INNOVEX INC, SC 13D, 1999-07-08

INNOVEX INC
SC 13D, 1999-07-08
ELECTRONIC COMPONENTS, NEC

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Schedule 13D

Under the Securities Exchange Act of 1934

ADFLEX SOLUTIONS, INC.
- ------------------------------------------------------------------------------
(Name of Issuer)

Common Shares
- ------------------------------------------------------------------------------
(Title of Class of Securities)

006866107
- ------------------------------------------------------------------------------
(CUSIP Number)

Thomas W. Haley
Innovex, Inc.
530 Eleventh Avenue South
Hopkins, MN 55343
(612)930-4677
- ------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

with copies to:

William B. Payne, Esq. Jack T. Kramer, Esq.
Dorsey & Whitney LLP Dorsey & Whitney LLP
Pillsbury Center South Pillsbury Center South
220 South Sixth Street 220 South Sixth Street
Minneapolis, Minnesota 55402 Minneapolis, Minnesota 55402
(612) 340-2722 (612) 340-8702

June 30, 1999
- ------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(f) or 240.13d-1(g), check the following
box. [_]

* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter the
disclosures provided in a prior cover page.

The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).

<PAGE>

SCHEDULE 13D
------------

CUSIP No. 006866107

1. Names of Reporting Persons Innovex, Inc.
I.R.S. Identification Nos. of Above Persons
(entities only) 41-1223933

2. Check The Appropriate Box If A Member Of A Group
(a) [ ]
(b) [_]
3. SEC Use Only

4. Source Of Funds

5. Check If Disclosure Of Legal Proceedings Is Required Pursuant To
Items 2(D) Or 2(E) [_]

6. Citizenship Or Place Of Organization

Minnesota

7. Sole Voting Power
Number Of 0
Shares
Beneficially 8. Shared Voting Power
Owned By 1,392,347 (1)
Each
Reporting 9. Sole Dispositive Power
Person 0
With
10. Shared Dispositive Power
1,392,347 (1)

11. Aggregate Amount Beneficially Owned By Each Reporting Person

1,392,347

12. Check If The Aggregate Amount In Row (11) Excludes Certain
Shares
[_]

13. Percent Of Class Represented By Amount In Row (11)

15.5%

14. Type Of Reporting Person

- ---------------------
(1) Innovex, Inc. and Innovex Acquisition Corp. do not directly or
indirectly own any Shares. Innovex, Inc. and Innovex Acquisition
Corp. beneficially own 1,392,347 Shares with respect to which the
owner, Havant International Holdings Limited, has granted,
pursuant to an agreement dated June 30, 1999, a proxy to Innovex
Acquisition Corp. to vote such Shares in favor of the Merger
Agreement and the transactions contemplated thereby.

<PAGE>

SCHEDULE 13D
------------

CUSIP No. 006866107

1. Names of Reporting Persons Innovex Acquisition Corp.
I.R.S. Identification Nos. of Above Persons
(entities only) Pending

2. Check The Appropriate Box If A Member Of A Group
(a) [ ]
(b) [_]
3. SEC Use Only

4. Source Of Funds

5. Check If Disclosure Of Legal Proceedings Is Required Pursuant To
Items 2(D) Or 2(E) [_]

6. Citizenship Or Place Of Organization

Delaware

7. Sole Voting Power
Number Of 0
Shares
Beneficially 8. Shared Voting Power
Owned By 1,392,347 (2)
Each
Reporting 9. Sole Dispositive Power
Person 0
With
10. Shared Dispositive Power
1,392,347 (2)

11. Aggregate Amount Beneficially Owned By Each Reporting Person

1,392,347

12. Check If The Aggregate Amount In Row (11) Excludes Certain
Shares
[_]

13. Percent Of Class Represented By Amount In Row (11)

15.5%

14. Type Of Reporting Person

- ---------------------
(2) See footnote (1) on Page 2.

<PAGE>

This statement is filed by Innovex Acquisition Corp. (the "Offeror")
and Innovex, Inc. ("Innovex") with the U.S. Securities and Exchange
Commission on July 7, 1999. Capitalized terms used and not defined herein
have the meanings ascribed to them in the Offer to Purchase dated July 7,
1999, a copy of which is attached as Exhibit 99(a)(1) (the "Offer to Purchase").

Item 1. Security and Issuer.

The name of the issuer is ADFlex Solutions, Inc., a company
organized under the laws of Delaware (the "Company"), which has its principal
executive offices at 2001 W. Chandler Boulevard, Chandler, Arizona 85224.

The class of equity securities to which this statement relates is
the common shares (the "Shares") of the Company.

Item 2. Identity and Background.

(a) - (c) and (f) The information set forth in "Introduction,"
"Tender Offer - 8. Certain Information Concerning Purchaser and Parent" and
Schedule I of the Offer to Purchase is incorporated herein by reference.

(d) and (e) During the last five years, neither Innovex, a Minnesota
corporation, nor Offeror, a Delaware corporation and a wholly owned
subsidiary of Innovex, nor, to the best of their knowledge, any of the
individuals listed in Schedule I to the Offer to Purchase has (i) been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors) or (ii) been a party to civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding, was or is subject to a judgment, decree, final order enjoining
future violations of, or prohibition or mandating activities subject to,
federal or state security laws, or finding of any violation of such laws.

Item 3. Source and Amount of Funds or Other Consideration.

The information set forth in "The Tender Offer - 9. Source and
Amount of Funds" of the Offer to Purchase is hereby incorporated by reference.

Item 4. Purpose of Transaction.

(a) - (j) The information set forth in "Introduction," "The Tender
Offer - 11. Contacts With the Company; Background of the Offer and the
Merger," "The Tender Offer - 12. Purpose of the Offer; the Merger Agreement;
the Tender Agreement," "The Tender Offer - 13. Dividends and Distributions,"
and "The Tender Offer - 14. Effects of the Offer on the Market for Shares;
Nasdaq National Market and Exchange Act Registration" of the Offer to
Purchase is hereby incorporated by reference.

Except as disclosed in the Offer to Purchase and the Tender
Agreement among Offeror, Innovex and Havant International Holdings Limited
("HIHL"), dated June 30, 1999, a copy of which is attached as Exhibit 99(c)(2)
(the "Tender Agreement"), neither Innovex nor the Offeror has any current plans
or proposals that relate to or would result in any of the events described in
clauses (a) through (j) of the instructions to Item 4 of Schedule 13D.

Item 5. Interest in Securities of the Issuer.

(a) - (c) The information set forth in "Introduction," "The Tender
Offer - 8. Certain Information Concerning Purchaser and Parent," "The Tender
Offer - 10. Certain Transactions Between Parent and the Company," and "The
Tender Offer - 12. Purpose of the Offer; the Merger Agreement; the Tender

<PAGE>

Agreement" of the Offer to Purchase are incorporated herein by reference. As
a result of the arrangement with HIHL pursuant to the Tender Agreement, each
of Innovex and the Offeror may be deemed to beneficially own, and have shared
voting and disposition power, with respect to 1,392,347 Shares, which
represents about 15.5% of the Shares outstanding. Each of Innovex and the
Offeror, however, disclaims beneficial ownership of such Shares, and this
statement shall not be construed as an admission that either Innovex or the
Offeror is, for any or all purposes, the beneficial owner of the securities
covered by these statements. To the best knowledge of Offeror and Innovex, no
executive officer or director of Offeror or Innovex beneficially owns any
Shares. Except as described above, there have been no transactions in the
Shares by the Offeror or Innovex, or, to the best knowledge of Offeror and
Innovex, by any of Offeror's or Innovex's executive officers or directors
during the past 60 days.

(d) The information set forth in "Introduction," "The Tender Offer -
8. Certain Information Concerning Purchaser and Parent," "The Tender Offer -
10 Certain Transactions Between Parent and the Company," and "The Tender
Offer -12. Purpose of the Offer; the Merger Agreement; the Tender Agreement"
of the Offer to Purchase is incorporated herein by reference. Until the
purchase of the Shares pursuant to the Tender Agreement relating to their
shares of the Common Stock, HIHL will retain the right to receive dividends
from, and the proceeds from the sale of, such Shares.

(e) Not applicable.

Items 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.

The information set forth in "Introduction," "The Tender Offer - 8.
Certain Information Concerning Purchaser and Parent," "The Tender Offer - 11.
Contacts With the Company; Background of the Offer and the Merger," and "The
Tender Offer - 12. Purpose of the Offer; the Merger Agreement; the Tender
Agreement" of the Offer to Purchase is incorporated herein by reference.

Item 7. Materials to be Filed as Exhibits.

Exhibit 99(a)(1) Offer to Purchase, dated July 7, 1999

Exhibit 99(c)(1) Agreement and Plan of Merger, dated as of July 1,
1999, by and among ADFlex Solutions, Inc., Innovex
Acquisition Corp., and Innovex, Inc.

Exhibit 99(c)(2) Tender Agreement among Innovex, Inc., Innovex
Acquisition Corp. and Havant International
Holdings Limited, dated June 30, 1999

<PAGE>

SIGNATURES

After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true and
complete.

Dated: July 7, 1999

INNOVEX ACQUISITION CORP.

By /s/ Douglas W. Keller
---------------------------------
Name: Douglas W. Keller
Title: Vice President, Finance

INNOVEX, INC.

By /s/ Douglas W. Keller
---------------------------------
Name: Douglas W. Keller
Title: Vice President, Finance

<PAGE>

EXHIBIT INDEX

Exhibit 99(a)(1) Offer to Purchase, dated July 7, 1999

Exhibit 99(c)(1) Agreement and Plan of Merger, dated as of July 1,
1999, by and among ADFlex Solutions, Inc., Innovex
Acquisition Corp., and Innovex, Inc.

Exhibit 99(c)(2) Tender Agreement among Innovex, Inc., Innovex
Acquisition Corp. and Havant International
Holdings Limited, dated June 30, 1999

<PAGE>
Exhibit (a)(1)

OFFER TO PURCHASE FOR CASH

ALL OUTSTANDING SHARES OF COMMON STOCK

(INCLUDING THE ASSOCIATED RIGHTS)

OF
ADFLEX SOLUTIONS, INC.
AT
$3.80 NET PER SHARE
BY

INNOVEX ACQUISITION CORP.,

A WHOLLY OWNED SUBSIDIARY OF
INNOVEX, INC.

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT MIDNIGHT, NEW YORK CITY TIME,
ON AUGUST 3, 1999 (THE "EXPIRATION DATE"), UNLESS THE OFFER IS EXTENDED.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN THAT NUMBER OF SHARES OF
COMMON STOCK, PAR VALUE $0.01 PER SHARE (INCLUDING THE ASSOCIATED RIGHTS) OF
ADFLEX SOLUTIONS, INC. (THE "COMPANY") THAT CONSTITUTES A MAJORITY OF THE TOTAL
OF THE THEN OUTSTANDING SHARES (INCLUDING FOR PURPOSES OF THIS CALCULATION ALL
SHARES ISSUABLE UPON EXERCISE OF ALL VESTED OPTIONS AND ALL OPTIONS THAT WILL
VEST ON OR BEFORE DECEMBER 31, 1999 AND CONVERSION OF CONVERTIBLE SECURITIES OR
OTHER RIGHTS TO PURCHASE OR ACQUIRE SHARES) (THE "MINIMUM CONDITION") AND (2)
THE SATISFACTION OR WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER
AND THE COMPANY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT, INCLUDING RECEIPT BY PURCHASER AND THE COMPANY OF CERTAIN
GOVERNMENTAL AND REGULATORY APPROVALS.

THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
MERGER AGREEMENT, THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS
OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, AND
RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER.
--------------------------

IMPORTANT

Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $0.01 per share, of the Company (the "Common
Stock"), including the associated rights (the "Rights," and together with the
Common Stock, the "Shares") should either (1) complete and sign the Letter of
Transmittal, or a facsimile copy thereof, in accordance with the instructions in
the Letter of Transmittal, mail or deliver it and any other required documents
to the Depositary and either deliver the certificates for such Shares to the
Depositary along with the Letter of Transmittal or tender such Shares pursuant
to the procedure for book-entry transfer set forth in this Offer to Purchase
under "THE TENDER OFFER--2. Procedure for Accepting the Offer and Tendering
Shares" or (2) request such stockholder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for the stockholder.
Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to tender
such Shares. Unless the context requires otherwise, all references to Shares
herein shall include the associated Rights. The Rights are presently evidenced
by the certificates for the Common Stock and a tender by a stockholder of such
stockholder's shares of Common Stock will also constitute a tender of the
associated Rights.

A stockholder who desires to tender Shares and whose certificates for Shares
are not immediately available, or who cannot comply on a timely basis with the
procedures for book-entry transfer described in this Offer to Purchase, may
tender such Shares by following the procedure for guaranteed delivery set forth
in this Offer to Purchase under "THE TENDER OFFER--2. Procedure for Accepting
the Offer and Tendering Shares."

Questions and requests for assistance, or for additional copies of this
Offer to Purchase, the Letter of Transmittal or other tender offer materials,
may be directed to the Information Agent at its address and telephone numbers
set forth on the back cover of this Offer to Purchase. Holders of Shares may
also contact brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.
--------------------------

THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE FAIRNESS OR MERITS OF THIS TRANSACTION NOR
UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
--------------------------

The Information Agent for the Offer is:

[LOGO]

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect) or Call Toll-Free (800) 322-2855

The date of this Offer to Purchase is July 7, 1999
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<C> <S> <C>
INTRODUCTION............................................................................................... 1

THE TENDER OFFER........................................................................................... 3
1. Terms of the Offer; Expiration Date........................................................... 3
2. Procedure for Accepting the Offer and Tendering Shares........................................ 5
3. Withdrawal Rights............................................................................. 8
4. Acceptance for Payment and Payment for Shares................................................. 8
5. Certain Federal Income Tax Consequences....................................................... 9
6. Price Range of the Shares..................................................................... 10
7. Certain Information Concerning the Company.................................................... 10
8. Certain Information Concerning Purchaser and Parent........................................... 13
9. Source and Amount of Funds.................................................................... 15
10. Certain Transactions Between Parent and the Company........................................... 15
11. Contacts With the Company; Background of the Offer and the Merger............................. 15
12. Purpose of the Offer; the Merger Agreement; the Tender Agreement.............................. 16
13. Dividends and Distributions................................................................... 25
14. Effects of the Offer on the Market for Shares; Nasdaq National Market and Exchange Act
Registration................................................................................ 25
15. Certain Conditions of the Offer............................................................... 26
16. Certain Legal Matters; Regulatory Approvals................................................... 27
17. Fees and Expenses............................................................................. 30
18. Miscellaneous................................................................................. 30
Schedule I................................................................................................. I-1
ANNEX A.................................................................................................... A-1
</TABLE>

i
<PAGE>
To the Holders of Common Stock of ADFlex Solutions, Inc.:

INTRODUCTION

Innovex Acquisition Corp., a Delaware corporation ("Purchaser"), which is a
wholly owned, direct subsidiary of Innovex, Inc., a Minnesota corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock,
par value $0.01 per share (the "Common Stock"), of ADFlex Solutions, Inc., a
Delaware corporation (the "Company"), including the associated rights (the
"Rights") issued pursuant to the Rights Agreement, dated as of July 10, 1996
(the "Rights Agreement"), between the Company and BankBoston N.A., formerly
First National Bank of Boston, N.A., as Rights Agent (the Common Stock and the
Rights are referred to herein as the "Shares") upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which together constitute the "Offer"), at the purchase price of
$3.80 per Share (the "Offer Price"), net to the tendering stockholder in cash.

The Offer is being made pursuant to the terms of the Agreement and Plan of
Merger, dated as of July 1, 1999 (the "Merger Agreement"), by and among the
Company, Purchaser and Parent. The Merger Agreement provides, among other
things, for the making of the Offer by Purchaser and further provides that,
following the purchase of Shares pursuant to the Offer and promptly after the
satisfaction or waiver of certain other conditions, Purchaser will be merged
with and into the Company (the "Merger"). Following the effective time of the
Merger (the "Effective Time"), the Company will continue as the surviving
corporation (the "Surviving Corporation") and will be a wholly owned subsidiary
of Parent. At the Effective Time, each Share outstanding immediately prior to
the Effective Time (other than Shares with respect to which appraisal rights are
properly exercised under Delaware law ("Dissenting Shares"), Shares held in the
treasury of the Company or any subsidiary or Shares owned by Parent, Purchaser
or any other direct or indirect wholly owned subsidiary of Parent) will, by
virtue of the Merger and without any action on the part of the holders of the
Shares, be converted into the right to receive the Offer Price, net to the
holder in cash, without interest.

THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") UNANIMOUSLY HAS
DETERMINED THAT THE MERGER AGREEMENT, THE OFFER AND THE MERGER ARE FAIR TO AND
IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER
AND THE MERGER, AND RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER.

BANC BOSTON ROBERTSON STEPHENS INC., FINANCIAL ADVISOR TO THE COMPANY, HAS
DELIVERED A WRITTEN OPINION TO THE COMPANY'S BOARD, DATED JULY 1, 1999, TO THE
EFFECT THAT, AS OF THAT DATE, THE CONSIDERATION TO BE RECEIVED BY THE
STOCKHOLDERS OF THE COMPANY PURSUANT TO THE MERGER AGREEMENT IS FAIR FROM A
FINANCIAL POINT OF VIEW TO SUCH STOCKHOLDERS. THE OPINION ADDRESSES ONLY THE
FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE CONSIDERATION TO BE RECEIVED BY
THE HOLDERS OF SHARES OF THE COMPANY IN THE OFFER AND THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY HOLDER AS TO WHETHER TO TENDER SHARES IN THE
OFFER OR TO VOTE IN FAVOR OF THE APPROVAL OF THE MERGER AGREEMENT. THE FULL TEXT
OF THE OPINION OF BANC BOSTON ROBERTSON STEPHENS INC. IS

1
<PAGE>
ATTACHED TO THE COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE
14D-9, WHICH IS BEING MAILED TO STOCKHOLDERS OF THE COMPANY HEREWITH.
STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY AND IN ITS ENTIRETY FOR
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW OF BANC BOSTON
ROBERTSON STEPHENS INC.

THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OR
WAIVER OF CERTAIN CONDITIONS TO THE OBLIGATIONS OF PURCHASER, PARENT AND THE
COMPANY TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT,
INCLUDING (I) THERE BEING VALIDLY TENDERED BY THE EXPIRATION DATE AND NOT
WITHDRAWN THAT NUMBER OF SHARES THAT CONSTITUTES A MAJORITY OF THE TOTAL OF THE
THEN OUTSTANDING SHARES (INCLUDING FOR PURPOSES OF THIS CALCULATION ALL SHARES
ISSUABLE UPON EXERCISE OF ALL VESTED OPTIONS AND ALL OPTIONS THAT WILL VEST ON
OR BEFORE DECEMBER 31, 1999 AND CONVERSION OF CONVERTIBLE SECURITIES OR OTHER
RIGHTS TO PURCHASE OR ACQUIRE SHARES) (THE "MINIMUM CONDITION"), (II) RECEIPT BY
PURCHASER, PARENT AND THE COMPANY OF CERTAIN GOVERNMENTAL AND REGULATORY
APPROVALS AND (III) CERTAIN OTHER CONDITIONS. SEE "THE TENDER OFFER--15. CERTAIN
CONDITIONS OF THE OFFER."

THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION, IF NECESSARY, WOULD BE MADE
ONLY PURSUANT TO SEPARATE PROXY MATERIALS COMPLYING WITH THE REQUIREMENTS OF
SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE
ACT").

Purchaser is not offering to acquire outstanding options ("Options") to
acquire Shares in the Offer. Pursuant to the Merger Agreement, all Options will
be canceled in exchange for the payment in cash of the excess, if any, of the
Offer Price over the exercise price of such Options.

The Offer will expire at Midnight, New York City time, on August 3, 1999,
unless extended.

Tendering stockholders will not be obligated to pay brokerage commissions,
solicitation fees or, subject to Instruction 6 of the Letter of Transmittal,
stock transfer taxes on the purchase of Shares pursuant to the Offer. However,
any tendering stockholder or other payee who fails to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be subject
to a required backup federal income tax withholding of 31% of the gross proceeds
payable to such stockholder or other payee pursuant to the Offer. See "THE
TENDER OFFER--5. Certain Federal Income Tax Consequences." Purchaser will pay
all charges and expenses of EquiServe, L.P., as depositary (in such capacity,
the "Depositary"), and MacKenzie Partners, Inc., as Information Agent (in such
capacity, the "Information Agent"), incurred in connection with the Offer. For a
description of the fees and expenses to be paid by Purchaser, see "THE TENDER
OFFER--17. Fees and Expenses."

Consummation of the Merger is subject to a number of conditions, including
approval by the stockholders of the Company if such approval is required by
applicable law. If the Minimum Condition is satisfied, Purchaser will have
sufficient voting power to approve and adopt the Merger Agreement and the Merger
at a stockholders' meeting without the vote of any other stockholder of the
Company. Under the Delaware General Corporation Law (the "DGCL"), if, after
consummation of the Offer, Purchaser owns at least 90% of the then outstanding
Shares, Purchaser will be able to cause the Merger to occur without a vote of
the Company's stockholders. If, however, after consummation of the Offer, the
Purchaser owns less than 90% of the then outstanding Shares, a vote of the
Company's stockholders will be required under the DGCL to approve the Merger.

The Company has informed Parent that as of July 1, 1999, there were
8,984,518 Shares issued and outstanding and 1,093,821 Shares reserved for
issuance upon the exercise of outstanding Company stock options (the "Options").
Based on the foregoing, and assuming no additional Shares (or warrants, options
or rights exercisable for, or securities convertible into, Shares) will be
issued (other than Shares issued pursuant to the Options referred to above), if
Purchaser were to acquire 5,039,170 Shares

2
<PAGE>
pursuant to the Offer (including the Shares that HIHL has agreed to tender
pursuant to the Tender Agreement), then Purchaser would own a majority of the
Shares outstanding and the Minimum Condition would be satisfied.

The information contained in this Offer to Purchase concerning the Company
was supplied by the Company. Purchaser takes no responsibility for the
completeness or accuracy of such information. The information contained in this
Offer to Purchase concerning the Offer, the Merger, Parent and Purchaser was
supplied by Parent. The Company takes no responsibility for the completeness or
accuracy of such information.

THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER. ALSO SEE "THE TENDER OFFER--18. MISCELLANEOUS" FOR
INFORMATION REGARDING CERTAIN ADDITIONAL DOCUMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") IN CONNECTION WITH THE OFFER.

References herein to Parent shall, unless the context indicates otherwise,
include Parent and all of its subsidiaries including Purchaser.

THE TENDER OFFER

1. TERMS OF THE OFFER; EXPIRATION DATE

Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), Purchaser will accept for payment and pay for all Shares validly
tendered on or prior to the Expiration Date and not withdrawn in accordance with
the provisions set forth in this Offer to Purchase under "TENDER OFFER--3.
Withdrawal Rights." The term "Expiration Date" shall mean Midnight, New York
City time, on August 3, 1999, unless and until Purchaser, subject to
restrictions contained in the Merger Agreement, shall from time to time have
extended the period of time during which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by Purchaser, shall expire.

Rights are presently evidenced by the certificates for the Common Stock and
tender by a stockholder of such stockholder's shares of Common Stock will also
constitute a tender of the associated Rights. Pursuant to the Offer, no separate
payment will be made by Purchaser for the Rights.

Pursuant to the Merger Agreement, Purchaser may increase the Offer Price and
may make any other changes in the terms and conditions of the Offer, provided
that, without the prior written consent of the Company, Purchaser will not, and
Parent will cause Purchaser not to, (i) decrease or change the form of the Offer
Price, (ii) decrease the number of Shares subject to the Offer, (iii) amend or
waive the Minimum Condition or impose conditions other than those set forth in
the Merger Agreement, (iv) except as provided in the next paragraph, extend the
Expiration Date or (v) amend any term of the Offer in any manner materially
adverse to holders of Shares.

Purchaser may, without the consent of the Company, (i) extend the Offer from
time to time if at the initial Expiration Date or any extension thereof any of
the conditions to the Offer shall not have been satisfied or waived, until such
time as such conditions are satisfied or waived but not beyond December 31, 1999
and (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable to
the Offer but not beyond December 31, 1999. Purchaser will, from time to time,
at the request of the Company, extend the Offer if at any scheduled Expiration
Date any condition has not been satisfied or waived until such

3
<PAGE>
time as the conditions are satisfied or waived; provided, however, that
Purchaser shall not be required to extend the Offer beyond December 31, 1999.

Subject to the applicable rules and regulations of the Commission, Purchaser
expressly reserves the right, subject to the terms and conditions of the Merger
Agreement, at any time and from time to time, upon the failure to be satisfied
of any of the conditions to the Offer, to (i) terminate or amend the Offer, (ii)
extend the Offer and postpone acceptance for payment of any Shares or (iii)
waive any condition to completion of the Offer. During any such extension all
Shares previously tendered and not properly withdrawn will remain subject to any
such extension and will remain subject to the Offer, subject to the right of a
tendering stockholder to withdraw such stockholder's Shares. In the event that
Purchaser waives any of the conditions set forth in this Offer to Purchase under
"THE TENDER OFFER--15. Certain Conditions of the Offer," the Commission may, if
the waiver is deemed to constitute a material change to the information
previously provided to the stockholders, require that the Offer remain open for
an additional period of time and/or that Purchaser disseminate information
concerning such waiver.

If Purchaser extends the Offer, or if Purchaser (whether before or after its
acceptance for payment of Shares) is delayed in its payment for Shares or is
unable to pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may retain
tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn
except to the extent tendering stockholders are entitled to withdrawal rights as
described in this Offer to Purchase under "THE TENDER OFFER--3. Withdrawal
Rights." However, as described above, the ability of Purchaser to delay payment
for Shares that Purchaser has accepted for payment is limited by Rule 14e-1(c)
under the Exchange Act.

If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials (including by
public announcement as set forth above) and extend the Offer to the extent
required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. Such
rules generally provide that the minimum period during which a tender offer must
remain open following a material change in the terms of the offer or information
concerning the offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances, including the
relative materiality of the changes in the terms or information. In the
Commission's view, an offer should remain open for a minimum of five business
days from the date a material change is first published, sent or given to
security holders, and, if material changes are made with respect to information
that approaches the significance of price and share levels, a minimum of ten
business days may be required to allow for adequate dissemination and investor
response. With respect to a change in price or a change in percentage of
securities sought, a minimum of ten business days is generally required to allow
for adequate dissemination to stockholders and for investor response.

Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement in accordance with the public
announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that any material change in the information published, sent or
given to stockholders in connection with the Offer be promptly disseminated to
stockholders in a manner reasonably designed to inform stockholders of such
change) and without limiting the manner in which Purchaser may choose to make
any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the Dow Jones News Service.

The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the Letter of Transmittal and other
relevant materials will be mailed to record holders of Shares and

4
<PAGE>
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing, for subsequent transmittal to beneficial owners of
Shares.

2. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES

VALID TENDER OF SHARES

For a stockholder to validly tender Shares pursuant to the Offer, either (i)
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees, or an Agent's Message
(as defined herein) in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase, and either
certificates ("Share Certificates") for tendered Shares must be received by the
Depositary at one of such addresses or such tendered Shares must be delivered
pursuant to the procedure for book-entry transfer set forth below (and a
Book-Entry Confirmation (as defined herein) received by the Depositary), in each
case prior to the Expiration Date, or (ii) the tendering stockholder must comply
with the guaranteed delivery procedures set forth below.

BOOK-ENTRY TRANSFERS

The Depositary will establish an account with respect to the Shares at The
Depositary Trust Company (the "Book-Entry Transfer Facility") for purposes of
the Offer within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer Facility
may make book-entry delivery of the Shares by causing the book-entry transfer
system to transfer such Shares into the Depositary's account at the Book-Entry
Transfer Facility in accordance with the Book-Entry Transfer Facility's
procedure for such transfer. Although delivery of Shares may be effected through
book-entry transfer at the Book-Entry Transfer Facility, a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent's Message (as defined herein) in
connection with a book-entry transfer, and any other required documents, must,
in any case, be transmitted to, and received by, the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedures described below. The confirmation of a book-entry transfer
of Shares into the Depositary's account at the Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation." DELIVERY
OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH ITS
BOOK-ENTRY PROCEDURES DOES NOT CONSTITUTE VALID DELIVERY TO THE DEPOSITARY.

The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares, that such participant has received the
Letter of Transmittal and agrees to be bound by the terms of the Letter of
Transmittal and that Purchaser may enforce such agreement against such
participant.

THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE RISK OF THE TENDERING STOCKHOLDER
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED AT THE DEPOSITARY.
IF DELIVERY IS BY MAIL, THEN INSURED OR REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.

5
<PAGE>
SIGNATURE GUARANTEES

No signature guarantee on the Letter of Transmittal is required if (i) the
Letter of Transmittal is signed by the registered holder of the Shares (which
term, for purposes of this Section, includes any participant in the Book-Entry
Transfer Facility system whose name appears on a security position listing as
the owner of the Shares) tendered therewith and such registered holder has not
completed either the box entitled "Special Delivery Instructions" or the box
entitled "Special Payment Instructions" on such Letter of Transmittal or (ii)
such Shares are tendered for the account of a bank, broker, dealer, credit
union, savings association or other entity that is a member in good standing of
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(each, an "Eligible Institution"). In all other cases, all signatures on the
Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made to, or certificates for
Shares not validly tendered, not accepted for payment or not purchased are to be
issued or returned to, a person other than the registered holder of the
certificates for Shares, then the tendered certificates must be endorsed in
blank or accompanied by appropriate stock powers, signed exactly as the name of
the registered holder appears on the certificates with the signature on such
certificates or stock powers guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal.

GUARANTEED DELIVERY

If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's certificates for Shares are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date, such Shares may nevertheless be tendered provided that all of
the following guaranteed delivery procedures are duly complied with:

(a) such tender is made by or through an Eligible Institution;

(b) the Depositary receives (by hand, mail, telegram or facsimile
transmission) on or prior to the Expiration Date, a properly completed
and duly executed Notice of Guaranteed Delivery, substantially in the
form provided by Purchaser; and

(c) the certificates representing all tendered Shares, in proper form for
transfer (or Book-Entry Confirmation with respect to such Shares),
together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) and any other documents required by
the Letter of Transmittal, are received by the Depositary within three
Nasdaq trading days after the date of such Notice of Guaranteed Delivery.
A "Nasdaq trading day" is any day on which securities are traded on the
Nasdaq National Market.

The Notice of Guaranteed Delivery may be delivered by hand, or may be
transmitted by telegram, facsimile transmission or mail, to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.

Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of (i) Share Certificates for (or a timely Book-Entry
Confirmation with respect to) such Shares, (ii) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), or, in the case of
book-entry transfer, an Agent's Message, and (iii) any other documents required
by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at
different times depending upon when certificates for Shares or Book-Entry
Confirmations with respect to Shares and such other documents are actually
received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY
PURCHASER ON THE PURCHASE PRICE OF THE SHARES TO ANY TENDERING STOCKHOLDERS,
REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT.

6
<PAGE>
DETERMINATION OF VALIDITY

All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be determined
by Purchaser in its sole discretion, which determination will be final and
binding. Purchaser reserves the absolute right to reject any or all tenders of
any Shares that it determines are not in proper form or the acceptance for
payment of or payment for which may, in the opinion of Purchaser's counsel, be
unlawful. Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any
Shares with respect to any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders. No
tender of Shares or Rights will be deemed to have been validly made until all
defects and irregularities relating thereto have been cured or waived. None of
Purchaser, Parent, the Depositary, the Information Agent or any other person
will be under any duty to give notice of any defects or irregularities in
tenders or incur any liability for failure to give any such notice. Purchaser's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.

OTHER REQUIREMENTS

By executing the Letter of Transmittal as set forth herein, a tendering
stockholder irrevocably appoints designees of Purchaser as such stockholder's
proxies, each with full power of substitution, in the manner set forth in the
Letter of Transmittal, to the full extent of such stockholder's rights with
respect to the Shares tendered by such stockholder and accepted for payment by
Purchaser (and with respect to any and all other Shares or other securities or
rights issued or issuable in respect of such Shares on or after the date such
Shares were tendered), effective when, if and to the extent that Purchaser
accepts such Shares for payment pursuant to the Offer. All such proxies shall be
considered coupled with an interest in the tendered Shares, including the
associated Rights. Upon such acceptance for payment, all prior proxies given by
such stockholder with respect to such Shares accepted for payment or other
securities or rights will, without further action, be revoked, and no subsequent
proxies may be given. Such designees of Purchaser will, with respect to such
Shares for which the appointment is effective, be empowered to exercise all
voting and other rights of such stockholder as they in their sole discretion may
deem proper in respect of any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares.

Purchaser's acceptance for payment of Shares tendered pursuant to any of the
procedures described herein will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the conditions
of the Offer.

BACKUP FEDERAL INCOME TAX WITHHOLDING

To prevent backup federal income tax withholding on payments of cash
pursuant to the Offer, a stockholder tendering Shares in the offer must provide
the Depositary with such stockholder's correct taxpayer identification number
("TIN") on a Substitute Form W-9 and certify under penalties of perjury that
such TIN is correct and that such stockholder is not subject to backup
withholding. If a stockholder does not provide its correct TIN or fails to
provide the certification described herein, federal income tax laws require the
Depositary to withhold 31% of the amount of any payment made to such stockholder
pursuant to the Offer. All stockholders tendering Shares pursuant to the Offer
should complete and sign the Substitute Form W-9 that is part of the Letter of
Transmittal to provide the information and certification necessary to avoid
backup withholding. Noncorporate foreign stockholders should complete and sign a
Form W-8, Certificate of Foreign Status, a copy of which may

7
<PAGE>
be obtained from the Depositary, in order to avoid backup withholding. See
Instruction 10 to the Letter of Transmittal.

3. WITHDRAWAL RIGHTS

Shares tendered may be withdrawn at any time prior to the Expiration Date.
Thereafter, such tenders are irrevocable, except that Shares tendered may be
withdrawn at any time after September 4, 1999 if such Shares have not been
accepted for payment as provided in this Offer to Purchase.

For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
notice of withdrawal must specify the name of the person who tendered the Shares
to be withdrawn, the number of Shares to be withdrawn and the name of the
registered holder of the Shares to be withdrawn as set forth on such Share
Certificates if different from the name of the person who tendered such Shares.
If Share Certificates have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share Certificates, the
serial numbers shown on such Share Certificates must be submitted to the
Depositary and, unless such Shares have been tendered by an Eligible
Institution, the signatures on the notice of withdrawal must be guaranteed by an
Eligible Institution. If Shares have been delivered pursuant to the procedures
for book-entry transfer set forth in Section 2 above, any notice of withdrawal
must specify the name and number of the account at the Book-Entry Transfer
Facility to be credited with such withdrawn Shares and otherwise comply with the
Book-Entry Transfer Facility's procedures for withdrawal, in which case a notice
of withdrawal will be effective if delivered to the Depositary by any method of
delivery described in the first sentence of this paragraph.

All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser in its sole discretion,
and its determination will be final and binding. None of Purchaser, Parent, the
Depositary, the Information Agent or any other person will be under any duty to
give notice of any defects or irregularities in any notice of withdrawal, nor
shall any of them incur any liability for failure to give any such notice.

Withdrawals of tenders of Shares may not be rescinded, and any Shares
properly withdrawn will thereafter be deemed not validly tendered for purposes
of the Offer. However, withdrawn Shares may be retendered by following one of
the procedures described in Section 2 above at any time on or prior to the
Expiration Date.

4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES

Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), promptly after the Expiration Date, Purchaser will accept for
payment, and will pay for, any and all Shares that had been validly tendered,
and not properly withdrawn, on or prior to the Expiration Date. Subject to
applicable rules of the Commission and the terms and conditions of the Merger
Agreement, Purchaser expressly reserves the right, in its sole discretion, to
delay acceptance for payment of, or payment for, Shares in order to comply in
whole or in part with any applicable law. Any such delay will be effected in
compliance with Rule 14e-1(c) under the Exchange Act. In all cases, payment for
Shares tendered and accepted for payment pursuant to the Offer will be made only
after timely receipt by the Depositary of (i) the Share Certificates (or timely
Book-Entry Confirmation of the book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedures set forth under Section 2 above), (ii) the Letter of Transmittal (or
facsimile thereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer and (iii) any other documents required by the Letter of
Transmittal.

8
<PAGE>
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to Purchaser and not
properly withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. In all cases, upon the terms and subject to the conditions of the Offer,
payment for Shares so accepted for payment will be made by the deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering stockholders for the purpose of receiving payment from Purchaser and
transmitting payment to validly tendering stockholders. UNDER NO CIRCUMSTANCES
WILL INTEREST BE PAID BY PURCHASER ON THE PURCHASE PRICE OF THE SHARES TENDERED
PURSUANT TO THE OFFER, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN
MAKING SUCH PAYMENT. Upon the deposit of funds with the Depositary for the
purpose of making payments to tendering stockholders, Purchaser's obligation to
make such payments shall be satisfied and tendering stockholders must thereafter
look solely to the Depositary for payment of amounts owed to them by reason of
the acceptance for payment of Shares pursuant to the Offer. Purchaser will pay
any stock transfer taxes with respect to the transfer and sale to it or its
order pursuant to the Offer, except as otherwise provided in Instruction 6 of
the Letter of Transmittal, as well as any charges and expenses of the Depositary
and the Information Agent.

If Purchaser is delayed in its acceptance for payment of, or payment for
tendered Shares or is unable to accept for payment or pay for such Shares
pursuant to the Offer for any reason, then, without prejudice to Purchaser's
rights under the Offer (but subject to Purchaser's obligations under Rule
14e-1(c) under the Exchange Act to pay for or return the tendered Shares
promptly after the termination or withdrawal of the Offer), the Depositary
nevertheless may retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering stockholders are entitled to
exercise, and duly exercise, withdrawal rights as described under Section 3
above.

If any tendered Shares are not purchased pursuant to the Offer because of an
invalid tender or for any reason, Share Certificates for any such Shares will be
returned, without expense, to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility pursuant to the procedures set forth
under Section 2 above, such Shares will be credited to an account maintained at
the Book-Entry Transfer Facility) as promptly as practicable following the
expiration or termination of the Offer.

5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The summary of federal income tax consequences set forth below is for
general information only and is based on Purchaser's understanding of the law as
currently in effect. The tax consequences to each stockholder will depend in
part upon such stockholder's particular situation. Special tax consequences not
described herein may be applicable to particular classes of taxpayers, such as
financial institutions, broker-dealers, persons who are not citizens or
residents of the United States and stockholders who acquired their Shares
through the exercise of an employee stock option or otherwise as compensation.
ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE PARTICULAR
TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE
APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL OR
FOREIGN INCOME AND OTHER TAX LAWS AND OF CHANGES IN SUCH TAX LAWS.

The receipt of cash for Shares pursuant to the Offer (or the Merger) will be
a taxable transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. Generally, for
federal tax purposes, a stockholder who receives cash for Shares pursuant to the
Offer (or the Merger) will recognize gain or loss for federal income tax
purposes equal to the difference between the amount of cash received in exchange
for the Shares sold and such stockholder's adjusted tax basis in such Shares.
Provided that the Shares constitute capital assets in the

9
<PAGE>
hands of the stockholder, such gain or loss will be capital gain or loss, and
will be long term capital gain or loss if the holder has held the Shares for
more than one year at the time of sale. Gain or loss will be calculated
separately for each block of Shares (I.E., a group of Shares with the same tax
basis and holding period) tendered pursuant to the Offer.

A stockholder (other than certain exempt stockholders including, among
others, all corporations and certain foreign individuals and entities) that
tenders Shares may be subject to 31% backup withholding unless the stockholder
provides its TIN and certifies that such number is correct or properly certifies
that it is awaiting a TIN, or unless an exemption applies. A stockholder who
does not furnish its TIN may be subject to a penalty imposed by the Internal
Revenue Service. See Section 2.

If backup withholding applies to a stockholder, the Depositary is required
to withhold 31% from payments to such stockholder. Backup withholding is not an
additional tax. Rather, the amount of the backup withholding can be credited
against the federal income tax liability of the person subject to the backup
withholding, provided that the required information is given to the Internal
Revenue Service. If backup withholding results in an overpayment of tax, a
refund can be obtained by the stockholder upon filing an appropriate income tax
return.

6. PRICE RANGE OF THE SHARES

The Shares are traded on the Nasdaq National Market under the symbol "AFLX."
The following table sets forth, for the periods indicated, the high and low
sales prices per share as reported on the Nasdaq National Market according to
published sources:

<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
Quarter Ended:
June 27, 1999............................................................ $ 4.20 $ 1.56
March 28, 1999........................................................... $ 7.75 $ 2.94
December 27, 1998........................................................ $ 9.50 $ 2.38
September 30, 1998....................................................... $ 9.13 $ 2.75
June 30, 1998............................................................ $ 22.38 $ 8.38
March 31, 1998........................................................... $ 19.50 $ 14.88
December 31, 1997........................................................ $ 28.13 $ 14.63
September 30, 1997....................................................... $ 28.50 $ 14.75
June 30, 1997............................................................ $ 19.00 $ 11.75
March 31, 1997........................................................... $ 16.13 $ 10.75
</TABLE>

The Rights trade together with the Common Stock. On July 1, 1999, the last
full day of trading prior to the public announcement of the execution of the
Merger Agreement, according to published sources, the last reported sale price
of the Common Stock on the Nasdaq National Market was $4.28125 per Share. On
July 6, 1999, the last full day of trading before the commencement of the Offer,
according to published sources, the last reported sale price of the Common Stock
on the Nasdaq National Market was $3.5625 per Share. STOCKHOLDERS ARE URGED TO
OBTAIN A CURRENT MARKET QUOTATION FOR THE COMMON STOCK.

7. CERTAIN INFORMATION CONCERNING THE COMPANY

GENERAL

The Company is a Delaware corporation with its principal offices located at
2001 West Chandler Boulevard, Chandler, Arizona 85224.

The Company is a leading worldwide provider of flexible circuit interconnect
solutions to original equipment manufacturers in the electronics industry. The
Company offers a full range of customized

10
<PAGE>
flexible circuit applications and services from initial design, development and
prototype to fabrication, assembly and test on a global basis. The Company
targets high-volume markets where miniaturization, form and weight are driving
factors and flexible circuits are an enabling technology. Applications for
flexible circuits currently addressed by the Company include notebook computers,
portable communication devices such as cellular telephones and pagers, data
storage devices such as hard disk drives, tape drives and arrays, and high-end
consumer electronics products such as compact disk players.

AVAILABLE INFORMATION

The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and, in
accordance therewith, is required to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Certain information, as of particular dates,
concerning the Company's directors and officers (including their remuneration,
stock options granted to them and shares held by them), the principal holders of
the Company's securities, and any material interest of such persons in
transactions with the Company is required to be disclosed in proxy statements
and annual reports distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information are available
for inspection and copying at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located in Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, Suite 1300, New York, New York 10048. Copies of this material may also
be obtained by mail, upon payment of the Commission's customary fees from the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Commission also maintains an Internet site on the World Wide Web at
http://www.sec.gov that contains Company reports, proxy statements and other
information, all of which may be printed out via computer with no fees charged.
In addition, such material should also be available for inspection at The Nasdaq
Stock Market, Inc., 1735 K Street, N.W., Washington, D.C. 20006.

SUMMARY FINANCIAL INFORMATION

The following table sets forth certain summary consolidated financial
information with respect to the Company and its consolidated subsidiaries
derived from the audited financial statements contained in the Company's 1998
Annual Report on Form 10-K and the unaudited financial statements contained in
the Company's Quarterly Report on Form 10-Q for the quarter ended March 28,
1999. The summary below is qualified by reference to such documents (which may
be inspected and obtained as described above under "Available Information"),
including the financial statements and related notes contained therein.

11
<PAGE>
ADFLEX SOLUTIONS, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED FISCAL YEAR ENDED
------------------------ ----------------------------------------
MARCH 28, MARCH 31, DECEMBER 27, DECEMBER 31, DECEMBER 31,
1999 1998 1998 1997 1996
----------- ----------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statement of Operations:
Net sales................................... $ 28,638 $ 50,023 $ 170,097 $ 213,878 $ 156,836
Gross profit (loss)......................... (378) 10,518 17,121 38,052 18,563
Operating expenses.......................... 10,989 6,148 20,659 23,472 52,254
Operating income (loss)..................... (11,367) 4,370 (3,538) 14,580 (33,691)
Net income (loss)........................... (21,150) 2,631 (4,753) 8,596 (25,024)
Net income (loss) per basic share:.......... (2.36) 0.30 (0.54) 0.99 (2.92)
Common shares used in the calculation of net
income (loss) per basic share............. 8,966 8,805 8,867 8,712 8,580
</TABLE>

<TABLE>
<CAPTION>
AT FISCAL YEAR ENDED
----------------------------------------
DECEMBER 27, DECEMBER 31, DECEMBER 31,
1998 1997 1996
AT ------------ ------------ ------------
MARCH 28,
1999
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Total assets.......................................... $ 92,127 $ 108,304 $ 114,200 $ 93,181
Total current liabilities............................. 65,140 60,786 40,063 42,212
Long-term debt and capitalized lease
obligations......................................... 127 69 23,230 10,680
Total stockholders' equity............................ 26,860 47,449 50,907 40,289
</TABLE>

Except as otherwise noted in this Offer to Purchase, all of the information
with respect to the Company set forth in this Offer to Purchase has been derived
from publicly available information. Although Purchaser has no knowledge that
any such information is untrue, Purchaser takes no responsibility for the
accuracy or completeness of information contained in this Offer to Purchase with
respect to the Company or for any failure by the Company to disclose events
which may have occurred or may affect the significance or accuracy of any such
information.

PROJECTED FINANCIAL INFORMATION

In the course of the discussions between representatives of Parent and the
Company, certain projections of future operating performance of the Company were
furnished to Parent's representatives. These projections were not prepared with
a view to public disclosure or compliance with published guidelines of the
Commission or the guidelines established by the American Institute of Certified
Public Accountants regarding projections, and are included in this Offer to
Purchase only because they were provided to Parent. The projections have not
been examined or compiled by the Company's independent public accountants. The
Company did not make any representations to the Parent or the Purchaser
concerning the projections. Neither Parent, nor the Purchaser, nor any of their
advisors assumes any responsibility for the accuracy of these projections. While
presented with numerical specificity, these projections are based upon a variety
of assumptions relating to the businesses of the Company that may not be
realized and are subject to significant uncertainties and contingencies, many of
which are beyond the control of the Company. There can be no assurance that the
projections will be realized, and actual results may vary materially from those
shown. The inclusion of such projections herein should not be regarded as an
indication that Parent, Purchaser, the Company, any of their

12
<PAGE>
respective advisors or any other party who received such information considers
it an accurate prediction of future events. None of the Company, Parent,
Purchaser or any other party intends publicly to update or otherwise publicly
revise the projections set forth above even if experience or future changes make
it clear that such projections will not be realized.

Set forth below is a summary of the material portions of the projections.
These projections should be read together with the financial statements of the
Company referred to herein.

ADFLEX SOLUTIONS, INC. AND SUBSIDIARIES
PROJECTED FINANCIAL INFORMATION
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDING
----------------------
DECEMBER DECEMBER
1999 2000
---------- ----------
<S> <C> <C>
Net Sales............................................................. $ 138,372 $ 175,500
Operating income (loss)............................................... (6,961) 18,323
Net income............................................................ (20,080) 14,137
</TABLE>

8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT

Purchaser is a Delaware corporation with its principal executive offices
located at 530 Eleventh Avenue South, Hopkins, Minnesota 55343. Purchaser, a
wholly owned, direct subsidiary of Parent, was organized to acquire the Company
and has not conducted any unrelated activities since its organization.

Parent is a Minnesota corporation with its principal office located at 530
Eleventh Avenue South, Hopkins, Minnesota 55343. Parent develops, engineers and
manufactures specialty precision products for original equipment manufacturers
and designs and manufactures highly complex circuitry and chemically machined
components.

Set forth below is certain selected consolidated financial information with
respect to Parent and its subsidiaries excerpted from the information contained
in Parent's 1998 Annual Report to Stockholders (the "Parent 1998 Annual Report")
and Parent's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999
(the "Parent 1999 10-Q"). More comprehensive financial information is included
in the Parent 1998 Annual Report, the Parent 1999 10-Q and other documents filed
by Parent with the Commission, and the following summary is qualified in its
entirety by reference to the Parent 1998 Annual Report, the Parent 1999 10-Q and
such other documents and all the financial information (including any related
notes) contained therein. The Parent 1998 Annual Report, the Parent 1999 10-Q
and such other documents should be available for inspection and copies thereof
should be obtainable in the manner set forth below under "Available
Information."

13
<PAGE>
INNOVEX, INC. AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31, FISCAL YEAR ENDED SEPTEMBER 30,
---------------------------- -------------------------------------------
1999 1998 1998 1997 1996
------------- ------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net sales.......................... $ 42,732 $ 58,114 $ 96,278 $ 142,004 $ 69,570
Income before taxes................ 7,795 16,448 22,654 49,978 18,742
Net income......................... 5,534 11,536 15,911 35,094 13,121
Net income per share basic:........ 0.37 0.79 1.08 2.43 0.93
Common and common equivalent shares
outstanding, basic............... 14,786,180 14,616,603 14,695,214 14,424,427 14,170,652
</TABLE>

<TABLE>
<CAPTION>
AT FISCAL YEAR ENDED
SEPTEMBER 30,
---------------------
1998 1997
AT MARCH 31, ---------- ---------
1999
------------
(UNAUDITED)
<S> <C> <C> <C>
Balance Sheet Data:
Total assets.............................................................. $ 116,704 $ 109,652 $ 97,275
Total current liabilities................................................. 8,776 6,251 9,507
Long-term debt, less current maturities................................... 713 755 951
Total stockholders' equity................................................ 106,987 102,418 86,817
</TABLE>

AVAILABLE INFORMATION. Parent is subject to the informational requirements
of the Exchange Act and, in accordance therewith, files reports relating to its
business, financial condition and other matters. Information, as of particular
dates, concerning Parent's directors and officers, their remuneration, stock
options and other matters, the principal holders of Parent's securities and any
material interest of such persons in transactions with Parent is required to be
disclosed in proxy statements distributed to Parent's shareholders and filed
with the Commission. Such reports, proxy statements and other information should
be available for inspection at the Commission and copies thereof should be
obtainable from the Commission in the same manner as is set forth with respect
to the Company in Section 7.

The name, business address, citizenship, present principal occupation or
employment and five-year employment history of each of the executive officers of
Parent and Purchaser are set forth in Schedule I hereto.

Except as described in this Offer to Purchase (i) none of Parent or
Purchaser or, to the knowledge of Parent and Purchaser, any of the persons
listed in Schedule I hereto, or any associate or majority owned subsidiary of
Parent or any of the persons so listed, beneficially owns or has any right to
acquire directly or indirectly any Shares or has any contract, arrangement,
understanding or relationship with any other person with respect to any Shares,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any Shares, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss, or the giving or withholding of proxies, and (ii) none
of Parent or Purchaser or to the knowledge of Parent and Purchaser, any of the
other persons referred to above, or any of the respective directors, executive
officers or subsidiaries of any of the foregoing, has effected any transaction
in the Shares during the past 60 days.

14
<PAGE>
9. SOURCE AND AMOUNT OF FUNDS

The total amount of funds required by Purchaser to purchase all the Shares
will be approximately $34 million. Purchaser plans to obtain all funds needed
for the Offer through a capital contribution, which will be made by Parent to
Purchaser at the time the Shares tendered pursuant to the Offer are accepted for
payment. Parent intends to use its available cash on hand to make this capital
contribution. Neither the Offer nor the Merger is conditioned on obtaining
financing.

10. CERTAIN TRANSACTIONS BETWEEN PARENT AND THE COMPANY

Except as set forth in this Offer to Purchase, since January 1, 1996, none
of Parent or Purchaser or, to the knowledge of Parent and Purchaser, any of the
persons listed on Schedule I hereto, has had any transaction with the Company or
any of its executive officers, directors or affiliates that is required to be
reported under the rules and regulations of the Commission applicable to the
Offer. Except as set forth in this Offer to Purchase, since January 1, 1996,
there have been no contracts, negotiations or transactions between Parent, or
any of its subsidiaries or, to the knowledge of Parent and Purchaser, any of the
persons listed in Schedule I to this Offer to Purchase, on the one hand, and the
Company or its affiliates, on the other hand, concerning a merger, consolidation
or acquisition; a tender offer for or other acquisition of securities of any
class of the Company; an election of directors of the Company; or a sale or
other transfer of a material amount of assets of the Company or any of its
subsidiaries.

11. CONTACTS WITH THE COMPANY; BACKGROUND OF THE OFFER AND THE MERGER

At its annual meeting in January 1999, Parent announced a five-year
strategic plan to accomplish eight key business objectives, one of which was to
differentiate its customer base so that no industry segment supplies more than
one-third of Parent's revenue. To achieve this objective, Parent determined it
would need to pursue one or more strategic acquisitions. As a result, for the
last several months Parent has researched publicly available information about
the Company and other potential acquisition candidates in the flex circuit
fabrication industry.

On or about April 5, 1999, the Company announced that its Chairman,
President and Chief Executive Officer, Rolando C. Esteverena, had resigned to
pursue other interests. Upon reviewing this announcement, on or about April 13,
1999, William P. Murnane, the President and Chief Operating Officer of Parent,
contacted Jeffery D. Wieland, a representative of Needham & Company, Inc.
("Needham"), to inquire if the Company's recent announcement of Mr. Esteverena's
resignation and the Company's current financial position provided an opportunity
to pursue an acquisition of the Company. Within days, Mr. Wieland informed Mr.
Murnane that the Company was interested in talking with Parent about a possible
transaction. On or about April 16, 1999, Mr. Murnane had a telephone
conversation with Steve Sanghi, Chairman of the Company, regarding the Company's
interest in seeking a strategic partner. Mr. Sanghi indicated that the senior
executive team that had been formed subsequent to Mr. Esteverena's resignation
was considering this strategy and had identified a limited number of candidates
they believed would best suit the future needs of all of the current
constituencies of the Company. Mr. Sanghi also indicated that Parent was one of
the Company's primary candidates for a strategic partnership. As a result of
that conversation, a meeting was scheduled in Chandler, Arizona on April 23,
1999.

Attending the April 23 meeting in Chandler, Arizona on behalf of Parent were
Mr. Murnane and Timothy S. McIntee, Senior Vice President--Corporate. Attending
on behalf of the Company were Mr. Sanghi, Neil Dial, President and Chief
Operating Officer, and Donald E. Frederick, Chief Financial Officer. At that
meeting the Company representatives confirmed the Company's interest in seeking
a strategic partner and presented the current state of financial and operational
affairs of the Company. At the conclusion of that meeting, the parties agreed to
assess their respective interests in pursuing a

15
<PAGE>
potential acquisition of the Company by Parent. On or about April 30, 1999,
Parent and the Company entered into a nondisclosure agreement.

On or about May 7, 1999, Mr. Murnane contacted Mr. Sanghi and informed him
of Parent's desire to proceed with a due diligence investigation. The Company
presented to Parent detailed documentation concerning the Company. Following
this submission, Parent conducted a series of on-site examinations of the
Company's facilities and operations. Parent representatives visited the
Company's manufacturing facilities in Chiang Mai, Thailand on May 10, 1999 and
May 17, 1999, and visited the Company's facilities and operations in Chandler,
Arizona and Agua Prieta, Sonora, Mexico on or about May 25, 1999.

On May 24, 1999, Parent engaged Needham to serve as its investment advisor
in connection with Parent's potential acquisition of the Company. On
approximately the same date, Parent engaged Dorsey & Whitney LLP to represent
Parent in connection with the potential acquisition. On May 28, 1999, Parent
held a meeting with its advisors in Hopkins, Minnesota. In attendance were John
C. Michaelson and Jeffery D. Wieland from Needham; William P. Murnane, Douglas
W. Keller and Timothy S. McIntee from Parent; and William B. Payne from Dorsey &
Whitney LLP. The meeting was held to formulate an acquisition strategy and
action plan. Following the meeting and upon the advice of its advisors, Parent
management called a special meeting of its board of directors. In addition,
immediately following the May 28 meeting, Mr. Murnane contacted Mr. Sanghi and
proposed a $3.00 per share cash tender offer, which was increased to $3.50 per
share after further negotiation. Mr. Murnane also requested that Mr. Sanghi
obtain the authority from the Company's board of directors to enter into
negotiations to be conducted the following week for the purchase of the Company
by Parent.

On June 1, 1999, a telephonic meeting of the Board of Directors of Parent
was held for the purpose of informing the board of management's investigation to
date of the potential acquisition of the Company and to obtain the Board's
approval, subject to further due diligence, to present an acquisition proposal.
The Board provided its authorization and directed management to proceed.

On June 2 and June 3, 1999, Mr. Murnane and Mr. Sanghi held numerous
telephonic negotiations. The Company and Parent signed an Exclusivity Agreement
dated June 7, 1999 pursuant to which the parties agreed that they would
negotiate, on an exclusive basis through June 30, 1999, the terms of a
definitive agreement for the acquisition by Parent of the outstanding common
shares of the Company at a per share price of $3.80. On June 30, 1999, the term
of the Exclusivity Agreement was extended to July 1, 1999.

Over the course of the succeeding weeks, Parent's representatives conducted
further due diligence, and the parties negotiated the terms of the Merger
Agreement. On June 28, 1999, the Board of Directors of Parent approved the
Merger Agreement. On June 30, 1999, the Board of Directors of the Company
approved the Merger Agreement, which was signed by the Company, Parent and
Purchaser on the evening of July 1, 1999. Parent and the Company issued a joint
press release announcing the Merger Agreement as soon as possible after the
Merger Agreement was signed on July 1, 1999.

12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; THE TENDER AGREEMENT

PURPOSE AND STRUCTURE

The purpose of the Offer is for Parent to acquire the entire equity interest
in the Company. The purpose of the Merger is for Parent to acquire all of the
equity interest in the Company not acquired pursuant to the Offer. Upon
consummation of the Merger, Purchaser will merge into the Company, and the
Company will survive as a wholly owned subsidiary of Parent. The acquisition of
equity in the Company has been structured as a cash tender offer followed by a
merger in order to provide a prompt transfer of ownership of the equity interest
in the Company held by the Company's public stockholders

16
<PAGE>
from them to Parent and to provide them with cash for all of their Shares. At
the Effective Time of the Merger, each outstanding Share (other than Dissenting
Shares, Shares held in the treasury of the Company or any of its subsidiaries or
Shares owned by Parent, Purchaser or any other direct or indirect wholly owned
subsidiary of Parent) will be converted into the right to receive the Offer
Price, net to the holder in cash, without interest.

Under the DGCL, the approval of the Board and, under certain circumstances,
the affirmative vote of the holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. If the Minimum Condition is
satisfied, Purchaser will have sufficient voting power to approve and adopt the
Merger Agreement and the Merger at a stockholders' meeting without the vote of
any other stockholder of the Company. Under the DGCL, if, after consummation of
the Offer, Purchaser owns at least 90% of the then outstanding Shares, Purchaser
will be able to cause the Merger to occur without a vote of the Company's
stockholders. If, however, after consummation of the Offer, the Purchaser owns
less than 90% of the then outstanding Shares, a vote of the Company's
stockholders will be required under the DGCL to approve the Merger.

In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as promptly as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby, if such action
is required under the DGCL.

PLANS FOR THE COMPANY

Except as described in this Offer to Purchase, Parent and Purchaser have no
present plan or proposals that would result in any extraordinary corporate
transaction, such as a merger, reorganization or liquidation or sale or transfer
of a material amount of assets, involving the Company and any of its
subsidiaries or any internal changes in the Company's corporate structure or
business or any change in its present Board of Directors or management.

THE MERGER AGREEMENT

The following summary of certain provisions of the Merger Agreement is
presented only as a summary and is qualified in its entirety by reference to the
Merger Agreement, a copy of which is included as an exhibit to the Schedule
14D-1.

THE OFFER. The Merger Agreement provides for the making of the Offer by
Purchaser. Purchaser's obligation to accept for payment or pay for Shares is
subject to the satisfaction of the conditions that are described in "THE TENDER
OFFER--15. Certain Conditions of the Offer."

17
<PAGE>
The Merger Agreement provides that Purchaser may, without the consent of the
Company, (i) extend the Offer from time to time if at the initial Expiration
Date or any extension thereof any of the conditions to the Offer shall not have
been satisfied or waived, until such time as such conditions are satisfied or
waived but not beyond December 31, 1999 and (ii) extend the Offer for any period
required by any rule, regulation, interpretation or position of the Commission
or the staff thereof applicable to the Offer but not beyond December 31, 1999.
The Merger Agreement also provides that Purchaser will, from time to time, at
the request of the Company, extend the Offer if at any scheduled Expiration Date
any condition has not been satisfied or waived until such time as the conditions
are satisfied or waived; provided, however, that Purchaser shall not be required
to extend the Offer beyond December 31, 1999.

The Merger Agreement provides that promptly upon the purchase of Shares by
Purchaser pursuant to the Offer, and from time to time thereafter, Parent will
be entitled to designate such number of directors ("Parent's Designees") to the
Board of Directors of the Company (the "Company Board"), rounded up to the next
whole number, as will give Parent representation on the Company Board equal to
the product of (a) the number of directors on the Company Board (giving effect
to any increase pursuant to this sentence) and (b) the percentage that the
number of Shares purchased by Purchaser bears to the aggregate number of Shares
outstanding; provided, that if the number of Shares purchased pursuant to the
Offer equals or exceeds a majority of the outstanding Shares, Parent will be
entitled to designate a majority of the Company Board. At all times prior to the
Effective Time of the Merger, the Company Board will include at least three
directors who were directors of the Company as of the date of the Merger
Agreement.

The Merger Agreement provides that, notwithstanding any other provision of
the Merger Agreement, of the Certificate of Incorporation or Bylaws of the
Company or of applicable law to the contrary, following the election or
appointment of Parent's Designees pursuant to the Merger Agreement and prior to
the Effective Time, any amendment or termination of the Merger Agreement by the
Company, extension by the Company for the performance or waiver of the
obligations or other acts of Parent or Purchaser under the Merger Agreement or
waiver by the Company of the Company's rights under the Merger Agreement will,
in addition to the approval of the Company Board, require the affirmative vote
of the majority of members of a committee comprised of those members of the
Company Board who were directors of the Company as of the date of the Merger
Agreement.

THE MERGER. As soon as practicable after the satisfaction or waiver of the
conditions to the Merger, Purchaser will be merged with and into the Company, as
a result of which the separate corporate existence of Purchaser will cease and
the Company will continue as the "Surviving Corporation" as a wholly owned
subsidiary of Parent. The Effective Time will occur at the date and time that a
Certificate of Merger, in such form as required by, and executed in accordance
with, the relevant provisions of Delaware Law (the "Certificate of Merger"), is
duly accepted by the Secretary of State of the State of Delaware for filing
pursuant to the DGCL or such later time as Purchaser and the Company may agree
upon and set forth in the Certificate of Merger. The Surviving Corporation shall
continue its corporate existence under the laws of the State of Delaware. In the
Merger each outstanding Share (other than Shares held in the treasury of the
Company or any subsidiary, Shares owned by Parent, Purchaser or any subsidiary
of Parent, Purchaser or the Company or Dissenting Shares) will be canceled and
retired and will be automatically converted into the right to receive the Offer
Price, without interest thereon (the "Cash Merger Consideration"). All Shares
that are held in the treasury of the Company or any subsidiary of the Company or
owned by Parent, Purchaser or any subsidiary of Parent, Purchaser or the Company
will be automatically canceled and retired and will cease to exist, and no
payment or other consideration will be made with respect to such Shares. Each
share of common stock of Purchaser issued and outstanding at the Effective Time
will be converted into one share of the Surviving Corporation.

18
<PAGE>
Purchaser is not offering to acquire outstanding Options in the Offer.
Pursuant to the Merger Agreement, each Option (whether or not then exercisable)
will be canceled in exchange for the payment of the excess, if any, of the Offer
Price over the exercise price of such Option, less applicable income and
employment taxes required to be withheld.

The Certificate of Incorporation of the Surviving Corporation shall be
amended and restated at and as of the Effective Time to read as did the
Certificate of Incorporation of the Purchaser immediately prior to the Effective
Time (except that the name of the Surviving Corporation shall remain unchanged).
The Bylaws of the Surviving Corporation shall be amended and restated at and as
of the Effective Time to read as did the Bylaws of the Purchaser immediately
prior to the Effective Time (except that the name of the Surviving Corporation
shall remain unchanged). The directors of Purchaser shall become the directors,
and the officers of the Company shall become the officers, of the Surviving
Corporation at and as of the Effective Time.

STOCKHOLDERS' MEETING. If the Purchaser purchases more than 90% of the
outstanding Shares (the "Threshold Condition"), then as soon as practicable
after the acceptance for payment and purchase of Shares pursuant to the Offer
(the "Purchase Date"), the Purchaser would be eligible to effect the Merger
without a stockholders' meeting in accordance with the short-form merger
provisions of Delaware law. The Merger would be effected as soon as practicable
after the Purchase Date.

On the other hand, if the Purchaser does not obtain the Threshold Condition,
then as promptly as possible, the Company will take all actions necessary,
including mailing to its stockholders an information statement conforming to the
requirements of Schedule 14C under the Exchange Act to convene a special meeting
of the Company's stockholders to consider approval of the Merger Agreement and
the Merger. (Proxies are not expected to be solicited, because to the extent the
Minimum Condition of the Offer is fulfilled, the Purchaser will control
sufficient voting power to approve the Merger Agreement and the Merger.) Because
of timing requirements under federal and Delaware law, the special meeting of
stockholders would not take place until a number of weeks following the
acceptance for payment and purchase of Shares pursuant to the Offer. If the
Merger is approved at the special meeting, then shortly thereafter the Merger
would be consummated.

REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains certain
customary representations and warranties of the parties thereto. These include
representations and warranties of the Company with respect to corporate
existence and power, capitalization, subsidiaries, corporate authorization
relative to the Merger Agreement, governmental consents and approvals,
Commission reports, financial statements, documents relating to the Offer and
the Merger, and other matters. Parent and Purchaser have also made certain
representations and warranties with respect to corporate existence and power,
corporate authorization relative to the Merger Agreement, governmental consents
and approvals, documents relating to the Offer and the Merger, the availability
of funds to finance the Offer and the Merger, Commission reports and other
matters.

CONDUCT OF BUSINESS PENDING THE MERGER. During the period from the date of
the Merger Agreement until the Effective Time, or as otherwise contemplated in
the Merger Agreement, the Company will, and will cause its subsidiaries to,
carry on their respective businesses in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted and in compliance in
all material respects with all applicable laws and, to the extent consistent
therewith, use all reasonable efforts to preserve intact their current business
organizations, use reasonable efforts to keep available the services of their
current officers and other key employees and preserve their relationships with
those persons having business dealings with them to the end that their goodwill
and ongoing businesses will be unimpaired at the Effective Time. Without
limiting the generality or effect of the foregoing, except pursuant to the terms
and conditions of the Merger Agreement or as expressly and specifically
described therein, during the period from the date of the Merger Agreement to
the Effective Time, the Company will not, and will not permit any of its
subsidiaries to: (i) other than

19
<PAGE>
dividends and distributions (including liquidating distributions) by a direct or
indirect wholly owned subsidiary of the Company to its parent, or by a
subsidiary that is partially owned by the Company or any of its subsidiaries,
provided that the Company or any such subsidiary receives its proportionate
share thereof, (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities; (ii) except upon exercise of the Options or with respect to the July
31, 1999 purchase under the 1999 Employee Stock Purchase Plan, as amended
("ESPP"), issue, deliver, sell, pledge or otherwise encumber any shares of its
capital stock, any other voting securities or any securities convertible into,
or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities; (iii) amend its certificate of
incorporation, bylaws or other comparable organizational documents; (iv) acquire
by merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, limited
liability company, partnership, joint venture, association or other business
organization or division thereof; (v) sell, lease, license, mortgage or
otherwise encumber or subject to any lien or otherwise dispose of any of its
properties or assets, other than in the ordinary course of business consistent
with past practice; (vi) (A) incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any of its subsidiaries, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, except for short-term borrowings
incurred in the ordinary course of business consistent with past practice or (B)
make any loans, advances or capital contributions to, or investments in, any
other person, other than to the Company or any subsidiary of the Company or to
officers and employees of the Company or any of its subsidiaries for travel,
business or relocation expenses in the ordinary course of business; (vii) make
or agree to make any capital expenditure or capital expenditures other than
capital expenditures set forth in the capital budget of the Company; (viii) make
any change to its accounting methods, principles or practices, except as may be
required by generally accepted accounting principles; (ix) except as required by
law or contemplated by the Merger Agreement, enter into, adopt or amend in any
material respect or terminate any stock option plan of the Company or any other
agreement, plan or policy involving the Company or any of its subsidiaries and
one or more of their directors, officers or employees, or materially change any
actuarial or other assumption used to calculate funding obligations with respect
to any Company pension plans, or change the manner in which contributions to any
Company pension plans are made or the basis on which such contributions are
determined; (x) increase the compensation of any director or executive officer
of the Company or pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such Person; (xi)
hire any new domestic employees, or enter into consulting or similar agreements,
other than employees providing direct labor; or (xii) authorize, or commit or
agree to take, any of the foregoing actions.

CONDITIONS TO THE MERGER. The obligation of each of the Company, Parent and
Purchaser to effect the Merger is subject to the fulfillment of each of the
following conditions: (i) Purchaser shall have made the Offer and shall have
purchased the Shares pursuant to the Offer, provided, that this condition shall
be deemed to have been satisfied with respect to the obligation of the Parent
and the Purchaser to effect the Merger if the Purchaser fails to accept for
payment or pay for Shares pursuant to the Offer in violation of the terms of the
Offer or of the Merger Agreement; (ii) the Merger Agreement shall have been
approved in the manner required by applicable law by the holders of the issued
and outstanding shares of capital stock of the Company; and (iii) no order or
law enacted, entered, promulgated, enforced or issued by any court of competent
jurisdiction or other governmental

20
<PAGE>
entity or other legal restraint or prohibition (collectively, "Restraints")
preventing the consummation of the Merger shall be in effect. The obligation of
Parent and Purchaser to effect the Merger is also subject to the satisfaction or
waiver of the additional condition that the Company has performed in all
material respects its agreements contained in the Merger Agreement required to
be performed on or prior to the Effective Time.

RETIREMENT OF BANK DEBT. The Company is a party to a credit agreement, as
amended (the "Credit Agreement"), among the Company, certain lenders and
BankBoston N.A. as agent for the lenders. Prior to October 30, 1998, the credit
facility consisted of a $35,000,000 term loan and a $25,000,000 revolving line
of credit, secured by the Company's assets and 66 2/3% of the stock of its
subsidiaries. On October 30, 1998, the Company and the lenders amended the
credit facility to reduce the term loan to $30,000,000, change the amortization
schedule of the term loan, reduce the revolver to $20,000,000, and change the
financial covenants.

As of March 28, 1999, the Company was in default under certain financial
covenants of the credit facility, giving the lenders certain remedies, including
acceleration of maturity of the entire principal balance of the loans. At March
28, 1999, $18,300,000 was outstanding under the term loan (less warrant discount
of $200,000) and the Company had $12,700,000 available under the revolving line
of credit. Subsequent to March 28, 1999, the Company and the lenders engaged in
extensive negotiations concerning a forbearance arrangement with respect to the
existing defaults, although no such arrangement was reached. The lenders have
notified the Company that the financing commitments are terminated, and the
lenders are no longer obligated to lend funds to the Company pursuant to the
Credit Agreement.

The Purchaser has agreed, under the terms of the Merger Agreement, to pay
off all outstanding balances under the Credit Agreement at the Effective Time of
the Merger Agreement.

OTHER POTENTIAL ACQUIRERS. Pursuant to the Merger Agreement, the Company,
its affiliates and their respective officers, directors, employees,
representatives and agents agreed to immediately cease any discussions or
negotiations, if any, with any parties conducted previously with respect to any
Company Takeover Proposal (as defined below). The Merger Agreement further
provides that the Company will not, nor will it permit any of its subsidiaries
to, nor will it authorize or permit any of its officers, directors or employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries to, directly or
indirectly, (i) solicit, initiate or encourage (including without limitation by
way of furnishing information), or take any other action designed or reasonably
likely to facilitate, any inquiries or the making of any proposal which
constitutes or reasonably may give rise to any Company Takeover Proposal or (ii)
participate in any discussions or negotiations regarding any Company Takeover
Proposal. If, however, at any time prior to the Purchase Date, the Company Board
determines in good faith after taking into account the advice of its legal
counsel, that it is necessary to do so in order to comply with its fiduciary
duties to the Company's stockholders under applicable law, the Company may, in
response to a Company Takeover Proposal that was not solicited by it and did not
otherwise result from a breach of any provision of the Merger Agreement, (A)
furnish information with respect to the Company and each of its subsidiaries to
any person pursuant to a customary confidentiality agreement not more favorable
to the recipient of such information than the confidentiality agreement entered
into with Parent and (B) participate in negotiations regarding such Company
Takeover Proposal. The Company has agreed to immediately advise Parent orally
and in writing of any request for information or of any Company Takeover
Proposal, the material terms and conditions of such request or Company Takeover
Proposal and the identity of the Person making such request or Company Takeover
Proposal and to keep Parent reasonably informed of the status and details
(including amendments or proposed amendments) of any such request of Company
Takeover Proposal.

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The Merger Agreement provides that, except as expressly permitted by Section
5.1(b) thereof, neither the Company Board nor any committee thereof may (i)
withdraw or modify, or propose publicly to withdraw or modify, in a manner
adverse to Parent or the Purchaser, the approval or recommendation by the
Company Board or such committee of the Offer, the Merger or the Merger
Agreement, (ii) approve or recommend, or propose publicly to approve or
recommend, any Company Takeover Proposal or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement related to any Company Takeover Proposal (each, a
"Company Acquisition Agreement"). Section 5.2(b) of the Merger Agreement
provides that, notwithstanding the foregoing, in the event that prior to the
Effective Time and not less than two business days after notice of its intention
to do so has been given to Parent, the Company Board determines in good faith,
after receipt of a Superior Proposal (as defined below) and after taking into
account the advice of its legal counsel, that it is necessary to do so in order
to comply with its fiduciary duties to the Company's stockholders, the Company
Board may withdraw or modify its approval or recommendation of the Offer, the
Merger or the Merger Agreement, approve or recommend a Company Takeover Proposal
or terminate the Merger Agreement pursuant to Section 7.3(c) thereof. In the
event that the Company terminates the Merger Agreement in the manner described
in this paragraph or the Company Board withdraws or modifies in a manner adverse
to Parent or Purchaser its approval or recommendation of the Offer, the Merger
or the Merger Agreement, the Company has agreed to pay to Parent a fee of
$1,500,000 in cash and to reimburse Parent for its documented out-of-pocket
fees, costs and expenses up to $600,000.

A "Company Takeover Proposal" means any inquiry, proposal or offer from any
person relating to any direct or indirect acquisition or purchase of 25% or more
of the assets of the Company and its subsidiaries or 25% or more of any class of
equity securities of the Company or any of its subsidiaries, any tender offer or
exchange offer for Shares or any class of equity securities of the Company or
any of its subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries, other than the transactions contemplated by
the Merger Agreement, or any other transaction that is intended or could
reasonably be expected to prevent the completion of the transactions
contemplated by the Merger Agreement.

A "Superior Proposal" means a Company Takeover Proposal that (x) involves
the direct or indirect acquisition or purchase of 75% or more of the assets of
the Company and its subsidiaries or 75% or more of any class of equity
securities of the Company or any of its subsidiaries and (y) which Company
Takeover Proposal is otherwise on terms which the Company Board determines in
its good faith judgment (after consultation with a financial advisory of
nationally recognized reputation) to be reasonably capable of being completed
(taking into account all material legal, financial, regulatory and other aspects
of the proposal) and more favorable to the Company's stockholders from a
financial point of view than the Offer and the Merger, and for which financing,
to the extent required, is then committed or which, in the good faith judgment
of the Company Board, is capable of being obtained by such third party.

TERMINATION. Section 7.1 of the Merger Agreement provides that the Merger
Agreement may be terminated and the transactions contemplated thereby may be
abandoned at any time prior to the Purchase Date, before or after the approval
of the Merger Agreement by the stockholders of the Company, by the mutual
consent of Parent and the Company.

Section 7.2 of the Merger Agreement provides that the Merger Agreement may
be terminated and the transactions contemplated thereby may be abandoned at any
time prior to the Purchase Date by action of the Board of Directors of Parent or
the Company Board if (a) the Merger has not been consummated by December 31,
1999, provided that the party terminating may not terminate if that party's
failure to fulfill any of its obligations under the Merger Agreement is the
reason that the Effective Time has not occurred; (b) any governmental entity has
issued a restraint or taken any other

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action permanently enjoining, restraining or otherwise prohibiting the
consummation of the Offer, the Merger or any of the other transactions
contemplated by the Merger Agreement and such restraint or other action has
become final and nonappealable; or (c) the Offer expires or is terminated or
withdrawn pursuant to its terms without any Shares being purchased due to an
occurrence or circumstance resulting in a failure to satisfy the conditions to
the Offer (see "THE TENDER OFFER--15. Certain Conditions to the Offer").

Section 7.3 of the Merger Agreement provides that the Merger Agreement may
be terminated and the transactions contemplated thereby may be abandoned at any
time prior to the Purchase Date, before or after the approval of the Merger
Agreement by the stockholders of the Company, by action of the Company Board,
(a) if there has been a material breach by Parent or the Purchaser of any
representation or warranty contained in the Merger Agreement which is not
curable or, if curable, is not cured by December 31, 1999 and such breach would
prevent or materially delay Parent's or Purchaser's ability to consummate the
transactions contemplated by the Merger Agreement; (b) if there has been a
material breach of any of the covenants set forth in the Merger Agreement on the
part of Parent or the Purchaser, which breach is not curable or, if curable, is
not cured within 30 days after written notice of such breach is given by the
Company to Parent; or (c) in accordance with Section 5.2(b) of the Merger
Agreement.

Section 7.4 of the Merger Agreement provides that the Merger Agreement may
be terminated and the transactions contemplated thereby may be abandoned at any
time prior to the Purchase Date, before or after the approval of the Merger
Agreement by the stockholders of the Company, by Parent if (a) the Company Board
has (i) withdrawn or modified in a manner adverse to Parent or Purchaser its
approval or recommendation of the Merger Agreement, the Offer or the Merger or
failed to reconfirm its approval or recommendation within five business days
after a written request to do so; (ii) approved or recommended, or proposed
publicly to approve or recommend, a third-party Company Takeover Proposal to the
Company's stockholders; (iii) caused the Company to take any action referred to
in Section 5.2 of the Merger Agreement that would have constituted a breach
thereof but for the exceptions thereunder, including without limitation
authorizing the Company to enter into a Company Acquisition Agreement; (iv)
approved the breach of the Company's obligation under Section 5.2 of the Merger
Agreement or (v) resolved to take any of the foregoing actions; (b) there has
been a material breach by the Company of any representation or warranty
contained in the Merger Agreement which is not curable or, if curable, is not
cured by December 31, 1999 and such breach would (i) have a material adverse
effect on the business, properties, results of operations, financial condition
or prospects of the Company and its subsidiaries, taken as a whole, (ii) prevent
or materially delay consummation of any of the transactions contemplated by the
Merger Agreement or (iii) prevent or materially delay the Company's ability to
consummate the transactions contemplated by the Merger Agreement; (c) there has
been a material breach of any of the covenants set forth in the Merger Agreement
on the part of the Company, which breach is not curable or, if curable, is not
cured within five days after written notice of such breach is given by Parent to
the Company; or (d) any person or group (as defined in Section 13(d)(3) of the
Exchange Act) other than the Parent, Purchaser or any of their respective
affiliates shall have become the beneficial owner of more than 10% of the
Shares.

EFFECT OF TERMINATION. The Merger Agreement provides that in the event of
the termination of the Merger Agreement pursuant to the provisions of Article
VII (as described above), all obligations of the Company, Parent and Purchaser
will terminate, except the obligations of such parties pursuant to Sections 7.5
and 8.14 of the Merger Agreement.

Section 7.5 of the Merger Agreement provides that if the Merger Agreement is
terminated at such time that the Merger Agreement is terminable pursuant to
Sections 7.2, 7.3(c) or 7.4 of the Merger Agreement, then (a) the Company will
not later than two business days after receipt of notice from Parent pay to
Purchaser an amount equal to Parent's documented out-of pocket fees, costs and
other expenses, not to exceed $600,000 and (b) in the event that (i) a Company
Takeover Proposal is made

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known to the Company or any of its subsidiaries or has been made directly to
stockholders generally or any person publicly announces an intention (whether or
not conditional) to make a Company Takeover Proposal and (ii) thereafter the
Merger Agreement is terminated (A) by either Parent or the Company pursuant to
Section 7.2(a) or (c) of the Merger Agreement or (B) by the Company pursuant to
Section 7.3(c) of the Merger Agreement or by Parent pursuant to Section 7.4(a)
or (d) of the Merger Agreement, the Company will pay to Purchaser a fee of
$1,500,000 cash; provided, however, that if the Merger Agreement is terminated
by Parent as a result of a breach by the Company, Parent may pursue any remedies
available to it at law or in equity and will, in addition to its expenses, be
entitled to recover such additional amounts as Purchaser may be entitled to
receive at law or in equity.

EXPENSES. The Merger Agreement provides that, except as expressly otherwise
provided in the Merger Agreement, all fees and expenses incurred in connection
with the Offer, the Merger, the Merger Agreement and the transactions
contemplated thereby will be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated.

AMENDMENT. The Merger Agreement provides that, subject to applicable law,
the Merger Agreement may be amended, whether before or after any vote of the
stockholders of the Company contemplated thereby, only by written agreement of
the parties thereto, pursuant to action taken by their respective boards of
directors, at any time before or after approval of matters presented in
connection with the Merger by the stockholders of the Company; provided,
however, that after the approval of the Merger Agreement by the stockholders of
the Company, no such amendment which by law requires prior approval of the
stockholders of the Company will be made unless such approval has been obtained.

THE TENDER AGREEMENT

Concurrently with the execution of the Merger Agreement, Parent and
Purchaser entered into an agreement, dated as of June 30, 1999 (the "Tender
Agreement"), with Havant International Holdings Limited ("HIHL"), which is a
stockholder of the Company that beneficially owns 1,392,347 Shares representing
15.5% of the total outstanding Shares (excluding options). Pursuant to the
Tender Agreement, HIHL agreed, among other things, to tender (and not withdraw)
its Shares to Purchaser pursuant to and in accordance with the terms of the
Offer. In addition, pursuant to the Tender Agreement, HIHL agreed that, during
the time that the Tender Agreement is in effect, at any meeting of the
stockholders of the Company, however called, or in any written consent in lieu
thereof, HIHL will (i) vote the Shares owned by it in favor of the Merger and
any related agreements or related matters and (ii) unless and until the Merger
Agreement is terminated in accordance with its terms, vote the Shares owned by
it against any (A) Company Acquisition Agreement, (B) reorganization,
recapitalization, liquidation or winding up of the Company or any other
extraordinary transaction involving the Company, (C) corporate action the
consummation of which would frustrate the purposes, or prevent or delay the
consummation, of the transactions contemplated by the Merger Agreement, or (D)
other matters relating to, or in connection with, any of the foregoing matters.

HIHL has appointed Purchaser as attorney-in-fact and proxy, with full power
of substitution, and has agreed to use its reasonable effort to cause any record
owner of Shares to grant to Purchaser a proxy to the same effect as that
contained in the Tender Agreement; provided, however, that HIHL shall not be
required to expend any monies in the exercise of such effort; and provided
further, however, that the proxy granted by HIHL and all other obligations of
HIHL shall be revoked upon termination of the Merger Agreement in accordance
with its terms.

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13. DIVIDENDS AND DISTRIBUTIONS

The Company has not paid and does not intend to pay cash dividends on the
Shares. Pursuant to the terms of the Merger Agreement, the Company will not,
other than dividends and distributions (including liquidating distributions) by
a direct or indirect wholly owned subsidiary of the Company to its parent, or by
a subsidiary that is partially owned by the Company or any of its subsidiaries,
provided that the Company or any such subsidiary receives its proportionate
share thereof, (A) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock, (B) split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities.

14. EFFECTS OF THE OFFER ON THE MARKET FOR SHARES; NASDAQ NATIONAL MARKET AND
EXCHANGE ACT REGISTRATION

The purchase of Shares by Purchaser pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and the number of holders
of Shares and could thereby adversely affect the liquidity and market value of
the remaining publicly held Shares.

NASDAQ NATIONAL MARKET INCLUSION

Parent currently intends to cause the Company to terminate the inclusion of
the Shares on the Nasdaq National Market following the Purchase Date. Inclusion
of the Shares on the Nasdaq National Market is voluntary, so the Company may
terminate that inclusion at any time. In addition, according to the Nasdaq
National Market's current published guidelines, the Shares would not be eligible
to be included for continued listing if, among other things, the number of
publicly held Shares falls below 750,000, the number of holders of Shares falls
below 400, the aggregate market value of such publicly held Shares falls below
$5,000,000, or the net tangible assets fall below $4,000,000. If these standards
are not met, the Shares would no longer be admitted to quotation on the Nasdaq
National Market. Depending on the number of Shares acquired pursuant to the
Offer, price quotations for the Shares may no longer meet the requirements for
any continued trading over-the-counter, including the Nasdaq "additional list"
or a "local list." If, as a result of the purchase of Shares pursuant to the
Offer or otherwise, trading of the Shares over-the-counter is discontinued, the
liquidity of and market for the Shares could be adversely affected. Any
reduction in the number of Shares that might otherwise trade publicly may have
an adverse effect on the market price for or marketability of the Shares and may
cause future prices to be less than the Offer Price.

MARGIN REGULATIONS

The Shares are currently "margin securities" under the regulations of the
Board of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend credit
on the collateral of such Shares for the purpose of buying, carrying or trading
in securities ("Purpose Loans"). Depending upon factors similar to those
described above regarding the continued listing, public trading and market
quotations of the Shares, it is possible that, following the purchase of the
Shares pursuant to the Offer, the Shares would no longer constitute "margin
securities" for the purposes of the margin regulations of the Federal Reserve
Board and therefore could no longer be used as collateral for Purpose Loans made
by brokers.

EXCHANGE ACT REGISTRATION

The Shares are currently registered under the Exchange Act. Parent currently
intends to seek to cause the Company to terminate the registration of the Shares
under the Exchange Act as soon after

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the Purchase Date as the requirements for termination of registration are met.
The registration may be terminated upon certification by the Company to the
Commission that there are fewer than 300 record holders of the Shares. The
termination of the registration of the Shares under the Exchange Act would take
effect 90 days after the Company's certification to the Commission as to the
number of record holders of Shares, although the periodic reporting requirements
under the Exchange Act would terminate on the date of the certification. The
termination of such reporting requirements would substantially reduce the
information required to be furnished by the Company to holders of Shares and to
the Commission. When effective, the deregistration would make certain other
provisions of the Exchange Act no longer applicable to the Shares. In addition,
"affiliates" of the Company and persons holding "restricted securities" of the
Company may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended. If
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer be "margin securities" or be eligible for Nasdaq National Market
or Small Cap Market reporting.

15. CERTAIN CONDITIONS OF THE OFFER

Consummation of the Offer is conditioned upon satisfaction of the Minimum
Condition and the expiration or termination of any applicable waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
Furthermore, Purchaser shall not be required to accept for payment or (subject
to any applicable rules and regulations of the Commission, including Rule
14e-l(c) under the Exchange Act relating to Purchaser's obligation to pay for or
return tendered Shares promptly after termination or withdrawal of the Offer)
pay for, and may delay the acceptance for payment of, or (subject to the
restrictions referred to above) the payment for, any tendered Shares, and may
amend the Offer consistent with the terms of the Merger Agreement, including
extending the deadline for tendering Shares, or terminate the Offer, if any of
the following events shall occur:

(A) any governmental entity has enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order which is in effect, or there has been initiated, instituted or
pending any such action having any effect, and which (i) restricts, prevents or
prohibits consummation of the transactions contemplated by the Merger Agreement,
including the Offer or the Merger, (ii) prohibits, limits or otherwise adversely
affects the ownership or operation by Parent or any of its subsidiaries of all
or any portion of the business or assets of the Company and its subsidiaries or
compels the Company, Parent or any of their subsidiaries to dispose of or hold
separate all or any portion of the business or assets of the Company and its
subsidiaries, or (iii) imposes material limitations on the ability of the
Purchaser to exercise effectively full rights of ownership of any Shares,
including the right to vote any Shares acquired by the Purchaser pursuant to the
Offer or otherwise on all matters properly presented to the Company's
stockholders;

(B) the representations and warranties of the Company contained in the
Merger Agreement are not true and correct in all material respects as of the
Purchase Date as though made anew as of such date;

(C) the Company has not performed or complied in all material respects with
its covenants under the Merger Agreement and such failure continues until the
later of (a) 15 calendar days after actual receipt by it of written notice from
Parent setting forth in detail the nature of such failure or (b) the Purchase
Date;

(D) there has occurred any change, effect, event or condition (other than an
action or suit challenging the transactions contemplated by the Merger
Agreement) that would (i) have a material adverse effect on the business,
properties, results of operations, financial condition or prospects of the
Company and its subsidiaries, taken as a whole, (ii) prevent or materially delay
the consummation of any of the transactions contemplated by the Merger Agreement
or (iii) prevent or materially delay the Company's ability to consummate the
transactions contemplated by the Merger Agreement;

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(E) the Merger Agreement has been terminated in accordance with its terms;

(F) the Company Board has (i) withdrawn or materially modified (including by
amendment of Schedule 14D-9) in a manner adverse to the Purchaser or Parent or
taken a position inconsistent with its approval or recommendation of the Offer,
the Merger or the Merger Agreement, (ii) approved or recommended any Company
Takeover Proposal, (iii) taken any action referred to in Section 5.2 of the
Merger Agreement that is prohibited thereby or would be so prohibited but for
the exceptions thereto or (iv) resolved or publicly disclosed any intention to
do any of the foregoing;

(G) there has occurred (i) any general suspension of trading in, or
limitation on prices for, securities on the NYSE, (ii) a decline of at least 10%
in either the Dow Jones Average of Industrial Stocks or the Standard & Poor's
500 Index from the date of the Merger Agreement, (iii) the declaration of a
banking moratorium or any limitation or suspension of payments in respect of the
extension of credit by banks or other lending institutions in the United States,
(iv) any commencement of war, armed hostilities or other international or
national calamity directly involving the United States or having a significant
adverse effect on the functionality of financial markets in the United States,
or (v) in the case of any of the foregoing existing at the time of commencement
of the Offer, a material acceleration or worsening thereof; or

(H) it has been publicly disclosed or Parent has otherwise learned that (i)
any person or "group" (as defined in Section 13(d) (3) of the Exchange Act),
other than Parent or its affiliates or any group of which any of them is a
member or any affiliates controlled by it, shall have acquired beneficial
ownership (determined pursuant to Rule 13d-3 promulgated under the Exchange Act)
of more than 20% of the outstanding Shares or (ii) any person or group shall
have entered into any letter of intent, agreement in principle, acquisition
agreement or other similar agreement related to any Company Takeover Proposal or
an agreement in principle with respect thereto.

Notwithstanding the foregoing, the institution of an action or suit that
challenges the transactions contemplated by the Merger Agreement shall not be
deemed the failure of the foregoing conditions except in the circumstances
described in clause (A) above.

The foregoing conditions are for the sole benefit of the Purchaser and may
be waived by the Purchaser or Parent on behalf of Purchaser, in whole or in
part, from time to time in its sole discretion. The failure by the Purchaser at
any time to exercise any of the foregoing rights will not be deemed a waiver of
any such right and each such right will be deemed an ongoing right and may be
asserted at any time and from time to time.

16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS

GENERAL

Except as described below, based on a review of publicly available filings
made by the Company with the Commission and other publicly available information
concerning the Company, as well as certain representations made to Purchaser and
Parent in the Merger Agreement, neither Purchaser nor Parent is aware of any
license or regulatory permit that appears to be material to the business of the
Company and its subsidiaries, taken as a whole, that might be adversely affected
by the acquisition of Shares pursuant to the Offer, or of any approval or other
action by any governmental, administrative or regulatory agency or authority or
public body, domestic or foreign, that would be required for the acquisition or
ownership of Shares pursuant to the Offer. Should any such approval or other
action be required, it is presently contemplated that such approval or action
would be sought except as described below in this Section under "State Takeover
Statutes." While, except as otherwise expressly described herein, Parent does
not currently intend to delay acceptance for payment of Shares tendered pursuant
to the Offer pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if needed, would be obtained without
substantial conditions or that adverse

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consequences might not result to the Company's business or that certain parts of
the Company's business might not have to be disposed of in the event that such
approvals were not obtained or such other actions were not taken or in order to
obtain any such approval or other action, any of which could cause Parent to
decline to accept for payment or pay for any Shares tendered. Parent's
obligation under the Offer to accept for payment and pay for shares is subject
to the Offer conditions, including conditions relating to legal matters
discussed in this Section 16.

ANTITRUST

Under the HSR Act and the rules that have been promulgated thereunder by the
Federal Trade Commission ("FTC"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the FTC and
certain waiting period requirements have been satisfied. The acquisition of
Shares pursuant to the Offer is subject to such requirements.

Parent expects to file a Notification and Report Form with respect to the
Offer under the HSR Act as soon as practicable following commencement of the
Offer. The waiting period under the HSR Act with respect to the Offer will
expire at 11:59 p.m. New York City time, on the 15th day after the date such
form is filed, unless early termination of the waiting period is granted. In
addition, the Antitrust Division or the FTC may extend such waiting periods by
requesting additional information or documentary material from Parent. If such a
request is made with respect to the Offer, the waiting period related to the
Offer will expire at 11:59 p.m. New York City time on the 10th day after
substantial compliance by Parent with such request. With respect to each
acquisition, the Antitrust Division or the FTC may issue only one request for
additional information. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the Antitrust Division or the FTC raises substantive issues in connection with a
proposed transaction, the parties may engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while such negotiations continue.
Expiration or termination of applicable waiting periods under the HSR Act is a
condition to the obligation to accept for payment and pay for Shares tendered
pursuant to the Offer.

The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed purchase of the Shares
pursuant to the Offer. At any time before or after such purchase, the Antitrust
Division or the FTC could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin the
transaction or seeking divestiture of the Shares so acquired or divestiture of
substantial assets of Parent or the Company. Litigation seeking similar relief
could be brought by private parties. Parent does not believe that consummation
of the Offer and the other transactions contemplated by the Merger Agreement
will result in violation of any applicable antitrust laws. However, there can be
no assurance that a challenge to the Offer and the other transactions
contemplated by the Merger Agreement on antitrust grounds will not be made, or
if such a challenge is made, what the result will be. See Section 15 for certain
conditions to the purchase of the Shares, including conditions with respect to
litigation and certain governmental actions.

STATE TAKEOVER STATUTES

The Company is incorporated under the laws of the State of Delaware and
operations are conducted throughout the United States. A number of states
throughout the United States have enacted takeover statutes that purport, in
varying degrees, to be applicable to attempts to acquire securities of
corporations that are incorporated or have assets, stockholders, executive
offices or principal places of business in such states. In EDGAR V. MITE CORP.,
the Supreme Court of the United States held that the Illinois Business Takeover
Act, which involved state securities laws that made the takeover of certain
corporations more difficult, imposed a substantial burden on interstate commerce

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and therefore was unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA,
however, the Supreme Court of the United States held that a state may, as a
matter of corporate law and, in particular, those laws concerning corporate
governance, constitutionally disqualify a potential acquirer from voting on the
affairs of a target corporation without prior approval of the remaining
stockholders, provided that such laws were applicable only under certain
conditions. Subsequently, a number of federal courts ruled that various state
takeover statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.

The Company is subject to the provisions of Section 203 of the DGCL with
respect to restrictions upon business combinations involving the Company. In
general, Section 203 of the DGCL prevents an "interested stockholder" (E.G., a
person who owns or has the right to acquire 15% or more of a corporation's
outstanding voting stock) from engaging in a "business combination" (defined to
include mergers and certain other transactions) with a Delaware corporation for
a period of three years following the time such person became an interested
stockholder unless, among other things, the corporation's board of directors
approves such business combination or the transaction in which the interested
stockholder becomes such prior to the time the interested stockholder becomes
such. The Company Board has approved the Offer, the Merger and the Merger
Agreement for the purposes of Section 203 of the DGCL.

Except as described above with respect to Section 203 of the DGCL, Parent
and Purchaser have not attempted to comply with any other state takeover laws in
connection with the Offer and believe none of such laws to be applicable to the
Offer. Should any person seek to apply any state takeover law, Parent and
Purchaser reserve the right to take such action as then appears desirable, which
may include challenging the validity or applicability of any such statute
allegedly applicable to the Offer in appropriate court proceedings. Nothing in
this Offer to Purchase nor any action taken in connection herewith is intended
as a waiver of that right. In the event it is asserted that one or more state
takeover law is applicable to the Offer or the Merger, and an appropriate court
does not determine that it is inapplicable or invalid as applied to the Offer,
Parent and Purchaser might be required to file certain information with, or
receive approvals from the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment or pay for any Shares tendered
pursuant to the Offer, or be delayed in continuing or consummating the Offer and
the Merger. In such case, Purchaser may not be obligated to accept for payment
or pay for any Shares tendered. See Section 15 of this Offer to Purchase.

APPRAISAL RIGHTS

Holders of the Shares do not have appraisal rights as a result of the Offer.
However, if the Merger is consummated, holders of Shares whose Shares were not
accepted for payment and paid for by Purchaser in the Offer will have certain
rights pursuant to the provisions of Section 262 of the DGCL to dissent and
demand appraisal of their Shares. Under Section 262 of the DGCL, dissenting
stockholders who comply with the applicable statutory procedures will be
entitled to receive a judicial determination of the fair value of their Shares
(exclusive of any element of value arising from the accomplishment or
expectation of the Merger) and to receive payment of such fair value in cash,
together with a fair rate of interest, if any. Any such judicial determination
of the fair value of the Shares could be based upon factors other than, or in
addition to, the price per share to be paid in the Merger or the market value of
the Shares. The value so determined could be more or less than the price per
share to be paid in the Merger. See Annex A to this Offer to Purchase for
Section 262 of the DGCL.

LEGAL PROCEEDINGS

Parent and Purchaser are not aware of any pending or overtly threatened
legal proceedings which would affect the Offer or the Merger. If any such
matters were to arise, Purchaser could under certain

29
<PAGE>
circumstances decline to accept for payment or pay for any Shares tendered in
the Offer. See Section 15 of this Offer to Purchase.

17. FEES AND EXPENSES

Parent has retained MacKenzie Partners, Inc. to act as the Information Agent
and EquiServe, L.P. to serve as the Depositary in connection with the Offer. The
Information Agent and the Depositary each will receive reasonable and customary
compensation for their services and be reimbursed for certain reasonable
out-of-pocket expenses. Parent has also agreed to indemnify the Information
Agent and the Depositary against certain liabilities and expenses in connection
with the Offer, including certain liabilities under the federal securities laws.

Parent will not pay any fees or commissions to any broker or dealer or any
other person for soliciting tenders of Shares pursuant to the Offer (other than
to the Information Agent). Brokers, dealers, commercial banks, trust companies
and other nominees will, upon request, be reimbursed by Parent for customary
mailing and handling expenses incurred by them in forwarding offering materials
to their customers.

18. MISCELLANEOUS

The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the securities,
blue sky or other laws of such jurisdiction. Purchaser may, in its discretion,
however, take such action as it may deem necessary to make the Offer in any
jurisdiction and extend the Offer to holders of Shares in any such jurisdiction.

No person has been authorized to give any information or to make any
representation on behalf of Purchaser not contained herein or in the Letter of
Transmittal and, if given or made, such information or representation must not
be relied upon as having been authorized. Neither the delivery of this Offer to
Purchase nor any purchase pursuant to the Offer shall, under any circumstances,
create any implication that there has been no change in the affairs of
Purchaser, Parent or the Company since the date as of which information is
furnished or the date of this Offer to Purchase.

Purchaser and Parent have filed with the Commission a Tender Offer Statement
on Schedule 14D-1, together with exhibits, pursuant to Rule 14d-3 under the
Exchange Act, furnishing certain additional information with respect to the
Offer. In addition, the Company is required to file with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits,
pursuant to Rule 14d-9 under the Exchange Act, setting forth the recommendations
of the Company's Board with respect to the Offer and the reasons for such
recommendations and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, may be inspected and
copies may be obtained from the Commission in the manner set forth in Section 7
(except that they will not be available at the regional offices of the
Commission).

INNOVEX ACQUISITION CORP.
July 7, 1999

30
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER

INNOVEX, INC.

The following table sets forth the name, business or residence address,
principal occupation or employment at the present time and during the last five
years, and the name of any corporation or other organization in which such
employment is conducted or was conducted of each executive officer or director
of Parent. Except as otherwise indicated, all of the persons listed below are
citizens of the United States of America. Each occupation set forth opposite a
person's name, unless otherwise indicated, refers to employment with Parent.
Unless otherwise indicated, the principal business address of each director or
executive officer is 530 Eleventh Avenue South, Hopkins, Minnesota 55343-9904:

<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Thomas W. Haley............... Chairman and Chief Executive Officer of Chief Executive Officer--Innovex, Inc.
Innovex, Inc.; Director since 1988; Director and Chairman of
the Company since its inception in
1972.

Michael C. Slagle............. Retired; Director President--Minnesota Benefit Planners,
Inc., an insurance brokerage and
consulting firm, from 1990 to 1997.

Bernt M. Tessem............... Independent sales consultant; Director Independent sales consultant since
1992.

Gerald M. Bestler............. Retired; Director Formerly Executive Vice President of
BMC Industries Inc., an optical and
electronic components manufacturer, and
President of the Precision Etched
Products Group of BMC Industries Inc.;
Currently serves as a Director of ANCOR
Communications.

Frank L. Farrar............... Self-employed attorney and banker; Chairman--Performance Bankers, Inc.;
Director Chairman--Beresford Bancorporation,
Inc., a South Dakota thrift holding
company; Chairman--Capital
Bancorporation, Inc., a South Dakota
bank holding company; Chairman--Uptown
Bancorporation, Inc., an Illinois bank
holding company; Chairman--Fulda
Bancorporation, a Minnesota bank
holding company; Director--Mercury
Waste Solutions, Inc., a publicly held
mercury processing company.
</TABLE>

I-1
<PAGE>
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Elick E. Hawk................. President--Performance Bankers, Inc., Director--First National Bank, Fulda,
Pierre, SD; Director MN; Chairman--First National Bank,
Pierre, SD; Director--First Savings
Bank, Beresford, SD; Director--Cardinal
& Gold, Beresford, SD; Director-- First
Savings Financial Services, Beresford,
SD; Director--First National Credit
Card, Sioux Falls, SD;
Director--Capitol Card Services, Sioux
Falls, SD; Trustee-- Performance
Bankers Insurance Trust, Pierre, SD.

William P. Murnane............ President and Chief Operating Officer; President and Chief Operating Officer
Director since July 1998; Vice
President--Innovex, Inc. from 1995 to
1998; Chief Operating Officer--
Boutwell, Owens & Co., a private
manufacturer of packaging in Fitchburg,
MA from 1993 to 1995.

Allan J. Chan................. Senior Vice President, Sales and Senior Vice President, Sales and
Marketing Marketing since August 1998; Vice
President and General Manager of
Precision Products Division-- Innovex,
Inc., since 1995; Vice President of
Sales and Marketing of the Precision
Products Division since 1990;
responsibilities were expanded to
include manufacturing in 1991.

Bruce R. Funk................. Vice President, Asian Operations Vice President, Asian Operations since
July 1998; Managing Director of Asian
Operations for the Precision Products
Division-- Innovex, Inc., from 1990 to
1998.

Douglas W. Keller............. Vice President, Finance Vice President of Finance since October
1996; officer of the corporation since
May 1992; joined Innovex as corporate
controller in January 1990.
</TABLE>

I-2
<PAGE>
<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
Timothy S. McIntee............ Senior Vice President, Corporate Senior Vice President, Corporate, since
July 1998; joined the company in August
1997 as Vice President, Corporate
Development; Attorney--Lindquist &
Vennum, Mergers & Acquisitions
Division, from 1985 to 1997.

Steven L. Stiller............. Vice President, Operations Vice President, Operations, since July
1998; Director of U.S. Operations,
Precision Products Division, from
August 1996 to July 1998; Special
Products Engineer, December 1994 to
August 1996; Management consultant for
start-up magnetic head companies from
1993 to 1994.

Venkatraman B. Rao............ Vice President, Research & Development Vice President, Research & Development
since December 1998; Engineering
Department Manager--Silicon
Graphics/Cray Research of Chippewa
Falls, WI, for five years before
joining Innovex.

Brian R. Dahmes............... Vice President, Quality Assurance Vice President, Quality Assurance since
March 1999; joined Innovex in July 1997
as Plant Manager, later served as
Director of Manufacturing; Engineering
Manager--Sheldahl, Inc., of Northfield,
MN, and Longmont, CO, until July 1997.
</TABLE>

INNOVEX ACQUISITION CORP.

The following table sets forth the name, business or residence address,
principal occupation or employment at the present time and during the last five
years, and the name of any corporation or other organization in which such
employment is conducted or was conducted of each executive officer or director
of Purchaser. Except as otherwise indicated, all of the persons listed below are
citizens of the United States of America. Information relating to material
positions held during the past five years set forth opposite a person's name,
unless otherwise indicated, refers to employment with Parent.

I-3
<PAGE>
Unless otherwise indicated, the principal business address of each director or
executive officer is 530 Eleventh Avenue South, Hopkins, Minnesota 55343-9904:

<TABLE>
<CAPTION>
NAME, CITIZENSHIP AND MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS PRESENT OCCUPATION OR EMPLOYMENT DURING THE PAST FIVE YEARS
- ------------------------------ --------------------------------------- ---------------------------------------
<S> <C> <C>
William P. Murnane............ President and Chief Operating Officer; President and Chief Operating Officer
Director since July 1998; Vice
President--Innovex, Inc. from 1995 to
1998; Chief Operating Officer--
Boutwell, Owens & Co., a private
manufacturer of packaging in Fitchburg,
MA from 1993 to 1995.

Douglas W. Keller............. Vice President, Finance; Director Vice President of Finance since October
1996; officer of the corporation since
May 1992; joined Innovex as corporate
controller in January 1990.

Timothy S. McIntee............ Senior Vice President, Corporate; Senior Vice President, Corporate, since
Director July 1998; joined the company in August
1997 as Vice President, Corporate
Development; Attorney--Lindquist &
Vennum, Mergers & Acquisitions
Division, from 1985 to 1997.
</TABLE>

I-4
<PAGE>
ANNEX A

TEXT OF SECTION 262 OF TITLE B, CHAPTER 1, SUB-CHAPTER IX OF THE DELAWARE
GENERAL CORPORATION LAW 262

APPRAISAL RIGHTS

(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a non-stock corporation; the words "stock" and "share"
mean and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.

(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251(g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:

(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange
or designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or (ii) held of record by more than 2,000 holders; and further provided
that no appraisal rights shall be available for any shares of stock of
the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section251 of this title.

(2) Notwithstanding paragraph (1) of this subsection, appraisal rights under
this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to
SectionSection251, 252, 254, 257, 258, 263 and 264 of this title to
accept for such stock anything except:

(a) Shares of stock of the corporation surviving or resulting from such
merger or consolidation or depository receipts in respect thereof;

(b) Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or held of record by more
than 2,000 holders;

(c) Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or

A-1
<PAGE>
(d) Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph..

(3) In the event all the stock of a subsidiary Delaware corporation party to
a merger effected under Section253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.

(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.

(d) Appraisal rights shall be perfected as follows:

(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting
of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record
date for such meeting with respect to shares for which appraisal rights
are available pursuant to subsections(b) or (c) hereof that appraisal
rights are available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of SUCH STOCKHOLDER'S
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of SUCH STOCKHOLDER'S shares
shall deliver to the Corporation, before the taking of the Note on the
merger or consolidation, a written demand for appraisal of such
STOCKHOLDERS shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of SUCH STOCKHOLDER'S
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days
after the effective date of such merger or consolidation, the surviving
or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or

(2) If the merger or consolidation was approved pursuant to Section228 or
Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that appraisal
rights are available for any or all shares of such class or series of
stock of such constituent corporation, and shall include in such notice a
copy of this section; provided that, if the notice is given on or after
the effective date of the merger or consolidation, such notice shall be
given by the surviving or resulting corporation to all such holders of
any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and if, given on or after
the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days after
the date of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder's shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to

A-2
<PAGE>
demand the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or consolidation,
either(i) each such constituent corporation shall send a second notice
before the effective date of the merger or consolidation notifying each
of the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the effective date
the merger or consolidation or (ii) the surviving or resulting
corporation shall send such a second notice to all such holders on or
within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded appraisal of
such holders' shares in accordance with this subsection. An affidavit of
the secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders
entitled to receive either notice, each constituent corporation may fix,
in advance, a record date that shall be not more than 10 days prior to
the date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice
is given prior to the effective date, the record date shall be the close
of business on the day next preceding the day on which the notice is
given.

(e) Within 120 days after the effective date of the merger consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw SUCH
STOCKHOLDER'S demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received by and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after SUCH STOCKHOLDER'S written request for such a statement is received the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.

(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware, or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting corporation.

(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by

A-3
<PAGE>
certificates to submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal proceedings, and if any
stockholder fails to comply with such direction, the Court may dismiss the
proceedings as to such stockholder.

(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall taken in to account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceedings. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceedings, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the surviving
or resulting corporation pursuant to subsection (f) of this section and who has
submitted SUCH STOCKHOLDER'S certificates of stock to the Register in Chancery,
if such is required, may participate fully in all proceedings until it is
finally determined that SUCH STOCKHOLDER is not entitled to appraisal rights
under this section.

(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates represented by certificates upon the surrender to the corporation
of the certificates representing such stock. The Court's decree may be enforced
as other decrees in the Court of Chancery may be enforced, whether such
surviving or resulting corporation be a corporation of this State or of any
state.

(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.

(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of SUCH STOCKHOLDER'S
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.

(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.

A-4
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates for Shares should be sent or
delivered by each stockholder of the Company or such stockholder's broker,
dealer, commercial bank or trust company to the Depositary at one of its
addresses set forth below:

THE DEPOSITARY FOR THE OFFER IS:

EquiServe, L.P.

<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT, CERTIFIED BY HAND:
OR
EXPRESS MAIL DELIVERY:

EquiServe, L.P. EquiServe, L.P. Securities Transfer & Reporting
Corporate Actions Dept. Corporate Actions Dept. Services, Inc.
P.O. Box 8029 150 Royall Street c/o EquiServe, L.P.
Boston, MA 02266-8029 Canton, MA 02021 100 William Street, Galleria
New York, NY 10038

BY FACSIMILE TRANSMISSION: (781) 575-2232 CONFIRM BY TELEPHONE: (781) 575-3210
(For Eligible Institutions Only)
</TABLE>

Any questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth below. Requests for
additional copies of this Offer to Purchase and the Letter of Transmittal may be
directed to the Information Agent or the Depositary. Stockholders may also
contact their brokers, dealers, commercial banks or trust companies for
assistance concerning the Offer.

THE INFORMATION AGENT FOR THE OFFER IS:

[LOGO]

156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2855

<PAGE>

Exhibit (c)(1)

[CONFORMED COPY]

AGREEMENT AND PLAN OF MERGER

BY AND AMONG

ADFLEX SOLUTIONS, INC.,

INNOVEX, INC.

AND

INNOVEX ACQUISITION CORP.

JULY 1, 1999

<PAGE>
TABLE OF CONTENTS

<TABLE>

<S> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

ARTICLE I. THE TENDER OFFER. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.2 Offer, Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Company Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.4 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4

ARTICLE II. THE MERGER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.2 The Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.3 Actions at the Closing. . . . . . . . . . . . . . . . . . . . . . . . .5
2.4 Effect of Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.5 Procedure for Payment . . . . . . . . . . . . . . . . . . . . . . . . .6
2.6 Closing of Transfer Records . . . . . . . . . . . . . . . . . . . . . .7
2.7 Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

ARTICLE III. REPRESENTATIONS OF THE COMPANY. . . . . . . . . . . . . . . . . . . . .8
3.1 Existence; Good Standing; Corporate Authority . . . . . . . . . . . . .8
3.2 Authorization, Validity and Effect of Agreement . . . . . . . . . . . .8
3.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 Other Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 No Conflict; Required Filings and Consents. . . . . . . . . . . . . . .9
3.7 Compliance with Laws and Investments. . . . . . . . . . . . . . . . . 10
3.8 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 No Material Undisclosed Liabilities . . . . . . . . . . . . . . . . . 11
3.10 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . . . 11
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.13 Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.14 Millennium Compliance . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . 13
3.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . 13
3.17 State Takeover Statutes; Poison Pill. . . . . . . . . . . . . . . . . 14
3.18 Voting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.19 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.20 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . . . . 15
3.21 Offer Documents; Proxy Statement. . . . . . . . . . . . . . . . . . . 15

ARTICLE IV. REPRESENTATIONS OF THE PARENT AND THE PURCHASER . . . . . . . . . . . 15
4.1 Existence; Good Standing; Corporate Authority . . . . . . . . . . . . 15
4.2 Authorization, Validity and Effect of Agreement . . . . . . . . . . . 16
4.3 No Conflict; Required Filings and Consents. . . . . . . . . . . . . . 16

<PAGE>

4.4 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.5 Offer Documents; Proxy Statement. . . . . . . . . . . . . . . . . . . 17
4.6 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.7 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.8 SEC Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE V. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.1 Conduct of Business . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.2 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.3 Filings, Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . 22
5.4 Inspection of Records . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Proxy Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.7 Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.8 Insurance; Indemnity. . . . . . . . . . . . . . . . . . . . . . . . . 24
5.9 Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.10. Credit Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE VI. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . . . . . . 25
6.1 Conditions to Each Party's Obligation To Effect the Merger. . . . . . 25
6.2 Conditions to Obligation of Parent and Purchaser to Effect the
Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

ARTICLE VII. TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.1 Termination by Mutual Consent . . . . . . . . . . . . . . . . . . . . 26
7.2 Termination by Either Parent or Company . . . . . . . . . . . . . . . 26
7.3 Termination by Company. . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Termination by Parent . . . . . . . . . . . . . . . . . . . . . . . . 26
7.5 Effect of Termination and Abandonment; Termination Fee. . . . . . . . 27

ARTICLE VIII. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.1 Nonsurvival of Representations, Warranties and Agreements . . . . . . 28
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
8.3 Assignment; Binding Effect. . . . . . . . . . . . . . . . . . . . . . 29
8.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.5 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.7 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.8 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.9 Certain Definitions/Interpretations . . . . . . . . . . . . . . . . . 30
8.10 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.11 Incorporation of Annex A. . . . . . . . . . . . . . . . . . . . . . . 31
8.12 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.13 Enforcement of Agreement. . . . . . . . . . . . . . . . . . . . . . . 31
8.14 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ANNEX A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .A-1

</TABLE>

<PAGE>

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July 1, 1999,
by and among ADFlex Solutions, Inc., a Delaware corporation (the "Company"),
Innovex, Inc., a Minnesota corporation ("Parent"), and Innovex Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent
("Purchaser" and with the Company and Parent, "Parties").

RECITALS

Each of the Boards of Directors of the Company, Parent and Purchaser has
determined that it is in the best interests of its respective stockholders for
Purchaser to acquire the Company on the terms and subject to the conditions set
forth herein (the "Acquisition");

As a first step in the Acquisition, the Company, the Parent and the
Purchaser each desire that Parent cause Purchaser to commence a cash tender
offer (the "Offer") to purchase all of the Company's issued and outstanding
shares, par value $0.01 per share (the "Shares"), for $3.80 per share, or such
higher price as may be paid in the Offer (the "Per Share Amount"), on the terms
and subject to the conditions set forth in this Agreement;

To complete the Acquisition, each of the Boards of Directors of the
Company, the Parent and the Purchaser has approved the merger of the Purchaser
with and into the Company (the "Merger"), wherein any issued and outstanding
Shares other than Shares tendered and purchased by the Purchaser pursuant to the
Offer or owned directly or indirectly by the Company or any Dissenting Shares
(as hereinafter defined) will be converted into the right to receive the Per
Share Amount, on the terms and subject to the conditions of this Agreement and
in accordance with the Delaware General Corporation Law (the "DGCL");

The Board of Directors of the Company (the "Company Board") has
unanimously resolved to recommend that the holders of the Shares accept the
Offer and adopt this Agreement and has determined that the consideration to be
paid for each Share in the Offer and the Merger is fair to the holders of such
Shares;

NOW, THEREFORE, in consideration of the premises and the representations,
warranties and covenants herein contained, the Parties agree as follows.

ARTICLE I. THE TENDER OFFER

1.1 THE OFFER.

(a) As promptly as practicable (but in any event not later than three
business days after the public announcement of the execution and delivery of
this Agreement), Parent will cause the Purchaser to commence (within the meaning
of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), the Offer for all of the Shares at the Per Share Amount, net
to the seller in cash (subject to reduction for any applicable federal back-up
withholding or stock transfer taxes payable by the seller). Notwithstanding the
foregoing, if between the date of this Agreement and the Purchase Date (as
hereinafter defined) the outstanding Shares shall have been changed into a
different number of shares or a different class,

<PAGE>

by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares, the Per Share
Amount will be correspondingly adjusted on a per-share basis to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of Shares. The obligation of Parent to cause the
Purchaser to commence the Offer and to accept for payment and to pay for
Shares validly tendered in the Offer and not withdrawn in accordance
therewith will be subject only to those conditions set forth in Annex A
hereto (the "Offer Conditions").

(b) Without the prior written consent of the Company, the Purchaser
will not, and Parent will cause the Purchaser not to, (i) decrease or change the
form of the Per Share Amount, (ii) decrease the number of Shares subject to the
Offer, (iii) amend or waive the Minimum Condition (as defined in Annex A hereto)
or impose conditions other than the Offer Conditions on the Offer, (iv) except
as provided in this Section 1.1(b), extend the expiration date of the Offer or
(v) amend any term of the Offer in any manner materially adverse to holders of
Shares. The Purchaser may, without the consent of the Company, (i) extend the
Offer from time to time if at the initial expiration date of the Offer (which
initial expiration date shall be 20 business days following commencement of the
Offer) or any extension thereof any of the Offer Conditions shall not have been
satisfied or waived, until such time as such conditions are satisfied or waived
but not beyond December 31, 1999, and (ii) extend the Offer for any period
required by any rule, regulation, interpretation or positions of the Securities
and Exchange Commission, (the "SEC") or the staff thereof applicable to the
Offer but not beyond December 31, 1999. The Purchaser will, from time to time,
at the request of the Company, extend the Offer if at any scheduled expiration
date of the Offer any of the Offer Conditions has not been satisfied or waived
until such time as such conditions are satisfied or waived; PROVIDED, HOWEVER,
that the Purchaser shall not be required to extend the Offer beyond December 31,
1999. Assuming the satisfaction or waiver of the Offer Conditions, Parent will
cause the Purchaser to accept for payment and pay for, in accordance with the
terms of the Offer, all Shares validly tendered and not withdrawn pursuant to
the Offer as soon as practicable after expiration of the Offer. The date on
which the Purchaser shall purchase and pay for Shares tendered pursuant to the
Offer shall hereinafter be referred to as the "Purchase Date."

1.2 OFFER, DOCUMENTS.

(a) As soon as practicable an the date of commencement of the Offer,
Parent and the Purchaser will file or cause to be filed with the SEC a Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") which will contain an
offer to purchase and related letter of transmittal and other ancillary offer
documents and instruments pursuant to which the Offer will be made (collectively
with any supplements or amendments thereto, the "Offer Documents") and which
Parent and Purchaser represent, warrant and covenant will comply in all material
respects with the Exchange Act and other applicable Laws and will contain (or
will be amended in a timely manner so as to contain) all information which is
required to be included therein in accordance with the Exchange Act and the
rules and regulations thereunder and other applicable Laws; PROVIDED, HOWEVER,
that (i) no agreement or representation hereby is made or will be made by Parent
or the Purchaser with respect to information supplied by the Company in writing
expressly for inclusion in, or information derived from the Company's public SEC
filings (as amended by any subsequent SEC filings) which is incorporated by
reference or included in, the Offer Documents and (ii) no representation,
warranty or covenant is made or will be made herein by

<PAGE>

the Company with respect to information contained in the Offer Documents
other than information supplied by the Company in writing expressly for
inclusion in, or information derived from the certain SEC documents filed by
the Company (as amended by any SEC documents subsequently filed by the
Company) which is incorporated by reference or included in, the Offer
Documents.

(b) Parent, the Purchaser and the Company will each promptly correct
any information provided by them for use in the Offer Documents if and to the
extent that it becomes false or misleading in any material respect and Parent
and the Purchaser will jointly and severally take all lawful action necessary to
cause the Offer Documents as so corrected to be filed promptly with the SEC and
to be disseminated to holders of Shares, in each case as and to the extent
required by applicable Law. In conducting the Offer, Parent and Purchaser will
comply in all material respects with the provisions of the Exchange Act and
other applicable Laws. Parent and the Purchaser will afford the Company and its
counsel a reasonable opportunity to review and comment on the Offer Documents
and any amendments thereto prior to the filing thereof with the SEC.

1.3 COMPANY ACTIONS. The Company hereby consents to the Offer and
represents that (a) the Company Board (at a meeting duly called and held) has
(i) determined that this Agreement, the Offer and the Merger are fair to and
in the best interests of the Company and its stockholders, (ii) approved this
Agreement and the transactions contemplated hereby, including the Offer and
the Merger, and (iii) resolved to recommend acceptance of the Offer and
adoption of this Agreement by the holders of Shares and (b) BancBoston
Robertson Stephens, Inc. has delivered to the Company Board the Fairness
Opinion described in Section 3.20. The Company hereby consents to the
inclusion in the Offer Documents of the recommendation of the Board of
Directors referred to in this Section 1.3; PROVIDED HOWEVER, that the Company
Board may withdraw, modify or amend such recommendation in accordance with
Section 5.2(b). The Company will file with the SEC simultaneously with the
filing by Parent and the Purchaser of the Schedule 14D-1 a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, "Schedule 14D-9") containing such
recommendations of the Company Board in favor of the Offer and the Merger.
The Company represents, warrants and covenants that Schedule 14D-9 will
comply in all material respects with the Exchange Act and any other
applicable Laws and will contain (or will be amended in a timely manner so as
to contain) all information which is required to be included therein in
accordance with the Exchange Act and the rules and regulations thereunder and
other applicable Laws. The Company will include in the Schedule 14D-9
information furnished by Parent in writing concerning Parent's Designees (as
hereinafter defined) as required by Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder and will use its reasonable efforts to have the
Schedule 14D-9 available for inclusion to the initial mailing (and any
subsequent mailing) of the Offer Documents to holders of Shares. Each of the
Company and Parent will promptly correct any information provided by them for
use in Schedule 14D-9 if and to the extent that it becomes false or
misleading in any material respect and the Company will further take all
lawful action necessary to cause Schedule 14D-9 as so corrected to be filed
promptly with the SEC and disseminated to the holders of Shares, in each case
as and to the extent required by applicable Law. Parent and its counsel will
be given a reasonable opportunity to review the Schedule 14D-9 and any
amendments thereto prior to the filing thereof with the SEC. In connection
with the Offer, the Company will promptly furnish Parent with mailing labels,
security position listings and all

<PAGE>

available listings or computer files containing the names and addresses of
the record holders of Shares as of the latest practicable date and will
furnish Parent such information and assistance (including updated lists of
stockholders, mailing labels and lists of security positions) as Parent or
its agents may reasonably request in communicating the Offer to the record
and beneficial holders of Shares. Subject to the requirements of applicable
Law, and except for such actions as are necessary to disseminate the Offer
Documents and any other documents necessary to consummate the Offer and the
Merger, Parent and the Purchaser will, and will instruct each of their
respective Affiliates, associates, partners, employees, agents and advisors
to, hold in confidence the information contained in such labels, lists and
files, will use such information only in connection with the Offer and the
Merger, and, if this Agreement is terminated in accordance with its terms,
will deliver promptly to the Company (or destroy and certify to the Company
the destruction of) all copies of such information (and any copies,
compilations or extracts thereof or based thereon) then in their possession
or under their control.

1.4 DIRECTORS.

(a) Promptly upon the purchase of Shares by Purchaser pursuant to the
Offer, and from time to time thereafter, (i) Parent will be entitled to
designate such number of directors ("Parent's Designees"), rounded up to the
next whole number, as will give Parent, subject to compliance with Section 14(f)
of the Exchange Act, representation on the Company Board equal to the product of
(A) the number of directors on the Company Board (giving effect to any increase
in the number of directors pursuant to this Section 1.4) and (B) the percentage
that such number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being, the "Board Percentage"); PROVIDED, HOWEVER, that
if the number of Shares purchased pursuant to the Offer equals or exceeds a
majority of the outstanding Shares, the Board Percentage will in all events be
at least a majority of the members of the Company Board and (ii) the Company
will, upon request by Parent, promptly satisfy the Board Percentage by (A)
increasing the size of the Company Board or (B) using reasonable efforts to
secure the resignations of such number of directors as is necessary to enable
Parent's Designees to be elected to the Company Board and will use its
reasonable efforts to cause Parent's Designees promptly to be so elected,
subject in all instances to compliance with Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder. At the request of Parent, the Company
will take all lawful action necessary to effect any such election. Parent will
supply to the Company in writing and be solely responsible for any information
with respect to itself, the Parent's Designees and Parent's officers, directors
and Affiliates required by Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder to be included in the Schedule 14D-9. Notwithstanding
the foregoing, at all times prior to the Effective Time, the Company Board will
include at least three Continuing Directors. For purposes of this Agreement,
the term "Continuing Directors" means those directors of the Company who were
directors of the Company as of the date of this Agreement.

(b) Notwithstanding any other provision hereof, of the certificate of
incorporation or bylaws of the Company or of applicable Law to the contrary,
following the election or appointment of Parent's Designees pursuant to this
Section 1.4 and prior to the Effective Time, any amendment or termination of
this Agreement by the Company, extension by the Company for the performance or
waiver of the obligations or other acts of Parent or Purchaser hereunder or
waiver by the Company of the Company's rights hereunder will, in addition to the
approval of

<PAGE>

the Company Board, require the affirmative vote of the majority of members of
a committee comprised of those members of the Company Board who are
Continuing Directors.

ARTICLE II. THE MERGER

2.1 THE MERGER. On and subject to the terms and conditions of this
Agreement, the Purchaser will merge with and into the Company (the "Merger") at
the Effective Time. The Company shall be the corporation surviving the Merger
(the "Surviving Corporation").

2.2 THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Fennemore Craig in
Phoenix, Arizona, commencing at 9:00 a.m. local time on the second business day
following the satisfaction or waiver of all conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the respective Parties will take at the
Closing itself) or such other date as the Parties may mutually determine (the
"Closing Date"); PROVIDED, HOWEVER, that the Closing Date shall be no earlier
than August 3, 1999.

2.3 ACTIONS AT THE CLOSING. At the Closing, (i) the Company and the
Purchaser will file with the Secretary of State of the State of Delaware a
certificate of merger (the "Certificate of Merger") and (ii) the Parent will
cause the Surviving Corporation to deliver the Payment Fund to the Paying Agent
in the manner provided in Section 2.5.

2.4 EFFECT OF MERGER.

(a) The Merger shall become effective at the time (the "Effective
Time") the Company and the Purchaser file the Certificate of Merger with the
Secretary of State of the State of Delaware. The Merger shall have the
effect set forth in the DGCL. The Surviving Corporation may, at any time
after the Effective Time, take any action (including executing and delivering
any document) in the name and on behalf of either the Company or the
Purchaser in order to carry out and effectuate the transactions contemplated
by this Agreement.

(b) The Certificate of Incorporation of the Surviving Corporation
shall be amended and restated at and as of the Effective Time to read as did the
Certificate of Incorporation of the Purchaser immediately prior to the Effective
Time (except that the name of the Surviving Corporation will remain unchanged).

(c) The Bylaws of the Surviving Corporation shall be amended and
restated at and as of the Effective Time to read as did the Bylaws of the
Purchaser immediately prior to the Effective Time (except that the name of the
Surviving Corporation will remain unchanged).

(d) The directors of the Purchaser shall become the directors, and the
officers of the Company shall become the officers, of the Surviving Corporation
at and as of the Effective Time (retaining their respective positions and terms
of office).

(e) At and as of the Effective Time,

<PAGE>

(i) each share of Common Stock, $0.01 par value per share, of
the Purchaser shall be converted into one share of Common Stock, $0.01
par value per share, of the Surviving Corporation;

(ii) each Share held in the treasury of the Company or any
Subsidiary (a "Treasury Share") and each Share owned by Parent, Purchaser
or any other direct or indirect wholly owned subsidiary of the Parent
immediately before the Effective Time other than shares in trust
accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties (a "Parent-Owned Share") will be
automatically canceled and retired and will cease to exist and no payment
or other consideration will be made with respect thereto;

(iii) each Share (other than any Dissenting Share, Treasury Share
or Parent-Owned Share) shall be converted into the right to receive the
Per Share Amount. All such Shares, when so converted, will no longer be
outstanding and will automatically be canceled and retired and will cease
to exist, and each holder of a certificate formerly representing any such
Share will cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor upon the surrender of
such certificate in accordance with Section 2.5; and

(iv) each Dissenting Share shall be converted into the right to
receive payment from the Surviving Corporation with respect thereto in
accordance with the provisions of the DGCL.

Any payment made pursuant to this Section 2.4 and Section 2.5 will be
made net of applicable withholding taxes to the extent such withholding is
required by law. Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding Shares shall have been changed
into a different number of shares or a different class, by reason of any stock
dividend, subdivision, reclassification, split, combination or exchange of
shares, the Per Share Amount will be correspondingly adjusted on a per-share
basis to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares. No Share shall be
deemed to be outstanding or to have any rights other than those set forth above
in this Section 3.4(e) after the Effective Time.

2.5 PROCEDURE FOR PAYMENT.

(a) Immediately after the Effective Time (in any event, within two
business days following the Effective Time), (A) the Parent will cause the
Surviving Corporation to furnish to Boston EquiServe (the "Paying Agent") a
corpus (the "Payment Fund") consisting of cash sufficient in the aggregate
for the Paying Agent to make full payment of the Merger Consideration to the
holders of all of the outstanding Shares (other than any Dissenting Shares,
Treasury Shares and Parent-Owned Shares) and (B) the Parent will cause the
Paying Agent to mail a letter of transmittal (with instructions for its use)
to each record holder of outstanding Company Shares for the holder to use in
surrendering the certificates which represented his, her or its Shares
against payment of the Merger Consideration. No interest will accrue or be
paid to the holder of any outstanding Company Shares.

<PAGE>

(b) The Parent may cause the Paying Agent to invest the cash included
in the Payment Fund in one or more of the investments; PROVIDED, HOWEVER, that
the terms and conditions of the investments shall be such as to permit the
Paying Agent to make prompt payment of the Merger Consideration as necessary.
The Parent may cause the Paying Agent to pay over to the Surviving Corporation
any net earnings with respect to the investments, and the Parent will cause the
Surviving Corporation to replace promptly any portion of the Payment Fund which
the Paying Agent loses through investment.

(c) The Parent may cause the Paying Agent to pay over to the Surviving
Corporation any portion of the Payment Fund (including any earnings thereon)
remaining 180 days after the Effective Time, and thereafter all former
stockholders shall be entitled to look to the Surviving Corporation (subject to
abandoned property, escheat and other similar laws) as general creditors thereof
with respect to the cash payable upon surrender of their certificates.

(d) The Parent shall cause the Surviving Corporation to pay all
charges and expenses of the Paying Agent.

2.6 CLOSING OF TRANSFER RECORDS After the close of business on the
Closing Date, transfers of Shares outstanding prior to the Effective Time shall
not be made on the stock transfer books of the Surviving Corporation.

2.7 STOCK PLANS.

(a) At the Effective Time, each holder of a then-outstanding option to
purchase Shares under Company's 1993 Equity Incentive Plan, 1994 Stock Incentive
Plan and Employee Stock Purchase Plan (collectively, the "Stock Option Plans"),
whether or not then exercisable (the "Options"), will, in settlement thereof,
receive from the Company for each Share subject to such Option an amount
(subject to any applicable withholding tax) in cash equal to the difference
between the Per Share Amount and the per Share exercise price of such Option to
the extent such difference is a positive number (such amount being hereinafter
referred to as, the "Option Consideration"); PROVIDED, HOWEVER, that with
respect to any person subject to Section 16(a) of the Exchange Act, any such
amount will be paid as soon as practicable after the first date payment can be
made without liability to such person under Section 16(b) of the Exchange Act.
At the Effective Time, each Option will be canceled, and any and all rights the
holder had or may have had in respect to such Option shall be released.

(b) Prior to the Effective Time, Company will use reasonable efforts
to obtain all necessary consents or releases from holders of Options under the
Stock Option Plans and take all such other lawful action as may be necessary to
give effect to the transactions contemplated by this Section 2.7. Except as
otherwise agreed to by the parties, (i) the Stock Option Plans shall terminate
as of the Effective Time and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of Company or any Subsidiary thereof shall be canceled as
of the Effective Time and (ii) Company shall use reasonable efforts to assure
that following the Effective Time no participant in the Stock Option Plans or
other plans, programs or arrangements shall have any right thereunder to acquire
any equity securities of Company, the Surviving Corporation or any Subsidiary
thereof.

<PAGE>

ARTICLE III. REPRESENTATIONS OF THE COMPANY

The Company hereby represents and warrants to each of Parent and
Purchaser that, except as set forth in the letter, dated the date hereof, from
the Company to Parent initialed by those parties (the "Company Disclosure
Letter") as follows:

3.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware. The Company is duly licensed or qualified to do business as a
foreign corporation and is in good standing under the laws of each other state
of the United States in which the character of the properties owned or leased by
it or in which the transaction of its business makes such qualification
necessary, except where the failure to be so qualified or to be in good standing
would not have a Company Material Adverse Effect. The Company has all requisite
corporate power and authority to own, operate and lease its properties and carry
on its business as now conducted. Each of the Company's Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has the corporate power
and authority to own its properties and to carry on its business as it is now
being conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for jurisdictions in which such
failure to be so qualified or to be in good standing would not have a Company
Material Adverse Effect. As used in this Agreement, (i) "Company Material
Adverse Effect" means any change, effect, event or condition (other than an
action or suit challenging the transactions contemplated by this Agreement) that
would (A) have a material adverse effect on the business, properties, results of
operations, financial condition or prospects of the Company and its
Subsidiaries, taken as a whole, (B) prevent or materially delay consummation of
any of the transactions contemplated hereby or (C) prevent or materially delay
the Company's ability to consummate the transactions contemplated hereby and
(ii) the term "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, of
which such party directly or indirectly owns or controls at least a majority of
the securities or other interests having by their terms ordinary voting power to
elect a majority of the board of directors or others performing similar
functions.

3.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. The Company has
the requisite corporate power and authority to execute and deliver this
Agreement, and all agreements and documents contemplated hereby to be executed
and delivered by it. Subject only to the approval of the Merger by the holders
of a majority of the outstanding Shares, this Agreement, the Offer, the Merger
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all requisite corporate action. This Agreement
constitutes, and all agreements and documents contemplated hereby to be executed
and delivered by the Company will constitute (when executed and delivered
pursuant hereto), the valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms.

3.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 40,000,000 Shares and 10,000,000 shares of preferred stock. As of
the date hereof, there were (a) 8,984,518 Shares issued and outstanding, each of
which was duly authorized, validly issued, duly paid and nonassessable, (b) no
shares of preferred stock of the Company had been designated or issued, (c) no
Shares were held in treasury of the Company, (d) 181,746 Shares

<PAGE>

were reserved for issuance under the Stock Option Plans and (e) Options to
purchase 1,093,821 Shares had been granted under the Stock Option Plans.
Since the date hereof, no additional shares of capital stock of the Company
have been issued except pursuant to the exercise of Options or the ESPP (as
hereinafter defined) and no other options, warrants or other rights to
acquire shares of the Company's capital stock (collectively, the "Company
Rights") have been granted. Except as described in the preceding sentence,
the Company has no outstanding bonds, debentures, notes or other securities
or obligations the holders of which have the right to vote or which are
convertible into or exercisable for securities having the right to vote on
any matter on which any stockholder of the Company has a right to vote. All
issued and outstanding Shares are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. There are not any
existing options, warrants, calls, subscriptions, convertible securities or
other Company Rights that obligate the Company or any of its Subsidiaries to
issue, transfer or sell any shares of capital stock of the Company or any of
its Subsidiaries other than the Options. There are no outstanding
contractual obligations of the Company or any of its Subsidiaries to
repurchase, redeem, exchange or otherwise acquire any shares of capital stock
of the Company or any of its Subsidiaries. There are no outstanding
contractual obligations of the Company to vote or to dispose of any shares of
the capital stock of any of its Subsidiaries.

3.4 SUBSIDIARIES. Exhibit 21 to the Company's Annual Report on Form
10-K for the fiscal year ended December 27, 1998, lists all of the Subsidiaries
of the Company. The Company owns, directly or indirectly, all of the
outstanding shares of capital stock (or other ownership interests having by
their terms ordinary voting power to elect a majority of directors or others
performing similar functions with respect to such Subsidiary) of each of the
Company's Subsidiaries free and clear of all liens, pledges, security interests,
claims or other encumbrances (collectively, "Liens"). Each of the outstanding
shares of capital stock (or such other ownership interests) of each of the
Company's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable.

3.5 OTHER INTERESTS. Except for interests in the Company's
Subsidiaries, neither the Company nor any of the Company's Subsidiaries owns,
directly or indirectly, any interest or investment (whether equity or debt) in
any corporation, partnership, joint venture, business, trust or entity (other
than (a) non-controlling investments in the ordinary course of business and
corporate partnering, development, cooperative marketing and similar
undertakings and arrangements entered into in the ordinary course of business
and (b) other investments of less than $1.0 million in the aggregate).

3.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

(a) The execution and delivery of this Agreement by the Company do
not, and the consummation by the Company of the transactions contemplated hereby
will not, (i) conflict with or violate the certificate of incorporation or
bylaws or equivalent organizational documents of the Company or any of its
Subsidiaries, (ii) subject to making the filings and obtaining the approvals
identified in Section 3.6(b), conflict with or violate any statute, rule,
regulation or other legal requirement ("Law") or order, judgment or decree
("Order") applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or affected
or (iii) result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, result in the
loss of a material

<PAGE>

benefit under or give to others any right of purchase or sale, or any right
of termination, amendment, acceleration, increased payments or cancellation
of, or result in the creation of a Lien or other encumbrance on any property
or asset of the Company or any of its Subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of the Company or any of its
Subsidiaries is bound or affected.

(b) The execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement and the consummation by the
Company of the transactions contemplated hereby will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign (each a
"Governmental Entity"), except (i) applicable requirements, if any, of the
Exchange Act, (ii) the pre-merger notification requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act") and (iii) the filing of a
certificate of merger pursuant to the DGCL.

3.7 COMPLIANCE WITH LAWS AND INVESTMENTS. Neither the Company nor any
of its Subsidiaries is in conflict with, or in default or violation of, (a) any
material Law or Order applicable to the Company or any of its Subsidiaries or by
which any property or asset of the Company or any of its Subsidiaries is bound
or affected or (b) any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or any property or asset of the Company or
any of its Subsidiaries is bound or affected. The Company and its Subsidiaries
have obtained all material licenses, permits and other authorizations and have
taken all actions required by applicable Law or government regulations in
connection with their business as now conducted.

3.8 SEC DOCUMENTS.

(a) The Company has filed all forms, reports and documents required to
be filed by it with the SEC since January 1, 1996 (collectively, the "Company
Reports"). As of their respective dates, the Company Reports and any such
reports, forms and other documents filed by the Company with the SEC after the
date of this Agreement (i) complied, or will comply, in all material respects
with the applicable requirements of the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the rules and regulations thereunder and
(ii) did not, or will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in the light of the circumstances under which they
were made, not misleading. The representation in the preceding sentence does
not apply to any misstatement or omission in any Company Report filed prior to
the date of this Agreement which was superseded by a subsequent Company Report
filed prior to the date of this Agreement. No Subsidiary of the Company is
required to file any report, form or other document with the SEC.

(b) Each of the financial statements included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
presents fairly, in all material respects, the consolidated financial position
of the Company and its Subsidiaries as of its date or,

<PAGE>

if applicable, the results of operations, retained earnings or cash flows, as
the case may be, of the Company and its Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein.

3.9 NO MATERIAL UNDISCLOSED LIABILITIES. Neither the Company nor any
of its Subsidiaries has any material liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or reserved against in, a balance sheet of the Company or
described or referred to in the notes thereto prepared in accordance with
generally accepted accounting principles consistently applied, except for (i)
liabilities or obligations that were so reserved on, or reflected in (including
the notes to), the consolidated balance sheet of the Company as of December 27,
1998 and (ii) liabilities or obligations arising in the ordinary course of
business (including trade indebtedness) since December 27, 1998.

3.10 LITIGATION. There are no material actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries and there are no Orders of any Governmental
Entity or arbitrator outstanding against the Company or any of its Subsidiaries.

3.11 ABSENCE OF CERTAIN CHANGES. Except as described in the Company
Reports filed and publicly available prior to the date hereof (the "Company
Filed Reports") since December 27, 1998, there has not been (a) any Company
Material Adverse Effect, (b) any declaration, setting aside or payment of any
dividend of other distribution with respect to its capital stock, (c) any split,
combination or reclassification of any of the Company's capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for any shares of the Company's capital stock,
(d) any granting by the Company or any of its Subsidiaries to any director or
executive officer of the Company of any increase in compensation, (e) any
granting by the Company or any of its Subsidiaries to any director or executive
officer of any increase in severance or termination pay, (f) any entry by the
Company or any of its Subsidiaries into any employment, severance or termination
agreement with any director or executive officer or (g) except insofar as may be
required by a change in generally accepted accounting principles, any change in
accounting methods, principles or practices by the Company.

3.12 TAXES.

(a) (i) Each of the Company and its Subsidiaries has (A) duly and
timely filed (including applicable extensions) all material Tax Returns (as
hereinafter defined) required to be filed and (B) paid in full or established
adequate reserves (in accordance with GAAP) for all material Taxes (as
hereinafter defined) shown to be due on such Tax Returns; (ii) as of the date
hereof, neither the Company nor any of its Subsidiaries has requested any
extension of time within which to file any Tax Returns in respect of any fiscal
year which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding; and (iii) no material (A) audit or
examination or (B) refund litigation with respect to any Tax Return is pending.

<PAGE>

(b) As used in this Agreement, the following terms shall have the
following meanings:

(i) "Tax" or "Taxes" shall mean all taxes, charges, fees,
duties, levies, penalties or other assessments imposed by any federal,
state, local or foreign governmental authority, including, but not
limited to, income, gross receipts, excise, property, sales, gain, use,
license, custom, duty, unemployment, capital stock, transfer, franchise,
payroll, withholding, social security, minimum estimated, and other
taxes, and shall include interest, penalties or additions attributable
thereto; and

(ii) "Tax Return" shall mean any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.

3.13 PROPERTY.

(a) The Company and its Subsidiaries own or have the right to use all
material intellectual property used by them in connection with their business,
including (A) trademarks and service marks (registered or unregistered) and
trade names, and all goodwill associated therewith, (B) patents, patentable
inventions, discoveries, improvements, ideas, know-how, processes and computer
programs, software and databases (including source code), (C) trade secrets and
the right to limit the use or disclosure thereof, (D) copyrights in all works,
including software programs and mask works, and (E) domain names (collectively,
"Intellectual Property").

(b) As of the date of this Agreement, there is no suit, action or
proceeding pending or, to the Company's Knowledge, threatened against or
affecting the Company or any of its Subsidiaries, which challenges the legality,
validity, enforceability of, or the Company's or any of its Subsidiaries' use or
ownership of, any Intellectual Property owned by the Company or any of its
Subsidiaries, or, to the Company's Knowledge, licensed to the Company or to any
of its Subsidiaries.

(c) The conduct of the Company's and its Subsidiaries' business, the
Intellectual Property owned or used by the Company and its Subsidiaries and the
products or services produced, sold or licensed by the Company and its
Subsidiaries do not infringe, violate or misappropriate any Intellectual
Property right or any other proprietary right of any person or give rise to any
obligations to any person as a result of co-authorship, co-inventorship, or any
express or implied contract for any use or transfer.

3.14 MILLENNIUM COMPLIANCE.

(a) In the opinion of the Company, achieving Millennium Compliance for
all proprietary technology used or held for use in the business of the Company,
including without limitation all Intellectual Property so used or held
(collectively, "Technology"), would not, individually or in the aggregate, have
a Company Material Adverse Effect.

(b) For purposes of this Agreement, the Technology will be "Millennium
Compliant" if:

<PAGE>

(i) No value for a current date will cause any interruption in
operation;

(ii) Date-based functionality must behave consistently for dates
prior to, during and after the year 2000;

(iii) In all interfaces and data storage, the century in any date
must be specified either explicitly or by unambiguous algorithms or
inferencing rules; and

(iv) The year 2000 must be recognized as a leap year.

3.15 ENVIRONMENTAL MATTERS.

(a) Except as disclosed in the Company Filed Reports (i) neither the
Company nor any of its Subsidiaries has violated or is in violation of any
Environmental Law; (ii) none of the real property owned or leased by the Company
or any Subsidiary (including without limitation soils and surface and ground
waters) are contaminated with any Hazardous Substance in quantities which
require investigation or remediation under Environmental Laws; (iii) neither the
Company nor any of its Subsidiaries is liable for any off-site contamination;
(iv) neither the Company nor any of its Subsidiaries has any liability or
remediation obligation under any Environmental Law; (v) no assets of the Company
or any of its Subsidiaries are subject to pending or, to the Knowledge of the
Company, threatened Liens under any Environmental Law; (vi) the Company and its
Subsidiaries have all Permits required under any Environmental Law
("Environmental Permits"); and (vii) the Company and its Subsidiaries are in
compliance with their respective Environmental Permits.

(b) For purposes of this Agreement, the term (i) "Environmental
Laws" means any federal, state or local Law relating to: (A) releases or
threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (B) the manufacture, handling, transport, use, treatment, storage
or disposal of Hazardous substances or materials containing Hazardous
Substances; or (C) otherwise relating to pollution of the environment or the
protection of human health, and (ii) "Hazardous Substances" means: (A) those
materials, pollutants and/or substances defined in or regulated under the
following federal statutes and their state counterparts, as each may be
amended from time to time, and all regulations thereunder: the Hazardous
Materials Transportation Act, the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Clean Water Act, the Safe Drinking Water Act, the Atomic Energy Act, the
Federal Insecticide, Fungicide and Rodenticide Act and the Clean Air Act; (B)
petroleum and petroleum products including crude oil and any fractions
thereof; (C) natural gas, synthetic gas and any mixtures thereof; (D) radon;
and (E) any materials, pollutants and/or substance with respect to which any
Governmental Entity requires environmental investigation, monitoring,
reporting or remediation.

3.16 EMPLOYEE BENEFIT PLANS. Except as described in the Company Filed
Reports, (a) all employee benefit plans or programs maintained for the benefit
of the current or former employees or directors of the Company or any of its
Subsidiaries that are sponsored, maintained or contributed to by the Company or
any of its Subsidiaries, or with respect to which the Company or any of its
Subsidiaries has any liability, including without limitation any such plan that
is an "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income

<PAGE>

Security Act of 1974 ("ERISA"), are in compliance with all applicable
requirements of law, including ERISA and the Code, (b) neither the Company
nor any of its Subsidiaries has any liabilities or obligations with respect
to any such employee benefit plans or programs, whether accrued, contingent
or otherwise, nor to the Knowledge of the Company are any such liabilities or
obligations expected to be incurred and (c) neither the Company nor any of
its Subsidiaries is a party to any contract or other arrangement under which,
after giving effect to the Offer or the Merger, Parent or the Surviving
Corporation would be obligated to make any excess parachute payment within
the meaning of the Code. Except the Stock Option Plans, the execution of,
and performance of the transactions contemplated by, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any benefit plan, program, policy, arrangement or
agreement or any trust, loan or funding arrangement that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee.

3.17 STATE TAKEOVER STATUTES; POISON PILL.

(a) The Company Board has approved the Offer, the Merger, this
Agreement and the transactions contemplated hereby, and such approval is
sufficient to render inapplicable to the Offer, the Merger, this Agreement
and the transactions contemplated hereby, the provisions of Section 203 of
the DGCL. No other state "fair price," "merger moratorium," "control share
acquisition" or other state antitakeover or similar statute or state
regulation applies or purports to apply to the Merger, this Agreement, the
Offer or any of the transactions contemplated hereby.

(b) The Company and its Board of Directors have amended the Rights
Agreement between the Company and First National Bank of Boston, NA dated July
10, 1996 (the "Rights Agreement") (without redeeming the Rights issued
thereunder), which amendment has been provided to Parent, so that neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) cause any Rights issued pursuant to
the Rights Agreement to become exercisable, to be triggered or to separate from
the shares to which they are attached, (ii) cause the Parent or the Purchaser or
any of their affiliates to be an Acquiring Person (as defined in the Rights
Agreement) in connection with the transactions contemplated hereby or (iii)
trigger other provisions of the Rights Agreement, including giving rise to a
Distribution Date (as defined in the Rights Agreement) in connection with the
transactions contemplated hereby, and such amendment shall remain in full force
and effect from and after the date hereof.

3.18 VOTING REQUIREMENTS. The affirmative vote of the holders of a
majority of the issued and outstanding Shares, voting as a single class, at the
Company Stockholders' Meeting (as hereinafter defined) to adopt this Agreement
is the only vote of the holders of any class or series of the Company's capital
stock necessary to approve and adopt this Agreement and the transactions
contemplated hereby.

3.19 NO BROKERS. With the exception of the Company's retention of
BancBoston Robertson Stephens, Inc. the Company has not entered into any
contract, arrangement or understanding with any Person or firm which may result
in the obligation of the Company, Parent or Purchaser to pay any finder's fees,
brokerage or agent's commissions or other like payments in

<PAGE>

connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.

3.20 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of BancBoston Robertson Stephens, Inc. to the effect that, as of the
date hereof, the consideration to be received by the holders of Shares in the
Offer and the Merger is fair to such holders from a financial point of view.

3.21 OFFER DOCUMENTS; PROXY STATEMENT. (a) The proxy statement to be
sent to the stockholders of the Company in connection with a meeting of the
Company's stockholders to consider the Merger (the "Company Stockholders'
Meeting") or the information statement to be sent to such stockholders, as
appropriate (such proxy statement or information statement, as amended or
supplemented, is herein referred to as the "Proxy Statement"), at the date
mailed to the stockholders of the Company and at the time of the Company
Stockholders' Meeting (i) will comply in all material respects with the
applicable requirements of the Exchange Act and the rules and regulations
thereunder and (ii) will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Schedule 14D-9 will comply in all material
respects with the Exchange Act and the rules and regulations thereunder.
Neither the Schedule 14D-9 nor any of the information relating to the Company or
its Affiliates provided by or on behalf of the Company specifically for
inclusion in the Schedule 14D-1 or the Offer Documents will, at the respective
times the Schedule 14D-9, the Schedule 14D-1 and the Offer Documents or any
amendments or supplements thereto are filed with the SEC and are first
published, sent or given to stockholders of the Company, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they were made, not misleading. No
representation or warranty is made by the Company with respect to any
information supplied or approved by the Parent or the Purchaser specifically for
inclusion in the Proxy Statement or the Schedule 14D-9.

ARTICLE IV. REPRESENTATIONS OF THE PARENT AND THE PURCHASER

Each of Parent and Purchaser represents and warrants to the Company as of
the date of this Agreement as follows:

4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Parent is a
corporation duly incorporated, validly existing and in good standing under the
laws of Minnesota. Purchaser is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware. Parent is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of any other state of the United States in which the
character of the properties owned or leased by it or in which the transaction of
its business makes such qualification necessary, except where the failure to be
so qualified or to be in good standing would not prevent or materially delay
Parent's or Purchaser's ability to consummate the transactions contemplated
hereby (a "Parent Material Adverse Effect"). Parent has all requisite corporate
power and authority to own, operate and lease its properties and carry on its
business as now conducted.

<PAGE>

4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. Each of Parent
and the Purchaser has the requisite corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby to
be executed respectively by it. This Agreement, the Offer, the Merger and the
consummation by Parent and Purchaser of the transactions contemplated hereby
have been duly and validly authorized by the respective Boards of Directors of
Parent and Purchaser and by Parent as sole stockholder of Purchaser, and no
other corporate action on the part of Parent and Purchaser is necessary to
authorize this Agreement, the Offer and the Merger or to consummate the
transactions contemplated hereby or thereby. This Agreement constitutes, and
all agreements and documents contemplated hereby and thereby to be executed and
delivered by Parent or Purchaser will constitute (when executed and delivered
pursuant hereto), the valid and binding obligations of Parent or the Purchaser,
as the case may be, enforceable respectively against them in accordance with
their respective terms.

4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.

(a) The execution and delivery of this Agreement by Parent and the
Purchaser do not, and the consummation by Parent and Purchaser of the
transactions contemplated hereby will not, (i) conflict with or violate the
articles (certificate) of incorporation or bylaws of Parent or Purchaser, (ii)
subject to making the filings and obtaining the approvals identified in Section
4.3(b), conflict with or violate any Law or Order applicable to Parent or any of
its Subsidiaries or by which any property or asset of Parent or any of its
Subsidiaries is bound or affected or (iii) result in any breach of or constitute
a default (or an event which with notice or lapse of time or both would become a
default) under, result in the loss of a material benefit under or give to others
any right of termination, amendment, acceleration, increased payments or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or any of its Subsidiaries pursuant to, any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
Subsidiaries is a party or by which Parent or any of its Subsidiaries or any
property or asset of Parent or any of its Subsidiaries is bound or affected,
except, in the case of clauses (ii) and (iii) only, for any such conflicts,
violations, breaches, defaults or other occurrences which would not,
individually or in the aggregate, to have a Parent Material Adverse Effect.

(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement and the consummation of
the transactions contemplated hereby by either of them will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except for (i) applicable requirements, if any, of
the Exchange Act, (ii) the pre-merger notification requirements of the HSR Act
and (iii) the filing of a certificate of merger pursuant to the DGCL, and where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
have a Parent Material Adverse Effect.

4.4 NO BROKERS. Neither Parent or the Purchaser has entered into any
contract, arrangement or understanding with any Person or firm which may result
in the obligation of the Company to pay any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or the consummation of the transactions contemplated hereby.

<PAGE>

4.5 OFFER DOCUMENTS; PROXY STATEMENT. None of the information
supplied by the Parent, the Purchaser, their respective officers, directors,
representatives, agents or employees, for inclusion in the Proxy Statement, or
in any amendments thereof or supplements thereto, will, on the date the Proxy
Statement is first mailed to stockholders of the Company or at the time of the
Company Stockholders' Meeting, contain any statement which, at such time and in
light of the circumstances under which it will be made, will be false or
misleading with respect to any material fact, or will omit to state any material
fact necessary in order to make the statements therein not false or misleading
or necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the Company Stockholders' Meeting which has
become false or misleading. The Schedule 14D-1 will comply in all material
respects with the Exchange Act and the rules and regulations thereunder.
Neither the Schedule 14D-1 nor any of the information relating to Parent or its
Affiliates provided by or on behalf of Parent specifically for inclusion in the
Schedule 14D-9 will, at the respective times the Schedule 14D-1, the Schedule
14D-9 and the Offer Documents or any amendments or supplements thereto are filed
with the SEC and are first published, sent or given to stockholders of the
Company, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. No representation or warranty is made by Parent with
respect to any information supplied or approved by the Company specifically for
inclusion in the Schedule 14D-1.

4.6 FINANCING. Parent has funds sufficient to consummate the Offer
and the Merger on the terms contemplated by this Agreement, and at the
expiration of the Offer and the Effective Time, Parent and Purchaser shall have
available funds sufficient to perform their respective obligations under this
Agreement, including without limitation payment in full for all Shares validly
tendered in the Offer and all Shares (other than Dissenting Shares, Treasury
Shares and Parent Owned Shares) outstanding at the Effective Time and the pay
off of all outstanding balances under that certain Credit Agreement among the
Company, BankBoston N.A. and BankBoston N.A., as agent for Lenders, as amended
("Credit Agreement").

4.7 LITIGATION. As of the date hereof, there is no suit, action,
arbitration, proceeding, claim or investigation pending or threatened against
the Parent or Purchaser, nor is there any reasonable basis therefor, that
individually or in the aggregate could reasonably be expected to (i), except as
disclosed in the Parent SEC Documents, have a Parent Material Adverse Effect,
(ii) challenge or seek to enjoin or seek damages with respect to the Parent's or
Purchaser's entering into and performing this Agreement or impair the ability of
the Parent or Purchaser to perform their respective obligations under this
Agreement or (iii) prevent the consummation of any of the transactions
contemplated by this Agreement.

4.8 SEC DOCUMENTS.

(a) Parent has filed all forms, reports and documents required to be
filed by it with the SEC since October 1, 1995 (collectively, the "Parent
Reports"). As of their respective dates, the Parent Reports and any such
reports, forms and other documents filed by Parent with the SEC after the date
of this Agreement (i) complied, or will comply, in all material respects with
the applicable requirements of the Securities Act, the Exchange Act and the
rules and regulations thereunder and (ii) did not, or will not, contain any
untrue statement of a material fact or omit to

<PAGE>

state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading. The representation in the preceding sentence does
not apply to any misstatement or omission in any Parent Report filed prior to
the date of this Agreement which was superseded by a subsequent Parent Report
filed prior to the date of this Agreement. No Subsidiary of Parent is
required to file any report, form or other document with the SEC.

(b) Each of the financial statements included in or incorporated by
reference into the Parent Reports (including the related notes and schedules)
presents fairly, in all material respects, the consolidated financial position
of Parent and its Subsidiaries as of its date or, if applicable, the results of
operations, retained earnings or cash flows, as the case may be, of Parent and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to normal year-end audit adjustments), in each case in
accordance with generally accepted accounting principles consistently applied
during the periods involved, except as may be noted therein.

ARTICLE V. COVENANTS

5.1 CONDUCT OF BUSINESS.

(a) CONDUCT OF BUSINESS BY THE COMPANY. During the period from the
date of this Agreement to the Effective Time, the Company will, and will cause
its Subsidiaries to, carry on their respective businesses in the usual, regular
and ordinary course in substantially the same manner as heretofore conducted and
in compliance in all material respects with all applicable Laws and, to the
extent consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, use reasonable efforts to keep available the
services of their current officers and other key employees and preserve their
relationships with those Persons having business dealings with them to the end
that their goodwill and ongoing businesses will be unimpaired at the Effective
Time. Without limiting the generality or effect of the foregoing, except
pursuant to the terms and conditions of this Agreement or as expressly and
specifically described in Section 5.1 of the Company Disclosure Letter, during
the period from the date of this Agreement to the Effective Time, the Company
will not, and will not permit any of its Subsidiaries to:

(i) other than dividends and distributions (including
liquidating distributions) by a direct or indirect wholly owned
Subsidiary of the Company to its parent, or by a Subsidiary that is
partially owned by the Company or any of its Subsidiaries, provided that
the Company or any such Subsidiary receives its proportionate share
thereof, (A) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock, (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) purchase, redeem or
otherwise acquire any shares of capital stock of the Company or any of
its Subsidiaries or any other securities thereof or any rights, warrants
or options to acquire any such shares or other securities;

<PAGE>

(ii) except upon exercise of the Options or with respect to the
July 31, 1999 purchase under the 1994 Employee Stock Purchase Plan, as
amended ("ESPP"), issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities;

(iii) amend its certificate of incorporation, bylaws or other
comparable organizational documents;

(iv) acquire by merging or consolidating with, or by purchasing
a substantial portion of the assets of, or by any other manner, any
business or any corporation, limited liability company, partnership,
joint venture, association or other business organization or division
thereof;

(v) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of its properties or
assets, other than in the ordinary course of business consistent with
past practice;

(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of
the Company or any of its Subsidiaries, guarantee any debt securities of
another Person, enter into any "keep well" or other agreement to maintain
any financial statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing, except
for short-term borrowings incurred in the ordinary course of business
consistent with past practice or (B) make any loans, advances or capital
contributions to, or investments in, any other Person, other than to the
Company or any Subsidiary of the Company or to officers and employees of
the Company or any of its Subsidiaries for travel, business or relocation
expenses in the ordinary course of business;

(vii) make or agree to make any capital expenditure or capital
expenditures other than capital expenditures set forth in the capital
budget of the Company;

(viii) make any change to its accounting methods, principles or
practices, except as may be required by generally accepted accounting
principles;

(ix) except as required by Law or contemplated hereby, enter
into, adopt or amend in any material respect or terminate any Stock
Option Plan or any other agreement, plan or policy involving the Company
or any of its Subsidiaries and one or more of their directors, officers
or employees, or materially change any actuarial or other assumption used
to calculate funding obligations with respect to any Company pension
plans, or change the manner in which contributions to any Company pension
plans are made or the basis on which such contributions are determined;

(x) increase the compensation of any director or executive
officer of the Company or pay any benefit or amount not required by a
plan or arrangement as in effect on the date of this Agreement to any
such Person;

<PAGE>

(xi) hire any new domestic employees, or enter into consulting
or similar agreements, other than employees providing direct labor; or

(xii) authorize, or commit or agree to take, any of the foregoing
actions.

(b) MEETING OF STOCKHOLDERS. (i) The Company will take all action
necessary pursuant to applicable Law and its certificate of incorporation and
bylaws to convene a meeting of its Stockholders as promptly as practicable to
consider and vote upon the adoption of this Agreement. The Company Board will
recommend such adoption and the Company will each take all lawful action to
solicit such approval, including without limitation timely mailing any Proxy
Statement; PROVIDED, HOWEVER, if the Company Board determines in good faith,
after taking into account the advice of its legal counsel, that it is necessary
in order to comply with its fiduciary duties to the Company's stockholders under
applicable Law, the Company Board may change such recommendation or solicitation
(but not such action to convene the Company Stockholders' Meeting), including
any withdrawal or change of its recommendation. Without limiting the generality
or effect, the Company's obligations pursuant to the first sentence of this
Section 5.1(b) will not be affected by the commencement, public proposal, public
disclosure or communication to the Company of any Company Takeover Proposal.
(ii) Notwithstanding Section 5.1(b)(i), in the event that Parent, the Purchaser
or any other Subsidiary of Parent acquires at least 90% of the outstanding
shares pursuant to the Offer or otherwise, the Parties agree to take all
necessary and appropriate action to cause the Merger to become effective in
accordance with the DGCL without a meeting of stockholders of the Company as
soon as practicable after the acceptance for payment and purchase of Shares by
the Purchaser pursuant to the Offer. (iii) Purchaser shall vote all shares
owned by it for the Merger.

(c) ESOP. The Company shall discontinue the ESOP effective on the
date hereof; provided that purchases for the current period under the ESOP may
be completed provided that the allowable contributions thereunder are not
increased.

5.2 NO SOLICITATION.

(a) The Company, its Affiliates and their respective officers,
directors, employees, representatives and agents will immediately cease any
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any Company Takeover Proposal. The Company will not, nor will it
permit any of its Subsidiaries, to, nor will it authorize or permit any of its
officers, directors or employees or any investment banker, financial advisor,
attorney, accountant or other representative retained by it or any of its
Subsidiaries to, directly or indirectly, (i) solicit, initiate or encourage
(including without limitation by way of furnishing information), or take any
other action designed or reasonably likely to facilitate, any inquiries or the
making of any proposal which constitutes or reasonably may give rise to any
Company Takeover Proposal or (ii) participate in any discussions or negotiations
regarding any Company Takeover Proposal; PROVIDED, HOWEVER, that if, at any time
prior to the Purchase Date, the Company Board determines in good faith, after
taking into account the advice of its legal counsel, that it is necessary to do
so in order to comply with its fiduciary duties to the Company's stockholders
under applicable Law, the Company may, in response to a Company Takeover
Proposal that was not solicited by it and did not otherwise result from a breach
of any provision of this Agreement, (A) furnish information with respect to the
Company and each of its

<PAGE>

Subsidiaries to any Person pursuant to a customary confidentiality agreement
not more favorable to the recipient of such information than the
Confidentiality Agreement and (B) participate in negotiations regarding such
Company Takeover Proposal. For purposes of this Agreement, "Company Takeover
Proposal" means any inquiry, proposal or offer from any Person relating to
any direct or indirect acquisition or purchase of 25% more of the assets of
the Company and its Subsidiaries or 25% or more of any class of equity
securities of the Company or any of its Subsidiaries, any tender offer or
exchange offer for Shares or any class of equity securities of the Company or
any of its Subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
the Company or any of its Subsidiaries, other than the transactions
contemplated by this Agreement, or any other transaction that is intended or
could reasonably be expected to prevent the completion of the transactions
contemplated hereby.

(b) Except as expressly permitted by this Section 5.2(b), neither the
Company Board nor any committee thereof may (i) withdraw or modify, or propose
publicly to withdraw or modify, in a manner adverse to Parent or the Purchaser,
the approval or recommendation by the Company Board or such committee of the
Offer, the Merger or this Agreement, (ii) approve or recommend, or propose
publicly to approve or recommend, any Company Takeover Proposal or (iii) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other similar agreement related to any Company Takeover
Proposal (each, a "Company Acquisition Agreement"). Notwithstanding the
foregoing, in the event that prior to the Effective Time and not less than two
business days after notice of its intention to do so has been given Parent the
Company Board determines in good faith after receipt of a Superior Proposal and,
after taking into account the advice of its legal counsel, that it is necessary
to do so in order to comply with its fiduciary duties to the Company's
stockholders, the Company Board may withdraw or modify its approval or
recommendation of the Offer, the Merger or this Agreement, approve or recommend
a Company Takeover Proposal, or (iv) terminate this Agreement pursuant to
Section 7.3(c). For purposes of this Agreement, "Superior Proposal" means a
Company Takeover Proposal that (x) involves the direct or indirect acquisition
or purchase of 75% or more of the assets of the Company and its Subsidiaries or
75% or more of any class of equity securities of the Company or any of its
Subsidiaries and (y) which Company Takeover Proposal is otherwise on terms which
the Company Board determines in its good faith judgment (after consultation with
a financial advisor of nationally recognized reputation) to be reasonably
capable of being completed (taking into account all material legal, financial,
regulatory and other aspects of the proposal) and more favorable to the
Company's stockholders from a financial point of view than the Offer and the
Merger, and for which financing, to the extent required, is then committed or
which, in the good faith judgment of the Company Board, is capable of being
obtained by such third party.

(c) In addition to the obligations of the Company set forth in Section
5.2(a) and (b), the Company will (i) immediately advise Parent orally and in
writing of any request for information or of any Company Takeover Proposal, the
material terms and conditions of such request or Company Takeover Proposal and
the identity of the Person making such request or Company Takeover Proposal and
(ii) keep Parent reasonably informed of the status and details (including
amendments or proposed amendments) of any such request or Company Takeover
Proposal.

<PAGE>

(d) Nothing contained in this Section 5.2 will prohibit the Company
from taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act; PROVIDED, HOWEVER, that neither the
Company nor the Company Board nor any committee thereof may, except as expressly
permitted by Section 5.2, withdraw or modify, or propose publicly to withdraw or
modify, its position with respect to the Offer, this Agreement or the Merger or
approve or recommend, or propose publicly to approve or recommend, a Company
Takeover Proposal.

5.3 FILINGS, REASONABLE EFFORTS.

(a) Upon the terms and subject to the conditions set forth in this
Agreement, the Parties will use all reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other Parties in doing, all things, necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Offer, the Merger and the other transactions contemplated by this Agreement,
including without limitation, (i) seeking to obtain of all necessary actions or
nonactions, waivers, consents and approvals from Governmental Entities and
making of all necessary registrations and filings (including filings with
Governmental Entities) and taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) seeking to obtain of all necessary consents, approvals
or waivers from third parties, (iii) defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any adverse order entered by any court or other Governmental Entity vacated
or reversed and (iv) execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. Nothing set forth in this Section 5.3 will
limit or affect actions permitted to be taken pursuant to Section 5.2.

(b) In connection with and without limiting the foregoing, the Company
and Parent will, and Parent will cause the Purchaser to, (i) take all action
necessary to ensure that no state takeover statute or similar statute or
regulation is or becomes applicable to the Offer, the Merger or any of the other
transactions contemplated hereby, and (ii) if any state takeover statute or
similar statute or regulation becomes applicable thereto, take all action
necessary to ensure that the Offer and the Merger and such other transactions
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise to minimize the effect of such statute or regulation thereon.

5.4 INSPECTION OF RECORDS.

(a) From the date hereof to the Effective Time, the Company will (i)
allow all designated officers, attorneys, accountants and other representatives
of Parent reasonable access at all reasonable times to the offices, records and
files, correspondence, audits and properties, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of the parties and their respective
Subsidiaries, as the case may be and (ii) furnish to Parent and its counsel,
financial advisors, auditors and other authorized representatives such financial
and operating data and other information as such Persons may reasonably request.

<PAGE>

(b) Subject to the requirements of applicable Law, and except for such
actions as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer and the Merger, the Parties will,
and will instruct each of their respective Affiliates, associates, partners,
employees, agents and advisors to, hold in confidence all such information as is
confidential or proprietary, will use such information only in connection with
the Offer and the Merger and, if this Agreement is terminated in accordance with
its terms, will deliver promptly to the other (or destroy and certify to the
other the destruction of) all copies of such information (and any copies,
compilations or extracts thereof or based thereon) then in their possession or
under their control.

5.5 PUBLICITY. The initial press release relating to this Agreement
will be a joint press release and thereafter the Company and Parent will,
subject to their respective legal obligations (including requirements of stock
exchanges and other similar regulatory bodies), consult with each other, and use
reasonable efforts to agree upon the text of any press release, before issuing
any such press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any Governmental
Entity or with any national securities exchange with respect thereto.

5.6 PROXY STATEMENT. Parent and the Company will cooperate and
promptly prepare, and Company will file with the SEC as soon as practicable the
Proxy Statement and promptly thereafter will mail the Proxy Statement to its
stockholders. The Proxy Statement will contain the recommendation of the
Company Board that stockholders of the Company approve and adopt this Agreement
and approve the Merger and the other transactions contemplated hereby. If at
any time prior to the Company Stockholders Meeting any event or circumstance
relating to the Company or any of its Subsidiaries or Affiliates, or its or
their respective officers or directors, should be discovered by the Company that
is required to be set forth in a supplement to any Proxy Statement, the Company
shall promptly inform Parent and Purchaser to supplement such Proxy Statement
and mail such supplement to its stockholders.

5.7 FURTHER ACTIONS.

(a) Each party hereto will, subject to the fulfillment at or before
the Effective Time of each of the conditions of performance set forth herein or
the waiver thereof, perform such further acts and execute such documents as may
be reasonably required to effect the Merger.

(b) If, at any time after the Effective Time, the Surviving
Corporation considers or is advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights, properties or assets
of Purchaser or the Company or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of Purchaser or the Company, all
such deeds, bills of sale, assignments and assurances and to take and do, in the
name and on behalf of Purchaser or the Company, all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or assets in
the Surviving Corporation or otherwise to carry out this Agreement.

<PAGE>

5.8 INSURANCE; INDEMNITY.

(a) All rights to indemnification and exculpation from liabilities for
acts or omissions occurring at or prior to the Effective Time existing in favor
of the current or former directors or officers of the Company or each of its
Subsidiaries as provided in their respective certificate of incorporation or
bylaws (or comparable organizational documents) will be assumed by Parent and
Parent will be directly responsible for such indemnification, without further
action, as of the Effective Time and will continue in full force and effect in
accordance with their respective terms. In addition, from and after the
Effective Time, directors and officers of the Company who become or remain
directors or officers of Parent or the Surviving Corporation will be entitled to
the same indemnity rights and protections (including those provided by
directors' and officers' liability insurance) of Parent. Notwithstanding any
other provision hereof, the provisions of this Section 5.8 (i) are intended to
be for the benefit of, and will be enforceable by, each indemnified party, his
or her heirs and his or her representatives and (ii) are in addition to, and not
in substitution for, any other rights to indemnification or contribution that
any such Person may have by contract or otherwise.

(b) Parent will, and will cause the Surviving Corporation to, maintain
in effect for not less than three years after the Effective Time policies of
directors' and officers' liability insurance equivalent in all material respects
to those maintained by or on behalf of the Company and its Subsidiaries on the
date hereof (and having at least the same coverage and containing terms and
conditions which are no less advantageous to the Persons currently covered by
such policies as insured) with respect to matters existing or occurring at or
prior to the Effective Time; PROVIDED, HOWEVER, that if the aggregate annual
premiums for such insurance at any time during such period exceed per annum rate
of premium currently paid by the Company and its Subsidiaries for such insurance
on the date of this Agreement, then Parent will cause the Surviving Corporation
to, and the Surviving Corporation will, provide the maximum coverage that shall
then be available at an annual premium equal to such rate.

5.9 EMPLOYEE BENEFITS. Employees of the Company or its Subsidiaries
as of the Effective Time shall remain employees of the Company or its
Subsidiaries, as applicable, immediately following the Effective Time. From and
after the Effective Time, the Surviving Corporation will have sole discretion
over the hiring, promotion, retention, firing and other terms and conditions of
the employment of employees of the Surviving Corporation. Subject to the
immediately preceding sentence, Parent will provide, or will cause the Surviving
Corporation to provide, for the benefit of employees of the Surviving
Corporation or its Subsidiaries who were employees of the Company immediately
prior to the Effective Time, at the election of Parent, employee benefit plans
that are either (a) in the aggregate substantially comparable to the employee
benefit plans provided to such individuals by the Company on the date hereof or
(b) in the aggregate substantially comparable to the employee benefit plans
provided to similarly situated employees of Parent or its subsidiaries who were
not employees of the Company immediately prior to the Effective Time; PROVIDED,
HOWEVER, that notwithstanding the foregoing (i) nothing herein will be deemed to
require Parent to modify the benefit formulas under any pension plan of the
Company in a manner that increases the aggregate expenses thereof as of the date
hereof in order to comply with the requirements of ERISA, the Code or the Tax
Reform Act of 1986, (ii) employee stock ownership, stock option and similar
equity-based plans, programs and arrangements of the Company or any of its
Subsidiaries are not encompassed within the

<PAGE>

meaning of the term employee benefit plans hereunder, (iii) nothing herein
will obligate Parent or the Surviving Corporation to continue any particular
employee benefit plan for any period after the Effective Time and (iv) Parent
may substitute any benefit available to employees whom it determines are
similarly situated in other parts of its business for any employee benefit
under any such plan. Parent will cause the Surviving Corporation to honor
(subject to any withholdings under applicable Law) all employment, consulting
and severance agreements or arrangements to which the Company or any of its
Subsidiaries is presently a party, which are specifically disclosed in the
Company Disclosure Letter.)

5.10. CREDIT AGREEMENT. At and as of the Effective Time, Parent shall
provide all necessary funds and shall cause the Company to pay off all
outstanding balances under the Credit Agreement.

VI. CONDITIONS PRECEDENT

6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each Party to effect the Merger will be subject to the
fulfillment at or prior to the Closing Date of the following conditions:

(a) The Purchaser shall have made, or caused to be made, the
Offer and shall have purchased, or caused to be purchased, the Shares
pursuant to the Offer, provided, that this condition shall be deemed to
have been satisfied with respect to the obligation of the Parent and the
Purchaser to effect the Merger if the Purchaser fails to accept for
payment or pay for Shares pursuant to the Offer in violation of the terms
of the Offer or of this Agreement;

(b) This Agreement shall have been approved in the manner
required by applicable Law by the holders of the issued and outstanding
shares of capital stock of the Company; and

(c) No Order or Law enacted, entered, promulgated, enforced or
issued by any court of competent jurisdiction or other Governmental
Entity or other legal restraint or prohibition (collectively,
"Restraints") preventing the consummation of the Merger shall be in
effect.

6.2 CONDITIONS TO OBLIGATION OF PARENT AND PURCHASER TO EFFECT THE
MERGER. The obligation of Parent and Purchaser to effect the Merger will be
subject to the fulfillment at or prior to the Closing Date (or such other date
as may be specified below) of the additional condition that the Company shall
have performed in all material respects its agreements contained in this
Agreement required to be performed on or prior to the Closing Date.

<PAGE>

ARTICLE VII. TERMINATION

7.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated
and the transactions contemplated hereby may be abandoned at any time prior to
the Purchase Date, before or after the approval of this Agreement by the
stockholders of the Company, by the mutual consent of Parent and the Company.

7.2 TERMINATION BY EITHER PARENT OR COMPANY. This Agreement may be
terminated and the transactions contemplated hereby may be abandoned at any time
prior to the Purchase Date by action of the Board of Directors of either Parent
or the Company if (a) the Merger shall not have been consummated by December 31,
1999; provided, that no party may terminate this Agreement pursuant to this
Section 7.2(a) if such party's failure to fulfill any of its obligations under
this Agreement shall have been the reason that the Effective Time shall not have
occurred on or before said date, (b) any Governmental Entity shall have issued a
Restraint or taken any other action permanently enjoining, restraining or
otherwise prohibiting the consummation of the Offer, the Merger (or any of the
other transactions contemplated by this Agreement) and such Restraint or other
action shall have become final and nonappealable or (c) the Offer expires or is
terminated or withdrawn pursuant to its terms without any Shares being purchased
thereunder by the Purchaser as a result of the occurrence of any of the events
set forth in Annex A.

7.3 TERMINATION BY COMPANY. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Purchase Date, before or after the approval of the Agreement by the stockholders
of the Company, by action of the Board of Directors of the Company, if (a) there
has been a material breach by Parent or the Purchaser of any representation or
warranty contained in this Agreement which is not curable or, if curable, is not
cured by December 31, 1999 and such breach would have a Parent Material Adverse
Effect, (b) there has been a material breach of any of the covenants set forth
in this Agreement on the part of Parent or the Purchaser, which breach is not
curable or, if curable, is not cured within 30 days after written notice of such
breach is given by the Company to Parent or (c) in accordance with Section
5.2(b).

7.4 TERMINATION BY PARENT. This Agreement may be terminated and
the transactions contemplated hereby may be abandoned at any time prior to
the Purchase Date, before or after the approval of the Agreement by the
stockholders of the Company, by Parent, if (a) the Board of Directors of the
Company shall have (i) withdrawn or modified in a manner adverse to Parent or
Purchaser its approval or recommendation of this Agreement, the Offer or the
Merger or failed to reconfirm its approval or recommendation within five
business days after a written request to do so, (ii) approved or recommended,
or proposed publicly to approve or recommend, a third-party Company Takeover
Proposal to the Company's stockholders, (iii) caused the Company to take any
action referred to in Section 5.2 that would have constituted a breach
thereof but for the exceptions thereunder, including without limitation
authorizing the Company to enter into a Company Acquisition Agreement, (iv)
approved the breach of the Company's obligation under Section 5.2, or (v)
resolved to take any of the foregoing actions, (b) there has been a material
breach by the Company of any representation or warranty contained in this
Agreement which is not curable or, if curable, is not cured by December 31,
1999 and such breach had or would have a Company Material Adverse Effect, (c)
there has been a material breach of any of the covenants set forth in this
Agreement on the part of the Company, which breach is not curable or, if
curable,

<PAGE>

is not cured within five days after written notice of such breach is given by
Parent to the Company or (d) any Person or group (as defined in Section
13(d)(3) of the Exchange Act) other than the Parent, Purchaser or any of
their respective Affiliates shall have become the beneficial owner of more
than 10% of the shares.

7.5 EFFECT OF TERMINATION AND ABANDONMENT; TERMINATION FEE.

(a) In the event of termination of this Agreement pursuant to this
Article VII, all obligations of the parties hereto will terminate, except the
obligations of the parties pursuant to Sections 7.5 and 8.14. In the event of
termination of this Agreement, nothing herein will prejudice the ability of the
non-breaching party from seeking damages from any other party for any prior
breach of this Agreement, including without limitation attorneys' fees and the
right to pursue any remedy at law or in equity.

(b) (i) If this Agreement is terminated at such time that this
Agreement is terminable pursuant to Sections 7.2, 7.3(c) or 7.4, then (A) the
Company will not later than two business days after receipt of notice from
Parent pay to Purchaser an amount equal to Parent's documented Expenses, not to
exceed $600,000 and (B) in the event that (x) a Company Takeover Proposal is
made known to the Company or any of its Subsidiaries or has been made directly
to stockholders generally or any Person publicly announces an intention (whether
or not conditional) to make a Company Takeover Proposal and (y) thereafter this
Agreement is terminated (i) by either Parent or the Company pursuant to Section
7.2(a) or (c) or (2) by the Company pursuant to Section 7.3(c) or by Parent
pursuant to Section 7.4(a) or (d) the Company will pay to Purchaser a fee of
$1,500,000 cash; provided, however, that, if this Agreement is terminated by
Parent as a result of a breach by the Company, Parent may pursue any remedies
available to it at law or in equity and will, in addition to its expenses, be
entitled to recover such additional amounts as Purchaser may be entitled to
receive at law or in equity, in the event of termination by the Company
immediately prior to and as a condition of such termination and in the event of
a termination by Parent not later than two business days after termination.

(ii) This Section 7.5(b) will survive any termination of this
Agreement. The term "Expenses" means all out-of-pocket fees, costs and other
expenses incurred or assumed by Parent or Purchaser or incurred on their behalf
in connection with this Agreement or any of the transactions contemplated
hereby, including but not limited to in connection with the negotiation,
preparation, execution and performance of this Agreement, the structuring and
financing of the Merger and the other transactions contemplated hereby, or any
commitment or agreements relating to such financing, including, without
limitation, fees and expenses payable to all banks, investment banking firms,
other financial institutions and other Persons and their respective agents and
counsel for arranging, committing to provide or providing any financing for the
Merger and any other transactions contemplated hereby or structuring,
negotiating or advising with respect to such transactions or financing, and all
fees and expenses of counsel, accountants, experts and environmental, actuarial,
insurance and other consultants to Parent or Purchaser.

(iii) The Company acknowledges that the agreements contained in this
Section 7.5 (b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent and Purchaser would not
enter into this Agreement; accordingly, if the Company fails promptly to pay any
amount due pursuant to this Section 7.5(b), and, in order to

<PAGE>

obtain such payment, Parent or Purchaser commences a suit which results in a
judgment against the Company for the fee set forth in this Section 7.5(b) ,
the Company will pay to Parent and Purchaser their costs and expenses
(including attorneys' fees and expenses) in connection with such suit,
together with interest on the amount of the fee at the prime rate of Wells
Fargo Bank, N.A. in effect on the date such payment was required to be made.

VIII. GENERAL PROVISIONS

8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement will terminate at the Effective
Time, except that the covenants set forth in Sections 5.7, 5.8 and 5.9 will
survive the Effective Time indefinitely.

8.2 NOTICES. Any notice required to be given hereunder will be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:

If to Parent or Purchaser:

Innovex, Inc.
530 11th Avenue South
Hopkins, Minnesota 55343
Attention: William P. Murnane
President and Chief Operating Officer
Fax: (612) 979-0424

With copies to:

Dorsey & Whitney LLP
220 South Sixth Street
Pillsbury Center South
Minneapolis, Minnesota 55402
Attention: William B. Payne
Fax: (612) 340-8738

If to the Company:

ADFlex Solutions, Inc.
2001 W. Chandler Blvd.
Chandler, Arizona 85224
Attention: Neil Dial
President and Chief Operating Officer
Fax: (602) 786-8280

<PAGE>

With copies to:

Fennemore Craig
3003 North Central Avenue
Suite 2600
Phoenix, Arizona 85012-2913
Attention: Karen C. McConnell
Fax: (602) 816-5507

or to such other address as any party will specify by written notice so given,
and such notice will be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.

8.3 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the
rights, interests or obligations hereunder will be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon and will inure to the benefit of the parties
hereto and their respective successors and assigns. Notwithstanding anything
contained in this Agreement to the contrary, except for the provisions of
Section 5.8, nothing in this Agreement, expressed or implied, is intended to
confer on any Person other than the parties hereto or their respective heirs,
successors, executors, administrators and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.

8.4 ENTIRE AGREEMENT. This Agreement, Annex A, any documents
delivered by the parties in connection herewith and the confidentiality
agreement between Parent and the Company (the "Confidentiality Agreement") ,
which will survive the execution and delivery of this Agreement, constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings among the parties with respect
thereto. No addition to or modification of any provision of this Agreement will
be binding upon any party hereto unless made in writing and signed by all
parties hereto.

8.5 AMENDMENT. This Agreement may be amended by the parties hereto,
by action taken by their respective Board of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company but after any such stockholder approval, no
amendment will be made which by law requires the further approval of such
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.

8.6 GOVERNING LAW. This Agreement will be governed by and construed
in accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.

8.7 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
will be an original, but all such counterparts will together constitute one and
the same instrument. Each counterpart may consist of a number of copies hereof
each signed by less than all, but together signed by all of the parties hereto.

<PAGE>

8.8 HEADINGS. Readings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and will be given no substantive or
interpretive effect whatsoever.

8.9 CERTAIN DEFINITIONS/INTERPRETATIONS.

(a) For purposes of this Agreement:

(i) An "AFFILIATE" of any Person means another Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person;

(ii) "PERSON" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and

(iii) "KNOWLEDGE" of any Person which is not an individual means
the knowledge of any of such Person's executive officers after reasonable
inquiry.

(b) When a reference is made in this Agreement to an Article, Section
or Annex, such reference will be to an Article or section of, or an Annex to,
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and will not affect
in any way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they will be
deemed to be followed by the words "without limitation." The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this Agreement
will refer to this Agreement as a whole and not to any particular provision of
this Agreement. All terms used herein with initial capital letters have the
meanings ascribed to them herein and all terms defined in this Agreement will
have such defined meanings when used in any certificate or other document made
or delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein or in any agreement or instrument that is referred to herein means
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns.

8.10 WAIVERS. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, will be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by any party hereto of a
breach of any provision hereunder will not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.

<PAGE>

8.11 INCORPORATION OF ANNEX A. Annex A attached hereto is hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.

8.12 SEVERABILITY. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction will, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision will be
interpreted to be only so broad as is enforceable.

8.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties will be entitled
to seek an injunction or injunctions to prevent breaches of this Agreement and
to enforce specifically the terms and provisions hereof in any Delaware Court,
this being in addition to any other remedy to which they are entitled at law or
in equity.

8.14 EXPENSES. All fees and expenses incurred in connection with the
Offer, the Merger, this Agreement and the transactions contemplated thereby will
be paid by the party incurring such fees or expenses, whether or not the Merger
is consummated.

******

<PAGE>

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.

ADFLEX SOLUTIONS, INC.

By: /s/ Steve Sanghi
----------------------------------
Title: Chairman
----------------------------------

INNOVEX, INC.

By: /s/ Timothy S. McIntee
----------------------------------
Timothy S. McIntee

Title: Senior Vice President - Corporate
----------------------------------

INNOVEX ACQUISITION CORP.

By: /s/ Timothy S. McIntee
----------------------------------
Timothy S. McIntee

Title: Senior Vice President
----------------------------------

<PAGE>
ANNEX A

CONDITIONS TO COMPLETION OF THE OFFER

Notwithstanding any other provision of the Offer, the Purchaser will not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating
to Purchaser's obligation to pay for or return tendered Shares promptly after
expiration or termination of the Offer), to pay for any Shares, and, subject to
any such rules or regulations, may postpone the acceptance for payment or
payment for any Shares tendered, and, subject to the terms of the Agreement, may
amend or terminate the Offer (whether or not any Shares have theretofore been
purchased or paid for pursuant to the Offer) (i) unless the following conditions
have been satisfied: (a) there have been validly tendered and not withdrawn
prior to the Purchase Date that number of Shares which constitutes a majority of
the total number of the then outstanding Shares (including for purposes of this
calculation all Shares issuable upon exercise of all vested options and all
options that will vest on or before December 31, 1999 and conversion of
convertible securities or other rights to purchase or acquire Shares) sufficient
to approve the Merger (the "Minimum Condition") and (b) any applicable waiting
periods under the HSR Act shall have expired or been terminated or (ii) if at
any time on or after the date of the Merger Agreement and before the Purchase
Date (whether or not any Shares have theretofore been accepted for payment or
paid for pursuant to the Offer), any of the following shall have occurred:

(i) any Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order which is in effect, or there
shall be initiated, instituted or pending any such action having any
effect, and which (a) restricts, prevents or prohibits consummation of
the transactions contemplated by this Agreement, including the Offer or
the Merger, (b) prohibits, limits or otherwise adversely affects the
ownership or operation by Parent or any of its Subsidiaries of all or any
portion of the business or assets of the Company and its Subsidiaries or
compels the Company, Parent or any of their Subsidiaries to dispose of or
hold separate all or any portion of the business or assets of the Company
and its Subsidiaries, or (c) imposes material limitations on the ability
of the Purchaser to exercise effectively full rights of ownership of any
Shares, including the right to vote any Shares acquired by the Purchaser
pursuant to the Offer or otherwise on all matters properly presented to
the Company's stockholders;

(ii) the representations and warranties of the Company contained
in the Agreement shall not be true and correct in all material respects
as of the Purchase Date as though made anew as of such date;

(iii) the Company shall not have performed or complied in all
material respects with its covenants under the Agreement and such failure
continues until the later of (a) 15 calendar days after actual receipt by
it of written notice from Parent setting forth in detail the nature of
such failure or (b) the Purchase Date;

A-1

<PAGE>

(iv) there shall have occurred any change, effect, event or
condition constituting a Company Material Adverse Effect;

(v) the Agreement shall have been terminated in accordance with
its terms;

(vi) the Company Board shall have (a) withdrawn or materially
modified (including by amendment of Schedule 14D-9) in a manner adverse
to the Purchaser or Parent or taken a position inconsistent with its
approval or recommendation of the Offer, the Merger or this Agreement,
(b) approved or recommended any Company Takeover Proposal, (c) taken any
action referred to in Section 5.2 of the Agreement that is prohibited
thereby or would be so prohibited but for the exceptions thereto or (d)
resolved or publicly disclosed any intention to do any of the foregoing;

(vii) there shall have occurred (a) any general suspension of
trading in, or limitation on prices for, securities on the NYSE, (b) a
decline of at least 10% in either the Dow Jones Average of Industrial
Stocks or the Standard & Poor's 500 Index from the date of the Agreement,
(c) the declaration of a banking moratorium or any limitation or
suspension of payments in respect of the extension of credit by banks or
other lending institutions in the United States, (d) any commencement of
war, armed hostilities or other international or national calamity
directly involving the United States or having a significant adverse
effect on the functionality of financial markets in the United States, or
(e) in the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or worsening thereof;
or

(viii) it shall have been publicly disclosed or Parent shall have
otherwise learned that (a) any Person or "group" (as defined in Section
13(d) (3) of the Exchange Act), other than Parent or its affiliates or
any group of which any of them is a member or any affiliates controlled
by it, shall have acquired beneficial ownership (determined pursuant to
Rule 13d-3 promulgated under the Exchange Act) of more than 20% of the
outstanding Shares or (b) any Person or group shall have entered into a
Company Acquisition Agreement or an agreement in principle with respect
thereto.

Notwithstanding the foregoing the institution of an action or suit that
challenges the transactions contemplated by this Agreement shall not be deemed
the failure of the foregoing conditions except in the circumstances described in
clause (i) above.

The foregoing conditions are for the sole benefit of the Purchaser and
may be waived by the Purchaser or Parent on behalf of Purchaser, in whole or in
part, from time to time in its sole discretion. The failure by the Purchaser at
any time to exercise any of the foregoing rights will not be deemed a waiver of
any such right and each such right will be deemed an ongoing right and may be
asserted at any time and from time to time.

A-2

<PAGE>
EXHIBIT (c)(2)
June 30, 1999

Innovex, Inc.

Innovex Acquisition Corp.

In order to induce Innovex, Inc. ("Parent") and Innovex Acquisition
Corp. ("Purchaser") to enter into an Agreement and Plan of Merger (the
"Agreement") with ADFlex Solutions, Inc. (the "Company"), Purchaser has
requested the undersigned, and the undersigned has agreed, to enter into this
letter agreement with respect to all shares of capital stock of the Company
that the undersigned beneficially owns (the "Shares"). Capitalized terms
used but not separately defined herein shall have the meanings assigned to
such terms in the Agreement.

The undersigned agrees to vote all Shares that the undersigned is
entitled to vote at the time of any vote to approve and adopt the Agreement,
the Merger and all agreements related to the Merger and any actions related
thereto at any meeting of the stockholders of the Company, and at any
adjournment thereof, at which such Agreement and other related agreements (or
any amended version thereof), or such other actions, are submitted for the
consideration and vote of the stockholders of the Company. Unless and until
the Agreement is terminated in accordance with its terms, the undersigned
agrees that it will not vote any Shares in favor of the approval of any (i)
Company Acquisition Agreement, (ii) reorganization, recapitalization,
liquidation or winding up of the Company or any other extraordinary
transaction involving the Company, (ii) corporate action the consummation of
which would frustrate the purposes, or prevent or delay the consummation, of
the transactions contemplated by the Agreement or (iv) other matters relating
to, or in connection with any of the foregoing matters.

The undersigned hereby revokes any and all previous proxies granted with
respect to the Shares. The undersigned hereby grants a proxy appointing
Purchaser as attorney-in-fact and proxy, with full power of substitution, for
and in the undersigned's name, to vote, express, consent or dissent, or
otherwise to utilize such voting power in the manner contemplated by this
letter agreement above as Purchaser or its proxy or substitute shall, in
Purchaser's sole discretion, deem proper with respect to the shares. The
proxy granted hereby is irrevocable and is granted in consideration of
Purchaser entering into the Agreement and incurring certain related fees and
expenses. The proxy granted by the undersigned and all other rights
conferred upon the Purchaser under this letter shall be revoked upon
termination of the Agreement in accordance with its terms. The undersigned
shall use its reasonable effort to cause any record owner of Shares to grant
to Purchaser a proxy to the same effect as that contained herein; provided,
however, that the undersigned shall not be required to expend any monies in
the exercise of such efforts.

The undersigned hereby agrees to tender (and agrees that it will not
withdraw), pursuant to and in accordance with the terms of the Offer, the
Shares. Within five business days after the commencement of the Offer, the
undersigned shall deliver to the depositary designated in the Offer (i) a
letter of transmittal with respect to the Shares complying with the terms of
the Offer, (ii) certificates representing the Shares and (iii) all other
documents or instruments required to be delivered pursuant to the terms of
the Offer.

Very truly yours,

Havant International Holdings Limited

By: /s/ William Kennedy Wilkie
--------------------------------
Chief Executive