of Disagreement and the parties have not resolved such
         disagreement and made an appropriate payment in connection therewith
         within thirty (30) days after the date of delivery of the Notice of
         Disagreement, the parties shall submit to a KPMG LLP ("INDEPENDENT
         AUDITOR") such Initial Statement, Statement of Estimated Net Operating
         Assets, the Final Statement of Net Operating Assets and calculation of
         the Final Net Operating Assets Adjustment, the Most Recent Balance
         Sheet, the Notice of Disagreement, and any other documents or
         information which the parties deem, or the Independent Auditor deems,
         pertinent in order to make a final and binding determination of any
         issues as to which the parties are in disagreement. The Independent
         Auditor shall advise the parties of its decision relative to the
         controversy within sixty (60) days (or as soon as practicable) after
         its receipt of the applicable statements and other documents or
         information which it has requested and at such time the Final Net
         Assets Adjustment shall be deemed final. Such firm shall be acting as
         an arbitrator and not as an auditor and shall decide only those issues
         as to which the parties are not in agreement. The fees and expenses of
         the Independent Auditor shall be equally apportioned between the Buyer
         and the Seller.

                                       12


                  (h) Payment of Final Net Operating Assets Adjustment. Within
         fifteen (15) days after the final determination of the Final Net
         Operating Assets Adjustment as provided in either Section 2.3(f) or
         Section 2.3(g), (i) if the Final Net Operating Assets Adjustment
         results in an increase from the Initial Purchase Price, Buyer shall pay
         to Seller by wire transfer in immediately available funds such increase
         together with interest thereon from the Closing Date to the date of
         payment thereof, at an interest rate equal to the "prime rate" as
         published in The Wall Street Journal (the "PRIME RATE") in effect on
         the date of determination of the Final Net Operating Assets Adjustment
         ("ACCRUED INTEREST"), and (ii) if the Final Net Operating Assets
         Adjustment results in a decrease from the Initial Purchase Price,
         Seller shall pay to Buyer by wire transfer in immediately available
         funds such decrease together with the Accrued Interest. In the event
         that a party does not make its total payment as required by this
         Section 2.3(h), then the unpaid amount shall accrue interest at an
         annual rate equal to the Prime Rate plus five percent (5%) until fully
         paid.

         2.4      LIABILITIES

                  (a) Assumed Liabilities. On the Closing Date, Buyer shall
         assume and agree to pay, discharge or perform, as appropriate, the
         following liabilities and obligations of Seller (the "ASSUMED
         LIABILITIES"):

                           (i) all trade accounts payable and accrued
                  liabilities reflected on the Final Statement of Net Operating
                  Assets;

                           (ii) any warranty obligations of Seller under written
                  warranty agreements and statutory and common law warranty
                  obligations to customers of the Acquired Business in the
                  Ordinary Course of Business prior to the Closing Date; and

                           (iii) any obligations of Seller under the Seller
                  Contracts listed or described on Schedule 2.1(d) arising
                  subsequent to the Closing Date.

                  (b) Retained Liabilities. The Retained Liabilities (AS
         HEREINAFTER DEFINED) shall remain the sole responsibility of and shall
         be retained, paid, performed and discharged solely by Seller. "RETAINED
         LIABILITIES" shall mean every Liability of Seller other than the
         Assumed Liabilities.

         2.5      ALLOCATION

         The Purchase Price shall be allocated in each jurisdiction where a
Local Seller Entity transfers its Acquired Assets in accordance with Schedule
2.5. In any Proceeding related to the determination of any Tax, neither Buyer
nor Seller shall contend or represent that such allocation is not a correct
allocation.


                                       13


         2.6      POST-CLOSING ADJUSTMENTS TO THE PURCHASE PRICE

                  (a) Accounts Receivable. Buyer shall use its Commercially
         Reasonable Efforts to collect all Accounts Receivable, but shall not be
         required to institute litigation or refer uncollectible receivables to
         any collection agency. Any transferred Accounts Receivable which are
         not paid to Buyer within one hundred twenty (120) days of Closing shall
         be reassigned and transferred to Seller at face value and Buyer shall
         forthwith receive a payment for the amount so reassigned and
         transferred. On the 60th and 90th day following Closing, Buyer shall
         provided to Seller an Accounts Receivable aging report in writing. At
         any time after the 90th day following Closing, Seller may elect to have
         any Account Receivable reassigned to Seller and Buyer shall reassign
         such Account Receivable to Seller concurrently with Seller's payment to
         Buyer therefor.

                  (b) Inventory. On the first anniversary of Closing, Buyer
         shall prepare and deliver to Seller a written schedule of all obsolete,
         non-usable Inventory and shall reassign and transfer to Seller such
         items at an amount equal to the value assigned to such item on the
         Final Statement of Net Operating Assets and Buyer shall forthwith
         receive payment for all inventory so reassigned and transferred.

         2.7      CLOSING

         The purchase and sale provided for in this Agreement (the "CLOSING")
will take place at the offices of Buyer's counsel at 233 North Michigan Avenue,
Suite 1720, Chicago 60601 at 10:00 a.m. (local time) on January 26, 2005, unless
Buyer and Seller otherwise agree. The Closing shall be deemed effective at 11:59
p.m. (local time) that same day with respect to each Seller. Subject to the
provisions of Article 9, failure to consummate the purchase and sale provided
for in this Agreement on the date and time and at the place determined pursuant
to this Section 2.7 will not result in the termination of this Agreement and
will not relieve any party of any obligation under this Agreement. In such a
situation, the Closing will occur as soon as practicable, subject to Article 9.

         2.8      CLOSING OBLIGATIONS

         In addition to any other documents to be delivered under other
provisions of this Agreement, at the Closing:

                  (a) Seller shall deliver to Buyer:

                           (i) such bills of sale, assignment and assumption
                  agreements, the German Local Agreements, the Italian Local
                  Agreement and all other Local Agreements and other instruments
                  of transfer; release of lien instruments, and conveyance as
                  may reasonably be requested by Seller and/or Buyer, each in
                  form and substance satisfactory to the parties and their legal
                  counsel as appropriate and executed by Seller (without
                  limitation, "CONVEYANCE DOCUMENTS");

                           (ii) assignments of all intellectual property set
                  forth on Schedule 2.1(f) executed by Seller;

                                       14


                           (iii) non-competition and non-solicitation agreements
                  in the form of EXHIBIT 2.8(A)(iii), for the benefit of Buyer
                  with respect to the Acquired Assets, executed by Seller;

                           (iv) a certificate executed by Seller as to the
                  material accuracy of their representations and warranties as
                  of the date of this Agreement and as of the Closing in
                  accordance with Section 7.1 and as to their material
                  compliance with and performance of their covenants and
                  obligations to be performed or complied with at or before the
                  Closing in accordance with Section 7.2;

                           (v) a certificate of the Secretary of Seller
                  certifying, as complete and accurate as of the Closing,
                  attached copies of the Governing Documents of Seller,
                  certifying and attaching all requisite resolutions or actions
                  of Seller's board of directors (and shareholders, if required
                  by the Governing Documents or by any legal requirement)
                  approving the execution and delivery of this Agreement and the
                  consummation of the Contemplated Transactions and certifying
                  to the incumbency and signatures of the officers of Seller
                  executing this Agreement and any other document relating to
                  the Contemplated Transactions and accompanied by the requisite
                  documents for amending the relevant Governing Documents of
                  Seller required to effect such change of name in form
                  sufficient for filing with the appropriate Governmental Body;

                           (vi) the legal opinion of counsel to Seller, as to
                  the organization and authority of Checkpoint Systems, Inc. to
                  enter into this Agreement and the enforceability of this
                  Agreement with respect to Checkpoint Systems, Inc.

                           (vii) duly executed assignments of leases for each of
                  the Leased Real Property and all other material Leases assumed
                  by Buyer with applicable consents from each such lessor or
                  other party thereto, as applicable and where required.

                  (b) Buyer shall deliver to Seller as the case may be:

                           (i) the Initial Purchase Price to an account
                  specified by Seller in a writing delivered to Buyer at on the
                  Closing Date;

                           (ii) all Conveyance Documents executed by Buyer;

                           (iii) non-competition and non-solicitation agreements
                  in the form of EXHIBIT 2.8(B)(iii) (subject to completion of
                  the exhibits thereto), for the benefit of Seller with respect
                  to Seller's business not transferred hereunder, executed by
                  Buyer;

                           (iv) a certificate executed by Buyer as to the
                  material accuracy of its representations and warranties as of
                  the date of this Agreement and as of the Closing in accordance
                  with Section 8.1 and as to its material compliance with and
                  performance of its covenants and obligations to be performed
                  or complied with at or before the Closing in accordance with
                  Section 8.2; and

                                       15


                           (v) a certificate of the Secretary of Buyer
                  certifying, as complete and accurate as of the Closing,
                  attached copies of the Governing Documents of Buyer and
                  certifying and attaching all requisite resolutions or actions
                  of Buyer's board of directors approving the execution and
                  delivery of this Agreement and the consummation of the
                  Contemplated Transactions and certifying to the incumbency and
                  signatures of the officers of Buyer executing this Agreement
                  and any other documents relating to the Contemplated
                  Transactions.

         2.9 Break-up Fee. In the event that the Closing of the Contemplated
Transactions does not occur on or before February 28, 2006 due to Buyer's
failure to materially perform its obligations under this Agreement, where such
failure is not due to Seller's failure to materially perform its obligations
under this Agreement, Buyer shall pay to Seller, an amount equal to One Million
US Dollars (US $1,000,000) in immediately available funds, via wire transfer to
an account designated by Seller, payable immediately out of the Escrow Amount
(the "BREAK-UP FEE").

3.       REPRESENTATIONS AND WARRANTIES OF SELLER

         No specific representation or warranty shall limit the generality or
applicability of a more general representation or warranty. Representations and
warranties of the Seller are initially made as of the date hereof. All
representations and warranties of Seller are made subject to the exceptions
noted in the Schedules delivered by Seller to Buyer concurrently herewith and
incorporated herein by reference. All exceptions noted in the Schedules are
numbered to correspond with the applicable paragraph of Article III to which
such exception refers. All representations and warranties shall be certified to
as of the Closing Date pursuant to Section 7.1. Except as otherwise indicated on
the Schedules, each Seller Local Entity and Seller, jointly and severally,
represents and warrants to Buyer as follows:

         3.1      ORGANIZATION AND AUTHORITY

         Each Seller is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to conduct its business as it is now being
conducted, to own or use the properties and assets that it purports to own or
use, and to perform all its obligations hereunder and under the Seller
Contracts.

         3.2      ENFORCEABILITY; NO CONFLICT

                  (a) This Agreement constitutes the legal, valid and binding
         obligation of each Seller, enforceable against each Seller in
         accordance with its terms. Upon the execution and delivery by each
         Seller of each agreement to be executed or delivered by any or all of
         Seller at the Closing (collectively, the "SELLER'S CLOSING DOCUMENTS"),
         each of Seller's Closing Documents will constitute the legal, valid and
         binding obligation of each Seller, enforceable against each of them in
         accordance with its terms. Each Seller has the absolute and
         unrestricted right, power and authority to execute and deliver this
         Agreement and the Seller's Closing Documents to which it is a party and
         to perform its obligations under this Agreement and the Seller's
         Closing Documents and to transfer, convey and sell to Buyer at the
         Closing the Acquired Assets to be sold, and such action has been duly
         authorized by all necessary action by Seller.

                                       16


                  (b) Except as set forth in Schedule 3.2(b), neither the
         execution and delivery of this Agreement or any of the Seller's Closing
         Documents nor the consummation or performance of any of the
         Contemplated Transactions will, directly or indirectly (with or without
         notice or lapse of time, or both):

                           (i) Breach (A) any provision of any of the Governing
                  Documents of Seller, (B) any resolution currently in effect as
                  adopted by the board of directors or the shareholder(s) of
                  Seller, or (C) any Legal Requirement;

                           (ii) Breach any provision of, or give any Person the
                  right to declare a default or exercise any remedy under, or to
                  accelerate the maturity or performance of, or payment under,
                  or to cancel, terminate or modify, any material Seller
                  Contract; or

                           (iii) result in the imposition or creation of any
                  Encumbrance upon or with respect to any of the Acquired
                  Assets.

                  (c) Except as set forth in Schedule 3.2(c), Seller has given
         all notices to or obtained every Consent from any Person in connection
         with the execution and delivery of this Agreement or, prior to or on
         Closing, any of the Seller's Closing Documents or the consummation or
         performance of any of the Contemplated Transactions, except where the
         absence of such notice or Consent would not have, either individually
         or in the aggregate, a Material Adverse Change.

         3.3      FINANCIAL STATEMENTS

         Seller has delivered to Buyer the un-audited, internally prepared, pro
forma statement of operations and statement of assets and liabilities for the
12-month period ended December 26, 2004 and the 6-month period ended June 26,
2005 and the 9-month period ended September 25, 2005, each attached hereto on
Schedule 3.3(a). Since December 26, 2004, there has been no change in the
accounting policies, practices or procedures relating to the Acquired Business
undisclosed to the Buyer.

         3.4      ACQUIRED ASSETS

         Except for the Retained Assets, the Acquired Assets, which Seller is
selling to Buyer hereunder, constitute all of the assets, tangible and
intangible, set forth on the Estimated Statement of Net Operating Assets, as
adjusted by the Final Statement of Net Operating Assets, and are, as of the date
hereof, and will be, as of the Closing Date, utilized by Seller in the Acquired
Business.

         3.5      DESCRIPTION OF LEASED REAL PROPERTY

                  (a) [Intentionally Omitted].

                  (b) Schedule 3.5(b) contains an accurate description (by
         location, name of lessor, date of Lease and term expiry date) of all
         Leased Real Property to be assigned or sublet to Buyer.

                                       17


                  (c) Seller has been in peaceable possession since the
         commencement of the original term of its Leases and is not in material
         default thereunder and no waiver, indulgence or postponement of the
         obligations of Seller under any lease has been granted by any lessor.
         Each such lease is in full force and effect and to Seller's Knowledge,
         the lessor is not in default thereof, and no occurrence, condition, or
         act, including the execution and delivery of this Agreement and the
         other agreements and transactions contemplated thereby, which (with or
         without notice or lapse of time or both) would constitute a default
         thereunder.

         3.6      TITLE TO ASSETS; ENCUMBRANCES

         Seller owns good and transferable title to all of the Acquired Assets
free and clear of any Encumbrances other than those described in Schedule 3.6
("PERMITTED ENCUMBRANCES"). Upon consummation of the Closing, Buyer will acquire
from each Seller legal and beneficial ownership of, and good and marketable
title to, the Acquired Assets, free and clear of encumbrances except the
Permitted Encumbrances.

         3.7      CONDITION OF PROPERTY

                  (a) Use of the Leased Real Property for the various purposes
         for which it is presently being used is permitted as of right under all
         applicable zoning legal requirements and is not subject to "permitted
         nonconforming" use or structure classifications. All improvements are
         in compliance with all applicable Legal Requirements, including those
         pertaining to zoning, building and the disabled, are in good repair and
         in good condition, ordinary wear and tear excepted, and are free from
         latent and patent defects.

                  (b) Each item of Tangible Personal Property is suitable for
         immediate use in the Ordinary Course of Business in a manner consistent
         with historical use. No item of Tangible Personal Property is in need
         of repair or replacement other than as part of routine maintenance in
         the Ordinary Course of Business. Except as disclosed in Schedule
         3.7(b), all Tangible Personal Property used in Seller's business is in
         the possession of Seller.

         3.8      ACCOUNTS RECEIVABLE

         All Accounts Receivable that are reflected on the Final Statement of
Net Operating Assets represent or will represent valid obligations arising from
sales actually made or services actually performed by Seller in the Ordinary
Course of Business.

         3.9      INVENTORIES

         All items included in the Inventories consist of a quality and quantity
usable and, with respect to finished goods, saleable, in the Ordinary Course of
Business of Seller.

                                       18


         3.10     NO MATERIAL ADVERSE CHANGE

         Since June 30, 2005 and except as set forth on Schedule 3.10, there has
been:

                  (a) no Material Adverse Change with respect to the Acquired
         Business or any Leased Real Property;

                  (b) no express waiver or release by any Seller of any material
         right of any Material Contract;

                  (c) no change in or event affecting the Acquired Business that
         is reasonably likely to have a Material Adverse Change;

                  (d) no casualty, loss, damage or destruction (whether or not
         covered by insurance) of any of the Acquired Assets or the Leased Real
         Property, or that has involved or is reasonably likely to involve a
         loss, individually, of more than Twenty-Five Thousand Dollars ($25,000)
         or, in the aggregate, of more than One Hundred Thousand Dollars
         ($100,000); and

                  (e) no written notice received from any material customer or
         supplier of the Acquired Business to the effect that such customer or
         supplier intends to terminate or materially decrease expected ongoing
         purchases from, or sales to, as the case may be, Seller and Seller has
         no Knowledge of such termination or decrease.

         3.11     GOVERNMENTAL AUTHORIZATIONS

         Seller has all of the material Governmental Authorizations necessary to
permit Seller to lawfully conduct and operate the Acquired Business in the
manner in which it currently conducts and operates such business and to permit
Seller to own and use the Acquired Assets in the manner in which it currently
owns and uses such assets. The Parties acknowledge, however, that it is
necessary to re-grant to the Buyer the Governmental Authorizations which were
granted on a personal basis (Personalkonzessionen) to Seller. There have been no
notices from any Governmental Body in the last twelve (12) months that has had
or is reasonably likely to have a Material Adverse Change. All such Governmental
Authorizations are valid and in full force and effect and, to the extent
assignable, will remain so upon consummation of the transactions contemplated by
this Agreement. To Seller's Knowledge, no suspension, cancellation or
termination of any such Permits is threatened or imminent.

         3.12     LEGAL PROCEEDINGS; ORDERS

         Except as set forth in Schedule 3.12, there is no pending or, to
Seller's Knowledge, threatened Proceeding or Order that challenges, or that is
reasonably likely to have the effect of preventing, delaying, making illegal or
otherwise interfering with, any of, or any aspect of, the Contemplated
Transactions or, if determined adversely is reasonably to have a Material
Adverse Change or materially interfere with Seller's ability to perform this
Agreement. To the Knowledge of Seller, no event has occurred or circumstance
exists that is reasonably likely to give rise to or serve as a basis for the
commencement of any such Proceeding or Order.

                                       19


         3.13     CONTRACTS; NO DEFAULTS

                  (a) Schedule 3.13(a) contains an accurate and complete list,
         and Seller has delivered to Buyer true, accurate and complete copies,
         of all Material Contracts.

                  (b) Except as set forth in Schedule 3.13(b):

                           (i) each Material Contract identified or required to
                  be identified in Schedule 3.13(a) and which is to be assigned
                  to or assumed by Buyer under this Agreement is in full force
                  and effect, and there exists no default by Seller or, to the
                  Knowledge of Seller, any other party to such Material
                  Contract, and each Material Contract is valid and enforceable
                  in accordance with its terms; and

                           (ii) each Material Contract identified or required to
                  be identified in Schedule 3.13(a) and which is being assigned
                  to or assumed by Buyer is assignable by Seller to Buyer
                  without the consent of any other Person and the consummation
                  of the transactions contemplated by this Agreement will not
                  (and will not give any Person the unilateral right to)
                  terminate or modify any rights of, or accelerate or augment
                  any obligation of, any party to such Material Contract, unless
                  indicated otherwise in Schedule 3.13(a).

         3.14     ENVIRONMENTAL MATTERS

         Except as disclosed in Schedule 3.14 and with respect to both the
Acquired Assets and the Leased Real Property:

                  (a) Seller is, and at all times has been, in material
         compliance with, and has not been, and is not, in material violation of
         any Environmental Law. Seller has no basis to expect, nor has any other
         Person for whose conduct they are or may be held to be responsible
         received, any written notice from (i) any Governmental Body or private
         citizen acting in the public interest or (ii) the current or prior
         owner or operator of any Leased Real Property, of any actual or
         potential violation or failure to comply with any Environmental Law.

                  (b) There are no pending or, to the Knowledge of Seller,
         threatened claims in writing resulting from any Environmental, Health
         and Safety Liabilities or arising under or pursuant to any
         Environmental Law with respect to or affecting any Leased Real Property
         or any Acquired Asset.

                  (c) There has been no generation, use, transportation,
         treatment, storage or Release of any Hazardous Materials at or from any
         of the Leased Real Property which has created or is reasonably likely
         to create any material liability under any Environmental Law or which
         would require reporting to or notification of any Governmental Body,
         Acquired Assets which would have a Material Adverse Change.

                                       20


         3.15     EMPLOYEES

                  (a) With respect to the Employees Receiving an Offer (as
         defined in Section 10.1(a)(i)) in the United States:

                           (i) Except as listed on Schedule 3.15(a)(i), none of
                  the Employees Receiving an Offer has written employment
                  contracts or agreements which are being transferred to,
                  assumed by, or assigned to Buyer. A full, complete and
                  accurate list of the following information for each Employees
                  Receiving an Offer shall be provided to the Buyer not later
                  than seven (7) days prior to the Closing Date: employer; name;
                  job title; date of commencement of employment; current
                  compensation paid or payable; sick and vacation leave that is
                  accrued but unused; and service credited for purposes of
                  vesting and eligibility to participate under any Employee
                  Plan.

                           (ii) To the Seller's Knowledge, Seller is and has
                  been with respect to the Employees Receiving an Offer, in
                  substantial compliance with all applicable laws respecting
                  employment and employment practices, terms and conditions of
                  employment and wages and hours, including, without limitation,
                  any such laws respecting employment discrimination,
                  occupational safety and health, and unfair labor practices.

                           (iii) Seller is not delinquent in payments to any of
                  the Employees Receiving an Offer for any wages, salaries,
                  commissions, bonuses or other compensation for any services
                  performed by them to the Closing Date or amounts required to
                  be reimbursed to such employees.

                           (iv) The termination by Seller of the employment of
                  any of the Employees Receiving an Offer at Closing will not
                  subject Buyer to any liability to such employees for severance
                  pay after the Closing Date.

                           (v) Seller has no Knowledge of any intention of or
                  indication by a Significant Employee (as herein defined) that
                  such Significant Employee has terminated or intends to
                  terminate his employment with Seller prior to Closing. As used
                  herein, "SIGNIFICANT EMPLOYEE" means the individuals listed on
                  Schedule 3.15(a)(v).

                  (b) With respect to the Transferred Employees located in the
         European Union and Norway, the second sentence in subsections (a)(i) of
         this Section 3.15 and subsections (a)(ii) and (a)(iii) of this Section
         3.15 shall apply mutatis mutandis, provided the employment relation of
         the respective employee in fact transfers to the Buyer in connection
         with the completion of the transaction contemplated by this Agreement.

                  (c) With respect to the Transferred Employees located in
         Australia, New Zealand and Malaysia, the second sentence in subsections
         (a)(i) of this Section 3.15 and subsections (a)(ii) and (a)(iii) of
         this Section 3.15 shall apply mutatis mutandis, provided the employment
         relation of the respective employee in fact transfers to the Buyer in
         connection with the completion of the transaction contemplated by this
         Agreement.

                                       21


         3.16     EMPLOYEE BENEFITS

                  (a) With respect to the Transferable Employees located in the
United States:

                           (i) Set forth in Schedule 3.16(a)(i) is a complete
                  list of all "employee benefit plans" as defined by Section
                  3(3) of ERISA, and all other bonus, incentive-compensation,
                  deferred-compensation, profit-sharing, stock-option,
                  stock-appreciation-right, stock-bonus, stock-purchase,
                  employee-stock-ownership, savings, severance,
                  change-in-control, supplemental-unemployment, layoff,
                  salary-continuation, retirement, pension, health,
                  life-insurance, life-insurance, disability, accident,
                  group-insurance, vacation, holiday, sick-leave, fringe-benefit
                  fringe-benefit or welfare plan, and any other employee
                  compensation or benefit plan, agreement, policy, practice,
                  commitment, contract or understanding (whether qualified or
                  nonqualified, currently effective or terminated, written or
                  unwritten) and any trust, escrow or other agreement related
                  thereto that: (i) is maintained or contributed to by Seller
                  for the benefit of the Transferred Employees and (ii) provides
                  benefits, or describes policies or procedures applicable to
                  any Transferred Employee (collectively the "EMPLOYEE PLANS").

                           (ii) Seller has delivered or made available to Buyer
                  necessary and reasonable copies of: (i) the documents
                  comprising each Employee Plan, (ii) all trust agreements,
                  insurance contracts or any other funding instruments related
                  to the Employee Plans and (iii) all summary plan descriptions,
                  summaries of material modifications and memoranda, employee
                  handbooks and other written communications regarding the
                  Employee Plans.

                           (iii) To Seller's Knowledge, all Employee Plans
                  comply in all material respects with and are and have been
                  operated in accordance with each applicable provision of
                  ERISA, the Code (including, without limitation, the
                  requirements of Code Section 401(a) to the extent any Plan is
                  intended to conform to that Section), and any applicable Legal
                  Requirement.

                           (iv) To the Seller's Knowledge, neither any Employee
                  Plan or plan fiduciary has engaged in any transaction in
                  violation of Section 406 of ERISA or any "prohibited
                  transaction" (as defined in Section 4975(c)(1) of the Code)
                  and there has been no "reportable events" (as defined in
                  Section 4043(b) of ERISA) with respect to any of the Employee
                  Plans. Seller has not incurred or suffered to exist any
                  "accumulated funding deficiency" (as defined in Section 302 of
                  ERISA) whether or not waived by the IRS, involving any of the
                  Employee Plans. Except as noted on Schedule 3.16(a)(iv),
                  Seller has made all contributions and paid all amounts due and
                  owing as required by the terms of any of the Employee Plans or
                  any other applicable law.

                           (v) Other than routine claims for benefits, there are
                  no material pending or, to Seller's Knowledge, threatened
                  claims by any Transferable Employee covered under any Employee
                  Plan.

                                       22


                  (b) With respect to the employees located in the European
         Union and Norway, all employee benefits are governed by applicable
         local statutory law. Except as noted on Schedule 3.16(b), Seller has
         made all contributions and paid all amounts due and owing as required
         by the terms of any of the Employee Plans or any other applicable law.

                  (c) With respect to the employees located in Australia, New
         Zealand and Malaysia, all employee benefits are governed by applicable
         local statutory law. Except as noted on Schedule 3.16(c), Seller has
         made all contributions and paid all amounts due and owing as required
         by the terms of any of the Employee Plans or any other applicable law.

         3.17     LABOR DISPUTES; COMPLIANCE

                  (a) Seller has complied in all material respects with all
         Legal Requirements relating to employment practices, terms and
         conditions of employment, equal employment opportunity,
         nondiscrimination, immigration, wages, hours, benefits, collective
         bargaining and other requirements under applicable law, the payment of
         social security and similar Taxes and occupational safety and health.
         Seller is not liable for the payment of any Taxes, fines, penalties, or
         other amounts, however designated, for failure to comply with any of
         the foregoing Legal Requirements.

                  (b) Except as disclosed in Schedule 3.17(b): (i) Seller has
         not been, and is not now, a party to any bargaining agreement or other
         collective labor contract; (ii) since January 1, 2005, there has not
         been, there is not presently pending or existing, and to Seller's
         Knowledge there is not threatened, any strike, slowdown, picketing,
         work stoppage or employee grievance process involving Seller; (iii)
         there is not pending or, to Seller's Knowledge, threatened against
         Seller any Proceeding relating to the alleged violation of any Legal
         Requirement pertaining to labor relations, including any charge or
         complaint filed with the National Labor Relations Board or any
         comparable Governmental Body, and, to the Knowledge of Seller, there is
         no material organizational activity or other labor dispute against or
         affecting Seller or the Leased Real Property; (iv) no grievance or
         arbitration Proceeding exists that might have an adverse effect on the
         Acquired Business; and (v) to Seller's Knowledge there has been no
         charge of discrimination filed against Seller with the Equal Employment
         Opportunity Commission or similar Governmental Body.

         3.18     INTELLECTUAL PROPERTY ASSETS

         The Intellectual Property Assets listed in Schedule 2.1(f) and the Meto
IP Rights are all those necessary for the operation of the Acquired Business as
it is currently conducted. Seller is the owner or licensee of all right, title
and interest in and to each of the Intellectual Property Assets, free and clear
of all Encumbrances, and has the right to use, sell, license or dispose of use
without payment to a Third Party, Party all of the Intellectual Property Assets,
and with respect to the Meto IP Rights, to license such rights to the Buyer,
free and clear or any encumbrances.

         3.19     TAX AND OTHER RETURNS AND REPORTS.

         All Tax Returns have been filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns are required to be filed
and all such Tax Returns properly reflect the tax liabilities of Seller with
respect to the Acquired Business for the periods, property or events covered
thereby. Seller has not received any notice of assessment or proposed assessment
in connection with any Tax Returns and there are no pending or, to Seller's
Knowledge, threatened, tax examinations or tax claims asserted against Seller
with respect to, or that would have a Material Adverse Change to, the Acquired
Assets. There are no tax liens (other than any lien for current taxes not yet
due and payable) on any of the Acquired Assets.

                                       23


         3.20     ACCOUNTING RECORDS; INTERNAL CONTROLS.

                  (a) Accounting Records. Seller has records that accurately and
         validly reflect its transactions relating to the Acquired Business, and
         in Seller's opinion, accounting controls sufficient to insure that such
         transactions are (i) executed in accordance with management's general
         or specific authorization; and (ii) recorded so as to maintain
         accountability for assets.

                  (b) Data Processing; Access. Such records, to the extent they
         contain important information that is not easily and readily available
         elsewhere, have been duplicated and such duplicates are stored safely
         and securely pursuant to procedures and techniques utilized by
         companies of comparable size in similar lines of business.

         3.21     ACCURACY OF INFORMATION.

         The representations and warranties contained in this Article 3 or in
any schedule, statement, certificate or document furnished or to be furnished to
Buyer pursuant to this Agreement do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements and information contained in this Article 3 not misleading.

         3.22     TRANSFER OF GOING CONCERN

         Seller is transferring Assets to Buyer hereunder to permit Buyer to own
and operate the Acquired Business, as supplemented by the services identified in
the Transition Services Agreement, as a Going Concern, and there are no material
assets omitted from the Acquired Assets which will prevent Buyer from conducting
those business operations it is acquiring from Seller in the same manner that
Seller has operated the business.

4.       REPRESENTATIONS AND WARRANTIES OF BUYER

         Buyer represents and warrants to Seller as follows:

         4.1      ORGANIZATION AND GOOD STANDING

         Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the Republic of Singapore, with full corporate power
and authority to conduct its business as it is now conducted.


                                       24


         4.2      AUTHORITY; NO CONFLICT

                  (a) This Agreement constitutes the legal, valid and binding
         obligation of Buyer, enforceable against Buyer in accordance with its
         terms. Upon the execution and delivery by Buyer of each agreement to be
         executed or delivered by Buyer at Closing (collectively, the "BUYER'S
         CLOSING DOCUMENTS"), each of the Buyer's Closing Documents will
         constitute the legal, valid and binding obligation of Buyer,
         enforceable against Buyer in accordance with its respective terms.
         Buyer has the absolute and unrestricted right, power and authority to
         execute and deliver this Agreement and the Buyer's Closing Documents
         and to perform its obligations under this Agreement and the Buyer's
         Closing Documents, and such action has been duly authorized by all
         necessary corporate action.

                  (b) Neither the execution and delivery of this Agreement by
         Buyer nor the consummation or performance of any of the Contemplated
         Transactions by Buyer will give any Person the right to prevent, delay
         or otherwise interfere with any of the Contemplated Transactions
         pursuant to:

                           (i) any provision of Buyer's Governing Documents;

                           (ii) any resolution adopted by the board of directors
or the shareholders of Buyer;

                           (iii) any Legal Requirement or Order to which Buyer
may be subject; or

                           (iv) any Contract to which Buyer is a party or by
which Buyer may be bound.

         Buyer is not and will not be required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.

         4.3      CERTAIN PROCEEDINGS

         There is no pending Proceeding that has been commenced against Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal or otherwise interfering with, any of the Contemplated Transactions. To
Buyer's Knowledge, no such Proceeding has been threatened.

         5. COVENANTS OF SELLER PRIOR TO CLOSING

         Between the date of this Agreement and the Closing, Seller shall not,
and shall cause each of the Seller Local Entities not, to:

                  (a) conduct its business in any manner except only in the
         Ordinary Course of Business;

                                       25


                  (b) except as required by their terms, amend, terminate, renew
         or renegotiate any Material Contract or default (or take or omit to
         take any action that would constitute a default) in any of its
         obligations under any Material Contract or enter into any new Material
         Contract or take any action that would jeopardize the continuance of
         any material supplier or customer relationship;

                  (c) terminate or fail to renew or preserve any material
         Government Authorizations;

                  (d) grant or agree to grant (i) any general or uniform
         increase to the rates of pay or benefits to officers or executive
         employees (or a class thereof), or (ii) any more than a five percent
         (5%) increase of pay or agree to pay a bonus to any Person, except for
         scheduled salary increases or incentives consistent with past practice,
         and disclosed on Schedule 5.1(d);

                  (e) except as disclosed on Schedule 5.1(e), make any capital
         expenditure or commitments affecting the Leased Real Estate or the
         Acquired Assets aggregating more than Twenty-Five Thousand Dollars
         ($25,000); and

                  (f) introduce a new method of management or operation with
         respect to the Acquired Business.

         5.2      REQUIRED APPROVALS

         As promptly as practicable after the date of this Agreement, Seller
shall make all filings required by Legal Requirements to be made by it in order
to consummate the Contemplated Transactions. Seller shall also cooperate with
Buyer and its Representatives with respect to all filings, applications,
approvals and permits that Buyer elects to make or, pursuant to Legal
Requirements, shall be required to make in connection with the Contemplated
Transactions. Seller shall also cooperate with Buyer and its Representatives in
obtaining all Material Consents.

         5.3      COMMERCIALLY REASONABLE EFFORTS

         Seller shall use its Commercially Reasonable Efforts to cause the
conditions in Article 7 and Section 8.3 to be satisfied.

         5.4      PRESERVATION OF BUSINESS PRIOR TO CLOSING DATE.

         During the period beginning on the date hereof and ending on the
Closing Date, (i) Seller will use its Commercially Reasonable Efforts consistent
with past practices to preserve the Acquired Business and to preserve the
goodwill of the employees, customers, suppliers and others having business
relations with Seller in the Acquired Business; and (ii) Seller and Buyer will
consult with each other concerning the services of the officers and employees.


                                       26


         5.5      NEGOTIATIONS.

                  During the period beginning on the date hereof and ending on
the Closing Date, or the earlier termination of this Agreement in accordance
with the provisions of Article 9, the Seller shall not, directly or indirectly,
take any action or seek any offer from any Person to purchase the Acquired
Assets from Seller.

6.       COVENANTS OF BUYER PRIOR TO CLOSING

         6.1 REQUIRED APPROVALS

         As promptly as practicable after the date of this Agreement, Buyer
shall make, or cause to be made, all filings required by Legal Requirements to
be made by it to consummate the Contemplated Transactions. Buyer also shall
cooperate with Seller (a) with respect to all filings Seller shall be required
by Legal Requirements to make and (b) in obtaining all Consents identified in
Schedule 3.2(c), provided, however, that Buyer shall not be required to dispose
of or make any change to its business, expend any material funds or incur any
other burden in order to comply with this Section 6.1.

         6.2      COMMERCIALLY REASONABLE EFFORTS

         Buyer shall use its Commercially Reasonable Efforts to cause the
conditions in Article 8 and Section 7.3 to be satisfied.

7.       CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE

         Buyer's obligation to purchase the Acquired Assets and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):

         7.1      ACCURACY OF REPRESENTATIONS

         All of Seller's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), shall have been accurate in all material respects as
of the date of this Agreement, and shall be accurate in all material respects as
of the time of the Closing as if then made, without giving effect to any
supplement to the Disclosure Schedule.

         7.2      SELLER'S PERFORMANCE

         All of the covenants and obligations that Seller is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), shall have been duly performed and complied with in
all material respects.

                                       27


         7.3      CONSENTS

         Each of the Consents identified in Schedule 7.3 (the "MATERIAL
CONSENTS") shall have been obtained and shall be in full force and effect.
Notwithstanding anything to the contrary herein, in connection with certain
non-material operating leases for items such as computers and other office
equipment, the transfer thereof may require certain consents which seller shall
not obtain and there may exist certain liens or other encumbrances thereon that
will not be removed by Seller.

         7.4      GOOD STANDING

         Seller shall provide to Buyer a Certificate of Good Standing or its
equivalent for Seller;

         7.5      NO PROCEEDINGS

         Since the date of this Agreement, there shall not have been commenced
or threatened against Buyer, or against any related Person of Buyer, any
Proceeding (a) involving any challenge to, or seeking Damages or other relief in
connection with, any of the Contemplated Transactions or (b) that may have the
effect of preventing, delaying, making illegal, imposing limitations or
conditions on or otherwise interfering with any of the Contemplated
Transactions.

         7.6      NO CONFLICT

         Neither the consummation nor the performance of any of the Contemplated
Transactions will, directly or indirectly (with or without notice or lapse of
time or both), contravene or conflict with or result in a violation of or cause
Buyer or any related Person of Buyer to suffer any adverse consequence under (a)
any applicable Legal Requirement or Order or (b) any Legal Requirement or Order
that has been published, introduced or otherwise proposed by or before any
Governmental Body.

         7.7      LEASED REAL PROPERTY

         The parties or their designees shall enter into and deliver to each
other mutually agreed upon lease or sublease agreements consented to by each
lessor, where required, for the Leased Real Property.

         7.8      SUPPLY AGREEMENT

         Buyer shall have entered into a Supply Agreement with Seller, the draft
basis for which is attached hereto as Exhibit 7.8.

         7.9      GOVERNMENTAL AUTHORIZATIONS

         Buyer shall have received such Governmental Authorizations as are
necessary to allow Buyer to operate the Acquired Assets from and after the
Closing.

         7.10     NO MATERIAL ADVERSE CHANGE

         There shall not have been any Material Adverse Change or event in or
affecting (or reasonably expected to affect) any material aspect of the Acquired
Business.

                                       28


         7.11     INTENTIONALLY OMITTED

         7.12     METO LICENSE

         Buyer and Seller shall have entered into a License Agreement for the
Meto IP Rights, the draft basis for which is attached hereto as Exhibit 7.12.

         7.13     TRANSITION SERVICES AGREEMENT

         Buyer shall have entered into a Transition Services Agreement with
Seller, the draft basis for which is attached hereto as Exhibit 7.13.

8.       CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE

         Seller's obligation to sell the Acquired Assets and to take the other
actions required to be taken by Seller at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Seller in whole or in part):

         8.1      ACCURACY OF REPRESENTATIONS

         All of Buyer's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), shall have been accurate in all material respects as
of the date of this Agreement and shall be accurate in all material respects as
of the time of the Closing as if then made.

         8.2      BUYER'S PERFORMANCE

         All of the covenants and obligations that Buyer is required to perform
or to comply with pursuant to this Agreement at or prior to the Closing
(considered collectively), and each of these covenants and obligations
(considered individually), shall have been performed and complied with in all
material respects.

         8.3      CONSENTS

         Each of the Consents identified in Schedule 8.3 shall have been
obtained and shall be in full force and effect.

         8.4      LEASED REAL PROPERTY

         The parties or their designees shall enter into and deliver to each
other mutually agreed upon lease or sublease agreements for the Leased Real
Property.

                                       29


         8.5      NO INJUNCTION

         There shall not be in effect any Legal Requirement or any injunction or
other Order that (a) prohibits the consummation of the Contemplated Transactions
and (b) has been adopted or issued, or has otherwise become effective, since the
date of this Agreement.

         8.5      ANCILLARY AGREEMENTS

         Seller shall have entered into the agreements referenced of Exhibit
2.8(a)(iii) (Non-Competition Agreement), Exhibit 7.8 (Supply Agreement), Exhibit
7.12 (Meto License Agreement) and Exhibit 7.13 (Transition Services Agreement).

9.       TERMINATION

         9.1      TERMINATION EVENTS

         By notice given prior to or at the Closing, subject to Section 9.2,
this Agreement, if Section 2.1 does not apply, may be terminated as follows:

                  (a) by Buyer if a material Breach of any provision of this
         Agreement has been committed by Seller and such Breach has not been
         waived by Buyer or cured by Seller within thirty (30) days following
         delivery to Seller of written notice providing detail of such Breach;

                  (b) by Seller if a material Breach of any provision of this
         Agreement has been committed by Buyer and such Breach has not been
         waived by Seller or cured by Buyer within thirty (30) days following
         delivery to Buyer of written notice providing detail of such Breach;

                  (c) by Buyer if any condition in Article 7 has not been
         satisfied as of the date specified for Closing in the first sentence of
         Section 2.7 or if satisfaction of such a condition by such date is or
         becomes impossible (other than through the failure of Buyer to comply
         with its obligations under this Agreement), and Buyer has not waived
         such condition on or before such date;

                  (d) by Seller if any condition in Article 8 has not been
         satisfied as of the date specified for Closing in the first sentence of
         Section 2.7 or if satisfaction of such a condition by such date is or
         becomes impossible (other than through the failure of Seller to comply
         with their obligations under this Agreement), and Seller has not waived
         such condition on or before such date;

                  (e) by mutual consent of Buyer and Seller;

                  (f) by Seller if the Closing has not occurred on or before
         March 1, 2005, or such later date as the parties may agree upon, unless
         the Seller is in material Breach of this Agreement.

                                       30


         9.2      EFFECT OF TERMINATION

         Each party's right of termination under Section 9.1 is in addition to
any other rights it may have under this Agreement or otherwise, and the exercise
of such right of termination will not be an election of remedies. If this
Agreement is terminated pursuant to Section 9.1, all obligations of the parties
under this Agreement will terminate, except that the obligations of the parties
in this Section 9.2 and Articles 12 and 13 will survive, provided, however,
that, if this Agreement is terminated because of a Breach of this Agreement by
the nonterminating party or because one or more of the conditions to the
terminating party's obligations under this Agreement is not satisfied as a
result of the party's failure to comply with its obligations under this
Agreement, the terminating party's right to pursue all legal remedies will
survive such termination unimpaired.

10.      ADDITIONAL COVENANTS

         10.1     EMPLOYEES AND EMPLOYEE BENEFITS

                  (a) Employment of Seller Employees by Buyer.

                           (i) Schedule 10.1(a)(i) sets forth the employees of
                  the Acquired Business to which Buyer has agreed to offer
                  employment effective immediately subsequent to the Closing
                  Date (the "EMPLOYEES RECEIVING AN OFFER").

                            (ii) Schedule 10.1(a)(ii) sets forth the employees
                  of the Acquired Business to which Buyer shall employ
                  immediately subsequent to the Closing Date by operation of law
                  in accordance with the Legal Requirements of the jurisdiction
                  in which such employee is located or, if not by operation of
                  law shall employ the respective employee on the same
                  conditions as if the employment relationship had been
                  transferred by operation of law. However, the parties agree
                  that Schedule 10.1(a)(ii) is not exhaustive as labour courts
                  may determine that employees not listed are attributable to
                  the Acquired Business or that employees listed are not
                  attributable to the Acquired Business (the employees listed in
                  Schedule 10.1(a)(ii) together with the employees (irrespective
                  whether listed in Schedule 10.1(a)(ii) or not) whose
                  employment relationship is being transferred by operation of
                  law shall be referred to herein as the "ASSUMED EMPLOYEES"
                  and, together with the Employees Receiving an Offer, the
                  "TRANSFERRED EMPLOYEES"). The employees in the respective
                  jurisdictions will be transferred in accordance with the local
                  employment law and in accordance with the local agreement.
                  Notwithstanding anything to the contrary herein, Buyer shall
                  indemnify and hold Seller harmless from and against any and
                  all Losses arising from, or in connection with, the employment
                  of the Assumed Employees subsequent to the Closing Date.

                           (iii) On the Closing Date, Seller and Buyer shall
                  jointly prepare deliver a final updated Schedule 10.1(a)(i)
                  and Schedule 10.1(a)(ii).

                                       31


                           (iv) As of Closing Date, Buyer shall offer the
                  Employees Receiving an Offer: (i) compensation and employee
                  benefits which in the aggregate are substantially comparable
                  to such compensation and employee benefits (not to include
                  bonus compensation) offered to the Employees Receiving an
                  Offer by Seller immediately prior to the Closing Date and (ii)
                  credit for eligibility and vesting purposes for all of the
                  Employees Receiving an Offers' periods of service with Seller
                  prior to the Closing Date. In extending such benefits, Buyer
                  shall establish its own, or if practicable assume Seller's,
                  health and welfare plans to cover the Employees Receiving an
                  Offer and, in the event that new plans are established, shall
                  waive preexisting condition limitations in Buyer's plans that
                  might otherwise apply to the Transferred Employees except to
                  the extent the Employees Receiving an Offer have not satisfied
                  such limitations under the current health and welfare benefit
                  plans of Seller. Buyer shall assume responsibility under
                  Buyer's medical plans for all Employees Receiving an Offer and
                  their dependents who are entitled to COBRA continuation
                  coverage as of the Closing Date pursuant to Section 4980B of
                  the Code and Sections 601 to 606 of ERISA or, any comparable
                  Legal Requirement in the jurisdiction in which the Employees
                  Receiving an Offer reside. Seller shall be responsible for the
                  payment of all health and welfare plan benefits (including for
                  claims incurred but not reported) and premiums under the
                  Employee Plans covering employees of Seller with respect to
                  periods ending on or prior to Closing.

                           (v) Except for wages, payroll taxes and vacation
                  liability for the Transferred Employees (all of which will be
                  accrued on the Final Statement of Net Assets) assumed pursuant
                  to this Agreement or as expressly contemplated by this
                  Agreement, Buyer shall assume no liability for any agreements,
                  arrangements, Employee Plans, COBRA coverage for employees not
                  hired by Buyer or comparable legal requirement in foreign
                  jurisdictions, commitments, policies or understandings of any
                  kind relating to employment, compensation or benefits for the
                  present or former employees of the Acquired Business for all
                  employment prior to the Closing Date. The parties agree that
                  no employee shall be entitled to any third party beneficiary
                  status by virtue of this Section 10.1. Nothing in this
                  Agreement obligates Buyer to employ a Transferred Employee for
                  any specified minimum period of time and nothing in this
                  Agreement shall constitute a limitation on the right of Buyer
                  to terminate any Transferred Employee at will. All Transferred
                  Employees located in the US not employed by Buyer under an
                  employment agreement shall be employees at will and may be
                  terminated at any time, with or without notice, and with or
                  without cause. The parties are aware, that the transfer of
                  employment relationships by operation of European labour laws
                  comprises all rights and obligations out of the employment
                  relationship, including any pension obligations, and that such
                  rights and obligations shall be transferred as provided for by
                  the applicable labour laws.

                   (b) General Employee Provisions.

                           (i) Seller and Buyer shall give any notices required
                  by Legal Requirements and take whatever other actions with
                  respect to the plans, programs and policies described in this
                  Section 10.1 as may be necessary to carry out the arrangements
                  described in this Section 10.1.

                                       32


                           (ii) Seller and Buyer shall provide each other with
                  such plan documents and summary plan descriptions, employee
                  data or other information as may be reasonably required to
                  carry out the arrangements described in this Section 10.1.

                           (iii) If any of the arrangements described in this
                  Section 10.1 are determined by the IRS or other Governmental
                  Body to be prohibited by law, Seller and Buyer shall modify
                  such arrangements to as closely as possible reflect their
                  expressed intent and retain the allocation of economic
                  benefits and burdens to the parties contemplated herein in a
                  manner that is not prohibited by law.

                           (iv) If not provided prior to the date hereof, then
                  upon request by Seller, Buyer shall provide to Seller a
                  written true and complete statement of its then current plans
                  to make any future changes in the working conditions
                  (including any relocation thereof) of any of the Transferable
                  Employees ("CHANGE TO WORKING CONDITIONS STATEMENT") with the
                  understanding that, with respect to those jurisdiction that
                  require it, Seller shall include word-for-word the Change to
                  Working Conditions Statement provided by Buyer in an
                  informational letter to the applicable Transferable Employees
                  ("STATUTORILY REQUIRED EMPLOYEE INFORMATION LETTERS"). The
                  details with regard to the German information procedure are
                  set out in Schedule 10.1(b)(iv).

                           (v) Seller, using its Commercially Reasonable
                  Efforts, shall commence or cause the Seller Local Entities to
                  commence the necessary consultation and information
                  proceedings, required under the national labour and employment
                  laws, in order to fulfill the legal requirements in the
                  relevant jurisdictions which have to be observed in order to
                  implement the sale and purchase contemplated by this
                  Agreement. Seller and Buyer will consult with each other
                  concerning these proceedings and Buyer shall cooperate with
                  Seller.

         10.2     PAYMENT OF ALL TAXES RESULTING FROM SALE OF ASSETS BY SELLER

         Buyer shall pay in a timely manner all Taxes resulting from or payable
in connection with the sale and transfer of the Acquired Assets pursuant to this
Agreement, regardless of the Person on whom such Taxes are imposed by Legal
Requirements. The Purchase Price as stated herein is net of value added tax
(VAT), if any. In the event that the tax authorities determines that any of the
transactions contemplated by this Agreement is subject to VAT under applicable
VAT law, Seller (or the applicable Seller Local Entity) shall present to Buyer
an invoice separately showing VAT at the applicable rate and Buyer shall pay
such VAT in addition to the net Purchase Price. Buyer shall also be responsible
for all interest and penalties, if any, that are assessed in connection with any
Taxes payable under the terms of this Section 10.2.

         10.3     REMOVING RETAINED ASSETS

         Within sixty (60) days after the Closing Date, Seller shall remove all
Retained Assets from all Leased Real Property to be occupied by Buyer. Such
removal shall be done in such manner as to avoid any material damage to the
Leased Real Property and other properties to be occupied by Buyer and any undue
disruption of the business operations to be conducted by Buyer after the
Closing.

                                       33


         10.4     RETENTION OF AND ACCESS TO RECORDS

         After the Closing Date, Buyer shall retain for a period consistent with
Buyer's record-retention policies and practices those Records of Seller
delivered to Buyer. Buyer also shall provide Seller and its Representatives
reasonable access thereto, during normal business hours and on at least three
days' prior written notice, to enable them to prepare financial statements or
tax returns or deal with tax audits. After the Closing Date, Seller shall
provide Buyer and its Representatives reasonable access to Records that are
Retained Assets, during normal business hours and on at least three days' prior
written notice, for any reasonable business purpose specified by Buyer in such
notice.

         10.5     FURTHER ASSURANCES

         The parties shall cooperate reasonably, without incurring any material
burden or expending any material amount of funds, with each other and with their
respective Representatives in connection with any steps required to be taken as
part of their respective obligations under this Agreement, and shall (a) furnish
upon request to each other such further information; (b) execute and deliver to
each other such other documents; and (c) do such other acts and things, all as
the other party may reasonably request for the purpose of carrying out the
intent of this Agreement and the Contemplated Transactions. The Seller shall
make all commercially reasonable efforts to support the Buyer in obtaining its
own Governmental Authorizations.

         The parties further agree between the date hereof and the Closing Date
to cooperate with one another and to deliver such further and additional
supplemental schedules and agreements, or modifications of existing schedules
and agreements, to carry out the intent and purpose of this Agreement.

         10.6     NOTIFICATION OF CERTAIN MATTERS

         Seller shall give prompt notice to Buyer, and Buyer shall give prompt
notice to Seller, of (i) the occurrence, or failure to occur, of any event that
would be reasonably likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date of this Agreement to the Closing Date; (ii) any failure of Buyer
or Seller, as the case may be, to comply with or satisfy, in any material
respect, any covenant, condition or agreement to be complied with or satisfied
by it under this Agreement; and (iii) any event of which any of them obtains
Knowledge which has had, or would reasonably be expected to have, a Material
Adverse Change on the Acquired Business. No such notification shall affect the
representations and warranties of the parties or the conditions to their
respective obligations hereunder.


                                       34


         10.7     COLLECTION OF ACCOUNTS RECEIVABLE AND SALE OF INVENTORY

         Buyer agrees to use its Commercially Reasonable Efforts to collect all
Accounts Receivable subsequent to the Closing Date. Buyer agrees to use its
Commercially Reasonable Efforts to sell all Inventories subsequent to the
Closing Date.

11.      INDEMNIFICATION; REMEDIES

         11.1     SURVIVAL

         All representations, warranties, covenants and agreements set forth in
this Agreement or in any certificate or other writing delivered in connection
with the Contemplated Transactions shall survive the Closing and the
consummation of the transactions contemplated thereby, notwithstanding any
examination made for or on behalf of Buyer or the acceptance of any certificate
or opinion, until the date eighteen (18) months after the Closing Date, except
(a) with respect to a matter as to which a claim for indemnification has been
made by written notice pursuant to Section 11.4 on or before such date; (b) with
respect to a claim pertaining to a representation or breach of warranty,
agreement or covenant under Sections 3.6 and 3.14 for which there shall be no
limitations on survival, except to the extent that there exists a statute of
limitations applicable thereto and, in such event, such claim must be made
within the applicable statute of limitations; and (c) with respect to any claim
pertaining to Sections 3.16 and 3.19 which claim must be made within the
applicable statute of limitations.

         11.2     SELLER'S INDEMNIFICATION OF BUYER

                  (a) Subject to the limitations set forth in Section 11.2(b)
         below, Seller shall, jointly and severally, indemnify Buyer and its
         respective officers, directors, shareholders, members, managers,
         affiliates, employees, agents, representatives, successors and assigns
         (collectively, the "BUYER PARTIES") and hold each of them harmless
         against and pay on behalf of or reimburse such Buyer Parties in respect
         of any loss, liability, demand, claim, action, cause of action, cost,
         damage, deficiency, tax, penalty, fine or expense, whether foreseeable
         or unforeseeable, whether or not arising out of third party claims,
         including, but not limited to, interest or other carrying costs,
         penalties, legal, accounting and other professional fees and expenses
         reasonably incurred ("LOSSES") which any such Buyer Party may suffer,
         sustain or become subject to, arising from or directly relating to: (i)
         any material inaccuracy or the breach of any representation or warranty
         made by Seller contained in this Agreement or any Schedule or Exhibit
         hereto, (ii) the breach of any covenant or agreement of Seller
         contained in this Agreement, (iii) any claim (whether or not
         successful) by any Person to cause or require Buyer to pay or discharge
         any debt, obligation, liability or commitment, the existence of which
         constitutes a breach of any Seller representation, warranty, covenant
         or agreement, (iv) any other third party claims or demands regarding
         acts of Seller relating to the conduct of the Acquired Business prior
         to the Closing that are asserted after Closing and (v) any claim
         (whether or not successful) by any of the Transferred Employees or by a
         work council where Seller has made a statement that is incorrect,
         incomplete or both incorrect and incomplete: (i) from that which is set
         forth in Change to Working Conditions Statement or (ii) with regard to
         what the Transferred Employee's work conditions will be subsequent to
         Buyer's acquisition of the Acquired Business unless the making of such
         statement was directed by Buyer.

                                       35


                  (b) The indemnification provided for in Section 11.2(a) above
         is subject to the following limitations:

                           (i) Subject to the qualifications of Section 11.1,
                  Seller shall be liable to Buyer with respect to claims
                  referred to in subsection (a) above only if Buyer gives Seller
                  written notice thereof within eighteen (18) months after the
                  Closing Date.

                           (ii) Seller shall not be liable to Buyer for any Loss
                  arising under subsection (a) above unless the aggregate amount
                  of all such Losses relating to Breaches thereunder exceeds one
                  percent (1%) of the Initial Purchase Price in the aggregate
                  (the "THRESHOLD"), in which case Seller shall be liable only
                  for any Losses in excess of the Threshold, but only up to an
                  amount which does not exceed twenty-five percent (25%) of the
                  Initial Purchase Price in the aggregate (the "CAP"); provided
                  that:

                                    (1) the Threshold shall not apply to
                           breaches of the representations and warranties set
                           forth in Section 3.6 (Title), Section 3.14
                           (Environmental), Section 3.15 (Employees), Section
                           3.16 (Employee Benefits) and Section 3.19 (Taxes),

                                    (2) the Cap shall not apply to breaches of
                           the environmental or tax related representations and
                           warranties set forth in Section 3.6 (Title), Section
                           3.14 (Environmental), Section 3.15 (Employees),
                           Section 3.16 (Employee Benefits) and
                           Section 3.19 (Taxes),

                                    (3) with respect to the representations and
                           warranties contained in Section 3.8 and Section 3.9,
                           Seller shall not be liable to Buyer for any Loss
                           arising under such Sections unless Seller's breach is
                           found to have been grossly negligent or willful, and

                                    (4) notwithstanding the Cap, all proceeds
                           received by Seller under Seller's liability insurance
                           policies shall be paid over to Buyer to the extent
                           necessary to satisfy any Losses which Buyer may incur
                           by reason of such claims and Seller shall use its
                           Commercially Reasonable Efforts to obtain such
                           proceeds from the applicable insurers.

         Notwithstanding anything to the contrary herein, Buyer shall promptly,
after receipt thereof, reimburse Seller for all indemnification obligations paid
by Seller hereunder to the extent of: (i) any insurance proceeds received by
Buyer or by Seller and delivered to Buyer, and (ii) any other third-party
recovery in favor of Buyer. Notwithstanding anything to the contrary herein, the
parties agree that the protections and remedies for Buyer set forth in this
Section 11 shall be the exclusive remedies for Losses described under Section
11.2.

                                       36


                           (iii) Except as otherwise provided herein, any matter
reflected in this Agreement (including the exhibits and parts attached hereto)
and/or in documents, letters, memoranda, booklets, and brochures (the "DISCLOSED
DOCUMENTS") delivered to the Buyer which reasonably and adequately discloses a
claim or potential claim against any Seller, or a liability or potential
liability of Seller, shall be deemed a disclosure of such matter for all
purposes of this Agreement. As an example, if a contract between Seller and a
vendor is disclosed, Seller shall be relieved of any express payment obligations
due vendor and fully shown due in such contract. However, if Seller shall be in
material breach of its obligations under the Contract, and such breach is not
disclosed, Seller shall not be relieved of responsibility for any Loss resulting
therefrom.

         11.3     BUYER'S INDEMNIFICATION OF SELLER.

                  (a) Subject to the limitations contained in 11.3(b) below,
         Buyer agrees to indemnify Seller and its agents, representatives,
         successors and assigns and to hold them harmless against any Losses
         which they may suffer, sustain or become subject to, as the result of
         (i) a breach of any representation, warranty, covenant, or agreement by
         Buyer contained in this Agreement, (ii) Buyer's actions or omissions
         with respect to the Acquired Business and the Assumed Liabilities
         subsequent to the Closing Date, (iii) any claim (whether or not
         successful) by any of the Transferred Employees that the Statutorily
         Required Employee Information Letters containing the Change to Working
         Conditions Statement was, with respect to such Statement, either
         incomplete or incorrect or both incomplete and incorrect or that any
         statements (either oral or written) made by Buyer or at the direction
         of Buyer to any Transferred Employees prior to the date hereof were
         incorrect, incomplete or both incorrect and incomplete, and (iv) in the
         event that Buyer restructures any work or employment conditions in a
         jurisdiction where there exists a work council and Seller incurs any
         Losses due to any such restructuring.

                  (b) The indemnification provided for in Section 11.3(a) above
         is subject to the following limitations:

                           (i) Buyer shall be liable to Seller with respect to
                  claims referred to in subsection (a) above only if Seller
                  gives Buyer written notice thereof within eighteen (18) months
                  after the Closing Date.

                           (ii) Buyer shall not be liable to Seller for any Loss
                  arising under subsection (a) above unless the aggregate amount
                  of all such Losses relating to Breaches thereunder exceeds one
                  percent (1%) of the Initial Purchase Price ("BUYER
                  THRESHOLD"), in which case Buyer shall be liable for all such
                  Losses in excess of one percent (1%) of the Initial Purchase
                  Price but only up to an amount which does not exceed
                  twenty-five percent (25%) of the Initial Purchase Price;
                  provided, however, that the Buyer Threshold shall not apply to
                  the indemnification obligations of Buyer under Section 11.2
                  (a) (iii) and (iv) and Section 10.1(b)(v).

         Notwithstanding anything to the contrary herein, the parties agree that
the protections and remedies for Seller set forth in this Section 11 shall be
the exclusive remedies for Losses described under Section 11.3.

                                       37


         11.4     INDEMNIFICATION PROCEDURES.

                  (a) If a Party hereto seeks indemnification under this Section
         11, such Party (the "INDEMNIFIED PARTY") shall give written notice to
         the other Party (the "INDEMNIFYING PARTY") of the facts and
         circumstances giving rise to the claim. In that regard, if any suit,
         action, claim, liability or obligation shall be brought or asserted by
         any third party which, if adversely determined, would entitle the
         Indemnified Party to indemnity pursuant to this Section 11, the
         Indemnified Party shall promptly notify the Indemnifying Party of the
         same in writing, specifying in detail the basis of such claim and the
         facts pertaining thereto. The Indemnifying Party shall have thirty (30)
         days after receipt of such notice to elect to assume and control the
         defense thereof (and shall consult with the Indemnified Party with
         respect thereto), including the employment of counsel reasonably
         satisfactory to the Indemnified Party and the payment of all necessary
         expenses. With respect to any claim for which the Indemnifying Party
         assumes the defense of, the Indemnified Party agrees to cooperate with
         the Indemnifying Party and to provide the Indemnifying Party with
         access to the Indemnified Party's books, records, personnel and
         premises in order to determine and defend such claim. Further, with
         respect to any such claim, the Indemnifying Party shall have the
         authority to settle such claim provided the Indemnifying Party shall
         pay such settlement in full. In the event that the Indemnifying Party
         does not elect to assume and control of the defense of such claim, the
         Indemnified Party shall use Commercially Reasonable Efforts, consistent
         with prudent business judgment, to defend such claim. If the
         Indemnifying Party is permitted to assume and control the defense and
         elects to do so, the Indemnified Party shall have the right to employ
         counsel separate from counsel employed by the Indemnifying Party in any
         such action and to participate in the defense thereof, but the fees and
         expenses of such counsel employed by the Indemnified Party shall be at
         the expense of the Indemnified Party. The Indemnifying Party shall not
         be liable for any settlement of any such action or proceeding effected
         without the written consent of the Indemnifying Party, however, if
         there shall be a final judgment for the plaintiff in any such action,
         the Indemnifying Party agrees to indemnify and hold harmless the
         Indemnified Party from and against any loss or liability by reason of
         such judgment.

                  (b) To secure payment of Seller's indemnification obligations,
         inter alia, the parties have agreed to retain a portion of the Purchase
         Price in a holdback account on the terms and conditions set forth in
         the Escrow Agreement.

         12.      CONFIDENTIALITY

         12.1     DEFINITION OF CONFIDENTIAL INFORMATION

                  (a) As used in this Article 12, the term "CONFIDENTIAL
         INFORMATION" includes any and all of the information of Seller or Buyer
         that has been or may hereafter be disclosed in any form, whether in
         writing, orally, electronically or otherwise, or otherwise made
         available by observation, inspection or otherwise by either party
         (Buyer on the one hand or Seller, collectively, on the other hand) or
         its Representatives (collectively, a "DISCLOSING PARTY") to the other
         party or its Representatives (collectively, a "RECEIVING PARTY"):

                                       38


                           (i) all information that is a trade secret under
                  applicable trade secret or other law;

                           (ii) all information concerning product
                  specifications, data, know-how, formulae, compositions,
                  processes, designs, sketches, photographs, graphs, drawings,
                  samples, inventions and ideas, past, current and planned
                  research and development, current and planned manufacturing or
                  distribution methods and processes, customer lists, current
                  and anticipated customer requirements, price lists, market
                  studies, business plans, computer hardware, Software and
                  computer software and database technologies, systems,
                  structures and architectures;

                           (iii) all information concerning the business and
                  affairs of the Disclosing Party (which includes historical and
                  current financial statements, financial projections and
                  budgets, tax returns and accountants' materials, historical,
                  current and projected sales, capital spending budgets and
                  plans, business plans, strategic plans, marketing and
                  advertising plans, publications, client and customer lists and
                  files, contracts, the names and backgrounds of key personnel
                  and personnel training techniques and materials, however
                  documented), and all information obtained from review of the
                  Disclosing Party's documents or property or discussions with
                  the Disclosing Party regardless of the form of the
                  communication; and

                           (iv) all notes, analyses, compilations, studies,
                  summaries and other material prepared by the Receiving Party
                  to the extent containing or based, in whole or in part, upon
                  any information included in the foregoing.

                  (b) Any trade secrets of a Disclosing Party shall also be
         entitled to all of the protections and benefits under applicable trade
         secret law and any other applicable law. If any information that a
         Disclosing Party deems to be a trade secret is found by a court of
         competent jurisdiction not to be a trade secret for purposes of this
         Article 12, such information shall still be considered Confidential
         Information of that Disclosing Party for purposes of this Article 12 to
         the extent included within the definition. In the case of trade
         secrets, each of Buyer, Seller hereby waives any requirement that the
         other party submit proof of the economic value of any trade secret or
         post a bond or other security.

         12.2     RESTRICTED USE OF CONFIDENTIAL INFORMATION

                  (a) Each Receiving Party acknowledges the confidential and
         proprietary nature of the Confidential Information of the Disclosing
         Party and agrees that such Confidential Information (i) shall be kept
         confidential by the Receiving Party; (ii) shall not be used for any
         reason or purpose other than to evaluate and consummate the
         Contemplated Transactions; and (iii) without limiting the foregoing,
         shall not be disclosed by the Receiving Party to any Person, except in
         each case as otherwise expressly permitted by the terms of this
         Agreement or with the prior written consent of an authorized
         representative of Seller with respect to Confidential Information of
         Seller (each, a "SELLER CONTACT") or an authorized representative of
         Buyer with respect to Confidential Information of Buyer (each, a "BUYER
         CONTACT"). Each of Buyer and Seller shall disclose the Confidential
         Information of the other party only to its Representatives who require
         such material for the purpose of evaluating the Contemplated
         Transactions and are informed by Buyer or Seller, as the case may be,
         of the obligations of this Article 12 with respect to such information.
         Each of Buyer and Seller shall (iv) enforce the terms of this Article
         12 as to its respective Representatives; (v) take such action to the
         extent necessary to cause its Representatives to comply with the terms
         and conditions of this Article 12; and (vi) be responsible and liable
         for any breach of the provisions of this Article 12 by it or its
         Representatives.

                                       39


                  (b) Unless and until this Agreement is terminated, Seller
         shall maintain as confidential any Confidential Information (including
         for this purpose any information of Seller of the type referred to in
         Sections 12.1(a)(i), (ii) and (iii), whether or not disclosed to Buyer)
         of the Seller relating to any of the Acquired Assets or the Assumed
         Liabilities. Notwithstanding the preceding sentence, Seller may use any
         Confidential Information of Seller before the Closing in the Ordinary
         Course of Business in connection with the transactions permitted by
         Section 5.2.

                  (c) From and after the Closing, the provisions of Section
         12.2(a) above shall not apply to or restrict in any manner Buyer's use
         of any Confidential Information of the Seller relating to any of the
         Acquired Assets or the Assumed Liabilities.

         12.3     EXCEPTIONS

         Sections 12.2(a) and (b) do not apply to that part of the Confidential
Information of a Disclosing Party that a Receiving Party demonstrates (a) was,
is or becomes generally available to the public other than as a result of a
breach of this Article 12 or the Confidentiality Agreement by the Receiving
Party or its Representatives; (b) was or is developed by the Receiving Party
independently of and without reference to any Confidential Information of the
Disclosing Party; or (c) was, is or becomes available to the Receiving Party on
a non-confidential basis from a Third Party not bound by a confidentiality
agreement or any legal, fiduciary or other obligation restricting disclosure.
Seller shall not disclose any Confidential Information of Seller relating to any
of the Acquired Assets or the Assumed Liabilities in reliance on the exceptions
in clauses (b) or (c) above.

         12.4     LEGAL PROCEEDINGS

         If a Receiving Party becomes compelled in any Proceeding or is
requested by a Governmental Body having regulatory jurisdiction over the
Contemplated Transactions to make any disclosure that is prohibited or otherwise
constrained by this Article 12, that Receiving Party shall provide the
Disclosing Party with prompt notice of such compulsion or request so that it may
seek an appropriate protective order or other appropriate remedy or waive
compliance with the provisions of this Article 12. In the absence of a
protective order or other remedy, the Receiving Party may disclose that portion
(and only that portion) of the Confidential Information of the Disclosing Party
that, based upon advice of the Receiving Party's counsel, the Receiving Party is
legally compelled to disclose or that has been requested by such Governmental
Body, provided, however, that the Receiving Party shall use Commercially
Reasonable Efforts to obtain reliable assurance that confidential treatment will
be accorded by any Person to whom any Confidential Information is so disclosed.
The provisions of this Section 12.4 do not apply to any Proceedings between the
parties to this Agreement.

                                       40


         12.5     RETURN OR DESTRUCTION OF CONFIDENTIAL INFORMATION

         If this Agreement is terminated, each Receiving Party shall (a) destroy
all Confidential Information of the Disclosing Party prepared or generated by
the Receiving Party without retaining a copy of any such material; (b) promptly
deliver to the Disclosing Party all other Confidential Information of the
Disclosing Party, together with all copies thereof, in the possession, custody
or control of the Receiving Party or, alternatively, with the written consent of
a Seller Contact or a Buyer Contact (whichever represents the Disclosing Party)
destroy all such Confidential Information; and (c) certify all such destruction
in writing to the Disclosing Party, provided, however, that the Receiving Party
may retain a list that contains general descriptions of the information it has
returned or destroyed to facilitate the resolution of any controversies after
the Disclosing Party's Confidential Information is returned.

         12.6     ATTORNEY-CLIENT PRIVILEGE

         The Disclosing Party is not waiving, and will not be deemed to have
waived or diminished, any of its attorney work product protections,
attorney-client privileges or similar protections and privileges as a result of
disclosing its Confidential Information (including Confidential Information
related to pending or threatened litigation) to the Receiving Party, regardless
of whether the Disclosing Party has asserted, or is or may be entitled to
assert, such privileges and protections. The parties (a) share a common legal
and commercial interest in all of the Disclosing Party's Confidential
Information that is subject to such privileges and protections; (b) are or may
become joint defendants in Proceedings to which the Disclosing Party's
Confidential Information covered by such protections and privileges relates; (c)
intend that such privileges and protections remain intact should either party
become subject to any actual or threatened Proceeding to which the Disclosing
Party's Confidential Information covered by such protections and privileges
relates; and (d) intend that after the Closing the Receiving Party shall have
the right to assert such protections and privileges. No Receiving Party shall
admit, claim or contend, in Proceedings involving either party or otherwise,
that any Disclosing Party waived any of its attorney work-product protections,
attorney-client privileges or similar protections and privileges with respect to
any information, documents or other material not disclosed to a Receiving Party
due to the Disclosing Party disclosing its Confidential Information (including
Confidential Information related to pending or threatened litigation) to the
Receiving Party.

13.      GENERAL PROVISIONS

         13.1     EXPENSES

         Except as otherwise provided in this Agreement, each party to this
Agreement will bear its respective fees and expenses incurred in connection with
the preparation, negotiation, execution and performance of this Agreement and
the Contemplated Transactions, including all fees and expenses of its
Representatives. If this Agreement is terminated, the obligation of each party
to pay its own fees and expenses will be subject to any rights of such party
arising from a Breach of this Agreement by another party. All fees and
commissions due to agents, brokers, finders or investment bankers engaged by
Seller in connection with the negotiation, execution or performance of this
Agreement, as a result of this Agreement shall be paid by Seller.

                                       41


         13.2     PUBLIC ANNOUNCEMENTS

         Any public announcement, press release or similar publicity with
respect to this Agreement or the Contemplated Transactions will be issued, if at
all, at such time and in such manner as Seller and Buyer mutually agree, except
to the extent that a particular action is required by applicable law.

         13.3     NOTICES

         All notices, Consents, waivers and other communications required or
permitted by this Agreement shall be in writing and shall be deemed given to a
party when (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile or
e-mail with confirmation of transmission by the transmitting equipment; or (c)
received or rejected by the addressee, if sent by certified mail, return receipt
requested, in each case to the following addresses, facsimile numbers or e-mail
addresses and marked to the attention of the person (by name or title)
designated below (or to such other address, facsimile number, e-mail address or
person as a party may designate by notice to the other parties):

         Seller:           Checkpoint Systems, Inc.
                           101 Wolf Drive
                           P.O. Box 188, Thorofare, NJ 08086
                           Attention: John Van Zile, General Counsel
                           Fax no.: 856.848.5297
                           E-mail address: john.vanzile@checkpt.com

         with a mandatory copy to:

                           Stradley Ronon Stevens & Young, LLP
                           One Commerce Square
                           Philadelphia, PA 19103
                           Attention: William R. Sasso, Esquire and
                                      Thomas G. Harris, Esquire
                           Fax no.: 215.564.8120
                           E-mail address: wsasso@stradley.com and
                                           tharris@stradley.com

         Buyer:            Sato International Pte. Ltd.
                           438A Alexandra Road
                           #05-01/04
                           Alexandra Technopark
                           Singapore 119967
                           Attention: Kiyohiko Yoshii
                           Fax no.: +(65) 6271-2151
                           E-mail address: yoshii@sato-int.com



                                       42


         with a mandatory copy to:

                           Cohen Grossman & Rosenson, LLC
                           233 North Michigan Avenue, Suite 1720
                           Chicago, IL 60601
                           Attention: Howard M. Cohen
                           Fax no.: 312-552-9001
                           E-mail address: hcohen@cgrlegal.com

         13.4     JURISDICTION; SERVICE OF PROCESS

         Any Proceeding arising out of or relating to this Agreement or any
Contemplated Transaction may be brought in the United States Third Circuit
District Court, and each of the parties irrevocably submits to the exclusive
jurisdiction of each such court in any such Proceeding, waives any objection it
may now or hereafter have to venue or to convenience of forum, agrees that all
claims in respect of the Proceeding shall be heard and determined only in any
such court and agrees not to bring any Proceeding arising out of or relating to
this Agreement or any Contemplated Transaction in any other court. The parties
agree that either or both of them may file a copy of this paragraph with any
court as written evidence of the knowing, voluntary and bargained agreement
between the parties irrevocably to waive any objections to venue or to
convenience of forum. Process in any Proceeding referred to in the first
sentence of this section may be served on any party anywhere in the world.

         13.5     WAIVER; REMEDIES CUMULATIVE

         The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither any failure nor any delay by any party in
exercising any right, power or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a waiver of such right,
power or privilege, and no single or partial exercise of any such right, power
or privilege will preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. To the maximum
extent permitted by applicable law, (a) no claim or right arising out of this
Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.

         13.6     ENTIRE AGREEMENT AND MODIFICATION

         This Agreement supersedes all prior agreements, whether written or
oral, between the parties with respect to its subject matter (including any
letter of intent and any confidentiality agreement between Buyer and Seller) and
constitutes (along with the Disclosure Schedule, Exhibits and other documents
delivered pursuant to this Agreement) a complete and exclusive statement of the
terms of the agreement between the parties with respect to its subject matter.
This Agreement may not be amended, supplemented, or otherwise modified except by
a written agreement executed by the party to be charged with the amendment.

                                       43


         13.7     DISCLOSURE SCHEDULE

                  (a) The information in the Disclosure Schedule constitutes (i)
         exceptions to particular representations, warranties, covenants and
         obligations of Seller as set forth in this Agreement or (ii)
         descriptions or lists of assets and liabilities and other items
         referred to in this Agreement. If there is any inconsistency between
         the statements in this Agreement and those in the Disclosure Schedule
         (other than an exception expressly set forth as such in the Disclosure
         Schedule with respect to a specifically identified representation or
         warranty), the statements in this Agreement will control.

                  (b) The statements in the Disclosure Schedule, and those in
         any supplement thereto, relate only to the provisions in the Section of
         this Agreement to which they expressly relate and not to any other
         provision in this Agreement.

         13.8     ASSIGNMENTS, SUCCESSORS AND NO THIRD-PARTY RIGHTS

         No party may assign any of its rights or delegate any of its
obligations under this Agreement without the prior written consent of the other
parties, except that Buyer may assign any of its rights and delegate any of its
obligations under this Agreement to any subsidiary or affiliate of Buyer and may
collaterally assign its rights hereunder to any financial institution providing
financing in connection with the Contemplated Transactions. Subject to the
preceding sentence, this Agreement will apply to, be binding in all respects
upon and inure to the benefit of the successors and permitted assigns of the
parties. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the parties to this Agreement any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement, except such rights as shall inure to a successor or permitted
assignee pursuant to this Section 13.8.

         13.9     SEVERABILITY

         If any provision of this Agreement is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

         13.10    CONSTRUCTION

                  (a) The headings of Articles and Sections in this Agreement
         are provided for convenience only and will not affect its construction
         or interpretation. All references to "Articles," "Sections" and "Parts"
         refer to the corresponding Articles, Sections and Parts of this
         Agreement and the Disclosure Schedule.

                  (b) Interpretation. In this Agreement, unless a clear contrary
         intention appears:

                           (i) the singular number includes the plural number
and vice versa;

                                       44


                           (ii) reference to any Person includes such Person's
                  successors and assigns but, if applicable, only if such
                  successors and assigns are not prohibited by this Agreement,
                  and reference to a Person in a particular capacity excludes
                  such Person in any other capacity or individually;

                           (iii) reference to any agreement, document or
                  instrument means such agreement, document or instrument as
                  amended or modified and in effect from time to time in
                  accordance with the terms thereof;

                           (iv) reference to any Legal Requirement means such
                  Legal Requirement as amended, modified, codified, replaced or
                  reenacted, in whole or in part, and in effect from time to
                  time, including rules and regulations promulgated thereunder,
                  and reference to any section or other provision of any Legal
                  Requirement means that provision of such Legal Requirement
                  from time to time in effect and constituting the substantive
                  amendment, modification, codification, replacement or
                  reenactment of such section or other provision;

                           (v) "hereunder," "hereof," "hereto," and words of
                  similar import shall be deemed references to this Agreement as
                  a whole and not to any particular Article, Section or other
                  provision hereof;

                           (vi) all references to funds, money or dollars
                  hereunder shall mean United States dollars except that with
                  respect to Local Agreements where the applicable currency to
                  be paid by Buyer shall be stated therein; and

                           (vii) references to documents, instruments or
                  agreements shall be deemed to refer as well to all addenda,
                  exhibits, schedules or amendments thereto.

         13.11    GOVERNING LAW

         This Agreement will be governed by and construed under the laws of the
State of Delaware without regard to conflicts-of-laws principles that would
require the application of any other law.

         13.12    EXECUTION OF AGREEMENT

         This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
The exchange of copies of this Agreement and of signature pages by facsimile
transmission shall constitute effective execution and delivery of this Agreement
as to the parties and may be used in lieu of the original Agreement for all
purposes. Signatures of the parties transmitted by facsimile shall be deemed to
be their original signatures for all purposes.


                                       45


         13.13    SELLER SUBSIDIARIES

         To the extent that a wholly-owned subsidiary of Seller will be the
actual transferor of any of the Acquired Assets, Seller shall cause such
affiliate to make such transfer in accordance with this Agreement.

         13.14    HEADINGS

         The descriptive headings of the Articles, Sections and subsections of
this Agreement are for convenience only and do not constitute a part of this
Agreement.

         13.15    COUNTERPARTS

         This Agreement and any other agreement (or document) delivered pursuant
hereto may be executed in one (1) or more counterparts and by different parties
in separate counterparts. All of such counterparts shall constitute one and the
same agreement (or other document) and shall become effective when one (1) or
more counterparts of this Agreement have been signed by each party and delivered
to the other party.

         13.16    PARTIES IN INTEREST

         This Agreement shall be binding upon and inure to the benefit of each
party and their respective successors and assigns, but nothing in this
Agreement, express or implied, is intended to confer upon any other person any
rights or remedies of any nature whatsoever under or by reason of this
Agreement. Nothing in this Agreement is intended to relieve or discharge the
obligation of any third person to or confer any right of subrogation or action
over or against, any party to this Agreement.

         13.17    MISCELLANEOUS

         The terms, provisions and conditions of each supplemental Asset
Purchase Agreement entered into by the parties, or the party's Local Entities,
are hereby incorporated herein by reference thereto. To the extent of any
inconsistency between the terms of this Asset Purchase Agreement and any
supplementary Asset Purchase Agreement, the provisions of this Agreement shall
control, except to the extent that such construction results in a local law
violation in the jurisdiction governed by the supplementary Asset Purchase
Agreement. A breach or default under any supplementary Asset Purchase Agreement
shall also result in a breach or default under this Agreement and shall entitle
the non-defaulting party to pursue all available remedies at law and in equity
under this Agreement.


                                       46


         IN WITNESS WHEREOF, the parties have executed this Asset Purchase
Agreement as of the date first written above.



         BUYER:                     Sato International Pte. Ltd.
         -----

         By:
                                    --------------------------------------------
         Name:                      Toshihiro Waki
         Title:                     Managing Director

         SELLER:                    Checkpoint Systems, Inc.
         ------

         By:
                                    --------------------------------------------
         Name:                      George W. Off
         Title:                     President and Chief Executive Officer



                                       47

EX-2.1

                                                                     Exhibit 2.2

                      AMENDMENT TO ASSET PURCHASE AGREEMENT



                  THIS AMENDMENT TO ASSET PURCHASE AGREEMENT ("AMENDMENT") is
made this 29th day of January, 2006, by and between Sato International Pte.
Ltd., an entity organized under the laws of the Republic of Singapore (the
"BUYER"), and Checkpoint Systems, Inc., a Pennsylvania corporation (the
"SELLER").

                  This Amendment sets forth the agreed upon amendments and
modifications to the Asset Purchase Agreement dated December 22, 2005 by and
between the Seller and the Buyer ("ASSET PURCHASE AGREEMENT").

A. AMENDMENTS. The Asset Purchase Agreement is hereby amended as follows:

                  1. The second and last sentence of the definition of "Acquired
Business" is hereby amended and restated in its entirety to read as follows:

         "ACQUIRED BUSINESS" - means the design, manufacture and/or sales of:
         (i) with respect to North America, laser solutions/printers, thermal
         solutions/printers and horticultural identification labeling
         solutions/printers, (ii) the United States of America, Central America
         (through distribution channels) and South America (through distribution
         channels), hand-held labeling solutions and the "Turn-O-Matic" ticket
         dispensing systems, (iii) with respect to Europe, laser
         solutions/printers, thermal barcode printers and associated thermal
         hardware (including track and trace devices) and consumables (including
         stock/customized labels, tags and tickets for retail, manufacturing,
         logistics, industrial and horticultural applications), and (iv) with
         respect to the Asia Pacific region, thermal solutions/printers, custom
         labels to the courier industry, prime labels to the foodservice
         industry, white labels, and other specialized thermal barcode printing
         applications; provided, however, that the Acquired Business shall not
         include: (i) any labels or labels solutions that incorporate EAS, EM,
         and RF technology and Service Bureau Products and (ii) the business of
         Checkpoint Systems Hong Kong and its subsidiaries."

                  2. The definition of "Transferable Employees" is deleted and
the references in Section 3.16(a) and 10.1(b)(iv) to "Transferable Employees" is
deemed to mean "Transferred Employees."

                  3. The third sentence of Section 2.3(b) is hereby amended and
restated in its entirety to read as follows:

         "Not later than 5:00 p.m. eastern United States standard time on the
         day immediately preceding the Closing Date, the Seller shall deliver to
         Buyer an internally prepared, un-audited, balance sheet as of the
         Closing Date and a statement of estimated Net Operating Assets as of
         December 25, 2005 ("STATEMENT OF ESTIMATED NET OPERATING ASSETS"),
         prepared in a manner consistent with the Most Recent Balance Sheet and
         also made a part of Schedule 2.3(b)."

                  4. The first sentence of Section 2.3(e) is hereby amended and
restated in its entirety to read as follows:

         "As promptly as possible following the close of business on the Closing
         Date, but in no event later than forty-five (45) days after the Closing
         Date, the Seller shall prepare, at the expense of Seller, a final
         statement of Net Operating Assets as of the Closing Date ("FINAL
         STATEMENT OF NET OPERATING ASSETS"). For purposes of the Final
         Statement of Net Operating Assets, the parties agree that the



                  5. The first sentence of Section 2.7 is hereby amended and
restated in its entirety to read as follows:

         "The purchase and sale provided for in this Agreement (the "CLOSING")
         will take place at the offices of Seller's counsel at 2600 One Commerce
         Square, Philadelphia, PA 19103 at 10:00 a.m. (local time) on January
         29, 2005, unless Buyer and Seller otherwise agree."

                  6. Pursuant to Section 10.1(a)(iii) of the Asset Purchase
Agreement, Schedule 10.1(a)(i) to the Asset Purchase Agreement is hereby amended
and restated and replaced in its entirety by EXHIBIT A attached hereto and made
a part hereof.

                  7. Pursuant to Section 10.1(a)(iii) of the Asset Purchase
Agreement, Schedule 10.1(a)(2) to the Asset Purchase Agreement is hereby amended
and restated and replaced in its entirety by EXHIBIT B attached hereto and made
a part hereof.

                  8. The first line of Section 10.1(a)(v) should be revised to
read as follows: "Except AS OTHERWISE PROVIDED IN SECTION 10.1(A)(vi), BELOW,
AND for wages, payroll taxes and vacation . . . ."

                  9. A new Section 10.1(a)(vi) should be added to read as
follows:

         "(vi) Effective as of the Closing Date, Seller and Buyer shall take
         such steps as may be necessary to cause the account balances of
         Transferred Employees under the Checkpoint Systems, Inc. 401(k) Savings
         Plan (the "PLAN") who become employed by Buyer in connection with the
         transactions contemplated by this Agreement to be spun-off to a
         separate defined contribution plan maintained by Sato Labeling
         Solutions America, Inc. (the "SATO 401(K) PLAN"), the terms and
         features of which in all material respects shall be substantially
         identical to the terms of the Plan. The actual transfer of assets
         allocated to such spun-off account balances shall occur as soon as
         practicable following the Closing Date. The Transferred Employees whose
         account balances are spun-off shall be eligible to participate in the
         Sato 401(k) Plan immediately following the Closing Date."


         B. The parties hereto further agree as follows:

         1. Checkpoint shall, in a reasonably prompt manner, remove the name
"Checkpoint" and associated logos from all HLS and Turn-O-Matic hardware and
packaging.

         2. Attached hereto as EXHIBIT C are the following updated Schedules to
the Asset Purchase Agreement :

                                    Schedule 2.1.1(a)
                                    Schedule 2.1.1(d)
                                    Schedule 2.1.1(f)
                                    Schedule 2.1.1(g)

         3. Checkpoint shall give Sato a credit of EU60,000 as of Closing on the
Final Statement of Net Operating Assets and in consideration thereof, Sato shall
assume all responsibility and shall indemnify Checkpoint against any liability
resulting from claims by IG Metall attributable to the agreements between IG
Metall and Checkpoint.

         4. Sato agrees to indemnify Checkpoint from and against any liability
resulting from any claims arising under or in connection with that certain
assigned Lease dated November 22, 2002 between Ronald and Cynthia Frederick and
Checkpoint for the premises located at 930 Jimmy Ann Drive, Daytona Beach,
Florida, 32117 which are attributable to any period arising on or after the
Closing Date.

         5. Checkpoint agrees to indemnify Sato from and against any liability
resulting from an employee related claim where the claim arises from
Checkpoint's actions or omissions in the Acquired Business prior to Closing or
if such claim is attributable to any statutory end-of-service allowance, paid
vacation allowance or similar benefit due such employee which relates to the
period in which such person was a Checkpoint employee.

         6. With respect to the calculation of the pension obligation on the
Final Statement of Net Operating Assets with respect to the Transferred
Employees located in Germany, the parties have agreed to use a discount rate of
4.125% and all other actuarial assumptions shall remain the same. To the extent
a discount rate assumption is required in any other jurisdiction to compute
Checkpoint's accrued pension liability in a manner similar to Germany and the
parties cannot agree on the discount rate, the parties shall rely upon the
Hewitt Year End Report and agree to use the mid-point 2005 Year-end discount
rate in such report.

         7. The indemnities set forth in paragraphs 3 through 5 above shall not
be subject to any Threshold or other limitations set out in the Asset Purchase
Agreement.


         8. The parties acknowledge and agree that with respect to the leased
computers used by the Transferred Employees in Spain, the lessor of such
computers has refused assignment of the computer leases to Sato and, therefore,
the parties have agreed that Checkpoint will: (i) purchase such computers, (ii)
transfer them to Sato as part of the updated schedules to the Asset Purchase
Agreement and (iii) include the buy-out amount for the computers on the Final
Statement of Net Operating Assets as an asset.

         9. Sato agrees to grant Checkpoint a non-exclusive, fully paid-up,
royalty free, world-wide, nontransferable, irrevocable, non-terminable right and
license in connection with enforcement rights in the intellectual property set
forth on SCHEDULE D and SCHEDULE E, each attached hereto.

         C. Effect of Amendment. Except as set forth in this Amendment, the
Asset Purchase Agreement and all terms and conditions thereof shall remain
unaltered and in full force and effect and are hereby ratified and confirmed in
all respects, as hereinabove amended. Any reference in the Asset Purchase
Agreement or in any instrument, document or consideration executed or delivered
pursuant to the Asset Purchase Agreement to "this Agreement", "hereof",
"hereto", and "hereunder" and similar references thereto shall be deemed and
construed to be a reference to the Asset Purchase Agreement, as amended by this
Amendment.

         D. Defined Terms. Capitalized terms used herein and not otherwise
defined herein shall have the meanings ascribed to such terms in the Asset
Purchase Agreement.

         E. Governing Law/Counterparts. This Agreement will be governed by and
construed under the laws of the State of Delaware without regard to
conflicts-of-laws principles that would require the application of any other
law. This Amendment may be executed in any number of counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute but one and the same agreement.




IN WITNESS WHEREOF, the undersigned have executed this Amendment to Asset
Purchase Agreement as of the day and year first above written.

                                 Sato International Pte. Ltd.



                                 By:______________________________
                                    Name:  Kiyohiko Yoshii
                                    Title:    Director

                                 Checkpoint Systems, Inc.



                                 By:_________________________________
                                    Name:  John R. Van Zile
                                    Title:    Senior Vice President








                                   SCHEDULE A

                                   TRADEMARKS



                 TRADEMARK                      REG. DATE          REG. NO.

TURN-O-MATIC                                    8-Sep-64          US 776,575

TURN-O-MATIC Logo                               31-Jan-89        US 1,522,396

Turn-O-Matic TICKET Logo                        15-Jun-93        US 1,777,495

Turn-O-Matic TICKET Logo                        24-Aug-93        US 1,789,247

PRIMARK                                         10-Oct-72         US 944,599








                                   SCHEDULE E

                                     PATENTS






             U.S. PATENT TITLE                                     INVENTORS               ISSUE DATE       U.S. PATENT NO.
                                                                                                   
Labeling device                                                  Becker, Werner              9-Feb-88         US 4,724,034

Setting mechanism for endless band printing device               Volk, Heinrich             17-May-88         US 4,744,295

Setting mechanism for selective printing member                  Volk, Heinrich et al.       7-Mar-89         US 4,809,603

Hand Held Portable Labeling Device                               Becker, Werner             02-Nov-93         US 5,258,090

Hand-Held Label Printer With Currency Conversion                 Konig, Theo                28-APR-99        US 09/299,919

Labeller                                                         Becker, Werner             29-May-01         US 6,237,664

Labelling Apparatus                                              Becker, Werner             15-Jan-91         US 4,985,110

Portable Hand-Held Labelling And Marking Device And
Printing Mechanism Therefore                                     Volk, Heinrich             17-Jun-97         US 5,639,340

Printer With Type-Bearing Printing Bands                         Heckmann, Rainer           22-Feb-05         US 6,857,360

Ticket Dispenser                                                 Svensson, Kjell            26-Sep-95         US 5,453,311

EX-31.1

EXHIBIT 31.1

                                 CERTIFICATIONS

I, George W. Off, Chairman of the Board, President and Chief Executive Officer
of Checkpoint Systems, Inc. certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Checkpoint Systems,
     Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
     financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the registrant and have:

         a)  Designed such disclosure controls and procedures, or caused such
             disclosure controls and procedures to be designed under our
             supervision, to ensure that material information relating to the
             registrant, including its consolidated subsidiaries, is made known
             to us by others within those entities, particularly during the
             period in which this report is being prepared;

         b)  Designed such internal control over financial reporting, or caused
             such internal control over financial reporting to be designed under
             our supervision, to provide reasonable assurance regarding the
             reliability of financial reporting and the preparation of financial
             statements for external purposes in accordance with generally
             accepted accounting principles;

         c)  Evaluated the effectiveness of the registrant's disclosure controls
             and procedures and presented in this report our conclusions about
             the effectiveness of the disclosure controls and procedures, as of
             the end of the period covered by this report based on such
             evaluation; and

         d)  Disclosed in this report any change in the registrant's internal
             control over financial reporting that occurred during the
             registrant's most recent fiscal quarter that has materially
             affected, or is reasonably likely to materially affect, the
             registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a)  All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     b)  Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.


                                                By: /s/George W. Off
                                                    ------------------------
                                                Name:  George W. Off

                                                Title: Chairman of the Board,
                                                       President and
                                                       Chief Executive Officer
Date: May 5, 2006

EX-31.2

EXHIBIT 31.2

                                 CERTIFICATIONS

I, W. Craig Burns, Executive Vice President, Chief Financial Officer and
Treasurer of Checkpoint Systems, Inc. certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Checkpoint Systems,
     Inc.;

2.   Based on my knowledge, this report does not contain any untrue statement of
     a material fact or omit to state a material fact necessary to make the
     statements made, in light of the circumstances under which such statements
     were made, not misleading with respect to the period covered by this
     report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this report;

4.   The registrant's other certifying officer(s) and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over
     financial reporting (as defined in Exchange Act Rules 13a-15(f) and
     15d-15(f)) for the registrant and have:

         a.  Designed such disclosure controls and procedures, or caused such
             disclosure controls and procedures to be designed under our
             supervision, to ensure that material information relating to the
             registrant, including its consolidated subsidiaries, is made known
             to us by others within those entities, particularly during the
             period in which this report is being prepared;

         b.  Designed such internal control over financial reporting, or caused
             such internal control over financial reporting to be designed under
             our supervision, to provide reasonable assurance regarding the
             reliability of financial reporting and the preparation of financial
             statements for external purposes in accordance with generally
             accepted accounting principles;

         c.  Evaluated the effectiveness of the registrant's disclosure controls
             and procedures and presented in this report our conclusions about
             the effectiveness of the disclosure controls and procedures, as of
             the end of the period covered by this report based on such
             evaluation; and

         d.  Disclosed in this report any change in the registrant's internal
             control over financial reporting that occurred during the
             registrant's most recent fiscal quarter that has materially
             affected, or is reasonably likely to materially affect, the
             registrant's internal control over financial reporting; and

5.   The registrant's other certifying officer(s) and I have disclosed, based on
     our most recent evaluation of internal control over financial reporting, to
     the registrant's auditors and the audit committee of registrant's board of
     directors (or persons performing the equivalent functions):

     a.  All significant deficiencies and material weaknesses in the design or
         operation of internal control over financial reporting which are
         reasonably likely to adversely affect the registrant's ability to
         record, process, summarize and report financial information; and

     b.  Any fraud, whether or not material, that involves management or other
         employees who have a significant role in the registrant's internal
         control over financial reporting.

                                               By: /s/W. Craig Burns
                                                   -------------------------
                                               Name:  W. Craig Burns

                                               Title: Executive Vice President,
                                                      Chief Financial Officer
                                                      and Treasurer

Date: May 5, 2006

EX-32.1

EXHIBIT 32.1

           CERTIFICATION FURNISHED PURSUANT TO 18 U.S.C. SECTION 1350
                    AS ADOPTED PURSUANT TO SECTION 906 OF THE
                           SARBANES-OXLEY ACT OF 2002


The undersigned executive officers of the Registrant hereby certify that this
Quarterly Report on Form 10-Q for the quarter ended March 26, 2006 (the Report")
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, and the information contained in the Report fairly
presents, in all material respects, the financial condition and results of
operations of the Registrant.

                                         By: /s/George W. Off
                                             ------------------------

                                         Name:  George W. Off

                                         Title: Chairman of the Board,
                                                President and
                                                Chief Executive Officer




                                         By: /s/W. Craig Burns
                                             -------------------------

                                         Name:  W. Craig Burns

                                         Title: Executive Vice President, Chief
                                                Financial Officer
                                                and Treasurer

A signed original of this written statement required by Section 906 has been
provided to the Company and will be retained by the Company and furnished to the
Securities and Exchange Commission upon request. This certification accompanies
the Report and shall not be treated as having been filed as part of the Report.

Date: May 5, 2006