LUKENS MEDICAL CORP
PRE 14A, 1998-06-03
SURGICAL & MEDICAL INSTRUMENTS & APPARATUS
Previous: CANADA LIFE OF NEW YORK VARIABLE ANNUITY ACCOUNT 1, 497, 1998-06-03
Next: WEST COAST REALTY INVESTORS INC, PRE 14A, 1998-06-03






                            SCHEDULE 14A INFORMATION

                  Proxy Statement Pursuant to Section 14(a) of
                     the Securities and Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[X]  Preliminary Proxy Statement

[ ]  Confidential,  for  Use  of the  Commission  Only  (as  permitted  by  Rule
     14a-6(e)(2))

[ ]  Definitive Proxy Statement

[ ]  Definitive Additional Materials

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

                           LUKENS MEDICAL CORPORATION
- --------------------------------------------------------------------------------
                (Name of Registrant as Specified in Its Charter)

                           LUKENS MEDICAL CORPORATION
- --------------------------------------------------------------------------------
                   (Name of Person(s) Filing Proxy Statement)

Payment of Filing Fee (Check the appropriate box):
[ ]  No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.

     1)   Title of each class of securities to which transaction applies:
          COMMON STOCK, $.01 PAR VALUE

     2)   Aggregate number of securities to which transaction applies:
          3,093,359 SHARES OF COMMON STOCK, PAR VALUE $.01 PER SHARE

     3)   Per unit  price  or other  underlying  value of  transaction  computed
          pursuant to Exchange Act Rule O-11:
          $4.00 FOR THE COMMON STOCK, PAR VALUE $.01 PER SHARE

     4)   Proposed maximum aggregate value of transaction:
          $12,373,436.00

     (5)  Amount of filing fee:
          $2,474.69

[ ]  Fee paid previously with preliminary materials.
[ ]  Check box if any part of the fee is offset as provided by Exchange Act Rule
     O-11(a)(2)  and identify the filing for which the  offsetting  fee was paid
     previously.  Identify the previous filing by registration statement number,
     or the Form or Schedule and the date of its filing:

     1)   Amount previously paid:_______________________________________________
     2)   Form, schedule or registration statement no.:_________________________
     3)   Filing Party:_________________________________________________________
     4)   Date Filed:___________________________________________________________


<PAGE>



                           LUKENS MEDICAL CORPORATION
                         3820 Academy Parkway North, NE
                          Albuquerque, New Mexico 87109

                                                                 _________, 1998

To Our Stockholders:

     You are cordially  invited to attend a Special  Meeting of  Stockholders of
Lukens Medical  Corporation  (the "Company") to be held at 10:00 a.m. local time
on Tuesday, July 28, 1998 at ___________________, New York, New York.

     At this important  meeting,  you will be asked to consider and vote upon an
Agreement  and Plan of Merger  (the  "Merger  Agreement")  dated as of April 28,
1998,  among Medisys PLC  ("Medisys"),  a Scottish public limited  company,  LMC
Acquisition  Corp.  ("Merger  Sub"), a Delaware  corporation  and a wholly owned
subsidiary  of  Medisys,  and the Company  pursuant to which  Merger Sub will be
merged  with and into the Company  (the  "Merger"),  with the Company  being the
surviving  corporation  and wholly owned by Medisys.  If the proposed  Merger is
consummated,  the  Company's  stockholders  will be entitled to receive $4.00 in
cash for each  share of Common  Stock of the  Company,  par value $.01 per share
("Lukens Common Stock") owned by such stockholders.

     Approval and adoption of the Merger Agreement requires the affirmative vote
of the holders of a majority of the outstanding  shares of the Company,  as more
fully  described in the  accompanying  Proxy  Statement in the section  entitled
"Voting at the Special Meeting -- Record Date; Vote Required."

     YOUR  BOARD OF  DIRECTORS  BELIEVES  THAT THE MERGER IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS.  THE BOARD OF DIRECTORS HAS
UNANIMOUSLY  APPROVED  OF THE  TERMS OF THE  MERGER  AGREEMENT  AND  UNANIMOUSLY
RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.

     Sands  Brothers  & Co.,  Ltd.,  a  financial  advisor to the  Company,  has
rendered a written  opinion to the Board of  Directors of the Company that as of
the date of the Merger  Agreement,  the  consideration  to be  received  by each
stockholder of the Company in connection  with the Merger pursuant to the Merger
Agreement  is fair from a  financial  point of view to the  Company  and to such
stockholders.  A copy  of such  opinion  is  attached  as  Annex B to the  Proxy
Statement and should be read in its entirety by the holders of Common Stock.

     Important  information  regarding  the Company and the  proposed  Merger is
included  in the  enclosed  Proxy  Statement  which  contains  a  more  complete
description of the proposed Merger and the background thereof.  You are urged to
read the Proxy Statement carefully.

     Your  vote is  important.  Whether  or not you plan to attend  the  Special
Meeting,  please  complete,  sign and date your  proxy card and return it in the
enclosed envelope. If you do attend, you will be entitled to vote in person, and
such vote will revoke your proxy.

                                           Sincerely,

                                           -------------------------------------
                                           Robert S. Huffstodt
                                           President and Chief Executive Officer


<PAGE>



                           LUKENS MEDICAL CORPORATION
                         3820 Academy Parkway North, NE
                          Albuquerque, New Mexico 87109

     NOTICE IS HEREBY  GIVEN  that a special  meeting of the  stockholders  (the
"Special Meeting") of Lukens Medical  Corporation,  a Delaware  corporation (the
"Company"),  will be held at New York,  New York on  Tuesday,  July 28,  1998 at
10:00 a.m.  (local time) to (i) consider and vote upon a proposal to approve and
adopt the  Agreement  and Plan of Merger dated as of April 28, 1998 (the "Merger
Agreement"),  by and among the  Company,  Medisys  PLC  ("Medisys"),  a Scottish
public limited  company and LMC  Acquisition  Corp.  ("Merger  Sub"), a Delaware
corporation  and a wholly owned  subsidiary  of Medisys,  providing for a merger
(the  "Merger")  pursuant  to which  Merger Sub will be merged with and into the
Company, and each share of Common Stock, par value $.01 per share of the Company
(the "Lukens  Common  Stock") issued and  outstanding  immediately  prior to the
effective  date of the Merger  (the  "Effective  Date"),  other than  dissenting
shares and shares held by Medisys and its  subsidiaries,  will be converted into
the right to receive,  and will be exchangeable for, $4.00 in cash,  without any
interest  thereon;  and (ii)  transact  such other  business as may  properly be
brought before the Special Meeting or any adjournment or postponement thereof. A
copy of the Merger  Agreement is attached as Annex A to the  accompanying  Proxy
Statement.

     THE BOARD OF DIRECTORS OF THE COMPANY HAS  UNANIMOUSLY  DETERMINED THAT THE
MERGER AGREEMENT AND THE TRANSACTIONS  CONTEMPLATED  THEREBY,  TAKEN AS A WHOLE,
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS. THE
BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY  RECOMMENDS APPROVAL OF THE MERGER
BY THE COMPANY'S STOCKHOLDERS.

     All stockholders are cordially invited to attend the Special Meeting.  Only
stockholders of record at the close of business on June 30, 1998 are entitled to
notice of and to vote at the Special  Meeting or any  adjournment  thereof.  The
affirmative  vote  of a  majority  of the  shares  of the  Lukens  Common  Stock
outstanding  on such record  date is  necessary  to approve  the Merger.  PLEASE
COMPLETE,  SIGN AND DATE THE  ENCLOSED  PROXY  CARD AND MAIL IT IN THE  ENCLOSED
ENVELOPE WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING.

     If the Merger is approved by the stockholders of the Company at the Special
Meeting and the Merger  becomes  effective,  holders of Lukens  Common Stock who
comply with the requirements of Section 262 of the Delaware General  Corporation
Law, a copy of which is attached as Annex C to the accompanying Proxy Statement,
will be  entitled  to  dissenters'  rights  with  respect to their  shares.  See
"Dissenters'  Rights" in the  accompanying  Proxy Statement for a description of
the procedures to be followed to perfect dissenters' rights.

                      BY ORDER OF THE BOARD OF DIRECTORS

                      ----------------------------------------------------------
                      Robert S. Huffstodt, President and Chief Executive Officer

Dated:   ___________, 1998


<PAGE>



                           LUKENS MEDICAL CORPORATION
                         3820 Academy Parkway North, NE
                          Albuquerque, New Mexico 87109

                                 PROXY STATEMENT
                                       FOR
                         SPECIAL MEETING OF STOCKHOLDERS
                           TO BE HELD ON July 28, 1998

     This Proxy Statement is being furnished to the holders of Common Stock, par
value $.01 per share ("Lukens  Common  Stock"),  of Lukens  Medical  Corporation
("Lukens" or the "Company"),  in connection with the  solicitation of proxies by
the Board of  Directors  of the Company  for use at the  special  meeting of the
stockholders  of the Company to be held at 10:00 a.m.,  local time,  on July 28,
1998 at _______,  New York,  New York, and at any  adjournment  or  postponement
thereof (the "Special Meeting").

     The  purpose  of the  Special  Meeting  is to  consider  and  vote  upon an
Agreement  and Plan of Merger  (the  "Merger  Agreement")  dated as of April 28,
1998,  among Medisys PLC  ("Medisys"),  a Scottish public limited  company,  LMC
Acquisition  Corp.  ("Merger  Sub"), a Delaware  corporation  and a wholly owned
subsidiary  of  Medisys,  and the Company  pursuant to which  Merger Sub will be
merged  with and into the Company  (the  "Merger"),  with the Company  being the
surviving  corporation  and wholly owned by Medisys.  If the proposed  Merger is
consummated,  the  Company's  stockholders  will be entitled to receive $4.00 in
cash for each share of Lukens Common Stock owned by such stockholders.

     This  Proxy  Statement  is  dated  _______,  1998  and is,  along  with the
accompanying  form of proxy,  first being distributed to the stockholders of the
Company on or about such date.




<PAGE>



                              AVAILABLE INFORMATION

     Lukens is  subject  to the  informational  requirements  of the  Securities
Exchange  Act of 1934,  as  amended  (the  "Exchange  Act") and,  in  accordance
therewith,  files periodic reports,  proxy and information  statements and other
information with the SEC. Lukens'  registration  statements  (including exhibits
thereto),  as well as such reports,  proxy and information  statements and other
information,  may be  inspected  and copied at the public  reference  facilities
maintained by the SEC at Room 1024,  Judiciary  Plaza,  450 Fifth Street,  N.W.,
Washington,  D.C.  20549 and are  available  for  inspection  and copying at the
public  reference  facilities  maintained  by the  regional  offices  of the SEC
located  at 7 World  Trade  Center,  Suite  1300,  New York,  New York 10048 and
Citicorp  Center,  500  West  Madison  Street,  Suite  1400,  Chicago,  Illinois
60661-2511.  Copies of such  information can be obtained by mail from the Public
Reference  Section of the SEC, Room 1024,  450 Fifth Street,  N.W.,  Washington,
D.C. 20549, at prescribed rates.

     The SEC  maintains a World Wide Web site that contains  reports,  proxy and
information  statements and other  information  regarding  registrants that file
electronically   with  the  SEC.   The   address   of  the  SEC's  web  site  is
http:\\www.sec.gov.




<PAGE>



                                TABLE OF CONTENTS

SUMMARY  ......................................................................1
         The Parties...........................................................1
         The Special Meeting...................................................1
         Record Date; Vote Required............................................1
         Background of the Merger..............................................2
         Recommendation of Lukens' Board of Directors..........................2
         Opinion of Financial Advisor..........................................2
         Interests of Certain Persons in the Merger............................2
         Certain Federal Income Tax Consequences...............................3
         Regulatory Approvals..................................................3
         Effective Date........................................................3
         Conditions to the Merger..............................................3
         Treatment of Stock Options............................................3
         Termination...........................................................3
         Dissenters' Rights....................................................4
         Cancellation of Stock Certificates....................................4

VOTING AT THE SPECIAL MEETING..................................................5
         Introduction..........................................................5
         Time, Date and Place of Meeting.......................................5
         Record Date; Vote Required............................................5
         Quorum   .............................................................5
         Solicitation, Revocation and Use of Proxies...........................5
         Dissenters' Rights....................................................6
         Trading Market for and Market Price of Lukens Common Stock............6

FACTORS TO BE CONSIDERED.......................................................6
         Purposes and Effects of the Merger....................................6
         Background of the Merger..............................................7
         Recommendation of the Board of Directors; Fairness of the Merger......9
         Opinion of Financial Advisor.........................................11
         Interests of Certain Persons in the Merger; Indemnification..........12
         Accounting Treatment.................................................13
         Certain Effects of the Merger........................................13
         Certain Federal Income Tax Consequences .............................14
         Regulatory and Other Approvals.......................................15

MERGER AGREEMENT..............................................................15
         The Merger...........................................................15
         Representations and Warranties.......................................16
         Certain Covenants....................................................17
              Conduct of Business by the Company Pending the Merger...........17
              Stockholder Approval; Proxies...................................18
              Employee Matters................................................18
              Indemnification.................................................18
              Alternative Proposals...........................................18
              Cancellation of Warrants; Repayment of Loans from Affiliates....19




<PAGE>



              Agreement of Principal Stockholders.............................19
              Fairness Opinion................................................20
              Miscellaneous...................................................20
         Conditions to the Merger.............................................20
         Termination..........................................................20
         Non-Survival of Representations, Warranties and Agreements...........22
         Fees and Expenses....................................................22

DISSENTERS' RIGHTS............................................................22

BUSINESS OF THE COMPANY.......................................................24
         Products ............................................................25
              Suture Products.................................................25
              Bone Wax .......................................................26
         Ulster Product Lines.................................................26
              Lancets, Needles and Accessories................................26
              Dispettes.......................................................26
              Infection Control Kits..........................................26
         Pro-Tec Product Lines................................................26
         New Products ........................................................27
         India Joint Venture..................................................27
         Brazil Joint Venture.................................................27
         Sales, Marketing and Customers.......................................27
              Product Sales...................................................27
              Marketing Strategy..............................................27
              Customers.......................................................28
         Research and Development Activities..................................28
         Production and Quality Assurance.....................................28
         Suppliers............................................................29
         Competition..........................................................30
         Government Regulations...............................................30
         Patents and Proprietary Rights.......................................31
         Product Liability and Insurance......................................32
         Employees............................................................33
         Description of Property..............................................33
         Legal Proceedings....................................................33

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
         AND MANAGEMENT OF THE COMPANY........................................33

CERTAIN TRANSACTIONS..........................................................34

MARKET INFORMATION REGARDING LUKENS COMMON STOCK .............................35

LUKENS DIVIDEND POLICY........................................................36

MANAGEMENT'S DISCUSSION AND ANALYSIS OF LUKENS' FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS .................................36
         Results of Operations................................................36
         Liquidity and Capital Resources......................................37
         Other Information....................................................39




<PAGE>



INFORMATION REGARDING MEDISYS AND MERGER SUB..................................39

FINANCIAL INFORMATION.........................................................40

FEES AND EXPENSES.............................................................40

OTHER MATTERS.................................................................40

1998 ANNUAL MEETING OF STOCKHOLDERS...........................................40

INDEPENDENT CERTIFIED ACCOUNTANTS.............................................40

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS...................................F-1



Annex A -- Merger Agreement

Annex B -- Fairness Opinion of Sands Brothers & Co., Ltd.

Annex C -- Section 262 of Delaware General Corporation Law




<PAGE>



                                     SUMMARY

     The following is a brief summary of certain information contained elsewhere
in this Proxy Statement or incorporated herein by reference. This summary is not
intended to be complete  and is  qualified  in its  entirety by reference to the
more detailed  information  appearing elsewhere in, or incorporated by reference
in, this Proxy Statement and the Annexes hereto.  Capitalized  terms used herein
without  definition  have the meanings  ascribed to them elsewhere in this Proxy
Statement.  STOCKHOLDERS ARE URGED TO REVIEW THE ENTIRE PROXY STATEMENT, AND THE
ANNEXES HERETO, CAREFULLY.

THE PARTIES

     Lukens  Medical  Corporation,  a  Delaware  corporation  ("Lukens"  or  the
"Company"), is engaged in the design,  development,  manufacturing and marketing
of wound  closure  products and other  devices for use in the medical  industry,
including,  without  limitation,  suture  products,  bone wax,  lancets,  sharps
containers and diagnostic  devices.  Suture  products  include  sutures  (suture
material  attached to a surgical  needle) and  ligatures  (suture  materials not
attached to a surgical needle).  The Company's  principal  executive offices are
located at 3820 Academy Parkway North NE,  Albuquerque,  New Mexico 87109, (505)
342-9638.

     Medisys PLC, a Scottish  public limited company  ("Medisys"),  is a medical
technology company providing  products,  through its divisions and subsidiaries,
to the point of care environment, at present focused on two markets -- the point
of care and over the  counter  diagnostics  market and the  market  for  on-site
disposal of  biohazardous  medical  waste..  LMC  Acquisition  Corp., a Delaware
corporation  and a wholly  owned  subsidiary  of Medisys  ("Merger  Sub"),  is a
corporation  recently  organized  in  connection  with  the  Merger  and has not
conducted  any other  business.  Medisys' and Merger Sub's  principal  executive
offices are  located at Walmar  House,  288-292  Regent  Street,  London W1R SH8
England, (011) 44-171-436-3353

THE SPECIAL MEETING

     The special meeting (the "Special  Meeting") of stockholders of Lukens will
be  held  at  10:00  a.m.   (local  time)  on  Tuesday,   July  28,   1998,   at
_________________, New York, New York.

     The  Special  Meeting  will be held to permit  holders  of shares of Lukens
Common  Stock to  consider  and vote upon a proposal  to  approve  and adopt the
Agreement  and Plan of Merger,  dated as of April 28,  1998,  a copy of which is
attached hereto as Annex A (the "Merger Agreement"),  among Lukens, Medisys, and
Merger Sub  providing  for the merger of Merger  Sub with and into  Lukens  (the
"Merger") and the conversion,  upon consummation of the Merger, of all shares of
Common Stock,  par value $.01 per share of Lukens ("Lukens Common Stock") issued
and  outstanding  immediately  prior to the Effective  Date of the Merger (other
than dissenting shares and shares held by Medisys and its subsidiaries) into the
right to receive,  and be exchangeable for, $4.00 in cash,  without any interest
thereon (the "Merger Consideration"). See "Voting at the Special Meeting."

RECORD DATE; VOTE REQUIRED

     Only  holders of record of Lukens  Common Stock as of the close of business
on June 30, 1998 (the "Record Date"),  will be entitled to notice of and to vote
at the Special  Meeting.  On the Record Date,  3,093,359 shares of Lukens Common
Stock were outstanding.

     Under the Delaware  General  Corporation Law (the "DGCL") and the Company's
bylaws, the presence, in person or by proxy, of the holders of a majority of the
shares of Lukens  Common  Stock  outstanding  on the Record Date is necessary to
constitute a quorum at the Special Meeting. Stockholders of record on the Record
Date are entitled to one vote per share on any matter  which may  properly  come
before the Special Meeting.  Under the DGCL, the affirmative vote of the holders
of a majority  of the shares of Lukens  Common  Stock is required to approve the
Merger Agreement. The obligations of Lukens and Medisys to consummate the Merger
are subject, among other things, to the



<PAGE>



condition  that the  affirmative  vote of the holders of a majority of shares of
Lukens  Common  Stock  shall  have  been  obtained.  See  "Merger  Agreement  --
Conditions to the Merger." The Board of Directors of Lukens unanimously approved
the Merger  Agreement on April 27, 1998.  The Board of Directors of Medisys also
has approved the Merger Agreement.

     As of the Record Date, the directors and executive officers of Lukens owned
885,857 shares of Lukens Common Stock  (representing  approximately 28.6% of the
total outstanding  shares of Lukens Common Stock). See "Factors to be Considered
- - -- Interests of Certain Persons in the Merger;  Indemnification" and "Security
Ownership of Certain  Beneficial Owners and Management of the Company." Pursuant
to the Merger Agreement and subject to the qualifications se forth therein, each
of Messrs.  Robert L.  Priddy,  John H.  Robinson and John P. Holmes have agreed
that from and after the date of the Merger  Agreement  until August 31, 1998, or
such earlier date as the Merger  Agreement shall be terminated that he shall not
transfer  or pledge his shares of Lukens  Common  Stock and he shall vote all of
his shares of Lukens Common Stock in favor of the Merger.  See "Merger Agreement
- -- Certain Covenants -- Agreement of Principal Stockholders."

BACKGROUND OF THE MERGER

     For a  description  of the events  leading up to the approval of the Merger
Agreement  by the Board,  see "Factors to be  Considered  --  Background  of the
Merger."

RECOMMENDATION OF LUKENS' BOARD OF DIRECTORS

     THE BOARD OF DIRECTORS OF LUKENS HAS UNANIMOUSLY DETERMINED THAT THE MERGER
AGREEMENT AND THE TRANSACTIONS  CONTEMPLATED THEREBY, TAKEN AS A WHOLE, ARE FAIR
TO, AND IN THE BEST  INTERESTS  OF,  LUKENS AND ITS  STOCKHOLDERS.  THE BOARD OF
DIRECTORS OF LUKENS UNANIMOUSLY  RECOMMENDS  APPROVAL OF THE MERGER AGREEMENT BY
LUKENS'  STOCKHOLDERS.  For a discussion  of the factors  considered  by Lukens'
Board of Directors in approving  the Merger,  see "Factors to be  Considered  --
Recommendation of the Board of Directors; Fairness of the Merger."

OPINION OF FINANCIAL ADVISOR

     The Board has retained  Sands  Brothers & Co., Ltd.  ("Sands  Brothers") to
deliver  to the Board of  Directors  of Lukens a written  opinion  dated May 15,
1998,  to the effect  that,  as of the date of such  opinion  and based upon and
subject to certain matters stated therein,  the Merger  Consideration  was fair,
from a financial point of view, to the holders of Lukens Common Stock.  The full
text of the written  opinion of Sands  Brothers  dated May 15, 1998,  which sets
forth the  assumptions  made,  matters  considered and limitations on the review
undertaken,  is attached as Annex B to this Proxy  Statement  and should be read
carefully  in its  entirety.  The  opinion of Sands  Brothers is directed to the
Board of  Directors  of Lukens and  relates  only to the  fairness of the Merger
Consideration  from a financial point of view, does not address any other aspect
of the Merger or related  transactions  and does not constitute a recommendation
to any  stockholder  as to how  such  stockholder  should  vote  at the  Special
Meeting. See "Factors to be Considered -- Opinion of Financial Advisor."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

     On the  Effective  Date,  pursuant  to the  Merger  Agreement  (i)  certain
warrants to purchase  shares of Lukens Common Stock held by a director of Lukens
shall be canceled and the holder  thereof shall have the right to receive a cash
payment in exchange therefor, (ii) loans by certain directors of Lukens shall be
converted  into the  right to  receive  a cash  payment  (either  comprising  or
including, as the case may be, all accrued and unpaid interest on such loan) and
the issuance to such directors of shares of Medisys ordinary  shares,  par value
1p per share,  and (iii) the conversion of employee stock options into the right
to purchase  Medisys ordinary shares (which options are held by one director and
certain officers).  Furthermore,  pursuant to the Merger Agreement,  Medisys and
Merger Sub have agreed to cause the

                                       -2-

<PAGE>



Surviving  Corporation to continue to indemnify the present and former  officers
and directors of Lukens to the fullest extent  provided under Lukens's  Articles
of  Incorporation  and  Bylaws,  as in effect on the date of the  Merger,  for a
period  of  three  years  following  the  Effective  Date.  See  "Factors  to be
Considered -- Interests of Certain Persons in the Merger; Indemnification."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

     Each Lukens stockholder will generally  recognize gain or loss, for federal
income tax purposes,  in an amount equal to the difference between the amount of
cash received by such  stockholder  for his or her shares of Lukens Common Stock
pursuant  to the  Merger  and the  adjusted  tax  basis in such  shares.  Lukens
stockholders   should  read  carefully  the  discussion  under  "Factors  to  be
Considered -- Certain Federal Income Tax  Consequences" and are urged to consult
their own tax  advisors as to the tax  consequences  of the Merger to them under
federal, state, local or any other applicable law.

REGULATORY APPROVALS

     Lukens is not aware of any  governmental or regulatory  approvals  required
for  consummation  of the Merger  other than the  filing of the  Certificate  of
Merger with the Secretary of State of the State of Delaware.  See "Factors to be
Considered -- Regulatory Approvals."

EFFECTIVE DATE

     Under the Merger  Agreement,  the  required  filing of the  Certificate  of
Merger is expected to be made as soon as practicable  after the  satisfaction or
waiver of all  conditions  to the Merger,  including  the approval of the Merger
Agreement by the stockholders of Lukens at the Special Meeting.  The Merger will
be effective as of the date and time of filing of a  Certificate  of Merger with
the Secretary of State of the State of Delaware in  accordance  with the DGCL or
at  such  time  thereafter  as  provided  in such  Certificate  of  Merger  (the
"Effective Date"). See "Merger Agreement -- The Merger."

CONDITIONS TO THE MERGER

     The obligations of Lukens,  Merger Sub and Medisys to consummate the Merger
are subject to the  approval of the Merger by the  stockholders  of Lukens.  The
Merger also is subject to certain other customary closing conditions that may be
waived by the parties, subject to applicable law and certain limitations imposed
by the Merger  Agreement.  Lukens  does not  presently  intend to waive any such
conditions  although it reserves  the right to do so. See "Merger  Agreement  --
Conditions to the Merger."

TREATMENT OF STOCK OPTIONS

     Each  outstanding  option to purchase  Lukens  Common  Stock under  Lukens'
employee  stock option plan shall be assumed by Medisys at the  Effective  Date,
and each such  option  shall  become an option to  purchase a number of ordinary
shares of Medisys,  par value 1p, equal to the number of shares of Lukens Common
Stock  subject to each such option  multiplied  by the "Option  Exchange  Ratio"
which is defined in the Merger  Agreement  as the ration of  (x)$4.00 to (y) the
U.S.  dollar  equivalent of the average of the  middle-market  closing price per
share of Medisys  ordinary  shares on the Alternative  Investment  Market of the
London Stock  Exchange,  as shown in the "London Stock  Exchange  Daily Official
List," for each of the ten trading  days  ending two  trading  days prior to the
Effective Date. See "Merger Agreement -- The Merger."

TERMINATION

     The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective  Date by mutual  written  consent of Medisys,  Lukens and
Merger Sub, or by either Lukens or Medisys in certain other

                                       -3-

<PAGE>



circumstances,  in  accordance  with the  termination  provisions  of the Merger
Agreement,  including, without limitation, the right of Medisys to terminate the
Merger  Agreement at any time prior to June 30, 1998 in the event that they fail
to obtain a commitment to obtain the necessary  financing on terms acceptable to
Medisys in its sole  discretion,  and Lukens'  ability to  terminate  the Merger
Agreement  at any time after June 30,  1998 in the event that  Medisys  does not
provide Lukens with a letter affirming the fact that all necessary financing has
been committed. See "Merger Agreement -- Termination."

DISSENTERS' RIGHTS

     Under Section 262 of the DGCL, stockholders who do not vote in favor of the
Merger Agreement nor consent thereto in writing,  and file demands for appraisal
prior to the stockholder  vote on the Merger  Agreement and who otherwise comply
with the  requirements of Section 262 of the DGCL, upon the  consummation of the
Merger,  have the right to obtain a cash  payment for the "fair  value" of their
shares of Lukens Common Stock.  In order to exercise such rights,  a stockholder
must  comply  with all the  procedural  requirements  of Section 262 of the DGCL
("Section  262"),  a description  of which is provided in  "Dissenters'  Rights"
herein and the full text of which is attached to this proxy  statement  as Annex
C. Such "fair value" would be determined in judicial proceedings,  the result of
which cannot be predicted.  Failure to take any steps required under Section 262
may result in a loss of such dissenters' rights.

CANCELLATION OF STOCK CERTIFICATES

     Promptly  following  the  Effective  Date,  notice of  consummation  of the
Merger,   together  with  a  letter  of  transmittal  for  use  in  surrendering
certificates  representing  shares of Lukens  Common  Stock in exchange  for the
Merger  Consideration,  will be mailed by a bank or trust  company or such other
person  designated by Medisys prior to the Effective Date as to the paying agent
(the  "Paying  Agent")  to  holders  of shares of Lukens  Common  Stock.  DO NOT
SURRENDER  YOUR  CERTIFICATES  OF LUKENS  COMMON  STOCK  UNTIL YOU  RECEIVE  AND
COMPLETE SUCH LETTER OF TRANSMITTAL. See "Merger Agreement -- The Merger."

                                       -4-

<PAGE>



                          VOTING AT THE SPECIAL MEETING

INTRODUCTION

     This Proxy  Statement is furnished in connection  with the  solicitation of
proxies by the Board of  Directors  of Lukens for the  Special  Meeting.  At the
Special Meeting, the stockholders of Lukens will consider and vote on a proposal
to approve the Merger Agreement.

TIME, DATE AND PLACE OF MEETING

     The Special  Meeting  will be held at 10:00 a.m.  (local  time) on Tuesday,
July 28, 1998 at ____________________, New York, New York.

RECORD DATE; VOTE REQUIRED

     The Board of  Directors  of Lukens has fixed the close of  business on June
30,  1998,  as the record  date (the  "Record  Date") for the  determination  of
stockholders  entitled  to  notice  of  and to  vote  at  the  Special  Meeting.
Accordingly,  only  stockholders of record of Lukens at the close of business on
the Record  Date have the right to receive  notice of and to vote at the Special
Meeting and any postponement or adjournment  thereof and will be entitled to one
vote for each share of Lukens  Common Stock held.  As of the Record Date,  there
were 3,093,359 shares of Lukens Common Stock outstanding,  held by approximately
83 holders of record.

     As of the Record Date, the directors and executive officers of Lukens owned
885,857 shares of Lukens Common Stock  (representing  approximately 28.6% of the
total outstanding  shares of Lukens Common Stock). See "Factors to be Considered
- - -- Interests of Certain Persons in the Merger;  Indemnification" and "Security
Ownership of Certain  Beneficial Owners and Management of the Company." Pursuant
to the Merger Agreement and subject to the qualifications se forth therein, each
of Messrs.  Robert L.  Priddy,  John H.  Robinson and John P. Holmes have agreed
that from and after the date of the Merger  Agreement  until August 31, 1998, or
such earlier date as the Merger  Agreement shall be terminated that he shall not
transfer  or pledge his shares of Lukens  Common  Stock and he shall vote all of
his shares of Lukens Common Stock in favor of the Merger.  See "Merger Agreement
- -- Certain Covenants -- Agreement of Principal Stockholders."

     Under the DGCL, the affirmative vote of holders of a majority of the shares
of Lukens Common Stock  outstanding as of the Record Date is required to approve
the Merger Agreement. Accordingly, abstentions and broker nonvotes will have the
effect of votes against the Merger Agreement.

     The Board of Directors of Lukens unanimously  determined on April 27, 1998,
that the Merger Agreement and the transactions  contemplated thereby, taken as a
whole,  are fair to, and in the best interests of, Lukens and its  stockholders.
The Board of Directors of Lukens  unanimously  approved the Merger Agreement and
recommends approval of the Merger Agreement by Lukens' stockholders. Each of the
Boards of  Directors  of  Medisys  and  Merger  Sub,  and  Medisys,  as the sole
stockholder of Merger Sub, have approved the Merger and the Merger Agreement.

QUORUM

     The  presence  in person or by  properly  executed  proxy of  holders  of a
majority of the issued and  outstanding  shares of Common  Stock is necessary to
constitute a quorum at the Special Meeting.

SOLICITATION, REVOCATION AND USE OF PROXIES

     Shares of Lukens  Common Stock  represented  by a properly  executed  proxy
received by Lukens  will,  unless such proxy is  properly  revoked  prior to the
Special  Meeting,  be  voted  at the  Special  Meeting  in  accordance  with the
instructions  thereon.  Shares of Lukens  Common Stock  represented  by properly
executed proxies that do not contain

                                       -5-

<PAGE>



instructions to the contrary will be voted FOR approval of the Merger and in the
discretion  of the proxy holder as to any other  matter that may  properly  come
before the Special Meeting or any adjournment or postponement thereof. The Board
of  Directors of Lukens knows of no other  business  that will be presented  for
consideration  at the  Special  Meeting  other than the  proposal to approve the
Merger.  If other matters  should  properly  come before the meeting,  the proxy
holders  will vote on such  matters in  accordance  with  their best  judgments.
Proxies  are being  solicited  hereby on  behalf  of the Board of  Directors  of
Lukens.

     Any  stockholder may revoke his or her proxy at any time before it is voted
by executing and  delivering to the  Secretary of Lukens,  at Lukens'  principal
executive  offices as set forth above,  an  instrument  of revocation or a proxy
bearing a later date,  and by  delivering a written  notice to the  Secretary of
Lukens stating that the proxy is revoked,  or by voting in person at the Special
Meeting.

     The  cost  of  soliciting   proxies,   including  the  cost  of  preparing,
assembling,  printing  and  mailing  this  Proxy  Statement,  the  Proxy and any
additional soliciting materials furnished to stockholders,  will be borne by the
Company and Medisys.  Arrangements  will be made with brokerage houses and other
custodians,  nominees and fiduciaries to send proxies and proxy materials to the
beneficial  owners  of  stock,  and such  persons  may be  reimbursed  for their
expenses.  Proxies may be solicited by  directors,  officers or employees of the
Company  in person or by  telephone,  telegram  or other  means.  No  additional
compensation will be paid for these services.

DISSENTERS' RIGHTS

     Under Section 262 of the DGCL, stockholders who do not vote in favor of the
Merger  Agreement not consent  thereto in writing and file demands for appraisal
prior to the stockholder  vote on the Merger Agreement and otherwise comply with
the  requirements  of  Section  262 of the DGCL,  upon the  consummation  of the
Merger,  have the right to obtain a cash  payment for the "fair  value" of their
shares of Lukens Common Stock.  In order to exercise such rights,  a stockholder
must  comply  with all the  procedural  requirements  of Section 262 of the DGCL
("Section  262"),  a description  of which is provided in  "Dissenters'  Rights"
herein and the full text of which is attached to this proxy  statement  as Annex
C. Such "fair value" would be determined in judicial proceedings,  the result of
which cannot be predicted.  Failure to take any steps required under Section 262
may  result  in a loss  of  such  dissenters'  rights.  Pursuant  to the  Merger
Agreement,  the  obligations  of Medisys  and Merger Sub to effect the Merger is
subject the condition that the number of shares of Lukens Common Stock for which
written  demand for  appraisal has been properly made pursuant to Section 262 of
the DGCL  shall not have  exceeded  5% of the  total  number of shares of Lukens
Common Stock  outstanding  immediately  prior to the Effective Date. See "Merger
Agreement -- Conditions to the Merger."

TRADING MARKET FOR AND MARKET PRICE OF LUKENS COMMON STOCK

     On April 28, 1998, the day prior to the date of public  announcement of the
proposed  Merger,  the closing bid and asked  prices of the Lukens  Common Stock
were $2-13/16 and $3,  respectively,  as reported on the National Association of
Securities  Dealers  Automated  Quotation  system.  As of the date of this Proxy
Statement,  the closing bid and asked prices of the Lukens Common Stock were $__
and $__,  respectively,  as reported on the National  Association  of Securities
Dealers Automated Quotation system.

                            FACTORS TO BE CONSIDERED

PURPOSES AND EFFECTS OF THE MERGER

     The purpose of the Merger is to provide Lukens'  stockholders with $4.00 in
cash for each share of Lukens  Common Stock they hold and for  Medisys,  through
Merger Sub, to acquire all of the outstanding shares of Lukens Common Stock. For
information  concerning the factors leading to the decision by Lukens to approve
the Merger and concerning  alternatives to the Merger considered by Lukens,  see
"Factors to be Considered -- Background of the Merger."

                                       -6-

<PAGE>



     The  acquisition  of Lukens is structured as a cash merger.  The Merger has
been  structured  as a cash  merger  in order to  provide a prompt  and  orderly
transfer of ownership of the Company to Medisys and to provide the  stockholders
of the Company with cash for all their shares.

     If the Merger is  consummated,  the  stockholders  of the  Company  will no
longer have any equity interest in the Company,  and therefore will not share in
its future earnings and growth.  Instead, each such stockholder (other than such
stockholders  who properly  perfect  appraisal rights in accordance with Section
262 of the DGCL) will receive, upon surrender of the certificate or certificates
evidencing  Lukens Common Stock,  the Merger  Consideration in exchange for each
share of Lukens Common Stock owned  immediately prior to the Effective Date. See
"Factors to be Considered -- Certain Effects of the Merger."

BACKGROUND OF THE MERGER

     The Company's management periodically has investigated various alternatives
to enhance the value of the Company's  Common Stock,  including  acquisitions by
the Company of other  publicly or  privately  held  firms,  continuation  of the
Company's growth internally, and strategic alliances with key vendors as well as
with other participants in the medical device industry. As of December 1997, the
Company's  management  and  Board  of  Directors  believed  that  the  Company's
competitive  position  within the  industry  would be  improved  by a  strategic
partnership or business combination with a larger company.

     In August,  1997,  Robert S. Huffstodt,  the Company's  President and Chief
Executive  Officer,  had  been  contacted  by a  competitor  ("Company  A")  who
indicated an interest in acquiring the Company for cash. After two visits to the
Company, Company A invited Mr. Huffstodt and Mr. Priddy, the Company's Chairman,
to a meeting at Company  A's  offices.  At this  meeting,  possible  offers were
discussed; however valuations suggested by Company A were not sufficiently above
the current  market price of the Lukens  Common Stock to interest the  Company's
Board of  Directors.  As the Company  began  discussions  in earnest  with other
parties in 1998,  Company A was again  contacted,  however Company A declined to
participate in discussions  at the  valuations  then being  discussed with other
parties.

     In December,  1997,  after it was determined by the Board of Directors that
the Company  should  explore the option of being acquired in order to attempt to
maximize  shareholder  value,  Mr.  Huffstodt  had a  meeting  with  one  of the
Company's larger customers  ("Company B") to discuss a potential  acquisition by
Company B. At that meeting,  the parties discussed an acquisition of the Company
in its entirety, and alternatively, a purchase of only certain product lines. In
early January 1998, Company B indicated that it was only interested in acquiring
one  product  line,  but  that it was not  prepared  to pay the  purchase  price
suggested by that product  line's share of the Company's  revenues and earnings.
Accordingly, discussions were discontinued.

     In December 1997, Robert L. Priddy, the Company's  Chairman,  was contacted
by  a  medical   distribution  company  ("Company  C")  concerning  a  potential
acquisition of the Company. At a meeting at the Company's headquarters,  Company
C's representatives  performed  preliminary due diligence in connection with the
potential  acquisition  of the Company by Company C. In January 1998, Mr. Priddy
met with  Company C to  discuss  structural  alternatives  with  respect  to the
potential acquisition.  The parties had no further significant discussions until
February 1998, when the Chairman of Company C contacted the Company and, at this
point,  discussed  acquiring the Company whereby each share of the Lukens Common
Stock  outstanding  would be  exchanged  for Company C stock with a stock market
value at the time in excess of the market value of the Lukens Common Stock as of
the date of such proposal.

     Mr.  Priddy  indicated  that the  Board of  Directors  would  consider  the
proposal,  but that  another  party  (Medisys)  had  expressed  interest  in the
Company, and had offered to purchase all of the outstanding shares of the Lukens
Common Stock for cash.  Thus,  unless the price offered by Company C was greater
than the per share cash  consideration  offered by such other party, the Company
would  most  likely  accept  the cash  offer.  Company C  replied  that it would
consider this point and respond later.  The following day, Company C revised its
proposal for a share exchange and increased the value of the stock to be offered
for each share of the Lukens Common Stock. Mr. Priddy then contacted  members of
the Board, who unanimously  stated that they still believed the cash offer to be
superior, based partly on the fact that

                                       -7-

<PAGE>



Company  C's stock was not traded on a  national  stock  exchange  or the NASDAQ
National  Market and there were risks  associated  with its  liquidity and price
fluctuations.  Mr. Priddy  contacted  Company C, which  declined to increase its
offer further.

     In January 1998, the Company was contacted by  representatives  of Medisys,
who asked for a meeting to discuss a strategic product alliance.  At the meeting
held at the Company's headquarters, Medisys' representatives also indicated that
they had been  following  the Company for a number of months,  and that they had
great  respect for the  Company's  management  team,  and would be interested in
conducting  acquisition  discussions  with  the  Company  if  the  Company  were
interested.  The Company's  Board of Directors  and the Medisys  representatives
held further discussions  regarding such acquisition.  In early February,  1998,
Medisys offered to purchase all of the  outstanding  shares of the Lukens Common
Stock at a purchase price of $4.00 per share.  At the time the Company  received
the offer from Medisys,  the Company issued a press release and a Current Report
on Form 8-K to publicly  announce the $4.00 per share offer and the fact that it
was then in negotiations  regarding a sale of the Company.  From the time of the
public  announcement  to the signing of the Merger  Agreement with Medisys,  the
Company  did not  receive  any higher or better  offers  for the  Company or its
assets.

     Although  there was no  definitive  agreement  on the terms of a  potential
transaction,  Medisys began to conduct its due diligence  review of the Company,
with  various  Medisys  officials  and  professional  consultants  visiting  the
Company's  facilities on several  occasions  throughout  March,  April, and May,
1998. In March and April 1998, as a sign of good faith, Medisys purchased 75,000
shares of Common  Stock from the  Company for $4.00 per share in cash in private
transactions with the Company.

     In  late  March  1998,   Lukens  was  contacted  by  an  independent  agent
representing a principal in the medical device industry ("Company D"). Company D
was interested in entering the U.S. market for certain of the Company's  product
lines.  After  an  exchange  of   confidentiality   agreements  and  preliminary
discussions about the status of the Company's negotiations with Medisys, Company
D indicated it would not be pursuing the discussions further.

     In late April, the Company was contacted by a party interested in acquiring
only certain  product  lines from the Company.  Since the price  offered was not
sufficient to adequately address the Company's  liquidity  problems,  and in any
event,  the funding of the party was not firm,  the Company  rejected the offer,
which has not been subsequently raised.

     Medisys delivered drafts to the Company of the Merger Agreement on April 1,
1998. Shortly  thereafter,  representatives  of Lukens,  Medisys and their legal
advisors began negotiating the definitive agreement.

     The Company's  Board of Directors met by conference call on April 27, 1998,
after having  received a copy of the most recent draft of the Merger  Agreement.
The Board then proceeded to discuss  whether the Merger was in the best interest
of the  Company  and  its  stockholders.  In  connection  therewith,  the  Board
discussed various aspects of, and factors  pertaining to, the Merger.  The Board
discussed at length  various  issues  regarding  the Merger  including  that the
Merger would be  structured  as a cash merger  whereby the  stockholders  of the
Company  would have the right to  receive  $4.00 for each  outstanding  share of
Lukens  Common  Stock,  and in connection  with such Merger,  certain  warrants,
options and debt instruments  would be canceled and in some  circumstances,  the
holders thereof would receive cash consideration  therefor. The Board considered
and discussed the possible  interest in the transaction of Mr. John Robinson,  a
director of the Company and Mr.  Priddy,  as the Merger  Agreement  contemplates
repayment of certain  indebtedness  owed by the Company to Messrs.  Robinson and
Priddy upon the consummation of the Merger.  Messrs.  Robinson and Priddy agreed
to excuse  themselves  from the  deliberations,  but it was decided by the other
members of the Board not to be  necessary  as they were all fully aware of their
personal interest in the transaction.

     The Board also  discussed the fact that  pursuant to the Merger  Agreement,
Medisys was given a very broad financing contingency through June 30, 1998, that
is, Medisys could  terminate the Merger  Agreement at any time prior to June 30,
1998 if they  failed to raise  financing  to fund the Merger and other  costs on
terms acceptable to them in their sole discretion.  The Board also discussed the
fact that Medisys was also to be granted a right to terminate the Merger

                                       -8-

<PAGE>



Agreement at any time prior to May 15, 1998 if its due  diligence  investigation
of the Company did not prove to be satisfactory.

     The Board  then  discussed  the  reasons  for the sale and  considered  and
discussed  various  alternatives  to the Merger that could possibly  enhance the
value of the Lukens Common Stock, including a sale of the stock or assets of the
Company to other  publicly  or  privately  held  entities,  continuation  of the
Company's growth internally and strategic  alliances with other  participants in
the medical supply industry.  Specifically,  the Board discussed previous offers
made for the  Company and its assets and  determined  the offer by Medisys to be
superior to the others. The Board also discussed the Company's current liquidity
problems and the existence of certain  payment and financial  covenant  defaults
under its line of credit with its lending bank.  Mr.  Huffstodt  reported  that,
based  upon  discussions,  the  Company's  lending  bank had agreed to waive the
Company's  existing defaults under the Company's bank facility and amend certain
of its financial  covenants,  subject to the  execution of the Merger  Agreement
with Medisys and the closing of the Merger.

     It was then  determined  that the Board would retain an investment  banking
firm to  prepare a  fairness  opinion  in  respect  of the  consideration  to be
received in the Merger.  The Company' legal counsel  explained to the Board that
they could terminate the Merger Agreement at any time prior to the expiration of
the three week  period from the date the Merger  Agreement  was signed if it did
not receive an  acceptable  fairness  opinion  within such time  period.  It was
discussed  that either Sands  Brothers or another  investment  banking firm with
previous  experience  with and knowledge about the Company should be retained to
provide the fairness  opinion due to their  familiarity  with the  Company.  Mr.
Priddy fully  disclosed to all of the Board  members his  relationship  with the
other possible  investment  banking firm and Mr. John Holmes fully disclosed his
past  relationship  with  Sands  Brothers  and it was  determined  that  neither
relationship  would have any impact on the quality of the fairness opinion to be
received from either firm. It was determined  that each of these firms should be
contacted  by the Board to determine  if they could  provide a fairness  opinion
within the requisite time period and at a reasonable price.

     The  Company's  legal  counsel  summarized  and  reviewed for the Board the
proposed terms of the Merger and various  provisions of the Merger  Agreement to
be executed in connection  therewith.  The Company's counsel pointed out various
positive  and  negative  aspects of the Merger,  including  the  existence  of a
financing contingency for Medisys.

     Based  upon its  discussions,  the  Board  determined  that in light of the
current  circumstances  and future prospects of the Company,  the Merger and the
Merger Agreement and the transactions  contemplated  thereby,  taken as a whole,
were fair to and in the best interest of the Company and the stockholders of the
Company.  The Board  approved  the Merger  Agreement,  but retained the right to
terminate  the Merger  Agreement  (as set forth  therein) if the Company did not
receive  a  fairness  opinion  acceptable  to  the  Board  indicating  that  the
consideration  to be received by the stockholders of the Company was fair from a
financial  point of view.  See "Merger  Agreement  --  Termination."  The Merger
Agreement was executed on April 28, 1998.

     During the week of May 1, 1998,  the  Company  retained  Sands  Brothers to
render an opinion to the Company's  Board as to the  fairness,  from a financial
point of view, of the  consideration  to be received by the  stockholders in the
proposed  transaction  with  Medisys.  Such  fairness  opinion was issued to the
Company on May 15, 1998.  See "Factors to be  Considered -- Opinion of Financial
Advisor."

RECOMMENDATION OF THE BOARD OF DIRECTORS; FAIRNESS OF THE MERGER

     The Board of Directors of Lukens has unanimously determined that the Merger
Agreement and the transactions  contemplated thereby, taken as a whole, are fair
to, and in the best interests of, Lukens and its  stockholders,  and unanimously
recommends approval of the Merger by Lukens's stockholders.  The Board based its
recommendation on a number of factors, including the following:

          (i) The Board  determined  that the purchase price per share of Lukens
Common Stock is fair to the stockholders of the Company.  This determination was
based on the  directors'  assessment  of the  Company's  value  considering  the
following  factors  taken as a whole:  the recent and  anticipated  stock market
valuation of the Company's

                                       -9-

<PAGE>



publicly-traded  stock in the absence of the Merger,  the Company's  current and
anticipated   operations   and   performance,   the  current   and   anticipated
opportunities  in the  markets  for the  Company's  products  and in the medical
products market  generally,  and the analysis and fairness opinion  presented by
Sands Brothers. The purchase price per share of Lukens Common Stock represents a
premium over prices at which the Company's stock was trading  immediately  prior
to the public announcement of the Merger and expected future prices.

          (ii) The Board reviewed and analyzed the  alternatives  to the Merger,
including:  (a) the  continuation  of the  Company's  operation as a stand alone
entity;  (b) the availability of other potential  business partners or strategic
alliances;  and (c) the probability that another form of corporate restructuring
would yield a comparable value to the stockholders of the Company. Specifically,
the  directors  analyzed  the  opportunities  and risks  associated  with  these
alternatives in light of the current and projected difficulties in the worldwide
medical  products  market,  together with the stock market's  perception of that
industry.  The Board concluded that due to the Company's chronic working capital
deficiency,  and its inability to raise adequate  funding from outside  sources,
the Company would have a very  difficult time  sustaining its growth.  The Board
believed that other potential corporate partnerships or alliances,  if available
at all,  would be, at best,  complex and time consuming to structure and, in any
event,  difficult to achieve.  Moreover, the Board concluded that any attempt to
solicit  a  purchase  of  all  or  any  part  of the  Company  would  create  an
unacceptable  operational  risk to the business  and would not likely  result in
providing  stockholders  with a value equal to or in excess of that  afforded by
the proposed Merger.

          (iii) The Board's  belief that the terms of the Merger  Agreement were
attractive to the Company and its  stockholders.  Particularly,  the Board noted
the benefits of an all cash purchase  price which was determined by the Board to
be superior to a stock proposal due to the certainty provided by cash.

          (iv) The fact that Lukens has  experienced  significant  volatility in
its share prices due, in part, to occasional earnings fluctuations, and the fact
that future  earnings  fluctuations  could result in decreased  stock prices for
Lukens.  Such lower stock  prices could  further  result in (i)  difficulty  for
Lukens to continue  growth through  acquisitions,  (ii)  difficulty in designing
appropriate equity incentive arrangements for the Company's employees, and (iii)
the need for  management  to focus  attention on  short-term  operating  results
rather than building long-term value for stockholders.

          (v) The fact that  during the two month  period  during  which  Lukens
actively had responded to potential collaboration or acquisition  opportunities,
and since  February  22, 1998 when  Lukens  issued a press  release  that it had
received an offer to purchase the Company at a price of $4.00 per share,  Lukens
received no other acquisition proposal, offer or collaboration opportunity that,
in the Board's  judgment,  offered a more favorable  opportunity for the Company
and its  stockholders  than the  Merger,  even  though  Lukens  had given  early
indications  to likely  candidates  that Lukens  would  consider an  acquisition
offer.

          (vi) The fact  that the  executive  officers  and  Board  members  own
approximately  42.9% of the outstanding Lukens Common Stock (on a fully-diluted,
as-converted  basis).  The Board  determined  that such directors' and executive
officers'  belief that the Merger presents the best opportunity to realize value
is a strong indication that the transaction will be in the best interests of the
Company's stockholders generally. But see "Factors to be Considered -- Interests
of Certain Persons in the Merger; Indemnification."

          (vii)  The  Board's  review of the  Merger  Agreement,  including  the
provisions  permitting Lukens to respond to unsolicited  inquiries and proposals
from,   provide  any  confidential   information  to,  and  participate  in  any
discussions and negotiations  with, third parties  concerning mergers or similar
transactions  with Lukens to the extent required to satisfy the fiduciary duties
of its  directors,  subject to  Lukens's  obligation  to pay  Medisys a $500,000
breakup fee under certain circumstances.

          (viii) The  conditions  to the  closing of the Merger and the  Board's
determination that such conditions could reasonably be expected to be satisfied.

                                      -10-

<PAGE>



          (ix) The opinion of Sands  Brothers to the effect that, and based upon
and subject to certain matters stated in such opinion,  the Merger Consideration
was fair, from a financial point of view, to holders of Lukens Common Stock. See
"Factors to be Considered -- Opinion of Financial Advisor."

     In view of the wide variety of factors  considered in  connection  with its
evaluation of the Merger,  the Lukens Board did not find it practicable  to, and
did not,  quantify or otherwise  assign relative weights to the specific factors
considered in reaching its decisions.

     Subsequent to  announcement of the proposed  Merger,  the trading prices of
Lukens's  Common Stock have approached the proposed  Merger  Consideration.  See
"Market  Information  Regarding  Lukens Common Stock." The Company believes this
appreciation in price to be due in part to market expectations that the proposed
Merger will be  consummated  and to be typical of companies  that have announced
pending   acquisitions  and  for  which  there  is  an  active  trading  market.
Accordingly,  the Merger Consideration may represent little or no premium to the
trading prices of Lukens Common Stock at or near the time of the Merger.

OPINION OF FINANCIAL ADVISOR

     On May 1, 1998,  Sands Brothers was retained by Lukens to render an opinion
as to the  fairness,  from a financial  point of view,  to the holders of Lukens
Common Stock of the  consideration to be received by such holders in the Merger.
At a meeting  of the  Lukens  Board  held on April 27,  1998,  to  evaluate  the
Proposed Merger,  the Board discussed that it would retain either Sands Brothers
or a different named investment banking firm to deliver a fairness opinion based
on the fact that each firm was familiar with the Company. In addition,  pursuant
to the Merger Agreement, Lukens agreed to engage such investment bank to deliver
the Fairness Opinion within three weeks of the date of the Merger Agreement (the
"Fairness Opinion Period"), and that in the event that Sands Brothers or another
investment  bank  satisfactory  to the Board was unable to deliver the  Fairness
Opinion  due to the  inadequacy  of the value of the Merger  Consideration,  the
Company had the right to terminate the Merger Agreement.

     In arriving at its opinion,  Sands Brothers  reviewed the Merger  Agreement
and  held  discussions  with  certain  senior  officers,   directors  and  other
representatives  and advisors of Lukens concerning the business,  operations and
prospects of Lukens. A  representative  of Sands Brothers visited the Company to
review  current  operations  and meet  firsthand  with members of the management
team.  Sands  Brothers  also  discussed the terms of the Merger  Agreement  with
management, and reviewed the Board minutes approving the Merger Transaction.  In
addition,  Sands Brothers  discussed the proposed  transaction and the Company's
operations  with members of the  management  team at Medisys PLC. Sands Brothers
also  reviewed  the  Company's  public SEC  filings,  including  its audited and
interim  financial  statements for 1996 and 1997. In conjunction with its review
of the financial  statements,  Sands Brothers reviewed the financial performance
and financial ratios relating to the Company's operations.  It also reviewed the
financial  projections  provided by the Company, and discussed these projections
with various  members of the  management  team to determine  how  realistic  the
execution of said  projections  would be. In looking at the projected  financial
performance  that it  believed  the  Company  was  capable of  achieving,  Sands
Brothers evaluated the capital structure and cash needs of the Company necessary
to  achieve  this  level  of  performance.   It  evaluated  possible  levels  of
performance for the Company both as an independent  company and as a division of
Medisys.  In reviewing these projections,  Sands Brothers evaluated the possible
future performance of the Company's stock based on the achievable performance of
the Company if it were to remain an independent entity in comparison to the cash
offer from  Medisys.  Sands  Brothers also looked at the valuation of comparable
medical products  companies in relation to both the current and potential future
valuation of Lukens' stock, as well as in relation to the cash tender offer from
Medisys.  It also  reviewed  the terms of  several  recent  acquisitions  in the
medical  products  industry,  and compared the valuation of such companies under
these  acquisitions  to the  valuation of Lukens both in the public  markets and
under  the  proposed   acquisition   by  Medisys.   In   conjunction   with  the
above-mentioned  analyses,  Sands Brothers considered the historical performance
of the Company's stock,  both  independently and in relation to other comparable
companies.

     In  rendering  its  opinion,  Sands  Brothers  assumed and relied,  without
independent  verification,  upon the accuracy and  completeness of all financial
and other information and data publicly available or furnished to or otherwise

                                      -11-

<PAGE>



reviewed by or discussed  with Sands  Brothers.  Sands Brothers did not make and
was not provided  with an  independent  evaluation or appraisal of the assets of
the Company.

     The full text of the written  opinion of Sands Brothers dated May 15, 1998,
which sets forth the assumptions made, matters considered and limitations on the
review undertaken, is attached hereto as Annex B and should be read carefully in
its  entirety.  The  opinion  of Sands  Brothers  is  directed  to the  Board of
Directors of Lukens and relates only to the fairness of the Merger Consideration
from a financial  point of view, does not address any other aspect of the Merger
or  related  transactions  and  does  not  constitute  a  recommendation  to any
stockholder as to how such stockholder  should vote at the Special Meeting.  The
summary of the opinion of Sands  Brothers  set forth in this Proxy  Statement is
qualified in its entirety by reference to the full text of such opinion.

     In preparing its opinion,  Sands Brothers  performed a variety of financial
and comparative  analyses,  including those described below. The summary of such
analyses  does  not  purport  to  be a  complete  description  of  the  analyses
underlying Sands Brothers'  opinion.  The preparation of a fairness opinion is a
complex  analytic  process  involving  various  determinations  as to  the  most
appropriate  and relevant  methods of financial  analyses and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily  susceptible  to summary  description.  Accordingly,  Sands Brothers
believes  that its analyses  must be  considered  as a whole and that  selecting
portions of its  analyses  and  factors,  without  considering  all analyses and
factors,  could  create  a  misleading  or  incomplete  view  of  the  processes
underlying  such  analyses and opinion.  In its  analyses,  Sands  Brothers made
numerous assumptions with respect to the Company, industry performance,  general
business,  economic,  market and financial conditions and other matters, many of
which are beyond the control of the  Company.  The  estimates  contained in such
analyses and the valuation ranges resulting from any particular analysis are not
necessarily  indicative  of actual  values or  predictive  of future  results or
values,  which may be significantly  more or less favorable than those suggested
by such analyses.  In addition,  analyses relating to the value of businesses or
securities  do not  purport to be  appraisals  or to reflect the prices at which
businesses or securities  actually may be sold.  Accordingly,  such analyses and
estimates are inherently  subject to substantial  uncertainty.  Sands  Brothers'
opinion and analyses should not be viewed as  determinative  of the views of the
Board  of  Directors  or  management  of  Lukens  with  respect  to  the  Merger
Consideration or the proposed Merger.

     Pursuant to the terms of Sands Brothers' engagement, the Company has agreed
to pay Sands  Brothers an opinion fee of $60,000 for its  services in  rendering
the Fairness Opinion in connection with the Merger.  The Company has also agreed
to indemnify Sands Brothers and related  persons  against  certain  liabilities,
including  liabilities under the federal  securities laws,  arising out of Sands
Brothers' engagement.

     Sands Brothers has advised Lukens that, in the ordinary course of business,
Sands  Brothers and its  affiliates may actively trade or hold the securities of
Lukens and Medisys for their own  account or for the account of  customers  and,
accordingly,  may at any time hold a long or short position in such  securities.
Sands Brothers and its affiliates  may maintain  relationships  with the Company
and Medisys and their respective affiliates.

     Sands Brothers is a recognized  investment banking firm and was selected by
Lukens based on its experience and expertise.  Sands Brothers  regularly engages
in the valuation of businesses and their  securities in connection  with mergers
and  acquisitions,   negotiated   underwritings,   competitive  bids,  secondary
distributions  of  listed  and  unlisted  securities,  private  placements,  and
valuations for estate, corporate and other purposes.

INTERESTS OF CERTAIN PERSONS IN THE MERGER; INDEMNIFICATION

     In  considering  the  recommendations  of Lukens's  Board of Directors with
respect to the  Merger,  stockholders  should be aware that  certain  members of
Lukens's  management and Board of Directors have certain interests in the Merger
that  are  in  addition  to or  different  from  the  interests  of  the  public
stockholders.  The Board of Directors of Lukens was aware of these interests and
considered them, among other things, in approving the Merger Agreement. Pursuant
to the Merger Agreement, on the Effective Date, (a) warrants to purchase 400,000
shares of Lukens  Common  Stock at an exercise  price of $1.10 per share held by
Mr. John Robinson, a director of the Company, are to be canceled

                                      -12-

<PAGE>



and in lieu thereof,  Mr. Robinson shall have the right to payment in cash equal
to  $400,000  in  exchange  therefor,  which  payment  shall be made by  Medisys
promptly after the Effective Date and (b) the outstanding  loans by Mr. Robinson
and Mr.  Priddy to the Company in the original  principal  amounts of $1,700,000
and  $500,000,  respectively,  shall be repaid by  Medisys  by (i) making a cash
payment to Mr. Robinson of $1,200,000, plus all accrued and unpaid interest, and
the issuance to Mr. Robinson of Medisys ordinary shares, par value 1p per share,
having a value equal to $500,000 and (ii) making a cash payment to Mr. Priddy of
all accrued and unpaid  interest on his loan and the  issuance to Mr.  Priddy of
Medisys  ordinary  shares,  par  value 1p per  share,  having  a value  equal to
$500,000,  which  payments  and  issuances  shall  be made  promptly  after  the
Effective Date.

     Additionally,  Mr. Robert S. Huffstodt,  President, Chief Executive Officer
and a  Director  of the  Company,  as well as each  of the  other  officers  and
employees of the Company,  will have all of the employee  stock  options held by
them  converted  into the  right to  purchase  a number  of  ordinary  shares of
Medisys,  par value 1p,  equal to the  number of shares of Lukens  Common  Stock
subject to each such option  multiplied by the Option Exchange Ratio (as defined
in the Merger  Agreement) (the  "Substitute  Options").  The Substitute  Options
shall have a per share  exercise  price equal to the current  exercise price per
share of Lukens  Common Stock  divided by the Option  Exchange  Ratio,  and each
Substitute  Option otherwise shall after the Effective Date be subject to all of
the other terms and conditions of the original  option to which it relates.  The
options to purchase  300,000  shares of Lukens Common Stock at an exercise price
of $4.00 per share held by Mr. Priddy will be canceled.

     Each of  Messrs.  Robinson,  Priddy  and  Holmes  (also a  director  of the
Company)  agreed  pursuant  to the  Merger  Agreement  not to sell or  otherwise
transfer or encumber any shares of Lukens  Common Stock and vote all such shares
in favor of the  Merger.  Such  obligation  expires on August  31,  1998 or such
earlier date as the Merger Agreement shall terminate.

     The Merger  Agreement also provides that the Company shall  indemnify,  and
after  the  Effective  Date,  the  Surviving  Corporation  shall  indemnify  the
officers,  directors and employees of the Company and its  Subsidiaries who were
such at any time  prior to the  Effective  Date  from and  against  all  losses,
expenses,  claims,  damages  or  liabilities  arising  out of  the  transactions
contemplated by the Merger Agreement  occurring before the Effective Date to the
fullest extent  permitted or required under applicable law;  provided,  however,
that such indemnification  shall not be available with respect to Losses arising
out of the failure of the Company to obtain the Fairness  Opinion.  In addition,
Medisys has agreed that all rights to  indemnification  existing in favor of the
directors,  officers or  employees  of the Company as provided in the  Company's
Certificate  of  Incorporation  or  By-Laws,  as in effect as of the date of the
Merger Agreement,  with respect to matters occurring through the Effective Date,
shall  survive  the  Merger  and shall  continue  in full force and effect for a
period of not less  than  three  years  from the  Effective  Date.  See  "Merger
Agreement -- Certain Covenants -- Indemnification."

ACCOUNTING TREATMENT

     The Merger will be  accounted  for as a purchase in  accordance  with GAAP.
From and after the  Effective  Date,  Lukens's  results  of  operations  will be
included in Medisys' consolidated results of operation.

CERTAIN EFFECTS OF THE MERGER

     Upon  consummation  of the Merger,  Merger Sub will be merged with and into
the Company,  the separate corporate existence of Merger Sub will cease, and the
Company will continue as the Surviving Corporation.  Medisys will own all of the
outstanding  shares of common  stock of the  Surviving  Corporation  and will be
entitled to all of the benefits and  detriments  resulting  from that  interest,
including  all  income  or  losses  generated  by  the  Surviving  Corporation's
operations  and any future  increase or decrease in the Surviving  Corporation's
value.  After the Effective Date, the present holders of the Lukens Common Stock
will no longer have any equity  interest in the  Company,  will not share in the
results of  operations  of the  Surviving  Corporation  and will no longer  have
rights to vote on corporate  matters.  The Company is  currently  subject to the
information filing requirements of the Exchange Act, and in accordance

                                      -13-

<PAGE>



therewith,  is  required  to file  reports  and other  information  with the SEC
relating to its business, financial statements and other matters. As a result of
the Merger,  the Company will become a  wholly-owned  subsidiary  of Medisys and
there will cease to be any public market for the Lukens Common Stock,  and after
the  Effective  Date,  the Lukens  Common Stock will be delisted from the Nasdaq
Stock Market.  Upon such event, the Surviving  Corporation will apply to the SEC
for the  deregistration  of the Lukens  Common Stock under the Exchange Act. The
termination  of the  registration  of the Lukens Common Stock under the Exchange
Act would make  certain  provisions  of the Exchange  Act  (including  the proxy
solicitation provisions of Section 14(a), and the short swing trading provisions
of  Section  16(b)),  no  longer   applicable  to  the  Surviving   Corporation.
Additionally, upon the termination of the registration of the Common Stock under
the Exchange  Act, the Lukens  Common  Stock will no longer  constitute  "margin
securities"  under the  regulations  of the Board of  Governors  of the  federal
Reserve System.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

     The following is a summary of the principal federal income tax consequences
relating to the Merger based on the  provisions of the Internal  Revenue Code of
1986, as amended (the "Code"), and applicable regulations,  rulings and judicial
authority as in effect on the date of this Proxy Statement.  Subsequent  changes
in the law could alter the federal income tax consequences of the Merger.

     THE  FEDERAL  INCOME TAX  CONSEQUENCES  SET FORTH  BELOW ARE  INCLUDED  FOR
GENERAL  INFORMATIONAL  PURPOSES  ONLY AND ARE BASED UPON PRESENT  LAW.  BECAUSE
INDIVIDUAL  CIRCUMSTANCES MAY DIFFER,  EACH STOCKHOLDER IS URGED TO CONSULT SUCH
STOCKHOLDER'S  OWN TAX  ADVISOR  TO  DETERMINE  THE  APPLICABILITY  OF THE RULES
DISCUSSED  BELOW TO SUCH  STOCKHOLDER  AND THE  PARTICULAR  TAX  EFFECTS  OF THE
MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.

     The  receipt by a  stockholder  of cash for shares of Lukens  Common  Stock
pursuant  to the Merger  (including  any cash  amounts  received  by  dissenting
stockholders  pursuant to the  exercise of  appraisal  rights) will be a taxable
transaction  for federal  income tax  purposes  under the Code and also may be a
taxable  transaction under applicable  state,  local and other tax laws. The tax
consequences  of such receipt may vary depending upon,  among other things,  the
particular  circumstances  of the  stockholder.  A  stockholder  will  generally
recognize  gain or loss  equal to the  difference  between  the  amount  of cash
received by the holder  pursuant to the Merger in exchange for his or her shares
and the  stockholder's  adjusted tax basis in such shares.  Gain or loss will be
calculated  separately  for each block of shares  (i.e.,  shares  acquired  in a
single  transaction  at the same  price).  Such gain or loss  generally  will be
capital  gain or loss if the  shares  are a  capital  asset in the  hands of the
stockholder  and will be  long-term  gain or loss if the  shares  have a holding
period of more than one year at the time of their  conversion  at the  Effective
Date.  Long-term  capital gain recognized by an individual  stockholder  will be
taxed at the lowest rates  applicable  to capital gains if the  stockholder  has
held  the  shares  of  Common  Stock  for more  than  eighteen  months.  Certain
limitations apply with respect to the deductibility of capital losses.

     The receipt of cash by a stockholder  pursuant to the Merger may be subject
to  backup  withholding  at the  rate of 31%  unless  the  stockholder  (i) is a
corporation  or  comes  within  other  exempt  categories,  or (ii)  provides  a
certified taxpayer identification number on Form W-9 and otherwise complies with
the backup withholding  rules.  Backup withholding is not an additional tax; any
amounts so withheld may be credited  against the federal income tax liability of
the stockholder subject to the withholding.

     This  tax  discussion  is  included  for  general  information  only.  This
discussion applies only to stockholders holding shares of Lukens Common Stock as
capital  assets,  and to  stockholders  holding  shares of Lukens  Common  Stock
received  pursuant to the  exercise of employee  stock  options or  otherwise as
compensation.  This discussion does not apply to Lukens stockholders who are not
citizens or  residents  of the United  States,  to Lukens  stockholders  who are
tax-exempt or to other Lukens stockholders of special status.

                                      -14-

<PAGE>



REGULATORY AND OTHER APPROVALS

     Lukens is not aware of any material governmental or regulatory requirements
to be complied  with in  connection  with the  Merger,  other than the filing of
Certificate  of  Merger  conforming  to the  requirements  of the DGCL  with the
Delaware  Secretary of State.  The Company  conducts  operations  in a number of
foreign  countries where  regulatory  filings may be required as a result of the
Merger. The Company will make such filings as it deems necessary or appropriate.

                                MERGER AGREEMENT

     The following is a brief summary of the Merger  Agreement,  a copy of which
is attached as Annex A to this Proxy  Statement  and is  incorporated  herein by
reference. Although the material provisions of the Merger Agreement set forth in
this Proxy Statement have been summarized accurately, the statements made herein
concerning such document are not necessarily complete,  and reference is made to
the full  text of the  Merger  Agreement  attached  hereto as Annex A. Each such
statement is qualified in its entirety by such reference. Capitalized terms that
are not  otherwise  defined in this  summary  have the meanings set forth in the
Merger Agreement.

THE MERGER

     The  Merger  Agreement  provides  that,  upon the terms and  subject to the
satisfaction or waiver of certain conditions set forth therein,  Merger Sub will
be merged with and into Lukens, the separate  corporate  existence of Merger Sub
will cease and Lukens will  continue as the  Surviving  Corporation.  The Merger
will become  effective on the Effective Date upon the filing of the  Certificate
of Merger with the  Secretary  of State of the State of  Delaware in  accordance
with the DGCL.

     The Merger  Agreement also provides that: (i) the Articles of Incorporation
of Merger  Sub,  as in effect  immediately  prior to the  Effective  Date,  will
thereafter be the Articles of Incorporation of the Surviving  Corporation;  (ii)
the Bylaws of Merger Sub, as in effect  immediately prior to the Effective Date,
will  remain  in  effect  on the  Effective  Date and will be the  Bylaws of the
Surviving  Corporation;  and (iii) the directors of Merger Sub immediately prior
to the Effective  Date shall be the directors of the Surviving  Corporation  and
the officers of the Company immediately prior to the Effective Date shall be the
officers  of the  Surviving  Corporation,  in each case until  their  respective
successors are duly elected and qualified.

     Pursuant to the Merger  Agreement,  on the Effective Date (i) each share of
Lukens Common Stock issued and  outstanding  immediately  prior to the Effective
Date (other than shares of Lukens Common Stock held by stockholders, if any, who
properly  exercise  their  dissenters'  rights under Section 262 of the DGCL and
shares held by Medisys and its subsidiaries) will be canceled and converted into
the  right  to  receive  $4.00 in cash  (the  "Merger  Consideration"),  without
interest,  upon surrender of the certificate evidencing such share in the manner
provided  below and (ii) each  share of  Merger  Sub  Common  Stock  issued  and
outstanding  immediately  prior to the Effective Date will be converted into and
become one validly issued, fully paid and nonassessable share of Common Stock of
the Surviving Corporation.

     Shares of Lukens Common Stock that are outstanding immediately prior to the
Effective  Date and which are held by holders  who shall have not voted in favor
of the  Merger or  consented  thereto in  writing  and who shall  have  demanded
properly in writing  appraisal for such shares in accordance with Section 262 of
the  DGCL and who  shall  not have  withdrawn  such  demand  or  otherwise  have
forfeited appraisal rights (collectively,  the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration.  Such
holders  shall be entitled  to receive  payment of the  appraised  value of such
shares,  except that all Dissenting Shares held by holders who shall have failed
to  perfect or who  effectively  shall have  withdrawn  or lost their  rights to
appraisal  of such shares  under such  Section 262 shall  thereupon be deemed to
have been  converted into and to have become  exchangeable,  as of the Effective
Date,  for the right to  receive,  without  any  interest  thereon,  the  Merger
Consideration,  upon surrender of the certificates  evidencing such shares.  See
"Dissenter's Rights."

                                      -15-

<PAGE>



     Promptly  after the  Effective  Date,  an agent  selected  by Medisys  (the
"Payment  Agent")  shall mail to each  holder of shares of Lukens  Common  Stock
(other than  Dissenting  Shares)  ("Certificates")  a letter of transmittal  and
instructions  to effect the  surrender of the  Certificates  in exchange for the
Merger Consideration.  Each holder of Lukens Common Stock, upon surrender to the
Payment Agent of such holder's Certificates with the letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to such
instructions, shall be paid the amount of cash to which such holder is entitled,
pursuant  to the  Merger  Agreement,  as  payment  of the  Merger  Consideration
(without any interest accrued thereon).  Until so surrendered,  each Certificate
shall after the  Effective  Date  represent  for all purposes  only the right to
receive the Merger Consideration. At the Closing, Medisys shall deposit in trust
with the Payment Agent,  for the ratable benefit of the holders of Lukens Common
Stock  (other  than  Dissenting  Shares  and  shares  held  by  Medisys  and its
subsidiaries), the appropriate amount of cash to which such holders are entitled
pursuant to the Merger  Agreement  as payment of the Merger  Consideration.  The
Payment Agent shall, pursuant to irrevocable instructions,  make the payments to
the holders of Lukens Common Stock as set forth in the Merger Agreement.  LUKENS
STOCKHOLDERS  SHOULD NOT SEND IN THEIR  CERTIFICATES  OR INSTRUMENTS  UNTIL THEY
RECEIVE A TRANSMITTAL FORM.

     In  addition,  the  holders of options to acquire  shares of Lukens  Common
Stock  issued  pursuant  to  the  Company's   employee  stock  option  plan  and
outstanding immediately prior to the Effective Date, whether vested or unvested,
shall be assumed by Medisys at the  Effective  Date,  and each such option shall
become an option  (the  "Substitute  Option")  to  purchase a number of ordinary
shares of Medisys,  par value 1p, equal to the number of shares of Lukens Common
Stock subject to each such option  multiplied by the Option  Exchange  Ratio (as
defined  below).  The  Substitute  Options shall have a per share exercise price
equal to the current  exercise price per share of Lukens Common Stock divided by
the Option Exchange Ratio, and each Substitute  Option otherwise shall after the
Effective  Date be  subject  to all of the  other  terms and  conditions  of the
original option to which it relates. The "Option Exchange Ratio" is the ratio of
(x) $4.00 to (y) the U.S. dollar  equivalent of the average of the middle-market
closing price per share of Medisys ordinary shares on the Alternative Investment
Market of the London  Stock  Exchange,  as shown in the "London  Stock  Exchange
Daily  Official  List," for each of the ten trading days ending two trading days
prior to the Effective Date.

     If the Merger is  approved by the  requisite  vote of the  stockholders  of
Lukens and certain  other  conditions  to the Merger are satisfied or waived (as
more fully  described  below),  the  Closing  will be held on the earlier of (A)
August  14,  1998 or (B) the day which is no later  than two (2)  business  days
after the day on which the last of the closing conditions set forth in Article X
of the Merger  Agreement  is  fulfilled  or waived and the  meeting of  Medisys'
stockholders  with respect to the Merger and related financing has been held, or
such other date as is agreed upon by the parties.

REPRESENTATIONS AND WARRANTIES

     The Merger  Agreement  contains various  representations  and warranties of
Lukens as to, among other things: (i) the due organization,  valid existence and
good standing of Lukens and its Subsidiaries,  (ii) the capitalization of Lukens
and its  Subsidiaries;  (iii) the authorization of the execution and delivery of
the Merger  Agreement and related  agreements,  the validity and  enforceability
thereof  against  Lukens,  the  noncontravention  thereby  of  the  articles  of
incorporation,   bylaws,  relationships  or  other  contracts,   commitments  or
agreements of Lukens or any of its Subsidiaries or of any material order,  writ,
injunction,  decree,  statute,  rule or  regulation  applicable to Lukens or any
Subsidiary  and,  other than filing the  Articles  of Merger  with the  Delaware
Secretary of State,  the absence of  requirements  for any consents,  approvals,
notices  or  registrations  to be  obtained  or  filed by  Lukens  or any of its
Subsidiaries in connection with  consummation of the Merger;  (iv) compliance in
all material  respects of Lukens'  filings with the SEC under the Securities Act
of 1933,  as  amended,  and the  Exchange  Act (the  "SEC  Documents"),  and the
accuracy of certain  information and financial  statements of Lukens included in
the SEC  Documents;  (v) the absence of  undisclosed  liabilities;  (vi) certain
Company  action;  (vii) material  contracts;  (viii)  compliance with applicable
laws; (ix) certain insurance matters; (x) product liability; (xi) the absence of
certain  changes or events since  December 31, 1997;  (xii) certain tax matters;
(xiii) certain intellectual property matters;  (xiv) litigation involving Lukens
or any of its Subsidiaries;

                                      -16-

<PAGE>



(xv) certain  employee  benefit  matters;  (xvi)  certain  labor and  employment
matters;  (xvii) certain  environmental  matters;  (xviii) title to property and
(xix) absence of certain business practices.

     The Merger Agreement also contains  representations  and warranties of each
of Medisys and Merger Sub as to, among other things: (i) their due organization,
valid existence and good standing;  (ii) capitalization of Merger Sub; (iii) due
authorization  of the execution and delivery of the Merger Agreement and related
agreements,  the validity and  enforceability  thereof  against  Medisys and the
noncontravention  thereby of the  Memorandum  and  Articles  of  Association  of
Medisys;  (iv)  the  good  faith  belief  by  Medisys  that it will  have  funds
sufficient  to  enable  it to  consummate  the  Merger  and  (v)the  absence  of
litigation involving Medisys.

CERTAIN COVENANTS

     CONDUCT OF BUSINESS BY THE COMPANY  PENDING THE MERGER.  The Company agreed
that prior to the Effective Date, unless Parent shall otherwise agree in writing
it shall,  and shall  cause its  Subsidiaries  to (i) carry on their  respective
businesses in the ordinary course in substantially the same manner as previously
conducted,  (ii) use their  commercially  reasonable  efforts to preserve intact
their present  business  organizations  and preserve  their  relationships  with
customers,  suppliers and others having  business  dealings with them to the end
that their goodwill and ongoing  businesses shall be unimpaired at the Effective
Date, (iii) maintain insurance coverages and its books,  accounts and records in
the usual manner  consistent with prior  practices;  (iv) comply in all material
respects with all laws,  ordinances  and  regulations of  Governmental  Entities
applicable  to the  Company  and its  subsidiaries;  (v)  maintain  and keep its
properties  and  equipment  in good  repair,  working  order  and  condition  in
accordance with past practice, ordinary wear and tear excepted; and (vi) perform
in all  material  respects its  obligations  under all  material  contracts  and
commitments to which it is a party or by which it is bound.

     The Company also agreed that prior to the Effective  Date, it shall not and
shall not  propose to (i) sell or pledge or agree to sell or pledge any  capital
stock owned by it in any of its Subsidiaries (subject to the fiduciary duties of
the Company's Board of Directors),  (ii) amend its Certificate of  Incorporation
or By-laws,  (iii) split, combine or reclassify its outstanding capital stock or
issue or authorize or propose the  issuance of any other  securities  in respect
of, in lieu of or in substitution for shares of capital stock of the Company, or
declare,  set aside or pay any dividend or other  distribution  payable in cash,
stock or property, or (iii) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem,  purchase or otherwise acquire any shares of Company
capital  stock.  In addition,  subject to the fiduciary  duties of the Company's
Board of  Directors,  the Company  agreed that prior to the  Effective  Date, it
shall not, nor shall it permit any of its  Subsidiaries  to, without the consent
of Medisys which shall not be unreasonably  withheld (i) issue,  deliver or sell
or agree to issue,  deliver or sell any  additional  shares of, or rights of any
kind to acquire any shares of, its capital stock of any class,  any indebtedness
having  the right to vote on which the  Company's  stockholders  may vote or any
option, rights or warrants to acquire, or securities convertible into, shares of
capital stock other than issuances of Lukens Common Stock pursuant to employment
agreements  as in effect  on the date  hereof,  the  exercise  of stock  options
outstanding  on the date  hereof or granted  prior to the  Effective  Date under
automatic  grants under the Company's  Employee Stock Option Plan; (ii) acquire,
lease or dispose or agree to acquire,  lease or dispose of any capital assets or
any other assets other than in the ordinary  course of business  consistent with
past  practice;  (iii)  incur  additional  indebtedness  or  encumber or grant a
security  interest  in any asset or enter  into any other  material  transaction
other than in each case in the ordinary course of business  consistent with past
practice;  (iv) acquire or agree to acquire by merging or consolidating with, or
by purchasing a  substantial  equity  interest in, or by any other  manner,  any
business  or  any  corporation,   partnership,  association  or  other  business
organization  or division  thereof;  or (v) enter into any contract,  agreement,
commitment or arrangement with respect to any of the foregoing. The Company also
agreed that prior to the  Effective  Date, it shall not, nor shall it permit any
of its  Subsidiaries to, except as required to comply with applicable law, enter
into any new (or amend any existing)  Company  Benefit Plan or any new (or amend
any existing) employment,  severance or consulting agreement,  grant any general
increase in the compensation of directors,  officers or employees (including any
such increase  pursuant to any bonus,  pension,  profit-sharing or other plan or
commitment)  or grant any  increase  in the  compensation  payable  or to become
payable to any  director,  officer or employee,  except in any of the  foregoing
cases in accordance with pre-existing  contractual provisions or in the ordinary
course of business consistent

                                      -17-

<PAGE>



with past practice. The Company also agreed that prior to the Effective Date, it
shall not, nor shall it permit any of its  Subsidiaries to, make any investments
in non-investment grade securities.

     STOCKHOLDER APPROVAL; PROXIES. Pursuant to the Merger Agreement, Lukens has
agreed to take all action  necessary in accordance  with  applicable law and its
Certificate  of  Incorporation  and Bylaws to  convene  the  Special  Meeting as
promptly as  practicable  to consider  and vote upon the  approval of the Merger
Agreement and the transactions contemplated thereby. Lukens also has agreed that
its  Board of  Directors  will,  subject  to the Board of  Directors'  fiduciary
duties, recommend that the Lukens' stockholders vote in favor of and approve the
Merger  and  the  adoption  of  the  Merger   Agreement  and  the   transactions
contemplated thereby.

     Pursuant  to the Merger  Agreement,  Medisys  has agreed to take all action
necessary,  in accordance  with  applicable  law,  stock  exchange rules and its
Memorandum and Articles of Association,  to convene an extraordinary  meeting of
the holders of its ordinary shares to approve the Merger  Agreement,  the Merger
and the related  issuance of  securities to Medisys,  to the extent  approval is
required  and  sought by  Medisys.  Medisys  has also  agreed  that its Board of
Directors  will,  subject to its fiduciary  duties,  recommend  that the Medisys
stockholders  vote in favor of and  approve  the Merger and the  adoption of the
Merger Agreement and the transactions contemplated thereby.

     The parties also agreed to cooperate and prepare and file with the SEC this
Proxy  Statement and the Company has agreed to use all reasonable  efforts,  and
Medisys has agreed to cooperate with the Company,  to have this Proxy  Statement
cleared by the SEC as promptly as practical.

     EMPLOYEE MATTERS.  Pursuant to the Agreement, as of the Effective Date, the
employees of the Company and each Subsidiary shall continue  employment with the
Surviving Corporation and the Subsidiaries,  respectively, in the same positions
and at the same level of wages and  without  having  incurred a  termination  of
employment or separation from service;  provided that, except as required by law
or by contract,  the Surviving  Corporation  and the  Subsidiaries  shall not be
required to continue  any  employment  relationship  with any  employee  for any
specified  period of time. As of the Effective  Date, the Surviving  Corporation
shall be the  sponsor of Lukens'  Employee  Benefit  Plans  sponsored  by Lukens
immediately  prior to the  Effective  Date,  and Medisys has agreed to cause the
Surviving  Corporation  and the  Subsidiaries  to satisfy  all  obligations  and
liabilities under such plans.

     INDEMNIFICATION.  Pursuant to the Merger Agreement,  the Company has agreed
to indemnify, and after the Effective Date, the Surviving Corporation has agreed
to  indemnify  the  officers,  directors  and  employees  of the Company and its
Subsidiaries  who  were  such at any  time  prior  to the  Effective  Date  (the
"Indemnified Parties") from and against all losses, expenses, claims, damages or
liabilities  ("Losses")  arising  out of the  transactions  contemplated  by the
Merger  Agreement  occurring  before the  Effective  Date to the fullest  extent
permitted  or  required  under  applicable  law;  provided,  however,  that such
indemnification shall not be available with respect to Losses arising out of the
failure of the Company to obtain the Fairness  Opinion.  Medisys has agreed that
all rights to  indemnification  existing in favor of the directors,  officers or
employees  of  the  Company  as  provided  in  the  Company's   Certificate   of
Incorporation or By-Laws,  as in effect as of the date of the Merger  Agreement,
with respect to matters  occurring through the Effective Date, shall survive the
Merger and shall continue in full force and effect for a period of not less than
three years from the Effective  Date.  In addition,  Medisys has agreed to cause
the  Surviving  Corporation  to maintain in effect for not less than three years
after the  Effective  Date the current  policies  of  directors'  and  officers'
liability insurance  maintained by the Company with respect to matters occurring
on or  prior to the  Effective  Date;  provided,  however,  that  the  Surviving
Corporation may substitute  therefor  policies of at least the same coverage and
Medisys  shall not be required to  maintain or procure  such  coverage to pay an
annual  premium  in excess of 150% of the  current  annual  premium  paid by the
Company for its existing coverage (the "Cap");  and provided,  further,  that if
equivalent  coverage  cannot be obtained,  or can be obtained  only by paying an
annual premium in excess of the Cap, Medisys shall only be required to obtain as
much coverage as can be obtained by paying an annual premium equal to the Cap.

     ALTERNATIVE  PROPOSALS.  Pursuant  to the  Merger  Agreement,  prior to the
Effective  Date,  the  Company  has  agreed  (a) that  neither it nor any of its
Subsidiaries shall, and it shall direct and use its best efforts to cause it and
its Subsidiaries' officers, directors, employees, agents and representatives not
to, initiate, solicit or encourage any inquiries

                                      -18-

<PAGE>



or the making or  implementation  of any  proposal  or offer  with  respect to a
merger,  acquisition,  consolidation or similar  transaction  involving,  or any
purchase of all or substantially  all of the assets or any equity securities of,
the  Company  or any of its  Subsidiaries  (any  such  proposal  or offer  being
hereinafter  referred  to  as  an  "Alternative  Proposal")  or  engage  in  any
negotiations concerning, or provide any confidential information to, or have any
discussions with, any person relating to an Alternative Proposal, or release any
third party from any  obligations  under any  existing  standstill  agreement or
arrangement  relating to any Alternative  Proposal,  or otherwise facilitate any
effort  to  implement  an  Alternative  Proposal;  (b) that it will  cause to be
terminated any existing  activities or discussions with any parties with respect
to any of the  foregoing,  and it will take the  necessary  steps to inform  the
individuals  or entities  referred to above of its  obligations  with respect to
Alternative  Proposals under the Merger  Agreement;  and (c) that it will notify
Medisys if any such inquiries or proposals are received by, any such information
is requested  from, or any such  negotiations  or  discussions  are sought to be
initiated or continued with, it or any of its Subsidiaries;  provided,  however,
the  Board  of  Directors  of the  Company  shall  not be  prohibited  from  (i)
furnishing information to or entering into discussions or negotiations with, any
person or entity  that makes an  unsolicited  bona fide  proposal to acquire the
Company  pursuant  to a merger,  consolidation,  share  exchange,  purchase of a
substantial   portion  of  assets,   business   combination   or  other  similar
transaction,  if, and only to the extent that, (A) the Board of Directors of the
Company  determines  in good faith that such action is required for the Board of
Directors to comply with its fiduciary  duties to  stockholders  imposed by law,
(B) prior to furnishing  such  information  to, or entering into  discussions or
negotiations  with,  such  person or entity,  (i) the Company  provides  written
notice  to  Medisys  to the  effect  that it is  furnishing  information  to, or
entering into  discussions or negotiations  with, such person or entity and (ii)
the Company and such person or entity enter into an appropriate  confidentiality
agreement  with respect to information to be supplied by the Company and (C) the
Company keeps Medisys promptly informed of the status and all material terms and
conditions  of any such  discussions  and,  if any such  proposal is in writing,
furnishes a copy of such proposal to Medisys; and (ii) to the extent applicable,
complying with Rule 14e-2  promulgated  under the Exchange Act with regard to an
Alternative Proposal.

     CANCELLATION OF WARRANTS;  REPAYMENT OF LOANS FROM AFFILIATES.  Pursuant to
the Merger  Agreement,  on the Effective Date, (a) warrants to purchase  400,000
shares of Lukens  Common  Stock at an exercise  price of $1.10 per share held by
Mr. John  Robinson,  a director of the  Company,  are to be canceled and in lieu
thereof,  Mr. Robinson shall have the right to payment in cash equal to $400,000
in exchange therefor,  which payment shall be made by the Surviving  Corporation
promptly  after the Effective  Date,  (b) warrants to purchase  50,000 shares of
Lukens  Common  Stock held by Mr.  Peter  Lordi  shall be  canceled  and in lieu
thereof,  Mr.  Lordi shall have the right to payment in cash equal to $50,000 in
exchange  therefor,  which payment  shall be made by the  Surviving  Corporation
promptly after the Effective Date and (c) the outstanding  loans by Mr. Robinson
and Mr. Robert L. Priddy, another director of the Company, to the Company in the
original  principal amounts of $1,700,000 and $500,000,  respectively,  shall be
repaid by Medisys by (i) making a cash  payment to Mr.  Robinson of  $1,200,000,
plus all  accrued  and unpaid  interest,  and the  issuance  to Mr.  Robinson of
Medisys  ordinary  shares,  par  value 1p per  share,  having  a value  equal to
$500,000 and (ii) making a cash payment to Mr.  Priddy of all accrued and unpaid
interest on his loan and the issuance to Mr. Priddy of Medisys  ordinary shares,
par value 1p per share,  having a value equal to  $500,000,  which  payments and
issuances shall be made promptly after the Effective  Date.  Options to purchase
300,000  shares of Lukens Common Stock at an exercise  price of $4.00 per share,
which are owned by Mr. Priddy, will be canceled.

     Additionally,  Mr. Robert S. Huffstodt,  President, Chief Executive Officer
and a  Director  of the  Company,  as well as each  of the  other  officers  and
employees  of the Company will have all of the  employee  stock  options held by
them  converted  into the  right to  purchase  a number  of  ordinary  shares of
Medisys,  par value 1p,  equal to the  number of shares of Lukens  Common  Stock
subject to each such option  multiplied by the Option Exchange Ratio (as defined
above) (the "Substitute Options"). The Substitute Options shall have a per share
exercise  price equal to the current  exercise  price per share of Lukens Common
Stock divided by the Option Exchange Ratio, and each Substitute Option otherwise
shall  after  the  Effective  Date be  subject  to all of the  other  terms  and
conditions  of the  original  option to which it  relates.  See  "Factors  to Be
Considered -- Interests of Certain Persons in the Merger; Indemnification."

     AGREEMENT OF PRINCIPAL  STOCKHOLDERS.  Each of Messrs.  Priddy and Robinson
and Mr.  John  Holmes  have  agreed  that from and after the date of the  Merger
Agreement  until August 31, 1998,  or such earlier date as the Merger  Agreement
shall be  terminated  that (a) he shall not  pledge,  hypothecate  or  otherwise
transfer his shares of Lukens

                                      -19-

<PAGE>



Common  Stock in any  manner  and (b) he shall  vote all of his shares of Lukens
Common  Stock in favor of the Merger  (and  against any  Alternative  Proposal),
provided that nothing shall prevent any of them, when acting in their capacities
as directors of the Company, from exercising their fiduciary duties as directors
in accordance with applicable law.

     FAIRNESS OPINION.  Pursuant to the Merger Agreement, the Company has agreed
to engage an investment bank for the purpose of delivering the Fairness Opinion.
The Company has agreed to engage such  investment  bank to deliver the  Fairness
Opinion  within three weeks of the date of the Merger  Agreement  (the "Fairness
Opinion  Period").  Any failure by the Company's  investment bank to deliver the
Fairness  Opinion  for any reason  other than the  adequacy  of the value of the
Merger Consideration shall be deemed, under the Merger Agreement, to be a breach
of such covenant by the Company.

     MISCELLANEOUS.  The  Company  has agreed to confer on a regular  basis with
Medisys on  operational  matters and advise Medisys orally and in writing of any
change  or event  that has had,  or could  reasonably  be  expected  to have,  a
material  adverse  effect.  The Company  has also agreed to promptly  provide to
Medisys (and its counsel)  copies of all filings made by such party with the SEC
or any other state or federal  governmental entity in connection with the Merger
Agreement  and the  transactions  contemplated  thereby.  In addition,  upon the
mutual  agreement of Medisys and the  Company,  the parties have agreed that the
Merger shall be restructured in the form of a forward  subsidiary  merger of the
Company  into Merger Sub or as a merger of the Company  into Medisys and in such
event,  the Merger Agreement shall be deemed  appropriately  modified to reflect
such form of merger.

CONDITIONS TO THE MERGER

     The obligations of each of Medisys, Merger Sub and Lukens to consummate the
Merger  are  subject to the  satisfaction  of  certain  conditions  prior to the
Effective Date, including:  (i) the approval of the Merger by the requisite vote
of the  stockholders  of Lukens and (ii) the absence of any  injunction or other
order  preventing the  consummation  of the Merger.  The obligation of Lukens to
consummate  the Merger is subject to the  satisfaction  (or waiver by Lukens) of
certain additional conditions at or prior to the Effective Date, including:  (i)
the accuracy of the  representations and warranties of Medisys and Merger Sub in
all material  respects when made and on the Effective Date; (ii) the performance
by each of Medisys and Merger Sub in all  material  respects of each  obligation
required  in the  Merger  Agreement  to be  performed  by it on or  prior to the
Effective  Date;  and (iii) the  delivery by Medisys and Merger Sub of certified
Board  resolutions,  various  officers'  certificates  and a  legal  opinion  of
Medisys' and Merger Sub's legal counsel.  The  obligations of Medisys and Merger
Sub to consummate the Merger are further  subject to the  fulfillment (or waiver
by Medisys) of certain additional  conditions at or prior to the Effective Date,
including:  (i) the accuracy of the  representations and warranties of Lukens in
all material  respects when made and on the Effective Date; (ii) the performance
by Lukens in all  material  respects of each  obligation  required by the Merger
Agreement to be performed on or prior to the Effective  Date;  (iii) the absence
of any change which has had or would  reasonably  be expected to have a material
adverse change in the financial  condition,  business,  results of operations or
prospects  of the  Company  and its  Subsidiaries,  taken as a whole;  (iv) that
Lukens has not received a written  demand for appraisal by holders of the number
of shares of Lukens  Common Stock  exceeding 5% of the total number of shares of
Lukens Common Stock outstanding immediately prior to the Effective Date; and (v)
the delivery by Lukens of certified Board and stockholder  resolutions,  various
officers' certificates and a legal opinion of Lukens' legal counsel.

TERMINATION

     The Merger  Agreement may be terminated  and the Merger may be abandoned at
any time  prior to the  Effective  Date,  before or after the  approval  of this
Agreement by the  stockholders of the Company,  by the mutual consent of Medisys
and the Company.

     In  addition,  the parties  have agreed  that the Merger  Agreement  may be
terminated  and the Merger may be  abandoned by action of the Board of Directors
of  either  Medisys  or the  Company  if (a) the  Merger  shall  not  have  been
consummated by August 31, 1998 (provided  that the  terminating  party shall not
have breached in any material respect its obligations under the Merger Agreement
that shall have proximately contributed to the failure to consummate the

                                      -20-

<PAGE>



Merger),  or (b) the approval of the Company's  stockholders shall not have been
obtained,   or  (c)  a  United  States  federal  or  state  court  of  competent
jurisdiction  or United  States  federal or state  governmental,  regulatory  or
administrative agency or commission shall have issued an order, decree or ruling
or taken  any other  action  permanently  restraining,  enjoining  or  otherwise
prohibiting  the  transactions  contemplated  by the Merger  Agreement  and such
order,   decree,   ruling  or  other   action   shall  have  become   final  and
non-appealable.

     The Merger  Agreement may be terminated  and the Merger may be abandoned at
any time prior to the Effective Date,  before or after the adoption and approval
by the  stockholders of the Company,  by action of the Board of Directors of the
Company and written  notice to Medisys,  if (a) in the exercise of its fiduciary
duties to its stockholders imposed by law, the Board of Directors of the Company
determines  that such  termination  is  required  by  reason  of an  Alternative
Proposal  being  made,  or (b) there has been a  material  breach by  Medisys or
Merger Sub of any  representation or warranty contained in the Merger Agreement,
or (c) there has been a material  breach of any of the  covenants or  agreements
set forth in the Merger  Agreement  on the part of Medisys,  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  Medisys.  In  addition,  the Company has the
right to terminate  the Merger  Agreement  and abandon the Merger (A) during the
Fairness  Opinion  Period if the  Company  receives a written  opinion  from the
investment bank to the effect that the Merger  Consideration  is not fair from a
financial  point of view to the holders of the Lukens  Common  Stock,  or on the
last day of the Fairness  Opinion  Period if the  Fairness  Opinion has not been
delivered,  or (B) at any time after June 30,  1998,  if,  within  five (5) days
after the  written  request by the  Company  after such  date,  Medisys  has not
furnish to the Company a written  letter  addressed  to the  Company  from Henry
Ansbacher & Co.  Limited  and/or other  reputable  investment  banks  capable of
providing  such  financing  confirming  their firm  commitment  to  provide  the
financing  required in  connection  with the  transactions  contemplated  by the
Merger  Agreement  for the  payment of all  amounts  due  thereunder  or related
thereto  (including  fees and  expenses  of its  financial  advisors  and  legal
counsel).

     In addition,  the Merger  Agreement may be terminated and the Merger may be
abandoned  at any time prior to the  Effective  Date,  by action of the Board of
Directors  of Medisys and  written  notice to the  Company,  if (a) the Board of
Directors of the Company shall have withdrawn or modified in a manner adverse to
Medisys its approval or  recommendation of the Merger Agreement or the Merger or
shall have recommended an Alternative Proposal to the Company's stockholders, or
(b) there has been a material  breach by the  Company of any  representation  or
warranty  contained  in the Merger  Agreement,  or (c) there has been a material
breach by the Company of any of the  covenants  or  agreements  set forth in the
Merger  Agreement,  which  breach is not curable  or, if  curable,  is not cured
within 30 days after  written  notice of such  breach is given by Medisys to the
Company,  or (d) there has been a change  which has the  effect of  producing  a
material  adverse  change  in the  financial  condition,  business,  results  of
operations or prospects of the Company and its  Subsidiaries,  taken as a whole.
The Merger  Agreement  may also be  terminated  by Medisys and the Merger may be
abandoned  (A) at any time prior to May 15, 1998 (which date was later  extended
to June 14,  1998),  by action of the Board of  Directors of Medisys and written
notice to the Company,  if Medisys  concludes  as a result of  Medisys's  legal,
business  and  financial  due  diligence  review  of the  Company,  that (i) the
Company's  business,  properties,  assets,  condition  (financial or otherwise),
liabilities  or  operations  are not  satisfactory,  or (ii) the  Company  is in
material breach of any  representation or warranty made in the Merger Agreement,
or (B) during the  Fairness  Opinion  Period if the  Company  receives a written
opinion from the investment bank to the effect that the Merger  consideration is
not fair from a  financial  point of view to the  holders of the  Lukens  Common
Stock, or within two business days after the termination of the Fairness Opinion
Period if the Company  shall not have  obtained  the  Fairness  Opinion,  or (C)
before  June 30,  1998 if Medisys  shall have  failed to obtain the  irrevocable
undertaking  from holders of a majority of Medisys's  ordinary shares to vote in
favor  of the  resolutions  necessary  to  effect  the  Merger  and the  related
financing or (D) prior to June 30, 1998 if Medisys and Merger Sub shall not have
obtained a firm  commitment  from Henry  Ansbacher & Co.  Limited  and/or  other
reputable  investment  banks capable of providing  such financing to provide the
financing  required in  connection  with the  transactions  contemplated  by the
Merger  Agreement  for the  payment of all  amounts  due  thereunder  or related
thereto  (including  fees and  expenses  of its  financial  advisors  and  legal
counsel).

     Pursuant to the Merger  Agreement,  in the event that (x) any person  shall
have made an  Alternative  Proposal  and  thereafter  the  Merger  Agreement  is
terminated either by the Company due to the Company Board of Directors'

                                      -21-

<PAGE>



determination  that such  termination  is required  by reason of an  Alternative
Proposal being made, or by either Medisys or the Company because the approval of
the Company's  stockholders has not been obtained, (y) the Board of Directors of
the Company shall have  withdrawn or modified in a manner adverse to Medisys its
approval or  recommendation  of the Merger Agreement or the Merger or shall have
recommended  an  Alternative  Proposal to the Company  stockholders  and Medisys
shall  have  terminated  the  Merger  Agreement  pursuant  to clause  (a) of the
immediately preceding paragraph or (z) any person shall have made an Alternative
Proposal and thereafter the Merger  Agreement is terminated for any reason other
than those set forth in clauses (x) or (y) above and within 12 months thereafter
any Alternative  Proposal shall have been  consummated  with the third party who
made such Alternative Proposal, then the Company shall promptly, but in no event
later than two days after  such  termination  or  consummation  with  respect to
clause (z), pay Medisys a fee of $500,000 (the  "Termination  Fee"), but Medisys
shall only be entitled to be paid the  Termination  Fee in the event that at the
time of the  termination  of the Merger  Agreement  Medisys  is not in  material
breach of any of the  representations,  warranties or covenants set forth in the
Merger Agreement.  The parties have agreed that if the Company fails to promptly
pay the Termination Fee, and, in order to obtain such payment, Medisys or Merger
Sub  commences a suit which  results in a judgment  against the Company for such
fee,  the  Company  shall  pay to  Medisys  its costs  and  expenses  (including
attorneys'  fees) in  connection  with such suit,  together with interest on the
amount of the fee at the rate of 12% per annum from the date such payment should
have been made.

     In the event of termination of the Merger  Agreement and the abandonment of
the Merger pursuant to Article XI of the Merger Agreement (as described  above),
all obligations of the parties thereto shall  terminate,  except the obligations
of the  parties  pursuant  to  this  paragraph  and  the  immediately  preceding
paragraph, and Section 12.3 (Fees and Expenses) and except for the provisions of
certain other miscellaneous sections including specific performance, assignment,
governing law and severability.

NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

     All  representations and warranties set forth in the Merger Agreement shall
terminate at the Effective  Date.  All covenants and agreements set forth in the
Merger Agreement and any instrument  delivered  pursuant to the Merger Agreement
shall survive in accordance with their terms.

FEES AND EXPENSES

     The  Merger   Agreement   provides  that  whether  or  not  the  Merger  is
consummated,  all costs and  expenses  incurred  in  connection  with the Merger
Agreement and the transactions  contemplated  thereby shall be paid by the party
incurring  such  expenses,  whether or not the Merger is  consummated  except as
expressly  provided  in the Merger  Agreement  and except that the filing fee in
connection with the filing of this Proxy Statement with the SEC and the expenses
incurred in connection  with printing and mailing this Proxy  Statement shall be
shared equally by Lukens and Medisys.

                               DISSENTERS' RIGHTS

     Stockholders who have not voted in favor of the Merger or consented thereto
in  writing  have the right to demand an  appraisal  of the fair  value of their
Lukens Common Stock in accordance with the provisions of Section 262 of the DGCL
("Section  262"),  which sets forth the rights and  obligations of  stockholders
demanding an appraisal  and the  procedures  to be  followed.  Stockholders  who
perfect such rights will not be entitled to surrender  their Lukens Common Stock
for payment of the Merger  Consideration  in the manner  otherwise  described in
this Proxy Statement.  Stockholders should assume that the Surviving Corporation
will  take no  action  to  perfect  any  appraisal  rights  of any  stockholder.
Therefore,  to  exercise  his or her  appraisal  rights,  a  stockholder  should
strictly  comply  with the  procedures  set forth in Section 262 and is urged to
consult his or her legal advisor before  electing or attempting to exercise such
appraisal  rights.  Stockholders  who  vote in favor of the  Merger  or  consent
thereto in writing cannot demand  appraisal  rights,  but  stockholders  are not
required  to vote their  shares of Common  Stock  against the Merger in order to
obtain such appraisal  rights.  Stockholders  who sign and return the proxy card
included with this Proxy  Statement  with  instructions  to vote in favor of the
Merger or,  since proxy cards  returned  without  instructions  will be voted in
favor of the Merger,

                                      -22-

<PAGE>



with no  instruction  to vote against or abstain from voting with respect to the
Merger, will not be entitled to appraisal rights.

     The following is a summary of the  procedures to be followed  under Section
262,  the text of which is  attached  to this  Proxy  Statement  as Annex C. The
summary does not purport to be a complete  statement of, and is qualified in its
entirety by reference to, Section 262 and to any amendments to Section 262 after
the date of this Proxy  Statement.  Failure to follow any Section 262  procedure
may result in termination  or waiver of appraisal  rights under Section 262. Any
stockholder  who desires to exercise his or her  appraisal  rights should review
carefully  Section 262 and is urged to consult his or her legal  advisor  before
electing or attempting to exercise such rights.

     Only a stockholder of record is entitled to seek appraisal.  The demand for
appraisal  must be  executed  by or for the  stockholder  of  record,  fully and
correctly,   as  such   stockholder's   name  appears  on  the  holder's   stock
certificates.  If the stock is owned of record in a fiduciary capacity,  such as
by a trustee, guardian or custodian, the demand should be made in that capacity,
and if the  stock is owned of  record  by more  than one  person,  as in a joint
tenancy in common,  the demand should be made by or for all owners of record. An
authorized agent, including one or more joint owners, may execute the demand for
appraisal for a  stockholder  of record;  however,  such agent must identify the
record owner or owners and  expressly  disclose in such demand that the agent is
acting as agent for the record  owner or owners of such shares of Lukens  Common
Stock. A record stockholder, such as a broker, who holds shares of Lukens Common
Stock  as a  nominee  for  beneficial  owners,  some of whom  desire  to  demand
appraisal,  must exercise  appraisal rights on behalf of such beneficial  owners
with  respect to the  shares of Lukens  Common  Stock  held for such  beneficial
owners. In such case, the written demand for appraisal must set forth the number
of shares of Lukens  Common Stock  covered by such  demand.  Unless a demand for
appraisal  specifies a number of shares of Lukens Common Stock, such demand will
be presumed to cover all shares of Lukens  Common Stock held in the name of such
record owner.

     The Company is mailing to each  stockholder of record as of the Record Date
this Proxy Statement,  which  constitutes the notice required under Section 262.
Included  with this Proxy  Statement is a copy of Section  262. Any  stockholder
entitled to appraisal rights may demand, in writing, from the Company,  prior to
the vote on the  Merger,  an  appraisal  of his or her  shares of Lukens  Common
Stock.  Such demand will be sufficient  if it reasonably  informs the Company of
the identity of the stockholder  and that the  stockholder  intends to demand an
appraisal of the fair value of his or her shares of Lukens Common Stock. Failure
to make such a demand will foreclose a stockholder's right to appraisal. A proxy
or vote against the Merger  shall not  constitute  a demand.  In  addition,  any
stockholder  voting in favor of the Merger or  consenting  thereto in writing is
not entitled to appraisal  rights under Section 262.  Stockholders  who sign and
return the proxy card included with this Proxy  Statement with  instructions  to
vote in favor of the Merger or, since proxy cards returned without  instructions
will be voted in favor of the Merger,  with no  instruction  to vote  against or
abstain  from  voting  with  respect  to the  Merger,  will not be  entitled  to
appraisal rights.

     A  stockholder  may  withdraw  his or her demand for  appraisal  by written
request  within 60 days after the Effective  Date of the Merger,  but thereafter
the approval of the Surviving Corporation is needed for such a withdrawal.  Upon
withdrawal of an appraisal demand, a stockholder will be entitled to receive the
Merger Consideration, without interest.

     Within 10 days  after  the  Effective  Date of the  Merger,  the  Surviving
Corporation  shall notify each  stockholder who has complied with the provisions
of Section 262. Within 120 days after the Effective Date (the "120-Day Period"),
in compliance  with Section 262, any  stockholder  who has properly  demanded an
appraisal and who has not  withdrawn  his or her demand as provided  above (such
stockholders  being referred to collectively  as the "Dissenting  Stockholders")
and the Surviving  Corporation  each has the right to file in the Delaware Court
of Chancery  (the  "Delaware  Court") a petition  (the  "Petition")  demanding a
determination  of the  value  of the  Lukens  Common  Stock  held  by all of the
Dissenting  Stockholders.  If, within the 120-Day Period, no Petition shall have
been filed as provided above,  all rights to appraisal will cease and all of the
Dissenting  Stockholders  who owned Lukens Common Stock will become  entitled to
receive the Merger Consideration. The Surviving Corporation is not obligated and
does not intend to file a Petition.  Any  Dissenting  Stockholder  is  entitled,
within the 120-Day Period and upon written request to the Surviving Corporation,
to  receive  from the  Surviving  Corporation  a  statement  setting  forth  the
aggregate number of shares of

                                      -23-

<PAGE>



Common Stock not voted in favor of the Merger and the aggregate number of shares
of Lukens  Common Stock with respect to which  demands for  appraisal  have been
received and the aggregate number of Dissenting Stockholders.

     Upon the filing of the Petition by a Dissenting  Stockholder,  the Delaware
Court may order that  notice of the time and place  fixed for the hearing on the
Petition  be  mailed  to the  Surviving  Corporation  and all of the  Dissenting
Stockholders and be published at least one week before the day of the hearing in
a newspaper of general circulation published in the City of Wilmington, Delaware
or in another  publication  determined by the Delaware Court. The costs relating
to these notices will be borne by the Surviving Corporation. If a hearing on the
Petition is held, the Delaware Court is empowered to determine which  Dissenting
Stockholders  have complied with the  provisions of Section 262 and are entitled
to an  appraisal  of their Common  Stock.  The  Delaware  Court may require that
Dissenting  Stockholders  submit their  certificates for notation thereon of the
pendency of the  appraisal  proceedings.  The  Delaware  Court is  empowered  to
dismiss the  proceedings  as to any Dissenting  Stockholder  who does not comply
with such  requirement.  Accordingly,  Dissenting  Stockholders are cautioned to
retain their certificates pending resolution of the appraisal proceedings.

     Stockholders  considering  seeking  appraisal  should have in mind that the
fair value of their shares of Lukens Common Stock  determined  under Section 262
could  be  more,  the  same,  or less  than the  Merger  Consideration  and that
investment  banking  opinions as to fairness from a financial  point of view are
not necessarily  opinions as to fair value under Section 262. The Delaware Court
has discretion to require the Surviving  Corporation to pay interest on the fair
value of the shares determined pursuant to Section 262.

     Dissenting  Stockholders  are  generally  permitted to  participate  in the
appraisal  proceedings.  No appraisal  proceeding in the Delaware Court shall be
dismissed as to any Dissenting  Stockholder without the approval of the Delaware
Court,  and this approval may be conditioned upon terms which the Delaware Court
deems just.

     From and after the  Effective  Date,  Dissenting  Stockholders  will not be
entitled to vote their  Common Stock for any purpose and will not be entitled to
receive  payment of dividends or other  distributions  in respect of such Common
Stock payable to stockholders of record thereafter.

                             BUSINESS OF THE COMPANY

     Lukens  was  incorporated  under  the laws of the  State of New  Jersey  on
December 27, 1982 and operated  under the name Gyneco,  Inc.  until 1987 when it
was renamed  Lukens  Corporation  -- New Jersey.  On April 27, 1988, the Company
reorganized  in the  State of  Delaware  by  merger  with and into its  Delaware
wholly-owned  subsidiary,  Lukens  Medical  Corporation.  All  references to the
Company   herein   include  the   operations  of  the   Company's   wholly-owned
subsidiaries.  The  Company's  executive  offices  are  located at 3820  Academy
Parkway  North NE,  Albuquerque,  New Mexico 87109 and its  telephone  number is
(505) 342-9638.

     The  Company  has  been  engaged  since  1906 in the  design,  development,
manufacturing  and  marketing of wound  closure  products for use in the medical
industry,  including, without limitation, suture products and bone wax, and more
recently  has  expanded  its  product  line to include  other  medical  devices,
including,  without  limitation,   lancets,  sharps  containers  and  diagnostic
devices.  Suture  products  include  sutures  (a  product  consisting  of suture
material  attached to a surgical  needle) and  ligatures  (suture  material  not
attached to a surgical needle).  Suture materials are made from silk, catgut and
other similar materials.  Bone wax is a product used to temporarily seal severed
bones during  surgery.  The Company  markets its  products  for general  surgery
applications,  including  for  use in  oral  and  veterinary  surgery,  and  for
specialty  surgery  applications,  including for use in plastic,  ophthalmic and
cardiovascular surgery.

     In March 1996,  the Company,  through a wholly-owned  subsidiary,  acquired
assets constituting the following three product lines of Ulster Scientific, Inc.
("Ulster")  of New Paltz,  New York (the  "Ulster  Acquisition"):  (i)  lancets,
including  needles and accessories,  (ii) dispettes and (iii) infection  control
kits  (collectively  referred to herein as the "Ulster Product Lines").  Lancets
are finger-prick devices used to draw small amounts of blood,  primarily to test
glucose levels.  Dispettes are disposable  diagnostic  devices used primarily in
physicians' offices to test blood.  Infection control kits contain various items
used in medical and  scientific  facilities  to clean up blood and other  bodily
fluid spills.

                                      -24-

<PAGE>



Approximately  30% of the Company's  revenues for the fiscal year ended December
31,  1997  are  attributable  to  the  sale  of  such  products.  For a  further
description of these Ulster Product Lines, see "Ulster Product Lines."

     In January 1997, the Company  entered into a new joint venture with certain
of its international  distribution  partners to manufacture  hypodermic needles,
and  other  medical  products  for  distribution  worldwide  (the  "India  Joint
Venture").  As part of the  transaction,  the joint  venture  acquired a modern,
fully-equipped  22,000  square foot plant in the Cochin  Export Zone in Southern
India. See "India Joint Venture."

     In May 1997, the Company  acquired a new  subsidiary,  Pro-Tec  Containers,
Inc.  ("Pro-Tec")  of Sanford,  Florida  (the  "Pro-Tec  Acquisition").  Pro-Tec
manufactures and markets a line of sharps disposal  containers which are used by
health care  providers  for safe disposal of used  "sharps,"  such as hypodermic
needles,  scalpels,  blades,  lancets,  and suture needles (the "Pro-Tec Product
Lines").  Approximately  8% of the Company's  revenues for the fiscal year ended
December  31, 1997 are  derived  from the sale of such  products.  For a further
description of these Pro-Tec Product Lines, see "Pro-Tec Product Lines."

     Also  in  May  1997,   the   Company   acquired  a  51%   interest  in  its
Brazilian-based  distributor,  Techsynt, which then changed its name to Techsynt
Lukens Ltd.  ("Techsynt").  Techsynt is engaged primarily in the manufacture and
marketing of sutures for the Brazilian  market,  although it is anticipated that
Techsynt will eventually export sutures to selected other markets worldwide, and
will market  certain of the Company's  other  products where the local market is
suitable.  Techsynt  did not  commence  operations  until  October 1, 1997,  and
therefore  did not  contribute  significant  revenues or earnings for the fiscal
year ended December 31, 1997.

PRODUCTS

     SUTURE PRODUCTS.  During 1997, the surgical suture industry  represented in
excess of $2.4  billion of the overall  disposable  surgical  product  industry,
approximately 60% of which represented the international market and 40% of which
represented the domestic  market.  Surgical suture products are comprised of two
principal categories:  (i) general surgical suture products,  and (ii) specialty
surgical  suture  products.  Differentiating  the  categories  are the  physical
properties of the surgical  needle such as size,  sharpness and  ductility,  the
type of  suture  material  used,  as well as  packaging  and cost.  The  Company
designs, develops, manufactures and markets suture products for both general and
specialty surgery uses.

     The  Company's   general   surgical   suture   products  are  comprised  of
approximately 250 standard products and approximately  3,000 additional products
which  the  Company  is  capable  of  providing  to meet the  specifications  of
particular  surgeons  and  practitioners.  General  surgical  sutures  primarily
include  standard  needles.  The Company  designs,  develops,  manufactures  and
markets  suture  products  that cover a broad  spectrum of surgical  categories,
including,  without limitation,  general, ob-gyn, urology,  orthopedic, oral and
veterinary surgery, all of which generally utilize the same types of needles and
suture  materials.  The  Company  markets  and sells  its full  line of  general
surgical suture products worldwide. See "Sales, Marketing and Customers."

     The Company's  specialty  surgical suture products consist of an innovative
line of  laser-drilled  needles  and  suture  materials  for use in the areas of
plastic, ophthalmic, cardiovascular and oral surgery. One major advantage to the
specialty  surgeon of utilizing a drilled  needle stems from the manner in which
the suture  material  is  attached  to such a needle.  When  suture  material is
attached to many  standard  needles,  the back end of the needle is sliced open,
the suture is placed in the  opened  portion of the needle and the metal is then
crimped together  (referred to as "channel swaging") to hold the suture material
in the needle.  Over the years,  specialty  surgeons have recognized that one of
the major  problems  with such  sutures  is that the  crimped  end of the needle
becomes  larger in diameter than the rest of the needle,  creating a larger hole
in the  tissue  than is  required.  Laser-drilled  needles  offer a  significant
improvement to the standard method.  Because the Company's specialty needles are
laser-drilled,  as opposed to sliced  open,  there is no bulge at the end of the
needle when the suture  material is inserted and crimped into place.  During the
laser  drilling  process,  the  excess  metal is  removed  from the  needle.  In
addition, because the distortion of the remaining metal is

                                      -25-

<PAGE>



minimal,  as  compared to the  standard  process,  the end of the  laser-drilled
needle is not as prone to  breakage or  snapping.  See  "Production  and Quality
Assurance."

     Laser-drilled  needles  are  manufactured  for the  Company by  independent
suppliers  in  accordance  with the  Company's  specifications  using 300 Series
stainless  steel, an alloy which is more corrosion  resistant than the materials
from which standard  needles are generally made. This special alloy of stainless
steel also enables the Company's needles to remain sharper than standard needles
after repeated passes through tissue. In addition,  as a result of using the 300
Series  stainless  steel,  the  Company's  laser-drilled  needles  are also less
brittle and more  ductile  than  standard  needles.  The  Company  relies on the
confidential  treatment of its proprietary  needle design  specifications by its
suppliers.  See "Suppliers,"  "Competition" and "Patent and Proprietary Rights."
The  Company  markets  and sells its full line of  specialty  surgical  products
worldwide. See "Sales, Marketing and Customers."

     BONE WAX.  The Company  believes it is one of only three  companies  in the
United  States  that  sells,   and  has  the  approval  of  the  Food  and  Drug
Administration (the "FDA") to manufacture and market, bone wax. Bone wax is used
to temporarily seal severed bones during surgery.  The Company  manufactures its
bone wax primarily from bees wax.  Although the total  worldwide bone wax market
is  relatively  small  (estimated by the Company to be  approximately  $7 to $10
million  annually),  gross margins in this area are relatively high. The Company
sells bone wax worldwide.

ULSTER PRODUCT LINES

     The Company's Ulster Product Lines are as follows:

     LANCETS,  NEEDLES AND  ACCESSORIES.  The  Company  markets a broad range of
blood lancet-type  devices,  including  general purpose style,  safety style and
automatic  single-use  style. The target markets for lancets include  hospitals,
nursing homes,  doctors'  offices,  industrial  establishments  and the home-use
market.  Blood  lancing-type  devices are used for several  purposes,  including
routine lab testing, diabetic monitoring, and cholesterol monitoring.

     DISPETTES.   Dispettes   are   disposable   diagnostic   devices  used  for
sedimentation rate testing of blood and are a more affordable alternative to the
expensive  automated blood testing labs. Because dispettes are convenient,  easy
to use, and  relatively  inexpensive  to purchase,  the primary market for these
products  are small  medical  clinics and  individual  physician  practices.  As
sophisticated  blood testing technology in the United States continues to become
more  prevalent,  the use of dispettes is expected to  gradually  diminish.  The
Company  intends to expand the marketing of this product  internationally  where
access to sophisticated blood analysis technology is more limited.

     INFECTION  CONTROL KITS.  Infection control kits contain various items used
in medical and  scientific  facilities  to clean up blood and other bodily fluid
spills.  The infection  control clean-up kits are marketing by the Company under
the "BASKIT" name. Under the Occupational  Safety and Health Act (OSHA),  safety
spill clean up kits, such as the one marketed by the Company, are required to be
maintained  in  any  facility  working  with  blood  and  other  bodily  fluids,
including,  without  limitation,  hospitals,  laboratories,  doctors offices and
ambulances.

     With the  exception  of certain raw  materials  produced  in the  Company's
Indian facility (see India Joint Venture),  the Company does not manufacture any
of the  products  in the Ulster  Product  Lines.  The  Company  purchases  these
products under agreements with certain  suppliers and,  following  sterilization
and  packaging,  resells the products to other medical supply  distributors  and
end-users. See "Suppliers."

PRO-TEC PRODUCT LINES

     In May 1997,  in  connection  with the  Pro-Tec  Acquisition,  the  Company
acquired  and began  selling  the  products in the Pro-Tec  Product  Lines.  The
Pro-Tec Product Lines consists of sharps disposal  containers  which are used by
health care  providers  for safe disposal of used  "sharps,"  such as hypodermic
needles,  scalpels,  blades,  lancets,  and suture  needles.  These products are
available  in  a  variety  of  sizes  and   configurations   to  suit  both  the
hospital-based and

                                      -26-

<PAGE>



office-based  healthcare  market  segments.  All of the  products in the Pro-Tec
Product Lines are manufactured and shipped by outside contractors.

NEW PRODUCTS

     In September  1997, the Company began marketing a device known as an aortic
punch, a product which is used by  cardiovascular  surgeons in performing bypass
procedures.  The device has several  unique  patented  features which enable the
surgeon to more  easily  perforate  the aorta  prior to  connecting  a new blood
vessel.  The Company  estimates  that the  worldwide  market for this product is
approximately  $7 million.  The Company has begun domestic  distribution of this
product  through  manufacturers'  representatives.  Due  to  the  product  being
launched  late in the year and the  relatively  long sales  cycle,  sales of the
aortic punch contributed less than 1% to the Company's revenues during 1997.

     Also in the  fourth  quarter,  the  Company  introduced  a  product  called
"Sed-Control,"  which can be used in conjunction with the Company's dispettes to
verify the accuracy of the test.  This product has met with very limited success
due, in the Company's  opinion,  to its relatively short shelf life, the lack of
regulatory  requirements to utilize such a control,  and heavy price competition
from other suppliers of such controls. The Company does not anticipate that this
product will generate substantial revenues in the future.

INDIA JOINT VENTURE

     In  January  1997,  the  Company  entered  into  a  new  joint  venture  to
manufacture  hypodermic  needles,   syringes  and  other  medical  products  for
distribution worldwide. As part of the transaction, the joint venture acquired a
modern,  fully-equipped  22,000  square foot plant in the Cochin  Export Zone in
Southern India.  The new subsidiary,  Lukens Medical Products Private Ltd., is a
joint venture between the Company and certain of its international  distribution
partners.  The Company is the majority shareholder,  and manages the operations,
with all partners  contributing  to the  marketing of the  products.  Production
began in November 1997 of lancet wires, also called lancet needles,  which prior
to being  manufactured  in-house,  were the most costly component in the lancets
marketed by the Company. It is anticipated that certain other disposable medical
products will be manufactured in the facility by the end of 1998.

BRAZIL JOINT VENTURE

     In  May  1997,  the  Company  acquired  a 51%  interest  in  its  exclusive
distribution  in Sao Paulo,  Brazil.  The Company  plans to expand the venture's
existing suture manufacturing  capacity,  and begin producing its new, synthetic
absorbable  sutures in Brazil.  Eventually  the Brazil Joint Venture will export
sutures to many of the Company's international markets.  Currently, Brazil has a
staff of 11 engaged primarily in suture production,  and markets via tenders and
a network of several independent sales  representatives.  Techsynt operates in a
5,000 square foot leased facility in Sao Paulo, Brazil.

SALES, MARKETING AND CUSTOMERS

     PRODUCT SALES.  The Company's  principal  means of selling its products has
been through independent distributors that have entered into either exclusive or
non-exclusive arrangements with the Company. Such arrangements have involved the
grant by the Company of  exclusive  or  semi-exclusive  rights to sell  specific
products or product lines in particular geographic territories.  Such agreements
generally  contain  specified  minimum  sales  levels  required in order for the
distributor  to  maintain  exclusivity,  as well  as  provisions  requiring  the
distributors to participate in trade shows and  conventions in their  respective
territories in order to promote the Company's products.

     MARKETING  STRATEGY.  The Company's  domestic  strategy with respect to its
suture products is to focus its marketing  energies on its general and specialty
surgical products which are used by doctors and practitioners  primarily outside
of a hospital (i.e., in doctors' offices, dentists' offices,  veterinary clinics
and outpatient plastic and ophthalmic  surgical  centers),  and where purchasing
decisions are made outside of the large hospital and institutional  environment.
To this end, the Company  aggressively  markets in the United  States its dental
and veterinary general surgical suture

                                      -27-

<PAGE>



products and its plastic  specialty  surgical suture products.  The Company also
continues to market and sell its line of general and specialty surgical products
to selected markets  internationally,  where it is better able to compete solely
as a quality,  low-cost  supplier  to the  foreign  hospital  and  institutional
market.  As a result of the recent  receipt by the Company of approval  from the
FDA to begin  marketing its synthetic  absorbable  suture product for human use,
the  Company  believes  that its  ability to  compete in parts of the  worldwide
suture market will be enhanced.

     In the third  quarter of 1997,  the  Company  refocused  its  international
marketing  strategy to limit its product offerings to higher margin products and
regions.  As a result,  the Company  reduced its standard suture product line to
include only  approximately 250 catalog codes (down from  approximately 750) and
intends to  de-emphasize  and even abandon  certain  international  markets.  In
connection  with this new  strategy,  in December  1997,  the Company  wrote-off
approximately  $3,030,000  worth of inventory  consisting of these  discontinued
catalog codes. See "Management's Discussion and Analysis of Operations."

     While the Ulster Product Lines and the Pro-Tec  Product Lines are currently
marketed entirely in the United States, the Company intends to launch certain of
these products internationally in 1998 and 1999.

     The Company  currently has a domestic  staff of five  employees  engaged in
direct sales, telemarketing and direct mail promotion of general surgical suture
products and bone wax products worldwide, as well as providing marketing support
to the Company's  specialty and general suture  distributors.  In addition,  the
Company  has a four  person  sales  staff  and a team  of  eight  manufacturer's
representatives responsible for selling all the Company's products in the United
States.

     CUSTOMERS.  The primary customers for the Company's suture products are its
distributors,  who then resell the products to end users,  generally under their
own brand  names.  The Company  sells its products  directly to certain  foreign
governments and is also a party to exclusive  agreements with  distributors in a
number of foreign  countries,  including  South  Africa,  Honduras and Italy and
non-exclusive  agreements  in Costa  Rica and Saudi  Arabia  for the sale of its
general  surgery  products  (as  well  as  certain  of the  Company's  specialty
products)  primarily  under the "Lukens'  name.  Customers of the Ulster Product
Lines primarily include large medical and laboratory  product  distributors,  as
well as mail order diabetic supply houses.

RESEARCH AND DEVELOPMENT ACTIVITIES

     During 1996, the Company's research and development efforts were focused on
finalizing its FDA submission for a braided synthetic absorbable suture product.
The Company  received  clearance  from the FDA in February of 1997 to market its
synthetic  absorbable  suture  product for human use.  The Company  released its
braided  synthetic  absorbable  suture  product to the human  market in April of
1997.  See  "Government  Regulations."  The  current  Research  and  Development
activities  of the  Company  are focused on the  development  of a  monofilament
synthetic  absorbable  suture,  the new products to be manufactured by the India
Joint  Venture,  and ongoing  improvements  to the Company's  product line.  The
Company does not expect to expend  significant funds on research and development
activities in 1998.

PRODUCTION AND QUALITY ASSURANCE

     The  Company's  manufacturing  operations  for the  production  of surgical
sutures  generally  consist of joining surgical needles with suture material and
packaging the finished suture  product.  The Company's  general  surgical suture
production  operations are primarily conducted in Juarez,  Mexico pursuant to an
agreement whereby a maquiladora  conducts  manufacturing and assembly operations
for the Company's  benefit,  with the Company  supplying all parts,  components,
materials,  machinery and equipment and bearing all labor costs. In addition,  a
number of the  Company's  suture  products are also  produced at its facility in
Albuquerque,   New  Mexico.  Suture  production  and  packaging  operations  are
extremely exacting and labor intensive processes. Because of the extensive range
of  possible  needle/suture  material  combinations  and  the  large  number  of
short-run,  special orders which must be filled, it is not economically feasible
to automate the predominant portion of the Company's production activities. Most
must instead be done by hand by highly-trained employees.

                                      -28-

<PAGE>



     Materials (i.e.,  needles and "suture materials") which comprise the suture
products  are  purchased  from a number of  vendors.  Upon their  receipt by the
Company,  all  materials  are subject to  inspection  by the  Company's  quality
assurance staff. Tests conduced by the Company's quality assurance staff include
visual  inspection  as well as physical  tests.  Conformity  with the  Company's
specifications  is of prime importance and one of the staff's goals is to detect
non-conforming  components  prior to  assembly  and  packaging.  Upon  approval,
needles and suture  materials are released to storage  areas for  pre-processing
preparation and subsequent assembly.

     Although many suture products  consist solely of the "thread" (e.g.,  silk,
catgut or other  materials),  most  consist  of suture  material  which has been
attached to one or two needles.  Braided suture materials  (e.g.,  silk) used in
the Company's products undergo "tipping," a process which creates a hardened tip
on the end of the suture  material to facilitate  the attachment of the material
to the needles. The attaching process, known as "swaging", is a critical step in
the Company's  production  process,  with the minimum strength of the attachment
prescribed by the U.S. Pharmacopeia.  The attaching process is largely performed
by individuals operating small, pedal activated machines which form the metal of
the needle around the thread,  crimping the two  together.  After  swaging,  the
completed sutures are wound by hand onto small cards and then packaged according
to suture type and intended use. Packaged and boxed sutures are either delivered
to subcontractors for sterilization, or, in the case of synthetic absorbable and
certain other sutures sterilized in-house. After sterilization, the products are
returned to the production department for additional packaging and distribution.
The Company's  quality  assurance  department is responsible  for in-process and
post-production analyses of all of the Company's products.  Quality assurance is
supported  through  the use of both manual and  computerized  systems to provide
traceability of product batches and track each stage of the production  process.
The Company's  production and quality assurance  operations must comply with the
FDA's current GMP regulations  and are subject to periodic FDA  inspection.  See
"Government Regulations."

     The  production of bone wax entails the  preparation  of the  beeswax-based
product at the Company's New Mexico  facility,  where it is packaged and sent to
subcontractors for sterilization by gamma radiation.  The products in the Ulster
Products  Lines are largely  purchased in finished  condition and do not involve
extensive  processing by the Company.  The products in the Pro-Tec Product Lines
are  produced,  and shipped  directly to the  Company's  customers,  by contract
manufacturers  utilizing the Company's molds. The hypodermic  needles,  syringes
and related  medical  products to be produced by the India Joint Venture will be
manufactured and molded at the facility acquired by the joint venture.

SUPPLIERS

     The Company's specialty needles are currently manufactured to the Company's
specifications  by two  independent  overseas  vendors.  The  Company's  general
surgery needles and its suture materials are supplied by a number of independent
manufacturers.  The  Company  believes  that  there are a number of  alternative
sources for all of such  products  and product  components.  Further,  while the
Company relies upon  confidentiality  agreements with its suppliers of specialty
needles to protect its particular  proprietary needle design and specifications,
specialty  needles  are  not  proprietary  to  the  Company  and  the  Company's
arrangements  with its  suppliers of specialty  needles are not  exclusive.  See
"Competition."

     While the Company  manufactures  its newly  approved  synthetic  absorbable
suture products,  it purchases the synthetic  absorbable  suture threads used in
these products from third-party  suppliers.  While these materials are currently
available upon  commercially  reasonable  terms, any disruption of the supply of
these  materials could have an adverse impact upon the ability of the Company to
produce its synthetic absorbable suture line.

     In connection with the Ulster Acquisition, the Company entered into two new
exclusive  supply  arrangements  with the principal  suppliers of certain of the
products in the Ulster  Product Lines.  The supply  agreement with Guest Elchrom
Scientific AG, relating to the dispette products, entitles the Company to act as
such supplier's exclusive distributor of such products in the United States. The
Company's  supply agreement with Korea Techma,  Inc.,  relating to the automatic
single-stick  lancet sold under the "Gentle-let 1" tradename,  also entitles the
Company to act as such  supplier's  exclusive  distributor in the United States.
The other products in the Ulster Product Lines are purchased by

                                      -29-

<PAGE>



the Company on a purchase-order basis from various other suppliers.  In general,
the molds utilized by such suppliers in the manufacture of the other products in
the Ulster  Product lines are not  proprietary  to the Company and the Company's
arrangements with such suppliers are not exclusive.

     The products in the Pro-Tec Product Line are all molded by outside contract
manufacturers,  who also ship the products  directly to the Company's  customers
which saves the Company shipping and warehousing expense. The Company uses three
primary vendors for molding, and holds title to all of its molds.

COMPETITION

     For the past 40 years,  the global  suture  market has been  dominated by a
small number of companies,  primarily Ethicon, Inc. ("Ethicon"),  a wholly-owned
subsidiary of Johnson & Johnson,  Inc.,  and Sherwood Davis & Geck. In addition,
there are several small national firms and regional suppliers of suture products
with which the  Company  competes  in both the  general  surgery  and  specialty
surgery markets.  In 1992, United States Surgical  Corporation  ("USSC") entered
the market with a full line of general and specialty surgery  products.  USSC is
currently the world's leading manufacturer and marketer of surgical staplers and
endoscopic instruments and supplies and they are beginning to gain market share.

     The Company believes that the extensive experience of its management group,
its  access  to  an  abundant  and  skilled  labor  pool,   and  its  economical
manufacturing  operations  have  enabled  the  Company to  position  itself as a
quality,  low-cost  supplier of general and specialty surgery suture products to
the foreign hospital and institutional  market,  and thus to compete in the sale
of  such  products  on  the  basis  of  price.  The  Company  currently  markets
approximately 250 products for use in general surgical  procedures,  and has the
capability and know-how to manufacture  approximately  3,000 additional products
in order to meet the specifications of particular  customers.  With the addition
of the Company's new synthetic  absorbable  suture line,  the Company's  product
line  offerings are  comparable  to those  offered by Ethicon,  Davis & Geck and
USSC.  The Company  believes  that its ability to remain a low-cost  producer of
general and specialty surgical suture products in certain  international markets
and its focus on the dental and veterinary  surgical suture markets,  as well as
certain  specialty  niches in the United States will be important to its ability
to remain  competitive  with the larger and better  capitalized  competitors  in
these markets.

     With respect to the Ulster Product Lines,  in the lancet and needle market,
the Company has essentially  four major  competitors:  Sherwood Medical Company,
Owen Mumford, Ltd., Gainor Medical U.S.A., Inc. and Can-Am Care Corporation.  LP
Italiana SpA and Polymedco are considered the Company's only  competitors in the
dispette  market.  The Company  believes the following four criteria,  listed in
order  of  priority,  influence  market  share:  price,  availability,  customer
relationships  and a well rounded  product line. The Company hopes to capitalize
on Ulster's  twenty years of  experience  in the market and its existing  client
base, augmented by the Company's international presence, to compete effectively.
However, the Company's  competitors in this area are larger,  better capitalized
and maintain  larger sales forces than the Company and are therefore  formidable
competitors.

     With  respect to the Pro-Tec  Product  Lines,  the Company has  essentially
three major  competitors:  Sage  Products,  Inc.,  Graphic  Controls,  Inc.  and
Becton-Dickinson,  Inc.  The Company  believes  that this  market is  influenced
primarily  by price and  complacency.  The fact that  these  products  are often
physically  attached to walls and  fixtures,  there is sometimes  resistence  to
switching  among  competing  brands.  The Company  believes  that its ability to
provide a low-priced product, combined with a nearly identical customer base for
its Ulster Product Lines, will enable it to effectively  compete in this market.
However, the Company's  competitors in this area are larger,  better capitalized
and maintain  larger sales forces than the Company and are therefore  formidable
competitors.

GOVERNMENT REGULATIONS

     The Company's  products and operations are subject to regulation by the FDA
in the United States and by comparable  regulatory  agencies in certain  foreign
countries.  Under the Federal Food, Drug and Cosmetic Act (the "FD&C Act"),  the
FDA  has  promulgated   regulations  and  established  guidelines  and  policies
governing "medical

                                      -30-

<PAGE>



devices",  including  certain of the products  sold by the Company.  Under these
regulations,  the Company's  products may not be shipped in interstate  commerce
(including export) without prior  authorization from the FDA (except any devices
that were in  commercial  distribution  prior to May 28, 1976 that were not then
regulated  as  drugs  and  that  have  not  changed   since  that  time).   Such
authorization is based on a review of the products' safety and effectiveness for
their intended use.  Medical  devices may be authorized by the FDA for marketing
either  pursuant to a pre-market  notification  under Section 510(k) of the FD&C
Act ("510(k)") or a pre-market approval  application  ("PMA"). A 510(k) consists
of a submission,  90 days prior to planned marketing,  of information sufficient
to establish that the device is  substantially  equivalent to a device  marketed
prior to May 28,  1976 or a device  substantially  equivalent  to such a device.
Such information normally consists of data comparing the respective devices, and
may include  data from  clinical  studies.  A finding by the FDA of  substantial
equivalence  may take  significantly  longer  than 90 days.  A PMA  consists  of
information  sufficient to establish that a device is safe and effective for its
intended use, including data from clinical and other studies.  FDA approval of a
PMA, may take as long as several years. Whether a product requires a 510(k) or a
PMA, depends on its  classification  under the law and FDA regulations.  Most of
the Company's  products  require  510(k)s,  although  certain products which the
Company may develop in the future might require a PMA. In addition,  the testing
of medical  devices  through  clinical  investigations  generally  requires  FDA
authorization.

     The  Company  believes  that it  currently  has in place all the  requisite
authorizations  to market its current line of products,  including nine PMAs and
sixteen 510(k)s.  The Company's  current line of suture products includes all of
the major suture  materials that are marketed in the United States.  The Company
believes that all of its current suture and  non-suture  products are covered by
its PMAs and 510(k)s, or are otherwise legally marketed,  and that, in view of a
reclassification  of suture  products by the FDA,  those  products for which the
Company has PMAs now require only 510(k)s;  however,  there is no assurance that
the FDA would agree with these positions.

     The  Company  is  subject to  additional  requirements  under the FD&C Act,
including registration,  recordkeeping and reporting requirements.  In addition,
the FDA regulates the promotion of medical  devices  (except for advertising for
non-restricted  devices which is regulated by other authorities),  in particular
to ensure  that  devices  are  promoted  within  the  terms of their  authorized
labeling guidelines. The Company's manufacturing operations must comply with the
FDA's current GMP regulations and are subject to periodic FDA inspection.

     Commencing on June 14, 1998, all medical devices  imported into Europe must
bear the CE mark. To begin affixing the CE mark to its products,  a company must
have implemented a quality management system in accordance with ISO 9001 Quality
Standard  requirements and have its products approved by an appropriate Notified
Body. While less than 5% of the Company's  revenues are generated in Europe, the
Company sees  potential for growth in this market,  as well as other benefits of
ISO approval. Accordingly, the Company is currently in the process of formal ISO
third-party  registration  of its  quality  system  and is  also  preparing  for
submission the necessary  technical  dossiers for the relevant products to be CE
marked.

     Future changes in  regulations  or  enforcement  policies could impose more
stringent  requirements  on the Company,  compliance  with which could adversely
affect the  Company's  business.  Failure to comply with  applicable  regulatory
requirements  could  result  in  enforcement  action,  including  withdrawal  of
marketing  authorization,  injunction,  seizure of products,  and  liability for
civil and/or criminal penalties.

PATENTS AND PROPRIETARY RIGHTS

     The Company considers its technology and procedures  relating to its suture
lines proprietary and relies primarily on trade secret laws and  confidentiality
agreements to protect its technology and  innovations.  Employees,  distributors
and key suppliers of the Company, as well as consultants which from time to time
may be hired, enter into confidentiality  and/or invention assignment agreements
providing for  non-disclosure of proprietary and trade secret information of the
Company  and the  assignment  to the  Company of all  inventions,  improvements,
technical information and suggestions relating in any way to the business of the
Company  (whether  patentable or not) which the employee or consultant  develops
during the period of their employment or association  with the Company.  Despite
these restrictions,  it may be possible for competitors or customers to copy one
or more aspects of the Company's products

                                      -31-

<PAGE>



or obtain  information  that the Company  regards as  proprietary.  In addition,
consultants  of the Company will most likely be employed by third  parties,  and
accordingly,  disputes could arise as to the  proprietary  rights to information
which has been  applied  to Company  projects  independently  developed  by such
consultants.

     Furthermore,  there can be no assurance that others will not  independently
develop products similar to those sold by the Company.

     The Company owns one United  States patent  relating to its  cardiovascular
product  packaging  and has filed one  additional  patent  application  with the
United States Patent and Trademark Office relating thereto.  The Company is also
licensed  under a patent for the coating of  synthetic  absorbable  sutures.  In
addition,  in connection with the Ulster  Acquisition,  the Company acquired the
rights to a patent  covering a mold used in the  production and component of the
BASKIT product and various trademarks and trademark applications relating to the
products in the Ulster Product Lines.

     In connection with the Pro-Tec  Acquisition,  the Company  acquired several
patents and  trademarks  related to the sharps  containers  and Pro-ject  needle
holder.  While the  Company  may seek  patent  protection  in the future for new
products,  there can be no assurance  that any patents,  or patents which may be
issued,  will provide the Company with  sufficient  protection in the case of an
infringement  of its  technology or that others will not  independently  develop
technology comparable or superior to the Company's.

     Although the Company  believes that the products sold by it do not and will
not infringe upon the patents or violates the proprietary  rights of others,  it
is possible that such  infringement  or violation has occurred or may occur.  In
the event that any products  sold by the Company are deemed to infringe upon the
patents or proprietary rights of others, the Company could be required to modify
its  products  or  obtain a  license  for the  manufacture  and/or  sale of such
products. There can be no assurance that, in such an event, the Company would be
able to do so in a timely  manner,  upon  acceptable  terms and conditions or at
all, and the failure to do any of the  foregoing  could have a material  adverse
effect upon the Company.

     Notwithstanding   the  foregoing   paragraph,   Owen  Mumford  Ltd.  ("Owen
Mumford"),  one of the  Company's  competitors,  filed a complaint in the United
States District Court for the Eastern District of Virginia, Richmond Division on
April 29,  1998 and served a summons  and  complaint  on the  Company on June 1,
1998,  alleging  that the one of the  Company's  products,  the  "Gentle-Let  1"
infringes  on a patent  owned  by Owen  Mumford.  The  complaint  seeks  damages
adequate to compensate Owen Mumford for the alleged patent infringement, as well
as costs and expenses.  The Company intends to vigorously  defend itself in this
proceeding. See "Business of the Company -- Legal Proceedings."

     The Company has acquired a registered  trademark for the "Lukens" name. The
Company  believes  that this name,  established  in 1906,  is  important  to its
business  and  prospects.  In  connection  with the Ulster  Acquisition  and the
Pro-Tec  Acquisition,  the Company  acquired  all rights to the  trademarks  and
tradenames used in connection with the sale of the products in those lines.  The
Company has also  obtained a perpetual,  non-exclusive,  license to use the name
"Ulster  Scientific"  in connection  with the sale of the products in the Ulster
Product Lines.

PRODUCT LIABILITY AND INSURANCE

     The use of the  Company's  products  entails  an  inherent  risk of medical
complications  to patients and resultant  product  liability  claims.  While the
Company  presently  maintains  product  liability  insurance in the amount of $2
million per  occurrence  and in the aggregate  which it believes is adequate for
its current activities,  there can be no assurance that the Company will be able
to obtain such insurance in the future or that such insurance will be sufficient
to cover all possible liabilities. In the event of a successful suit against the
Company or one of its customers,  lack or  insufficiency  of insurance  coverage
could have a material  adverse  impact on the Company.  To date, the Company has
had no material product liability claims.

                                      -32-

<PAGE>



EMPLOYEES

     At March 13, 1998,  the Company  worldwide had 201 employees  (including 67
contract  employees and 134 full time  employees),  of which 177 were engaged in
production,  2 in  development  activities,  11 in sales and marketing and 11 in
finance  and  administration.  The  Company's  employees  are not covered by any
collective  bargaining  agreement.  The  Company  considers  relations  with its
employees to be good.

DESCRIPTION OF PROPERTY

     On July 1, 1996, the Company relocated its principal offices and certain of
its production facilities to, and now occupies, approximately 17,000 square feet
of space  in  Albuquerque,  New  Mexico  which is  leased  by the  Company  (the
"Facility"). Rental payments on the Facility are equal to $10,000 per month. The
term of the lease  expires  on August  31,  2001,  with  two,  two-year  renewal
options. Management believes that the Facility is in good condition, is suitable
and  adequate  for  the  Company's  current  and  proposed  use  thereof  and is
adequately covered by insurance.

     In connection  with the Ulster  Acquisition,  the Company  leased  Ulster's
25,000 square foot  warehouse and office  facility in New Paltz,  New York for a
period of one year, at a rent equal to $12,500 per month.  Such lease expired in
March,  1997. In 1996,  the Company  relocated  the Ulster  Product Lines to the
Facility in Albuquerque, New Mexico.

     The  Company  currently  leases a 5,000  square foot  warehouse  and office
facility in  Sanford,  Florida at a rent equal to $2,600 per month from which it
sells its products in the Pro-Tec  Product  Lines.  Such lease expires in March,
2001.  Management believes that such facility is in good condition,  is suitable
and  adequate  for  the  Company's  current  and  proposed  use  thereof  and is
adequately covered by insurance.

     See "Description of the Business -- India Joint Venture," for a description
of the joint venture which owns a production facility utilized by the Company in
Southern India. Since the facility is located in an export zone, the India Joint
Venture leases the site from the zone at a nominal rate per year.

     See  "Description  of the Business -- Brazil Joint  Venture" for details on
the leased properties occupied by these entities.

LEGAL PROCEEDINGS

     On April 29, 1998, Owen Mumford, one of the Company's competitors,  filed a
complaint  in the United  States  District  Court for the  Eastern  District  of
Virginia,  Richmond Division,  alleging that the one of the Company's  products,
the "Gentle-Let 1" infringes on a patent owned by Owen Mumford.  The summons and
complaint  was  served on the  Company  on June 1,  1998.  The  complaint  seeks
unspecified  damages  adequate to compensate Owen Mumford for the alleged patent
infringement,  as well as costs and expenses.  The Company intends to vigorously
defend itself in this proceeding.

                 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                          AND MANAGEMENT OF THE COMPANY

     Set forth below is information  concerning  stock  ownership of all persons
known by the Company to own beneficially 5% or more of the outstanding shares of
Common Stock of the Company,  based on information provided to the Company, each
Director of the Company,  the Named Executive Officer and all Executive Officers
and Directors of the Company as a group as of the Record Date:

                                      -33-

<PAGE>



<TABLE>
<CAPTION>
    Name and Address of                      Nature and Amount of
    Beneficial Owner                         Beneficial Ownership (1)       Percentage of Class
    ----------------                         ------------------------       -------------------
<S>                                          <C>                                <C>  
    John H. Robinson                         927,000(2)                         26.1%
    RJH Enterprises
    260 Townsend Street, 2nd Floor
    San Francisco, CA  94107

    Robert L. Priddy                         493,300(3)                         15.2%
    3435 Kingsboro Road #1601
    Atlanta, GA  30326

    Robert S. Huffstodt                       92,641(4)                           2.9%
    Lukens Medical Corporation
    3820 Academy Parkway North NE
    Albuquerque, NM 87109

    John P. Holmes                           119,500(5)                           3.8%
    John P. Homes & Company, Inc.
    P.O. Box 428
    Shelter Island Heights, NY 11965

    All officers and directors as a group    1,656,458(6)                       42.9%
    (6 persons)
</TABLE>

(1)  Unless otherwise  indicated below, the persons in the above table have sole
     voting  and  investment  power  with  respect  to shares  of  Common  Stock
     beneficially owned by them.

(2)  Includes  immediately  exercisable  warrants to purchase  450,000 shares of
     Common Stock.  Includes  currently  exercisable  options to purchase  6,000
     shares of Common Stock.

(3)  Includes  immediately  exercisable  warrants to purchase  50,000  shares of
     Common Stock and currently  exercisable  options to purchase 106,000 shares
     of Common Stock.

(4)  Includes  options  exercisable  within 60 days to purchase 84,584 shares of
     Common Stock.

(5)  Includes  immediately  exercisable  options to  purchase  50,000  shares of
     Common  Stock.  The  shares of Common  Stock are owned by John P.  Holmes &
     Company, Inc., a company controlled by Mr. Holmes.

(6)  See footnotes 2 through 5 hereof.

                              CERTAIN TRANSACTIONS

     On April 13,  1995,  the Company  entered  into an  agreement  with John H.
Robinson, a director of the Company, whereby Mr. Robinson (i) loaned $400,000 to
the  Company  (the "April  Loan"),  (ii) agreed to  purchase,  at the  Company's
request at any time prior to March 31, 1996, up to $500,000 of the Lukens Common
Stock at the market price at the time of such  investment,  and (iii) was issued
400,000  five-year  warrants to purchase  Common  Stock at an exercise  price of
$1.10 per share.  The April Loan bears interest at the rate of 8% per annum, and
all  principal  and  interest  accrued  during the term  thereof is deferred and
payable on April 15,  1999.  Proceeds  of the April Loan were used to reduce the
Company's  outstanding  indebtedness  under its line of credit  with its lending
bank by $350,000 and the remainder was used for general corporate  purposes.  On
September 11, 1995, Mr.  Robinson  loaned the Company an additional  $250,000 to
partially  finance  the  payoff of  certain  capitalized  leases in  respect  of
equipment (the "Buyout

                                      -34-

<PAGE>



Loan").  The  Buyout  Loan  bears  interest  at the rate of 8% per annum and all
principal and interest  accrued  during the term thereof is deferred and payable
in October,  1999. On March 5, 1996, Mr. Robinson loaned the Company $400,000 to
fund a portion of the purchase  price  relating to the Company's  acquisition of
three product lines from Ulster Scientific,  Inc. (the "Acquisition  Loan"). The
Acquisition  Loan bears  interest at the rate of 10% per annum and all principal
and  interest  accrued  during  the term  thereof  is  deferred  and  payable on
September  5,  2000.  Repayment  of the  April  Loan,  the  Buyout  Loan and the
Acquisition  Loan are  subordinated  to the  Company's  line of credit  with its
lending  bank.  At the  request of the  Company's  lending  bank,  the  previous
maturity dates thereunder were extended for two additional years to the maturity
dates reflected above.

     As of March 1, 1996, the Company  entered into a consulting  agreement with
John H. Robinson,  a director of the Company.  Such  consulting  agreement has a
term of one year and thereafter  automatically  renews for  additional  one-year
periods unless previously  canceled by either party. Mr. Robinson is entitled to
receive  approximately $50,000 per year pursuant to the terms of such consulting
agreement.  Such consulting  agreement is terminable by either party at any time
after  the  first  year  upon 60 days'  prior  written  notice.  Mr.  Robinson's
consulting agreement is still in effect.

     On February 28, 1997,  the Company  entered into an agreement  with John H.
Robinson and Robert L. Priddy,  each a director and  substantial  stockholder of
the Company, whereby Messrs. Robinson and Priddy loaned the Company an aggregate
of  $1,000,000.  Such loans  bear  interest  at the rate of 10% per  annum,  are
repayable  on or  before  January  1, 1999 and are  subordinated  to the Line of
Credit. In connection  therewith,  Messrs.  Robinson and Priddy were each issued
warrants to purchase 15,000 shares of Common Stock at an exercise price of $6.25
per share, and warrants to purchase an additional  35,000 shares of Common Stock
at $6.25 per share.

                MARKET INFORMATION REGARDING LUKENS COMMON STOCK

     Lukens  Common  Stock  has  been  quoted  on the  National  Association  of
Securities Dealers Automated Quotation ("NASDAQ") system under the symbol "LUKN"
since May 6, 1992.  The Common  Stock has also been listed on the Pacific  Stock
Exchange under the symbol "LKN" since May 6, 1992.

     The following table sets forth the range of high and low bid prices for the
Common Stock for the periods  indicated,  as reported by NASDAQ,  the  principal
system or exchange on which such securities are quoted or traded. The quotations
represent   "inter-dealer"   prices,   without  retail  mark-up,   mark-down  or
commission, and may not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                           High ($)   Low ($)                                   High ($)         Low ($)
                           --------   -------                                   --------         -------
<S>                        <C>            <C>        <C>                        <C>             <C>
Quarter ended                                        Quarter ended
March 31, 1997             8 3/4          4 1/2      March 31, 1996             3 11/16          1 7/16

Quarter ended                                        Quarter ended
June 30, 1997              6 3/4          5 1/2      June 30, 1996              3 5/16           2 5/8

Quarter ended                                        Quarter ended
September 30, 1997         6 1/8          3 3/4      September 30, 1996         3 9/16           2 9/16

Quarter ended                                        Quarter ended
December 31, 1997          5 1/4          1 1/2      December 31, 1996          4 9/16           3


Fiscal Quarter Ending
March 31, 1998             3 3/8          1 5/8
- --------------
</TABLE>


                                      -35-

<PAGE>



     As of May 27, 1998,  there were  approximately  83 holders of record of the
Company's Common Stock.

     On May 27, 1998,  the closing bid and asked prices of the Common Stock were
$3-3/8 and $3-5/8, respectively.

                             LUKENS DIVIDEND POLICY

     The  Company  has never paid a cash  dividend  on its  capital  stock.  The
Company's loan agreement with its bank contains  restrictions  on the payment of
dividends.

            MANAGEMENT'S DISCUSSION AND ANALYSIS OF LUKENS' FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

     The  following   discussion   should  be  read  in  conjunction   with  the
consolidated  financial  statements and notes thereto included elsewhere in this
Proxy Statement.

RESULTS OF OPERATIONS

     FISCAL YEAR ENDED DECEMBER 31, 1997 ("1997")  COMPARED TO FISCAL YEAR ENDED
     DECEMBER 31, 1996 ("1996").

          Sales  increased 5% to  approximately  $8.6  million  during 1997 from
approximately  $8.2 million  during  1996,  primarily as a result of the Pro-Tec
Acquisition.  Domestic  sales of sutures  primarily in the dental and veterinary
market in 1997 were  approximately  even with sales in 1996.  Anticipated  sales
growth  in  the  veterinary  market  as a  result  of  the  introduction  of the
monofilament  synthetic  absorbable  suture  was not  realized  in  1997  due to
production  problems  experienced by the Company's  supplier of suture material.
The  Company  believes  that  these  supply  problems  have been  remedied.  The
Company's  export  sales in 1997 and 1996  totaled  $1,651,451  and  $2,295,066,
respectively,  which  represents  19% and 28% of  total  sales  in each of those
years, respectively.

          The Company's gross margins  decreased  slightly,  from 29% in 1996 to
28% in 1997.  Gross Margins for 1997 were negatively  impacted by a repricing of
inventory  at December  31,  1997.  Such  repricing  is reflected in the Audited
Financial  Statements  as an inventory  cost  reduction  totaling  approximately
$772,000.  The Company  expects that gross  margins in its most rapidly  growing
product  line,  lancets,  will  improve  in the  second  quarter  of 1998 due to
in-house  manufacturing  of needles (the most  expensive  component)  at its new
facility in Cochin,  India. The Company also expects overall margins to increase
in 1998 as the  suture  sales mix  shifts  from the lower  priced  international
markets to the more  lucrative  OEM domestic  markets,  and due partially to the
addition  of the Pro-Tec  Product  Lines which  typically  carry a higher  gross
margin than the Company has experienced historically.

          Selling  expenses  increased  51% in 1997 from  $716,042  in 1996,  to
$1,087,171, as a result of increases in the number of employees required to sell
and service the Pro-Tec and Ulster Product Lines,  increased  marketing expenses
relating  to the  Ulster  Product  Lines,  such  as  convention  and  literature
expenditures,  and charges for  uncollected  commissions  and an increase in the
reserve for uncollectible accounts receivable.

          General and  administrative  expenses  increased  approximately 33% to
$1,286,938 in 1997 compared to $965,180 in 1996, due mainly to the  amortization
of the  costs  incurred  in  connection  with the  Pro-Tec  Acquisition  and the
development costs related to the synthetic absorbable suture.

          Research and  development  expenses  decreased  approximately  35%, to
$70,386 in 1997 compared to approximately $108,594 in 1996, due primarily to the
finalization of the synthetic absorbable suture development project. The Company
does not  expect  to  expend  significant  funds  on  research  and  development
activities in 1998.

                                      -36-

<PAGE>



          In connection  with the Company's  refocused  international  marketing
strategy,  and as a result of the inventory cost reduction  described  above, in
December  1997 the  Company  wrote off  approximately  $3,030,000  of  inventory
consisting of discontinued  catalog codes and expired inventory,  which included
approximately  $300,000 of  inventory  relating to the  Company's  "Sed-Control"
product.  The resulting  aggregate inventory write-off and repricing in December
1997 was equal to  approximately  $4,100,000  (the "Inventory  Writeoff").  As a
result of the Inventory  Writeoff,  and increased  expenses described above, the
Company  experienced an operating loss of approximately  $3,400,000 for the year
ended December 31, 1997.

          Interest  income  was  $5,000  in 1997  compared  to  $6,000  in 1996.
Interest expense increased to approximately  $433,000 in 1997 from approximately
$198,000 in 1996 due primarily to the additional  debt incurred  relating to the
India and Brazil Joint Ventures, and the Pro-Tec Acquisition.

          As result of the Inventory Writeoff,  increased expenses and the other
income  adjustments  referred to above,  the Company  experienced  a net loss of
$3,768,018  for the year ended  December  31,  1997  compared to a net profit of
$463,481  for the year ended  December 31, 1996.  Without  giving  effect to the
Inventory  Writeoff,  the Company  experienced  a net profit of $334,262 for the
year ended December 31, 1997.

 THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

          Sales  increased  approximately  $255,000 or 11% for the quarter ended
March 31,  1998,  compared  to the  quarter  ended  March 31, 1997 due mainly to
revenue generated from the product lines acquired with Pro-Tec Containers,  Inc.
in May 1997 (the "Acquisition"), and due to increases in lancet sales.

          The gross margin percentage increased due to cost reductions resulting
from the manufacture of certain raw materials in India, and the generally higher
margins in the Pro-Tec line. The first quarter generated 39% margins compared to
32% last year.

          General and Administrative expenses increased $134,000 to $352,000 for
the 1998 quarter,  versus  $228,000 for the 1997  quarter.  The majority of this
increase was a result of increased amortization expenses relating to the various
acquisitions  in 1997, and the addition of staff in Brazil.  Sales and Marketing
expenses were  approximately  the same for the 1998 and 1997  quarters,  and R&D
increased  $5,000 to $17,000 for the 1998 quarter,  versus  $12,000 for the 1997
quarter.  The increase in R&D expenses  reflects the cost of the Company's focus
on obtaining ISO Certification in 1998.

          As a result of the foregoing,  Income from Operations  increased 142%,
or $132,000,  to $439,000 for the 1998 quarter versus Income from  Operations of
$307,000 for the same quarter in 1997.

          Interest expense increased $69,000 from $53,500 in 1997 to $122,000 in
1998 due to an increase in net  borrowings  to finance  the  Acquisition  in May
1997, and the investment in the Brazil joint venture in September 1997.

          As a result of the  foregoing,  the Company  achieved a net profit for
the quarter of $316,000,  or $.10 per share, for 1998,  compared to a net profit
of $253,000, or $.08 per share, in 1997.

LIQUIDITY AND CAPITAL RESOURCES

          The  Company's  primary  capital  needs have been to fund the  working
capital  requirements  created by its sales growth and to make acquisitions.  At
March 31, 1998, the Company had cash and cash equivalents of $53,882 and working
capital of $488,660.

          Bank  Financing.  As of  December  31,  1997 and March 31,  1998,  the
Company had drawn all of its $1,750,000  working  capital portion of its line of
credit with its lending bank (the "Line of Credit"). The Line of Credit

                                      -37-

<PAGE>



also includes an additional  $1,250,000  commitment  for the issuance of standby
and  commercial  letters of credit.  On December  31,  1997 and March 31,  1998,
approximately  $882,000 and  $360,000,  respectively,  in letters of credit were
outstanding under this letter of credit  commitment.  The Line of Credit matures
and expires on August 30, 1998 unless it is renewed, and all outstanding amounts
are due and payable on such date.  The Company  expects the Line of Credit to be
renewed  for an  additional  year  prior  to  its  expiration.  There  can be no
assurances,  however, that such a renewal will be forthcoming, or, if available,
will be on terms acceptable to the Company.

          As  of  December  31,  1997  and  March  31,  1998,  the  Company  had
approximately  $142,000 and $48,426,  respectively,  outstanding under a working
capital line of credit (the "SBA L/C  Facility")  with the U.S.  Small  Business
Administration  ("SBA"),  which provided working capital for foreign sales up to
the lesser of (a) $600,000 or (b) 80% of the face amount of  negotiated  letters
of credit issued for the benefit of the Company and delivered to the lender.  It
is the  Company's  understanding  that due to the fact that the  majority of the
letters of credit received by the Company from its  international  customers did
not meet the criteria set forth by the SBA, combined with various other factors,
including the existence of technical  financial covenant defaults under the Line
of Credit as a result of the Inventory Writeoff,  the SBA declined to renew this
line for 1998 and all  outstanding  amounts  are  required  to be repaid as each
outstanding letter of credit is drawn upon.

          At the same time,  during December 1997 and the first quarter of 1998,
the Company has experienced increased sales of certain products, requiring it to
significantly  increase its  purchases of raw  materials  necessary to fill such
orders. Due to the decreased liquidity caused by losing the SBA L/C Facility, as
well as the  increased  outlays for raw  materials,  the  Company  has  recently
experienced a shortage of working capital. As a result, the Company has recently
experienced difficulties financing its sales growth and has failed to timely pay
certain  amounts  due under  certain  term loans  granted to the  Company by its
lending bank in  connection  with the Line of Credit.  During the quarter  ended
March 31, 1998, the Company was still in technical  default of certain financial
covenants  and in  payment  default  under  certain  of its term  loans with its
lending  bank. In April 1998,  the Company  cured its payment  default under the
term loans and, subject to certain  conditions,  including,  without limitation,
the closing of the Merger with Medisys,  its lending bank amended certain of the
financial covenants so that the Company is no longer in default under any of its
lines of credit.  No assurance can be given that the Company's lending bank will
not  hereafter  reinstate the old  financial  covenants and thereby  causing the
Company to once again be in default under its Line of Credit.

          To fund future acquisitions and joint ventures, the Company is reliant
upon obtaining long-term borrowing and/or equity financing.  Management believes
that the Company will have access to the capital resources necessary to continue
to fund such expansion,  although there is no assurance that such financing will
be available or, if available, will be on terms acceptable to the Company. For a
more complete description of the Company's current credit facilities, see Note 5
to Notes to Consolidated Financial Statements.

          Stockholder  Loans.  On February 28, 1997, the Company entered into an
agreement  with John H.  Robinson  and Robert L.  Priddy,  each a  director  and
substantial  stockholder  of the Company,  whereby  Messrs.  Robinson and Priddy
loaned the Company an aggregate of  $1,000,000.  Such loans bear interest at the
rate of 10% per  annum,  are  repayable  on or  before  January  1, 1999 and are
subordinated to the Line of Credit. In connection  therewith,  Messrs.  Robinson
and Priddy were each issued  warrants to purchase  15,000 shares of Common Stock
at an exercise price of $8.25 per share,  and warrants to purchase an additional
35,000  shares  of  Common  Stock at $6.00 per  share.  See  "Item  12.  Certain
Relationships and Related Transactions."

          In the past,  the Company has been reliant  upon  Messrs.  Robinson or
Priddy  to  finance  the  costs  associated  with  certain  acquisitions  and to
restructure certain indebtedness,  on terms favorable to the Company.  There can
be no  assurance  the  such  financing,  or other  third  party  debt or  equity
financing,  will be available in the future or, if  available,  will be on terms
acceptable to the Company.

          Investment by Medisys.  In March and April of 1998,  Medisys purchased
an  aggregate  of 75,000  shares of Common  Stock from the Company for $4.00 per
share in cash in private transactions with the Company.

                                      -38-

<PAGE>



OTHER INFORMATION

          Sales to the U.S. Government.  During 1996, the department of the U.S.
Government  responsible for procuring medical supplies,  such as sutures,  began
purchasing more of such items outside the  traditional  bid system.  The Company
has been successful over the last several years in obtaining  substantial awards
under the bid system.  The new system,  which  incorporates local dealers called
Prime Vendors,  is less sensitive to price and more sensitive to the impact of a
direct sales force.  As a result of the foregoing,  since the Company has only a
limited sales force, there can be no assurance that the Company will continue to
meet or  exceed  its  historical  levels  of sales of its  products  to the U.S.
Government in the future and during 1997 sales were nominal.

          Acquisition  of the Pro-Tec  Product  Lines.  For a description of the
consideration  paid and  payable by the Company in  connection  with the Pro-Tec
Acquisition,   including,   without  limitation,  the  Common  Stock  issued  in
connection therewith,  see Note 15 to Notes to Consolidated Financial Statements
and the  Company's  Current  Report  of Form 8-K  filed in  connection  with the
Pro-Tec Acquisition.

          Pro-Tec  Stock  Price  Guarantee.   In  connection  with  the  Pro-Tec
Acquisition,  the  Company  agreed to  guarantee  the value of the Common  Stock
issued to the former  owner  pursuant  to such  acquisition  for a period of six
months from the effective date of the  Registration  Statement on Form S-3 which
was filed by the Company to register the resale of such  shares.  As a result of
the  decline in the price to the Lukens  Common  Stock  during  such period (and
taking into  account  certain  other  adjustments),  the Company owes the former
owner of Pro-Tec approximately  $300,000,  which amount is payable either by the
issuance of shares of the Lukens Common Stock or a one-year promissory note. The
Company and such individual are currently  negotiating to extend the term of the
payment of this amount. No agreement,  however, has yet been finalized and there
can be no assurance given that any such agreement will be reached.

          Net Operating Loss Carryforwards. As of December 31, 1997, the Company
had net operating loss carryforwards ("NOLs") of approximately $12,975,000 which
will expire from 1998 through 2010. The  deductibility of portion of the NOLs is
subject to an annual  limitation of approximately  $460,000;  the excess of such
annual  limitation  over the  amount to be used in  subsequent  year  until they
expire. See Note 10 of Notes to Consolidated Financial Statements.

          Year 2000  Disclosure.  The Company  believes that its operations will
not be  materially  disrupted  by any problems  associated  with the "Year 2000"
syndrome after January 1, 2000; however, there can no assurances in this regard.

                  INFORMATION REGARDING MEDISYS AND MERGER SUB

     Medisys PLC, a Scottish  public limited company  ("Medisys"),  is a medical
technology company providing  products,  through its divisions and subsidiaries,
to the point of care environment, at present focused on two markets -- the point
of care and over the  counter  diagnostics  market and the  market  for  on-site
disposal of  biohazardous  medical waste.  Merger Sub is a Delaware  corporation
recently  organized in connection with the Merger.  Merger Sub has not conducted
any  business  to  date,  other  than  incidental  to  its  organization  and in
connection  with the Merger.  Merger Sub will not have any assets or liabilities
(other than those arising under the Merger  Agreement or in connection  with the
Merger) or engage in any  activities  other than those incident to its formation
and capitalization  and the Merger. As of the date of this Proxy Statement,  all
the  authorized  capital  stock of Merger Sub is owned by Medisys.  Medisys' and
Merger Sub's principal  executive  offices are located at Walmar House,  288-292
Regent Street, London W1R SH8 England, (011)  44-171-436-3353.  As of the Record
Date,  Medisys owned 75,000 shares of Lukens Common Stock and neither Merger Sub
nor any of their affiliates owned any shares of Lukens Common Stock.

                                      -39-

<PAGE>



                              FINANCIAL INFORMATION

     The Company's consolidated audited financial statements for the years ended
December 31, 1997 and 1996 and the unaudited financial  statements for the three
month  period  ended March 31, 1998 and 1997 are  included as part of this Proxy
Statement.

                                FEES AND EXPENSES

     The  Merger   Agreement   provides  that  whether  or  not  the  Merger  is
consummated,  all costs and  expenses  incurred  in  connection  with the Merger
Agreement and the transactions  contemplated  thereby shall be paid by the party
incurring  such  expenses,  whether or not the Merger is  consummated  except as
expressly  provided  in the Merger  Agreement  and except that the filing fee in
connection with the filing of this Proxy Statement with the SEC and the expenses
incurred in connection  with printing and mailing this Proxy  Statement shall be
shared equally by Lukens and Medisys.

                                  OTHER MATTERS

     As of the  time of  preparation  of this  Proxy  Statement,  the  Board  of
Directors knows of no other matters that will be acted on at the Special Meeting
other than the approval and adoption of the Merger Agreement and the Merger.  If
any other  matters are  presented  for action at the  Special  Meeting or at any
adjournment  or  postponement  thereof,  it is intended that the proxies will be
voted with  respect  thereto in  accordance  with the best  judgment  and in the
discretion of the persons named as proxies in the  accompanying  proxy card. All
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of
the  Exchange  Act  subsequent  to the date  hereof and prior to the date of the
Special Meeting shall be deemed to be incorporated by reference herein.

                       1998 ANNUAL MEETING OF STOCKHOLDERS

     The Company does not plan to hold an annual meeting of stockholders  during
1998  unless the Merger is not  consummated.  If the Merger is not  consummated,
stockholder  proposals previously received by the Secretary of the Company on or
before November 30, 1997 will be considered for inclusion in the proxy materials
for the Company's 1998 Annual Meeting of Stockholders.

                        INDEPENDENT CERTIFIED ACCOUNTANTS

     Lukens'  independent  public accountants for the fiscal year ended December
31,  1997,  and for the current  fiscal year are Neff and Company LLP. It is not
anticipated that  representatives of Neff and Company LLP will be present at the
Special Meeting.

                                        ----------------------------------------
                                        Robert S. Huffstodt, President and Chief
                                                    Executive Officer

June __, 1998

STOCKHOLDERS  WHO DO NOT EXPECT TO BE PERSONALLY  PRESENT AT THE MEETING AND WHO
WISH TO HAVE THEIR  SHARES  VOTED ARE  REQUESTED  TO DATE AND SIGN THE  ENCLOSED
PROXY CARD AND RETURN IT TO  CONTINENTAL  STOCK  TRANSFER & TRUST  COMPANY,  THE
COMPANY'S TRANSFER AGENT.


                                      -40-

<PAGE>



                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

INDEPENDENT AUDITORS' REPORT                                                 F-1

FINANCIAL STATEMENTS

     Consolidated Balance Sheets for the years ended
        December 31, 1997 and 1996                                           F-2

     Consolidated Statements of Operations for the years ended
        December 31, 1997 and 1996                                           F-4

     Consolidated Statements of Stockholders' Equity for the years ended
        December 31, 1997 and 1996                                           F-5

     Consolidated Statements of Cash Flows for the years ended
        December 31, 1997 and 1996                                           F-7

     Notes to Consolidated  Financial Statements as of December 31, 1997     F-9

     Consolidated Balance Sheets for the quarter ended March 31, 1998
        (unaudited) and December 31, 1997                                   F-28

     Consolidated Statements of Operations for the three months
        ended March 31, 1998 (unaudited)                                    F-29

     Consolidated Statements of Cash Flows for the three months
        ended March 31, 1998 and 1997                                       F-30

     Notes to Consolidated  Financial Statements as of March 31, 1998       F-31



                                      -41-

<PAGE>



                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Lukens Medical Corporation

We have audited the accompanying  consolidated  balance sheets of Lukens Medical
Corporation  and  Subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
the years then ended.  These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the  financial  position of Lukens  Medical
Corporation  and  Subsidiaries at December 31, 1997 and 1996, and the results of
their  operations  and their cash flows for the years then ended,  in conformity
with generally accepted accounting principles.

                                                          /s/ Neff & Company LLP
Albuquerque, New Mexico
March 27, 1998

                                       F-1

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>

ASSETS
                                                                               1997              1996

<S>                                 <C>                                  <C>                       <C>    
Current assets:
    Cash and cash equivalents (Note 11)                                  $        74,048           878,090
    Accounts receivable, net of allowance of
        $40,000 in 1997 and $5,790 in 1996
        (Notes 5 and 6)                                                        1,836,542         1,901,947
    Inventory (Notes 2, 5, 6, and 14)                                          5,105,900         5,565,210
    Prepaid expenses                                                             127,080            34,290
                                                                         ---------------           -------
               Total current assets                                            7,143,570         8,379,537

Fixed assets, net (Notes 3, 5,
    6 and 8)                                                                   3,599,150         2,062,842

Intangible assets, net of accumulated amortization
    of $1,283,569 and $966,065 in 1997 and 1996,
    respectively (Notes 4 and 15)                                              3,001,139         1,098,487

Other assets                                                                      85,754           261,294
                                                                         ---------------           -------





               Total assets                                              $    13,829,613        11,802,160
                                                                         ===============        ==========
</TABLE>


The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                       F-2

<PAGE>



LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                               1997              1996

<S>                                                                      <C>                     <C>      
Current liabilities:
    Accounts payable                                                     $     1,864,832         1,406,243
    Accrued liabilities                                                          138,016            62,139
    Current maturities of long-term debt
        (Notes 5 and 6)                                                        5,146,950         2,002,191
    Current maturities of obligations under
        capital leases (Note 8)                                                  146,893            39,825
                                                                         ---------------         ---------
               Total current liabilities                                       7,296,691         3,510,398

Long-term debt, excluding current maturities
    (Notes 5, 6 and 11)                                                           73,483           796,446

Stockholder payable and accrued interest
     (Notes 7 and 11)                                                          2,290,991         1,157,408

Obligations under capital leases, excluding
    current maturities (Note 8)                                                  266,256            59,378
                                                                         ---------------         ---------
               Total liabilities                                               9,927,421         5,523,630
                                                                         ---------------         ---------

Commitments and contingencies (Notes 5, 8, 13, 15, and 16)

Minority interests                                                               129,531                 -
                                                                         ---------------         ---------

Stockholders' equity (Notes 5 and 9):
    Common stock $.01 par value, authorized

        20,000,000 shares; issued and outstanding
        3,043,359 shares in 1997 and 2,731,988 shares
        in 1996                                                                   30,434            27,320
    Additional paid-in capital                                                18,526,035        17,213,952
    Accumulated deficit                                                      (14,730,760)      (10,962,742)
    Foreign currency translation adjustments                                     (53,048)                -
                                                                         ---------------         ---------
               Total stockholders' equity                                      3,772,661         6,278,530
                                                                         ---------------         ---------
               Total liabilities and stockholders' equity                $    13,829,613        11,802,160
                                                                         ===============        ==========
</TABLE>


                                      F-3

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                               1997              1996
<S>                                                                      <C>                    <C>    
Net sales (Note 12)                                                      $     8,618,863         8,178,576
Cost of sales (Note 14)                                                        5,469,327         5,496,534
Inventory cost reduction                                                         770,000           300,000
                                                                         ---------------         ---------
        Gross profit                                                           2,379,536         2,382,042
                                                                         ---------------         ---------
Selling expenses                                                               1,087,171           716,042
General and administrative expenses                                            1,286,938           965,180
Research and development expenses                                                 70,386           108,594
Product restructuring charge (Note 14)                                         3,332,280                 -
                                                                         ---------------         ---------
        Total operating expenses                                               5,776,775         1,789,816
                                                                         ---------------         ---------
        Earnings (loss) from operations                                       (3,397,239)          592,226
                                                                         ---------------         ---------

Other income (expense):
    Interest income                                                                5,236             6,578
    Interest expense                                                            (433,463)         (197,566)
    Minority interests' share of loss                                             25,994                 -
    Other, net                                                                    31,454            62,243
                                                                         ---------------         ---------
        Total other expense, net                                                (370,779)         (128,745)
                                                                         ---------------         ---------
        Earnings (loss) before income taxes                                   (3,768,018)          463,481

Income tax expense (Note 10)                                                           -                 -
                                                                         ---------------         ---------
           Net earnings (loss)                                           $    (3,768,018)          463,481
                                                                         ===============           =======

Basic net earnings (loss) per share                                      $         (1.24)              .17
                                                                         ===============           =======
Dilutive net earnings (loss) per share                                   $         (1.24)              .15
                                                                         ===============           =======
Weighted average number of common shares
    outstanding - basic                                                        3,043,359         2,677,698
                                                                         ===============           =======
Weighted average number of common shares
    outstanding - dilutive                                                     3,043,359         3,068,113
                                                                         ===============           =======
</TABLE>


The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                      F-4

<PAGE>


LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                   COMMON STOCK                
                                                                 (NOTES 9 AND 15)              ADDITIONAL
                                                         ---------------------------------       PAID-IN 
                                                              SHARES            AMOUNT           CAPITAL


<S>                                                           <C>        <C>                    <C>       
Balance, December 31, 1995                                    2,611,418  $        26,115        16,938,696
Exercise of options for common
  stock                                                         120,570            1,205           275,256

Net earnings (loss)                                                   -                -                 -
                                                              ---------  ---------------        ----------

Balance December 31, 1996                                     2,731,988           27,320        17,213,952

Exercise of options for common
  stock                                                         111,371            1,114           478,103

Issuance of common stock for
  business acquisition                                          200,000            2,000           833,980

Net earnings (loss)                                                   -                -                 -

Foreign currency translation
  adjustments                                                         -                -                 -
                                                              ---------  ---------------        ----------

Balance, December 31, 1997                                    3,043,359  $        30,434        18,526,035
                                                              =========  ===============        ==========
</TABLE>



The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                      F-5

<PAGE>



                                             FOREIGN
                                            CURRENCY
                       ACCUMULATED         TRANSLATION
                         DEFICIT           ADJUSTMENTS         TOTAL

                     $   (11,426,223)                -        5,538,588


                                   -                 -          276,461

                             463,481                 -          463,481
                     --------------------------------------------------

                         (10,962,742)                -        6,278,530


                                   -                 -          479,217


                                   -                 -          835,980

                          (3,768,018)                        (3,768,018)


                                   -           (53,048)         (53,048)
                     ---------------------------------------------------

                         (14,730,760)          (53,048)       3,772,661
                     ==================================================

                                      F-6

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                               1997              1996
<S>                                                                      <C>                       <C>    
Cash flows from operations:
    Net earnings (loss)                                                  $    (3,768,018)          463,481
    Adjustments to reconcile net earnings
        to cash flows used in operating activities:
           Minority interest in net loss                                         (25,994)                -
           Depreciation                                                          398,943           262,941
           Amortization of intangible assets                                     317,504           169,563
           Decrease in inventory valuation allowance                                   -           250,000
           Loss on disposal of fixed assets                                            -             9,855
           Accrued interest due stockholder                                      133,583            79,024
    Changes in current assets and liabilities:
        Accounts receivable                                                      245,235          (632,736)
        Inventory                                                                472,310        (1,966,159)
        Prepaid expenses                                                         (92,305)          (10,834)
        Other assets                                                               4,667          (176,579)
        Accounts payable                                                         385,025           741,163
        Accrued liabilities                                                       62,634           (20,916)
                                                                         ---------------------------------
               Net cash applied to operating activities                       (1,866,416)         (831,197)
                                                                         ---------------------------------

Cash flows from investing activities:
    Purchase of equipment                                                     (1,561,378)         (561,910)
    Purchase of intangible assets                                               (876,626)         (785,377)
    Proceeds from disposal of equipment                                           26,417                 -
    Proceeds from joint venture formation,
        net of cash transferred                                                  155,525                 -
    Cash purchased with business acquisitions                                     25,084                 -
                                                                         ---------------------------------
               Net cash flows applied to
                  investing activities                                        (2,230,978)       (1,347,287)
                                                                         ---------------------------------

Cash flows from financing activities:
    Proceeds from issuance of common stock
        and equivalents                                                          479,217           276,461
    Borrowings on long-term debt                                               5,174,575         2,621,155
    Principal payments on long-term debt and
        capital leases                                                        (3,360,440)         (280,091)
    Borrowings from major stockholders                                         1,000,000           400,000
                                                                         ---------------------------------
               Net cash flows provided by
                  financing activities                                         3,293,352         3,017,525
                                                                         ---------------------------------
</TABLE>


The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                      F-7

<PAGE>


LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997 AND 1996

<TABLE>
<CAPTION>
                                                                               1997              1996
<S>                                                                      <C>                       <C>    
               Net increase (decrease) in cash and cash
                  equivalents                                                   (804,042)          839,041

Cash and cash equivalents at beginning of year                                   878,090            39,049
                                                                         ---------------------------------

Cash and cash equivalents at end of year                                 $        74,048           878,090
                                                                         =================================

Supplemental disclosures:
    Cash paid for interest                                               $       274,767           113,532
                                                                         =================================

    Production equipment acquired with capital
        leases                                                           $       375,484            63,095
                                                                         =================================
</TABLE>


The Notes to  Consolidated  Financial  Statements  are an integral part of these
statements.


                                      F-8

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Business  Activities.  Lukens Medical  Corporation,  a Delaware
corporation,  and its wholly-owned  subsidiaries,  (the Company) is a disposable
surgical products company engaged in the design, development,  manufacture,  and
marketing  of needle  suture  products,  disposable  safety  scalpels,  lancets,
disposal  supplies,  and bone wax. The Company markets its products worldwide to
hospitals,  independent care facilities,  physicians' offices, and to the United
States government directly and through independent distributors.

In addition to its  facility  in  Albuquerque,  New Mexico  which  includes  the
operations of Lukens Medical Corporation and its wholly owned subsidiary ProTec,
Inc., the Company's operations include the following:

     Lukens  Medical  Products  Limited,  a 90 percent  owned  joint  venture in
     Cochin, India that serves primarily as a manufacturing facility.

     Techsynt-Lukens  Industrial,  Commercial,  Import and Export Limited,  a 51
     percent owned joint venture in Sao Paolo,  Brazil,  that  manufactures  and
     sells the Company's products.

     Somar-Lukens  S.A de C.V.,  a 50  percent  owned  joint  venture in Piedras
     Negras, Mexico that is currently inactive.

     Contract maquiladora  manufacturing facilities in Piedras Negras and Ciudad
     Juarez, Mexico.

Principles of Consolidation.  The consolidated  financial statements include the
accounts of Lukens Medical Corporation and its wholly-owned subsidiary and joint
ventures.  All  significant  intercompany  accounts and  transactions  have been
eliminated in consolidation.

Cash and Cash Equivalents.  Cash and cash equivalents  consist  substantially of
cash in banks and repurchase  agreements which are  collateralized by government
securities  at a 102  percent of fair  market  value and  recorded in the bank's
name.  The  Company  considers  all highly  liquid  financial  instruments  with
original maturities of three months or less to be cash equivalents.

Inventory.  Inventory,  which consists  principally  of the Company's  products,
supplies and components, is stated at the lower of cost or market value. Cost is
determined  using the first-in,  first-out  (FIFO) method.  Market value for raw
materials is based on replacement costs and for other inventory  classifications
on net realizable  value.  Appropriate  consideration is given to deterioration,
obsolescence  and other factors in evaluating  net realizable  value.  Inventory
costs include material, labor, and manufacturing overhead.


                                      F-9

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fixed  Assets.  Equipment  and  leasehold  improvements  are  recorded  at cost.
Depreciation  expense is calculated using the straight-line  method based on the
estimated useful lives of the respective  assets which  approximate three to ten
years.  The  Company  follows  the  policy  of  capitalizing  expenditures  that
materially  increase asset useful lives and charging  ordinary  maintenance  and
repairs to operations as incurred.

Intangible  Assets.  Intangible assets consist  principally of costs incurred to
obtain Food and Drug Administration approvals, trademarks, organizational costs,
patents,  the rights to sell products  acquired,  goodwill and deferred start up
costs. The start up costs consist principally of costs incurred for the start up
of joint ventures and possible joint ventures in India,  Mexico, and Brazil. The
Company  evaluates  its  intangible  assets  annually  to  determine   potential
impairment by comparing the carrying value to the undiscounted future gross cash
margins of related  assets.  They are being  amortized  using the  straight-line
method over periods of 3 to 10 years.

Capitalization  of Interest.  Interest is  capitalized  in  connection  with the
construction  and  start-up of major  facilities.  The  capitalized  interest is
recorded  as part of the asset to which it  relates  and is  amortized  over the
asset's estimated useful life. In 1997, $80,828 of interest was capitalized.  No
interest was capitalized in 1996.

Income  Taxes.  The Company  accounts  for its income taxes in  accordance  with
Financial  Accounting  Standards  Statement No. 109, Accounting for Income Taxes
(SFAS 109).  SFAS 109 requires a company to recognize  deferred tax  liabilities
and assets for the  expected  future tax  consequences  of events that have been
recognized  in a  company's  financial  statements  or tax  returns.  Under this
method,  deferred  tax  liabilities  and  assets  are  determined  based  on the
difference  between the financial  statement  carrying  amounts and tax basis of
assets and  liabilities  using enacted tax rates in effect in the years in which
the  differences  are expected to reverse.  The Company has provided a valuation
allowance  to offset the  benefit of any net  operating  loss  carryforwards  or
deductible temporary differences.

Translation of Foreign  Currencies.  The translation of foreign  currencies into
U.S.  dollars is performed for balance  sheet  accounts  using current  exchange
rates in effect at the balance  sheet date and for revenue and expense  accounts
using an average  exchange  rate for the period.  The gains or losses  resulting
from translation are included in shareholders' equity.

Net Sales.  Sales are recorded net of sales returns and allowances.

Research and Development  Expenses.  Research and development costs are expensed
as incurred.


                                      F-10

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Long-Lived  Assets.   Statement  of  Financial  Accounting  Standards  No.  121,
Accounting for the Impairment of Long-Lived  Assets and for Long-Lived Assets to
be  Disposed  of (SFAS  121),  was  adopted  as of  January  1,  1996.  SFAS 121
standardized  the accounting  practices for the  recognition  and measurement of
impairment losses on certain  long-lived assets. The adoption of SFAS 121 had no
effect on the results of operations or financial position.

Effect of New Accounting Pronouncements.  Effective January 1, 1996, the Company
adopted  SFAS No. 123,  Accounting  for  Stock-Based  Compensation.  The Company
adopted this  pronouncement  by making the  required  pro forma note  disclosure
only.  Accordingly,  the  adoption of SFAS No. 123 did not impact the  Company's
results of operation or financial condition.

Earnings Per Share.  Effective for the year ended December 31, 1997, the Company
adopted  SFAS 128,  Earnings  Per Share.  In adopting  this  pronouncement,  the
Company  computed  the  earnings  (loss) per share on the basis of the  weighted
average  number of common  shares  outstanding  during the year and included the
effect  of  potential  common  stock  to the  extent  they  are  dilutive.  This
pronouncement was adopted for both 1997 and 1996,  however,  there was no impact
on the earnings per share previously reported for 1996.

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

Reclassification.  The  Company  has  reclassified  certain  amounts in the 1996
financial statements to conform to the 1997 presentation.


NOTE 2. INVENTORY

Inventory consists of the following components at December 31:

                                             1997              1996
    Raw materials                    $     1,938,343         2,767,214
    Work-in-process                        1,972,124         1,419,685
    Finished goods                         1,195,433         1,378,311
                                     ---------------------------------
                                     $     5,105,900         5,565,210
                                     =================================


                                      F-11

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 3. FIXED ASSETS

Fixed  assets  owned or held  under  capital  lease  (see Note 8) consist of the
following at December 31:

<TABLE>
<CAPTION>
                                                                               1997              1996

<S>                                                                      <C>                     <C>      
    Building                                                             $       899,762                 -
    Leasehold improvements                                                       227,112           172,677
    Production equipment                                                       3,951,117         3,018,600
    Office equipment                                                             286,461           229,646
    Construction in progress                                                     198,075                 -
                                                                         ---------------------------------
                                                                               5,562,527         3,420,923
           Less accumulated depreciation                                       1,963,377         1,358,081
                                                                         ---------------------------------
                                                                         $     3,599,150         2,062,842
                                                                         =================================
</TABLE>


Production  equipment  valued at $807,543 and  $776,553,  respectively,  was not
being  utilized  in 1996 or 1997 and as of  December  31,  1997,  was in Piedras
Negras, Mexico in anticipation of the start up of a joint venture (See Note 15).

NOTE 4. INTANGIBLE ASSETS

Intangible assets consisted of the following at December 31, 1997:

<TABLE>
<CAPTION>
                                                                               1997              1996

<S>                                                                      <C>                     <C>      
    Suture license rights and regulatory approvals                       $       963,448           920,089
    Ulster Scientific product rights                                             642,069           642,069
    ProTec patents and goodwill                                                1,296,968                 -
    Deferred start-up costs                                                      867,892            20,868
    Other                                                                        514,331           481,526
                                                                         ---------------------------------
               Total                                                           4,284,708         2,064,552

    Accumulated amortization                                                  (1,283,569)         (966,065)
                                                                         ---------------------------------
                                                                         $     3,001,139         1,098,487
                                                                         =================================
</TABLE>



                                      F-12

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997



NOTE 5. BANK FINANCING INSTRUMENTS

At December 31, 1997, the Company had the following bank borrowing agreements:

     A working capital line-of-credit  agreement,  which provides for borrowings
     for working capital up to the lesser of (a) $1,750,000 or (b) the sum of 80
     percent of eligible accounts  receivable (as defined in the agreement) plus
     the  lesser of 40  percent  of  qualified  inventory.  Interest  is payable
     monthly on the amount drawn at the Bank's  corporate  base rate (the Bank's
     prime rate) plus .75 percent.  At December 31, 1997,  there was  $1,750,000
     outstanding under this line-of-credit agreement.

     A  letter-of-credit  line,  which  provides  for other  credit  instruments
     including  commercial  letters-of-credit  and  banker's  acceptances  which
     guarantee payment to raw material suppliers, and standby  letters-of-credit
     which may also be used for the purchase of raw material on forward currency
     contracts. The sum of these shall not exceed $1,250,000 at any one time. At
     December  31,  1997,  there  was  $634,127  of  Bankers'   acceptances  and
     commercial  letters of credit  and  $124,577  in standby  letters-of-credit
     outstanding  under this line.  Under a separate  line of credit the Company
     had issued a $360,000  standby letter of credit relating to the purchase of
     the Indian facility.

     A SBA equipment term loan, which provides for the purchase of equipment and
     machinery up to $150,000,  interest and principal  payable monthly on equal
     installments  of $2,510 at the New York prime rate as published in the Wall
     Street Journal,  plus 1.5 percent. At December 31, 1997, there was $114,018
     outstanding under this agreement.

     A SBA equipment term loan, which provides for the purchase of equipment and
     machinery up to $150,000,  interest and principal  payable monthly on equal
     installments  of $2,535 at the New York prime rate as published in the Wall
     Street Journal,  plus 1.5 percent. At December 31, 1997, there was $135,221
     outstanding under this agreement.

     On May 24, 1996, the Company  obtained a bank term loan for the purchase of
     equipment and  machinery in the amount of $120,000,  interest and principal
     payable  monthly on equal  installments  of $3,859 at the bank's  corporate
     base rate  plus 1.5  percent.  At  December  31,  1997,  there was  $68,268
     outstanding under this agreement.

     On December 30, 1996, the Company  obtained a bank term loan for funding of
     a joint venture in India in the amount of $700,000,  interest and principal
     payable monthly on equal  installments  of $14,700 at the bank's  corporate
     base rate  plus 1  percent.  At  December  31,  1997,  there  was  $613,575
     outstanding under this agreement.

     On August 31,  1997,  the Company  obtained a bank term loan for funding of
     general  operations in the amount of  $1,000,000,  interest plus  principal
     payable in equal monthly  installments of $21,011,  at the bank's corporate
     rate plus .75 percent. At December 31, 1997, there was $972,099 outstanding
     under this agreement.


                                      F-13

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 5. BANK FINANCING INSTRUMENTS (CONTINUED)

     On November 27, 1997, the Company  obtained a bank term loan for payment of
     expired letters-of-credit in the amount of $184,087 interest plus principal
     due on March 27, 1998, at the bank's  corporate  rate plus 1.5 percent.  At
     December 31, 1997, there was $141,958 outstanding under this agreement.

At  December  31,  1997,  these bank  credit  instruments  had  covenants  which
provided,  among other things, for: the maintenance of tangible net worth of the
corporate  affiliates  on a  consolidated  basis  at any  time to be  less  than
$6,800,000,  a minimum  current  ratio,  as  defined in the  agreement,  of 2:1;
aggregate debt to consolidated  stockholders' equity of not greater than 1:1 and
fixed  charges  coverage  not less than 1:3. The  agreements  also provide for a
security  interest in substantially  all of the Company's assets and has certain
covenants  which  restrict  the  Company's  payment of  dividends  and  prohibit
incurring any additional material indebtedness without the consent of the Bank.

As of December  31, 1997,  the Company was in arrears on its bank notes  payable
and did not meet the  financial  ratios  required.  The bank has not  granted  a
waiver for any default by the Company;  as a result, the notes payable have been
classified as current.

NOTE 6. LONG-TERM DEBT

Long-term debt consisted of the following at December 31:

<TABLE>
<CAPTION>
                                                                               1997              1996
<S>                                                                      <C>                       <C>    
Bank Debt:

     Outstanding  letter-of-credit  payable  to  NationsBank,
          N.A. interest is accrued at the corporate base rate
          plus .75% (9.25% at December  31,  1997),  maturing
          August 30, 1998                                                $       634,127           796,838

     Outstanding line-of-credit payable to NationsBank,  N.A.
          interest is accrued at the corporate base rate plus
          .75% (9.25% at December 31, 1997),  maturing August
          30, 1998                                                             1,750,000           966,102

     Various notes payable to NationsBank,  N.A.  interest is
          accrued  at  the  base   corporate  rate  (8.5%  at
          December  31,  1997)  plus  1%  to  1.5%,  maturing
          between March 1998 and November 2003.                                2,045,138           952,074
</TABLE>


                                      F-14

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 6. LONG-TERM DEBT (CONTINUED)

<TABLE>
<S>                                                                      <C>                       <C>    
Other debt:

     Community  Development  Block Grant note, due in monthly
          installments  of $4,167,  plus  interest  at a rate
          equal to the  six-month  Treasury  Bill rate with a
          minimum of 7% and a maximum  of 9% (7% at  December
          31,  1997),  maturing  July  7,  1998,  secured  by
          equipment purchased with the proceeds from the note            $        20,973            83,623

     Note payable to Kerala State Industrial Corporation, due
          in monthly principal  installments of $15,000, plus
          interest due  quarterly at an annual rate of 15.5%,
          maturing   March   1999   secured   by  a   standby
          letter-of-credit with NationsBank, N.A.                                240,000                 -

     Notes payable  to the  sole  stockholder  of  ProTec for
          acquisition of ProTec Containers, Inc., terms to be
          finalized (Note 15)                                                    454,163                 -

     Other bank notes                                                             76,032                 -
                                                                         ---------------------------------

           Total long-term debt                                                5,220,433         2,798,637
           Current maturities of long-term debt                                5,146,950         2,002,191
                                                                         ---------------------------------

           Long-term debt, excluding current maturities                  $        73,483           796,446
                                                                         =================================
</TABLE>

The  NationsBank,  N.A.  debt is secured by accounts  receivable,  inventory and
fixed  assets of the  Company,  except  for those  purchased  with the  proceeds
obtained from the Community Development Block Grant note.



                                      F-15

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 6. LONG-TERM DEBT (CONTINUED)

Future scheduled debt payments at December 31 are:

           1998                                      $     5,146,950
           1999                                               73,483
                                                     ---------------

                                                     $     5,220,433
                                                     ===============

NOTE 7. STOCKHOLDER PAYABLE

During 1995, a major  stockholder  loaned the Company  $400,000 which defeased a
$350,000 line of credit and provided $50,000 for general operations. The note is
due  April  1999,  including  all  interest,  accrued  at 8  percent.  The major
stockholder   also  received   warrants  for  400,000  shares  of  common  stock
exercisable at 1.10 per share (Note 9).

In September  1995,  the Company  received  $250,000  from the  stockholder  for
repayment of various capital leases. The note is due October 1999, including all
interest, accrued at 10 percent.

In March 1996, the Company received $400,000 from the stockholder for use in the
Ulster  acquisition.  The note is due  September  2000,  including all interest,
accrued at 10 percent.

In March, May and June 1997, the Company received a total of $1,000,000 from two
major  stockholders  to fund expansion of the recently  acquired India Facility,
expansion of capacity for synthetic  absorbable  sutures and for the acquisition
of ProTec  Containers,  Inc. The notes are due January 1999 bearing  interest at
10%. Each major  stockholder also received  warrants for 50,000 shares of common
stock. These warrants are exercisable at $6.25 per share (Note 9)


                                      F-16

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 8. LEASES

The Company has five capital lease  obligations  for  production  equipment.  At
December 31, 1997 and 1996, the Company had $501,992 and $126,508, respectively,
recorded as production  equipment under capital leases with related  accumulated
depreciation of $42,120 and $4,206, respectively (see Note 3).

The present value of future  minimum  capital lease  payments as of December 31,
1997 follows:

<TABLE>
<CAPTION>
<S>                                                                      <C>            
           1998                                                          $       190,530
           1999                                                                  157,186
           2000                                                                   92,152
           2001                                                                   59,805
                                                                         --------------
               Total minimum lease payments                                      499,673

           Less amount representing interest
               (at rates ranging from 8% to 16%)                                  86,524
           Present value of net minimum capital
               lease payments                                                    413,149
           Current maturities of obligations under
               capital leases                                                    146,893
           Obligations under capital leases, ex-
               cluding current maturities                                $       266,256
                                                                         ===============
</TABLE>

The Company leases its facilities and certain  equipment  under terms of various
operating  leases.  Future minimum rental payments  required under the operating
leases as of December 31, 1997, are as follows:

         Year ending December 31:
                      1998                            $          125,748
                      1999                                       128,953
                      2000                                       132,253
                      2001                                        86,925
                                                      ------------------

         Total minimum payments required              $          473,879
                                                      ==================

Total rental expense for operating  leases during 1997 and 1996 was $147,807 and
$111,787, respectively.



                                      F-17

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 9. STOCK WARRANTS AND OPTIONS

Warrants for Common Stock

The following warrants are outstanding at December 31, 1997:

<TABLE>
<CAPTION>
          NUMBER OF SHARES                 EXERCISE                  DATE                 DATE OF
         COVERED BY WARRANTS                 PRICE                EXERCISABLE           EXPIRATION
<S>            <C>                            <C>                 <C>                  <C>    
               500,000                        6.00                Presently            May 6, 1998
                65,000                        4.50                Presently            June 11, 1999
               400,000                        1.10                Presently            April 13, 2000
                30,000                        6.25                Presently            March 1, 2002
                70,000                        6.25                Presently            May 1, 2002
                50,000                        3.00                Presently            March 5, 2004
</TABLE>                                              

Each  warrant  allows the holder to  purchase  one share of common  stock at the
warrant price.

Options for Common Stock

In 1992, the Company  adopted a stock option plan (1992 Plan) which provides for
the  issuance  of  incentive  and  nonqualified   stock  options  for  officers,
directors, key employees, and consultants of the Company. The 1992 Plan replaced
a similar plan in effect in prior years.  The 1992 Plan allows the issuance of a
maximum of 850,000 options for exercise into common stock at an option price not
less than the fair market value (trading  value) of the common stock on the date
such options are granted.  Options outstanding under the 1992 Plan total 623,508
and 243,223 at December 31, 1997 and 1996, respectively. As of December 31, 1997
and 1996,  an  additional  104,800 and  108,000,  respectively,  of options were
granted under various other plans. All options terminate three to ten years from
the date of issuance.  The Company has filed a  registration  statement  for its
stock option plans.

A summary of the common stock  options for the year ended  December 31, 1997 and
1996 follows:

<TABLE>
<CAPTION>
                                                                                            OPTIONS
                                               OPTIONS            PRICE RANGE             EXERCISABLE
<S>                                            <C>             <C>             <C>       <C>            
Balance, December 31, 1995                     484,142    $    1.063           6.50
    Granted                                    185,800         3.00            7.00
    Expired                                   (198,149)        2.375           3.00
    Exercised                                 (120,570)        1.063           2.38
                                        -------------------------------------------
Balance, December 31, 1996                     351,223         1.063           7.00      $       115,425
                                        -------------------------------------------      ===============
    Granted                                    464,600         3.125           6.25
    Expired                                    (41,144)        1.063           7.00
    Exercised                                  (46,371)        1.063           4.50
                                        -------------------------------------------

Balance, December 31, 1997                     728,308         1.063           6.50      $       280,180
                                        ===========================================      ===============
</TABLE>


                                      F-18

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 9. STOCK WARRANTS AND OPTIONS (CONTINUED)

On February 5, 1998, the Company granted  additional options under the 1992 plan
to purchase  19,200 shares at an exercise price of $4.00 per share.  The Company
applies APB Opinion No. 25 and related  Interpretations  in  accounting  for its
plans. FASB Statement No. 123 Accounting for Stock-Based Compensation (SFAS 123)
was  issued  by the  FASB  and,  if  fully  adopted,  changes  the  methods  for
recognition  of cost or plans similar to those of the Company.  Adoption of SFAS
123 is optional;  however,  proforma  disclosures as if the Company  adopted the
cost recognition requirements under SFAS 123 are presented below:

<TABLE>
<CAPTION>
                                                          1997                             1996
                                            --------------------------------    -----------------------------
                                                    AS                              AS
                                                 REPORTED        PROFORMA        REPORTED       PROFORMA

<S>                                          <C>                  <C>              <C>             <C>    
Net income (loss)                            $    (3,768,018)    (4,533,645)       463,481         267,225

Basic earnings (loss) per share                        (1.24)         (1.49)           .17             .10

Diluted earnings (loss) per share                      (1.24)         (1.49)           .15             .09
</TABLE>


The effects of applying SFAS 123 in this proforma  disclosure are not indicative
of  future  amounts.  SFAS  123  does  not  apply  to  awards  prior to 1996 and
additional awards in future years are anticipated.

NOTE 10. INCOME TAXES

At December 31, 1997 and 1996, the Company had deferred tax assets  amounting to
approximately $5,100,000 and $4,200,000,  respectively.  The deferred tax assets
consist  primarily of the tax benefit of net operating  loss  carryforwards  and
temporary  differences  in  depreciation  and are fully  offset  by a  valuation
allowance of the same amount.

The net  change in the  valuation  allowance  for  deferred  tax  assets  was an
increase of  approximately  $900,000 in 1997 and did not change  materially  for
1996.  The net change for 1997 is primarily due to the recording of the increase
of net operating loss carryforwards.

Recoveries  for income taxes  differs  from the amount of income tax  recoveries
determined by applying the applicable U.S.  statutory Federal income tax rate to
the pretax loss as a result of the increase in the valuation allowance to offset
the increase in the deferred tax assets.

There is no income tax payable at December 31, 1996, because of the usage of net
operating loss carryforwards.


                                      F-19

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 10. INCOME TAXES (CONTINUED)

The  net  operating   loss  and  credit  for  increasing   research   activities
carryforwards as of December 31, 1997, expire as follows:


<TABLE>
<CAPTION>
                                                                                       INCREASING RESEARCH
                                           APPROXIMATE NET OPERATING                   ACTIVITIES BOOK/TAX
                                               LOSS CARRYFORWARD                             CREDITS      
                  -----------------------------------------------------------       -----------------------
                            STATE LOSS           FEDERAL LOSS                          
                              AMOUNT                AMOUNT             TAX EFFECT          TAX EFFECT
<S>               <C>                           <C>                    <C>                    <C>    
1999              $        2,537,000                     -               122,000                3,800
2000                               -             1,930,000               656,000               37,200
2001                       2,400,000             1,835,000               739,000               37,500
2002                               -             1,132,000               385,000                1,400
2003                       1,480,000             2,086,000               780,000               25,100
2004                         315,000               390,000               148,000                    -
2005                         161,000               278,000               102,000                    -
2006                               -                50,000                17,000                    -
2007                               -                26,000                 9,000                    -
2008                               -                88,000                30,000                    -
2009                               -             2,760,000               938,000                    -
2017                               -             2,400,000               816,000                    -
                  -----------------------------------------------------------------------------------
                  $        6,893,000            12,975,000             4,742,000              105,000
                  ===================================================================================
</TABLE>

The  capital  loss  carryforwards  of  approximately  $271,000,  tax  effect  of
$105,000, expire in 1998.

The  deduction  of  federal  net  operating  loss  carryforwards  is  limited to
approximately $3,962,000 as of December 31, 1997. This limitation is based on an
annual  limitation of $460,000 plus  available  carryover of $654,000 and losses
incurred subsequent to 1992 of $5,248,000.  In addition,  should the sale of the
Company discussed in Note 16 occur, there may be additional limitations.

NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions are used by the Company in determining its
fair value disclosures for financial investments:

Cash and cash  equivalents.  The carrying  amount  reported in the balance sheet
approximates fair value.


                                      F-20

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

Long-term  debt  including  current  maturities  and  stockholder  payable.  The
floating-rate  long-term debt approximates its fair value. The fair value of the
fixed-rate stockholder payable is estimated using discounted cash flow analysis,
based on the Company's current incremental  borrowing rates for similar types of
borrowing arrangements.

The carrying amounts and fair values of the Company's financial instruments are:

<TABLE>
<CAPTION>
                                                                   CARRYING            FAIR
                                                                    AMOUNT             VALUE
                                                                    ------             -----
<S>                                                            <C>               <C>            
    Cash and cash equivalents                                  $        74,078   $        74,078
    Long-term debt, including current
        maturities                                             $     5,220,433   $     5,220,433
    Stockholder payable and accrued interest                   $     2,290,991   $     2,198,846
</TABLE>


NOTE 12. GEOGRAPHIC SEGMENT REPORTING

The Company sells its products  throughout the world. The Company's export sales
from  U.S.  operations  for 1997 and 1996  totaled  $1,651,451  and  $2,295,066,
respectively which represent 21 percent and 28 percent of total sales in each of
those  years.  Accounts  receivable  related  to these  scales is  $878,000  and
$1,033,000 at December 31, 1997 and 1996, respectively.

Geographic information for the year ended December 31, 1997, is presented in the
following table.  Transfers between geographic area are accounted for at amounts
that are  generally  above cost and  consistent  with rules and  regulations  of
governing tax  authorities.  Such transfers are  eliminated in the  consolidated
financial statements. Operating income by geographic segment does not include an
allocation  of general  corporate  expenses  which are included in United States
operations. Identifiable assets are those that can be directly associated with a
particular geographic area and include intangible assets.

    Customer sales:

        Brazil                                         $        87,330
        India                                                        -
        Mexico                                                       -
        USA                                                  8,531,533
        Eliminations                                                 -
                                                       ---------------
           Consolidated                                $     8,618,863
                                                       ===============



                                      F-21

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 12. GEOGRAPHIC SEGMENT REPORTING (CONTINUED)

    Intercompany sales
        Brazil                                        $             -
        India                                                   3,362
        Mexico                                                      -
        USA                                                   134,105
        Eliminations                                         (137,467)
                                                      ---------------
           Consolidated                               $             -
                                                      ===============

    Loss before taxes:
        Brazil                                        $       (48,226)
        India                                                 (35,055)
        Mexico                                                      -
        USA                                                (3,674,679)
        Eliminations                                          (10,058)
                                                      ---------------
           Consolidated                               $    (3,768,018)
                                                      ===============

    Assets:
        Brazil                                        $       436,105
        India                                               1,601,084
        Mexico                                              2,381,085
        USA                                                 9,564,445
        Eliminations                                         (153,106)
                                                      ---------------
           Consolidated                               $    13,829,613
                                                      ===============

The Company's  worldwide business is subject to risks of currency  fluctuations,
governmental actions and other governmental proceedings abroad. The Company does
not regard  these risks as a deterrent  to further  expansion  of its methods of
operations  abroad.   However,  the  Company  closely  reviews  its  methods  of
operations,  particularly  in less developed  countries,  and adopts  strategies
responsive to changing economic and political conditions.

NOTE 13. COMMITMENTS AND CONTINGENCIES

Employment Agreement.  The Company has entered into an employment agreement with
its Chief  Executive  Officer which  provides for a three-year  term expiring in
January 1998,  with automatic  one-year  extensions  thereafter.  This agreement
provides for a base salary of $135,000 per annum.  This agreement  allows for an
annual base salary  increase  at least equal to the  percentage  increase in the
Consumer Price Index (or closest substitute for such index then available).  For
future years,  the employee's base salary shall increase no less than 10 percent
if the  Company's  net income  increases  at least 10 percent as compared to the
preceding year. The Chief Executive Officer is entitled to an annual bonus of up
to 35  percent  of base  compensation  for such  year for  achieving  objectives
established  jointly by the employees and Board of Directors,  as defined in the
agreement.


                                      F-22

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 13. COMMITMENTS AND CONTINGENCIES (CONTINUED)

Litigation.  The Company is involved in  litigation  in the  ordinary  course of
business.  Management  believes,  after consulting with legal counsel,  that the
ultimate outcome of this litigation will not result in a material adverse impact
on the Company's financial statements.

The Company has been notified by a competitor  asserting  that the Company is in
violation of a certain patent which relates the single-stick lancet product. The
Company  believes it is  indemnified  under an agreement with a supplier and its
agreement with Ulster Scientific,  Inc. for the purchase of patents.  Management
intends to vigorously contest the competitor's assertion and cannot estimate the
potential liability, if any, at this time.

Consulting  Agreement.  Effective  March 1, 1996, the Company entered into a one
year  consulting  agreement,  which  can be  extended  annually,  with  a  major
stockholder. Payments under the agreement are $4,167 per month.

Profit  Sharing/Savings Plan. The Company has a voluntary profit sharing/savings
plan (Plan) covering  substantially all employees  residing in the United States
over age 21 and who have been  employed at least six months by the Company.  The
Plan is qualified  under section  401(k) of the Internal  Revenue Code. The Plan
provides for voluntary employee  contributions and discretionary  Company profit
sharing/savings plan contributions.  The Company matches employee  contributions
at a rate of 50  percent  of their  contributions  up to 3 percent of their base
pay.  In  addition,  the Plan  provides  that the  Company  may pay for  certain
administrative  costs of the Plan.  For 1997 and  1996,  there  were no  Company
profit sharing contributions.  Company matching contributions and administrative
expenses for 1997 and 1996 were approximately $36,000 and $24,500, respectively.

NOTE 14. PRODUCT LINE RESTRUCTURING AND INVENTORY REDUCTION

During the fourth  quarter of 1997,  the Company  implemented  a new strategy of
focusing its marketing efforts for sutures mainly on domestic accounts (See Note
18). This new strategy lead to a review of the product lines manufactured by the
Company and inventories held by the Company in certain cases for more than three
years.  These  inventories  had been  purchased  or  manufactured  to  service a
clientele that failed to grow,  thereby putting the value of such inventories in
question.  After attempting with limited success,  to sell these  inventories at
any price below the costs  necessary  is some cases to finish the  product,  the
Company  elected to write off the items in question as of December 31, 1997. The
resultant product line restructuring charge was $2,855,012.


                                      F-23

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 14. PRODUCT LINE RESTRUCTURING AND INVENTORY REDUCTION (CONTINUED)

Also in 1997, the Company  attempted to launch a new product into the diagnostic
market. This effort was unsuccessful. The costs of the product purchased for his
effort,  along with the costs attributable to abandoning  certain  international
markets resulted in a product line restructuring charge of $477,268 for 1997.

During  1997  and  1996,  the  Company  experienced  reductions  in its  cost to
manufacture  certain products mainly from favorable  shifts in overhead,  labor,
and exchange rates.  In order to more accurately  reflect the new cost structure
inventory  carrying  amounts  were  reduced  and  cost  of  sales  increased  by
approximately $770,000 in 1997 and $300,000 in 1996.

NOTE 15. ACQUISITIONS AND JOINT VENTURES

On March 4, 1996,  the Company  completed an  acquisition of three product lines
from Ulster Scientific, Inc. (USI), a New York corporation.  The acquisition was
accounted  for under the purchase  method.  USI was a wholesale  distributor  of
medical supplies.  The Company paid $248,000 cash,  assumed $320,000 in supplier
liabilities,  and agreed to terms on a  consulting  and  royalty  contract  with
payments of 2 percent or more of certain  Ulster sales over eight years and with
minimum  payments of $90,000 per year for the next five years. In addition,  the
Company issued 200,000  warrants to the seller,  150,000 of which are contingent
upon future product sales.  The Company  acquired,  in addition to inventory and
equipment,  the  rights to sell  Ulster  product  lines,  trademarks,  and other
intangible assets. All intangibles are amortized over eight years.

On May 12,  1997,  the  Company  acquired  100  percent  of the  stock of ProTec
Containers, Inc. a Florida corporation.  The acquisition was accounted for under
the purchase method.  ProTec is a manufacturer of containers for the disposal of
used medical "sharps",  such as hypodermic needles. The Company paid $250,000 in
cash to the owner of the  ProTec for  manufacturing  molds,  and issued  200,000
shares of its  common  stock,  valued at  $835,980  and  issued  notes  totaling
approximately  $515,328 in exchange for all  outstanding  shares of ProTec.  All
intangibles are amortized over ten years.


                                      F-24

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 15. ACQUISITIONS AND JOINT VENTURES (CONTINUED)

As a result of the acquisition of ProTec, the Company had the following non-cash
activity:

    Assets acquired:
        Accounts receivable, net                           $       179,830
        Inventory                                                   13,000
        Fixed assets                                                77,854
        Intangible assets                                        1,164,091
        Other                                                        9,051
                                                           ---------------
                                                                 1,443,826

    Liabilities assumed:
        Accounts payable and accrued liabilities                   (86,807)
        Notes payable                                              (30,795)
                                                           ---------------
                                                                  (117,602)

    Notes payable issued                                          (515,328)
    Value of common stock issued                                  (835,980)
                                                           ---------------
    Cash acquired                                          $       (25,084)
                                                           =============== 

The  proforma  results of  operations  for the year ended  December 31, 1997 and
1996,  as though the companies had been combined at the beginning of that period
is as follows:

<TABLE>
<CAPTION>
                                                                               1997              1996

<S>                                                                      <C>                     <C>      
    Net sales                                                            $     9,035,443         9,289,455
                                                                         =================================

    Net earnings (loss)                                                  $    (3,698,478)          648,923
                                                                         =================================

    Weighted  average  number  of common  and
    common  equivalent  shares outstanding:
           Basic                                                         $     2,996,612         2,877,698
                                                                         =================================
           Dilutive                                                      $     2,996,612         3,268,113
                                                                         =================================

    Net earnings (loss) per common and common equivalent share:
           Basic                                                         $         (1.23)              .23
                                                                         =================================
           Dilutive                                                      $         (1.23)              .20
                                                                         =================================
</TABLE>


                                      F-25

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 15. ACQUISITIONS AND JOINT VENTURES (CONTINUED)

In 1996, the Company formed a joint venture with Serral,  S.A de C.V., a Mexican
Corporation, to produce needles. The joint venture is an equal partnership, with
each partner  retaining  ownership of the equipment it provides.  As of December
31, 1997,  the venture was still in the process of setting up the  equipment and
configuring the production process.

In May 1997, the Company entered into another joint venture with two individuals
in Brazil to manufacture  and market  sutures into  international  markets.  The
Company  owns  51  percent  of the  venture.  The  venture  assumed  the  suture
operations of a pre-existing  Brazilian  company,  Medical Express Ltda. The new
venture did not become operational until October 1, 1997.

On January 9, 1997, the Company  became the majority  shareholder in a new joint
manufacturing  venture based in Cochin,  India. The venture,  which manufactures
syringes,  hypodermic  needles,  and  components  for  other  Company  products,
acquired  the basic  equipment  required  for the  process,  as well as a 22,000
square-foot  facility and began  operations in November  1997.  The venture will
market the products  through Lukens and the two minority  shareholders,  who are
all current distribution partners of Lukens, in various parts of the world.

NOTE 16. SUBSEQUENT EVENT

On February 20, 1998, the Company  announced that it was negotiating the sale of
the Company to an unnamed third party.  The proposal  most recently  received by
the Company  contemplates a merger  pursuant to which existing  shareholders  of
Lukens would receive approximately $4.00 in cash for each share of Lukens Common
Stock.  No definitive  terms have, as yet, been agreed upon and the proposal is,
and any  other  matters  are  subject  to  further  review by both  boards,  the
completion  of due  diligence  reviews  and the  negotiation  and  execution  of
definitive  agreements.  No assurance can be given that the current negotiations
will result in any transaction or as to the ultimate terms or timing of any such
transaction.


                                      F-26

<PAGE>



LUKENS MEDICAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997


NOTE 17. GOING CONCERN CONSIDERATIONS (UNAUDITED)

The  Company  produced  a net  loss in  1997.  At  December  31,  1997,  current
liabilities  exceed  current  assets,  the  Company  is in  arrears  on its note
payments  to the bank and has  violated  its  debt  covenants.  The bank has not
granted a waiver on any  default by the  Company.  However,  the bank has stated
that as long as the Company  adheres to the payment  plan  submitted,  no action
will be taken.  Total  long-term  debt to the bank and a major  stockholder  has
increased over 1996 levels. Some of these borrowings have been used to acquire a
subsidiary  and to fund the start up of joint  ventures  causing an  increase in
intangible and other assets.  The Company's capacity to meet its obligations and
its  viability as a going  concern is dependent  upon several  factors,  such as
returning to  profitability,  developing  adequate  liquidity,  adhering to debt
covenants and required  payments,  possible debt restructuring or sale (see Note
16).

In 1997,  the  Company  implemented  a major  strategic  shift in its  marketing
approach  regarding its largest  product line,  sutures.  This shift,  away from
lower  priced  markets  where the Company had been  successful  in securing  new
business to a focus on certain domestic accounts,  was a result of the Company's
desire to improve  margins,  reduce inventory  requirements,  and provide a more
consistent  order  flow.  While the  Company  intends to utilize  its  Brazilian
facility  to  continue  to  service  selected  international   customers,   many
unprofitable  markets will be  abandoned.  This  strategy  led to a  significant
write-off of inventory at the end of 1997.

In  1997,  the  Company  also  expanded  its  product  lines  further  with  the
acquisition  of ProTec  Containers,  Inc.,  and brought its  facility in Cochin,
India on-line for the  manufacture of certain key raw  materials.  These actions
provide an  opportunity  to increase  revenues  and overall  margins.  Cash flow
projections by management  anticipate  more abundant cash becoming  available in
May 1998.

While the Company has been  successful in increasing its orders in the new areas
of focus, and has been successful in producing  certain raw materials at a lower
cost,  there  can be no  assurance  that the  Company  efforts  will  result  in
profitability  from  operations  consistently in the future.  Additionally,  the
Company's  write-off  of  inventory  makes the  expansion  of its  credit  lines
unlikely in the near term,  and the financing of continued  internal  growth and
acquisitions difficult.


                                      F-27

<PAGE>

                           LUKENS MEDICAL CORPORATION
                           --------------------------
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                      (UNAUDITED)           AUDITED
                                                                                       MARCH 31,          DECEMBER 31,          
                                   ASSETS                                                1998                1997              
                                   ------                                            -------------       ------------          
<S>                                                                                 <C>                <C>
      CURRENT ASSETS:                                                                                                         
           Cash and cash equivalents                                                        $53,882            $74,048        
           Accounts Receivable, net of allowance for doubtful                            $2,262,518         $1,836,542        
                accounts of $40,000 as of December 31,1997 and                                                                
                $40,00 as of March 31,1998                                                                                    
           Inventory                                                                     $5,333,559         $5,105,900        
           Prepaid Expenses                                                                $138,846           $127,080        
                                                                                    ----------------   ----------------
              TOTAL CURRENT ASSETS                                                       $7,788,805         $7,143,570        
                                                                                                                              
           Land, building and equipment, net of accumulated                              $3,542,600         $3,599,150        
                depreciation  of $1,963,377as of December 31,1997                                                             
                 and depreciation  of $2,069,927 as of March 31,1998                                                           
                                                                                                                              
            Intangible assets and Investments in Joint Ventures,                         $2,899,224         $3,001,139        
                net of amortization  of $1,283,569 as of December 31,1997                                                     
                 and net of amortization  of $1,385,484 as of March 31,1998                                                    
           Other assets                                                                     $85,754            $85,754        
                                                                                    ================   ================       
              TOTAL ASSETS                                                              $14,316,383        $13,829,613        
                                                                                    ================   ================       
                                                                                                                              
                                                                                                                              
                                                                                                                              
                    LIABILITIES AND STOCKHOLDERS' EQUITY                                                                      
                    ------------------------------------                                                                      
      CURRENT LIABILITIES:                                                                                                    
        Accounts payable                                                                 $1,953,128         $1,864,832        
        Accrued liabilities                                                                $134,783           $138,016        
        Current maturities of long term debt                                             $5,065,341         $5,146,950        
        Current maturities of obligations under capital leases                             $146,893           $146,893        
                                                                                    ----------------   ----------------
              TOTAL CURRENT LIABILITIES                                                  $7,300,145         $7,296,691        
                                                                                                                              
        Long-term debt, excluding current maturities                                        $58,483            $73,483        
        Stockholder Payable                                                              $2,315,991         $2,290,991        
        Obligations under cap leases, excl current maturities                              $223,027           $266,256
                                                                                    ----------------   ----------------
              TOTAL LIABILITIES                                                          $9,897,646         $9,927,421        

        Minority interest                                                                  $129,531           $129,531        
                                                                                                                              

      STOCKHOLDERS' EQUITY:                                                                                                   
        Common stock, $.01 par value, authorized                                            $30,934            $30,434
             20,000,000 shares: issued and outstanding                                                                        
             3,093,359 shares as of December 31,1997and 3,300,130
             as of March 31, 1998.
        Additional paid-in capital                                                      $18,725,535        $18,525,035
        Accumulated Deficit + foreign Currency Adjustment                              $(14,467,283)      ($14,783,808)
                                                                                    ----------------   ----------------
           Total stockholders' equity                                                    $4,289,206         $3,772,661
                                                                                    ----------------   ----------------

           Total liabilities and stockholders' equity                                   $14,316,383        $13,829,613
                                                                                    ================   ================
</TABLE>


                                      F-28


<PAGE>


                           LUKENS MEDICAL CORPORATION
                           --------------------------
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      ------------------------------------
                                    UNAUDITED
                                    ---------
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED     
                                                         MARCH 31,         
                                                                           
                                                    1998             1997
                                              --------------    --------------     
<S>                                              <C>               <C>             
 SALES                                           $2,658,933        $2,403,939      
 Cost of sales                                   $1,624,062        $1,638,284      
                                              --------------    --------------     
      GROSS PROFIT                               $1,034,871          $765,655      
                                              --------------    --------------     
                                                                                   
 Selling expenses                                  $227,004          $228,374      
 General and administrative expenses               $351,808          $218,758      
 Research and development expenses                  $17,098           $12,020      
                                              --------------    --------------     
           TOTAL OPERATING EXPENSES                $595,910          $459,152      
                                              --------------    --------------  
      EARNINGS FROM OPERATIONS                     $438,961          $306,503   
                                              --------------    --------------  
                                                                                
 OTHER (EXPENSE) INCOME:                                                        
      Interest income                                  ($50)          ($1,860)  
      Interest expense                             $122,466           $53,466   
      Other, net                                         $0            $1,500   
                                              --------------    --------------  
           TOTAL OTHER (EXPENSE) INCOME            $122,416           $53,106   
                                              -------------     --------------  
           EARNINGS (LOSS) BEFORE                  $316,545          $253,397   
            EXTRAORDINARY ITEMS                                                 
 Income tax expense                                      $0                $0   
                                                                                
                                              --------------    --------------  
           NET EARNINGS (LOSS)                     $316,545          $253,397   
                                              ==============    ==============  
                                                                                
                                                                                
 Weighted average number of common and common                                   
      equivalent shares outstanding               3,300,130         3,315,737   
                                              ==============    ==============  
                                                                                
 Income (loss) per common and common                  $0.10             $0.08   
      equivalent shares outstanding                                             
                                               ==============    ============== 
                                                                                
</TABLE>


                                      F-29

                                                                                
<PAGE>

                           LUKENS MEDICAL CORPORATION
                           --------------------------
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                    UNAUDITED
<TABLE>
<CAPTION>
                                                                                
                                                                    THREE MONTHS ENDED            
                                                                        MARCH 31,                 
                                                                  1998               1997         
                                                             ----------------    -------------    
 Cash flows from operations:                                                                      
<S>                                                                 <C>              <C>          
    Net earnings (loss)                                             $316,545          $253,397     
    Adjustments to reconcile net earnings (loss) to cash                                          
         provided (used) by operating activities:                                                  
         Depreciation                                               $106,550           $82,309     
         Amortization of intangible assets                          $101,915           $37,049     
    Changes in current assets and liabilities:                                                    
         Accounts receivable                                       ($425,976)        ($218,117)     
         Inventory                                                 ($227,659)          $38,337     
         Prepaids                                                   ($11,766)         ($74,849)     
         Accounts payable                                           $113,296          ($13,786)     
         Accrued liabilities                                         ($3,233)         $165,534     
    Change in other assets                                                $0          ($83,606)     
                                                             ----------------    -------------    
                                                                                                  
           Net cash provided (used) by operating activities         ($30,328)         $186,268     
                                                             ----------------    -------------    
                                                                                                  
 Cash flows from investing activities:                                                            
    Purchase of plant and equipment                                 ($50,000)        ($31,547)     
    Investment in Joint ventures                                          $0         ($22,913)     
    Purchase of intangible assets                                         $0        ($583,689)     
                                                             ----------------    -------------    

           Net cash used in investing activities                    ($50,000)       ($638,149)     
                                                             ----------------    -------------    
                                                                                                  
 Cash flows from financing activities:                                                            
    Borrowings on long term debt & obligations under                    
     capital leases                                                       $0        ($239,470)  
    Principal payments on long term debt & obligations                  
     under capital leases                                          ($139,838)        ($25,783)                                   
    Proceeds from the issuance of common stock and                      
     equivalents                                                    $200,000          $13,154                               
                                                             ----------------    -------------    

           Net cash provided by financing activities                 $60,162        ($252,099)     
                                                             ----------------    -------------    
                                                                                                  
           Net increase (decrease) in cash and cash                      
             equivalents                                            ($20,166)       ($703,980)                                      
                                                                                                  
 Cash and cash equivalents at beginning of period                    $74,048         $878,090     
                                                             ================    =============    
                                                                                                  
 Cash and cash equivalents at end of period                          $53,882         $174,110   
                                                             ================    =============  
                                                                                                  
</TABLE>


                                      F-30

<PAGE>

                           LUKENS MEDICAL CORPORATION

                   Notes to Consolidated Financial Statements
                                 March 31, 1998
                                   (unaudited)

(1)  Summary of Significant Accounting Policies
     ------------------------------------------

     The Company's  principal  business  activity is the manufacture and sale of
     disposable surgical products. The Company's main product lines are surgical
     sutures,   lancets,   sharps  containers,   and  diagnostic  products.  The
     accompanying   unaudited   financial   statements  have  been  prepared  in
     accordance  with the  instructions  to Form  10-QSB  and  therefore  do not
     include  all  information  and  footnote  disclosure  necessary  for a full
     presentation of financial position,  results of operations, and cash flows.
     The  information  furnished,  in the opinion of  management,  reflects  all
     adjustments  necessary to present  fairly the results of  operations of the
     Company for the  three-month  period  ended  March 31,  1998 and 1997.  The
     accounting  policies  followed  by the Company are set forth in note (1) of
     Notes to the Company's  Consolidated  Financial Statements in the Company's
     Annual  Report on Form  10-KSB for the year ended  December  31,  1997 (the
     "1997 Form 10-K") filed with the  Securities and Exchange  Commission.  The
     results of operations of interim periods are not necessarily  indicative of
     results which may be expected for any other interim  period or for the year
     as a whole.

(2)  Inventory
     ---------

     Inventory consists of the following components at:

                                March 31         December 31
                                 1998               1997
                              ----------      ---------------
     Raw Materials            $2,127,718        $1,938,343
     Work-in-Process           1,950,637         1,972,124
     Finished Goods            1,255,204         1,195,433
                              ----------        ----------
                              $5,335,559        $5,105,900
                              ==========        ==========



                                      F-31

<PAGE>

(3)  Income Taxes

The  net  operating   loss  and  credit  for  increasing   research   activities
carryforwards as of December 31, 1997, expire as follows:

              Approximate                         Increasing Research
             Net Operating                        Activities Book/Tax
          Loss Carryforward                              Credits
          -----------------                              -------

        State Loss    Federal Loss

          Amount         Amount                Tax Effect     Tax Effect   
          ------         ------                ----------     ----------   
                                                                           
1999    $2,537,000    $    ---                $  122,000     $     3,800   
2000        ---        1,930,000                 656,000          37,200   
2001     2,400,000     1,835,000                 739,000          37,500   
2002        ---        1,132,000                 385,000           1,400   
2003     1,480,000     2,086,000                 780,000          25,100   
2004       315,000       390,000                 148,000            ---    
2005       161,000       278,000                 102,000            ---    
2006        ---           50,000                  17,000            ---    
2007        ---           26,000                   9,000            ---    
2008        ---           88,000                  30,000            ---    
2009        ---        2,760,000                 938,000                   
2017        ---        2,400,000                 816,000            ---    
                                                                           
- -------------------------------------------------------------------------- 
        $6,893,000   $12,975,000              $4,742,000        $105,000   
        ==========   ===========              ==========        =========  
                                             

The  capital  loss  carryforwards  of  approximately  $271,000,  tax  effect  of
$105,000, expire in 1998.

The  deduction  of  federal  net  operating  loss  carryforwards  is  limited to
approximately $3,962,000 as of December 31, 1997. This limitation is based on an
annual  limitation of $460,000 plus  available  carryover of $654,000 and losses
incurred subsequent to 1992 of $5,248,000.  In addition,  should the sale of the
Company occur (See "Liquidity and Capital  Resources"),  there may be additional
limitations.




                                      F-32

<PAGE>



                                                                         Annex A






                               AGREEMENT AND PLAN
                                    OF MERGER
                                   DATED AS OF
                                 APRIL 28, 1998
                                      AMONG
                                   MEDISYS PLC
                              LMC ACQUISITION CORP.
                                       AND
                           LUKENS MEDICAL CORPORATION






<PAGE>



                                TABLE OF CONTENTS

ARTICLE I.  THE MERGER.........................................................1
         Section 1.1.  The Merger..............................................1
         Section 1.2.  Effective Date of the Merger............................1

ARTICLE II. SURVIVING CORPORATION..............................................1
         Section 2.1.  Certificate of Incorporation............................1
         Section 2.2.  By-Laws.................................................2
         Section 2.3.  Board of Directors; Officers............................2
         Section 2.4.  Effects of Merger.......................................2

ARTICLE III.  CONVERSION OF SHARES; OTHER SECURITIES...........................2
         Section 3.1.  Merger Consideration....................................2

ARTICLE IV.  PAYMENT PROCEDURES; MECHANICS OF THE MERGER.......................3
         Section 4.1.  Payment Procedures......................................3
         Section 4.2.  Dissenting Shares.......................................4
         Section 4.3.  Stock Options...........................................5
         Section 4.4.  Stockholders' Meetings..................................5
         Section 4.5.  Closing of the Company's Transfer Books.................6
         Section 4.6.  Assistance in Consummation of Merger....................6
         Section 4.7.  Closing.................................................6



<PAGE>



ARTICLE V.  REPRESENTAIONS AND WARRANTIES OF PARENT............................6
         Section 5.1.  Organization and Qualification..........................6
         Section 5.2.  Authority Relative to this Agreement....................6
         Section 5.3.  Parent Action...........................................7
         Section 5.4.  Financial Advisor.......................................7
         Section 5.5.  Information.............................................7
         Section 5.6.  Financing...............................................8
         Section 5.7.  Litigation..............................................8

ARTICLE VI.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................8
         Section 6.1.  Organization and Qualification..........................8
         Section 6.2.  Capitalization..........................................8
         Section 6.3.  Subsidiaries............................................9
         Section 6.4.  Authority Relative to this Agreement....................9
         Section 6.5.  Reports and Financial Statements.......................10
         Section 6.6.  Absence of Certain Changes or Events...................11
         Section 6.7.  Litigation.............................................11
         Section 6.8.  Employee Benefit Plans.................................12
         Section 6.9.  Labor Matters..........................................14
         Section 6.10. Company Action.........................................14
         Section 6.11. Compliance with Applicable Laws........................15
         Section 6.12. Liabilities............................................15
         Section 6.13. Taxes..................................................15



<PAGE>



         Section 6.14. Certain Agreements.....................................15
         Section 6.15. Patents, Trademarks, Etc...............................16
         Section 6.16. No Material Adverse Effect.............................16
         Section 6.17. Products Liability.....................................17
         Section 6.18. Environmental Matters..................................17
         Section 6.19. Title to Property......................................18
         Section 6.20. Absence of Certain Business Practices..................19
         Section 6.21. Financial Advisor .....................................19

ARTICLE VII.  REPRESENTATIONS AND WARRANTIES REGARDING SUB....................19
         Section 7.1.  Organization...........................................19
         Section 7.2.  Capitalization.........................................19
         Section 7.3.  Authority Relative to this Agreement...................19

ARTICLE VIII.  CONDUCT OF BUSINESS PENDING THE MERGER.........................20
         Section 8.1.  Conduct of Business by the Company Pending the Merger..20

ARTICLE IX.  ADDITIONAL AGREEMENTS............................................21
         Section 9.1.  Access and Information.................................21
         Section 9.2.  Proxy Statement........................................22
         Section 9.3.  Employee Matters.......................................22
         Section 9.4.  Indemnification........................................23
         Section 9.5.  Additional Agreements..................................24
         Section 9.6.  Alternative Proposals..................................24
         Section 9.7.  Advice of Changes; SEC Filings.........................25




<PAGE>



         Section 9.8.  Restructuring of Merger................................25
         Section 9.9.  Cancellation of Warrants; Repayment of Loans from
                         Affiliates...........................................25
         Section 9.10. Agreement of Principal Stockholders....................26
         Section 9.11  Fairness Opinion.......................................26

ARTICLE X.  CONDITIONS PRECEDENT..............................................26
         Section 10.1. Conditions to Each Party's Obligation to Effect the
                         Merger...............................................26
         Section 10.2. Conditions to Obligation of the Company to Effect
                         the Merger...........................................27
         Section 10.3. Conditions to Obligations of Parent and Sub to 
                         Effect the Merger....................................27

ARTICLE XI.  TERMINATION, AMENDMENT AND WAIVER................................28
         Section 11.1. Termination by Mutual Consent..........................28
         Section 11.2  Termination by Either Parent or the Company............28
         Section 11.3. Termination by the Company.............................29
         Section 11.4. Termination by the Parent..............................29
         Section 11.5. Effect of Termination and Abandonment..................30

ARTICLE XII.  GENERAL PROVISIONS..............................................31
         Section 12.1. Non-Survival of Representations, Warranties and
                         Agreements...........................................31
         Section 12.2. Notices................................................31
         Section 12.3. Fees and Expenses......................................32
         Section 12.4. Publicity..............................................32
         Section 12.5. Specific Performance...................................32
         Section 12.6. Assignment; Binding Effect.............................33
         Section 12.7. Entire Agreement.......................................33



<PAGE>



         Section 12.8. Amendment..............................................33
         Section 12.9. Governing Law..........................................33
         Section 12.10. Counterparts..........................................33
         Section 12.11. Headings and Table of Contents........................33
         Section 12.12.  Interpretation.......................................33
         Section 12.13.  Waivers..............................................34
         Section 12.14.  Severability.........................................34
         Section 12.15.  Subsidiaries.........................................34
         Section 12.16.  United States Dollars; Exchange Rates................34






<PAGE>



                          AGREEMENT AND PLAN OF MERGER

     THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"),  dated as of April 28,
1998, by and among Medisys PLC, a Scottish  public limited  company  ("Parent"),
LMC Acquisition  Corp., a Delaware  corporation and a wholly owned subsidiary of
Parent ("Sub"),  and Lukens Medical  Corporation,  a Delaware  corporation  (the
"Company"):

                              W I T N E S S E T H:

     WHEREAS,  Parent and the Company desire to effect a business combination by
means of the merger of Sub with and into the Company (the "Merger"); and

     WHEREAS,  the Boards of  Directors  of  Parent,  Sub and the  Company  have
approved  the  Merger,  upon the terms and subject to the  conditions  set forth
herein;

     NOW,  THEREFORE,  in  consideration  of  the  foregoing  premises  and  the
representations,  warranties and agreements  contained herein the parties hereto
agree as follows:


                                    ARTICLE I
                                   THE MERGER

     1.1 The Merger. Upon the terms and subject to the conditions hereof, on the
Effective Date (as defined in Section 1.2), Sub shall be merged into the Company
and the separate existence of Sub shall thereupon cease, and the Company, as the
corporation surviving the Merger (the "Surviving Corporation"),  shall by virtue
of the Merger  continue its corporate  existence  under the laws of the State of
Delaware.

     1.2  Effective  Date  of the  Merger.  Subject  to the  provisions  of this
Agreement, a certificate of merger (the "Certificate of Merger") in such form as
is required by the relevant  provisions of the Delaware General  Corporation Law
(the "DGCL") shall be duly prepared,  executed and acknowledged by the Surviving
Corporation  and thereafter  delivered to the Secretary of State of the State of
Delaware  for filing on the date of the Closing (as defined in Section  4.1(c)).
The Merger shall become effective (the "Effective  Date") upon the filing of the
Certificate  of  Merger  or at  such  time  thereafter  as is  provided  in such
Certificate of Merger.


                                   ARTICLE II
                              SURVIVING CORPORATION

     2.1 Certificate of  Incorporation.  The Certificate of Incorporation of Sub
shall be the Certificate of Incorporation of the Surviving Corporation after the
Effective  Date, and thereafter may be amended in accordance  with its terms and
as provided by law and this Agreement.



<PAGE>




     2.2 By-Laws. The By-laws of Sub as in effect on the Effective Date shall be
the  By-laws of the  Surviving  Corporation,  and  thereafter  may be amended in
accordance with its terms and as provided by law and this Agreement.

     2.3 Board of Directors; Officers. The directors of Sub immediately prior to
the Effective Date shall be the directors of the Surviving Corporation,  and the
officers of the Company  immediately  prior to the  Effective  Date shall be the
officers  of the  Surviving  Corporation,  in each case until  their  respective
successors are duly elected and qualified.

     2.4  Effects of  Merger.  The Merger  shall have the  effects  set forth in
Section 259 of the DGCL.


                                   ARTICLE III
                     CONVERSION OF SHARES; OTHER SECURITIES

     3.1 Merger  Consideration.  On the Effective  Date, by virtue of the Merger
and without any action on the part of any holder of any shares of Common  Stock,
par value $.01 per share, of the Company ("Company Common Stock"):

          (a) All shares of Company  Common  Stock which are held by the Company
or any  subsidiary of the Company,  and any shares of Company Common Stock owned
by Parent, Sub or any other subsidiary of Parent, shall be canceled.

          (b) Each remaining  outstanding  share of Company Common Stock,  other
than the Dissenting  Shares (as defined in Section 4.2), shall be converted into
and represent the right to receive $4.00 in cash (the "Merger Consideration") in
accordance with Section 4.1.

          (c) Each issued and outstanding share of capital stock of Sub shall be
converted into and become one fully paid and nonassessable share of common stock
of the Surviving Corporation.

          In the event of any stock  dividend,  stock  split,  reclassification,
recapitalization,  combination  or exchange of shares with respect to, or rights
issued in respect of,  Company  Common Stock after the date  hereof,  the Merger
Consideration shall be adjusted accordingly.


                                        2

<PAGE>




                                   ARTICLE IV
                   PAYMENT PROCEDURES; MECHANICS OF THE MERGER

     4.1 Payment Procedures.

          (a) Prior to the Effective Date,  Parent shall select a Payment Agent,
which  shall  be  Parent's  Transfer  Agent  or such  other  person  or  persons
designated  by Parent,  to act as Payment  Agent for the  Merger  (the  "Payment
Agent").

          (b) Promptly  after the  Effective  Date,  Parent  shall  instruct the
Payment Agent to mail to each holder of a certificate or certificates evidencing
shares of Company Common Stock (other than Dissenting  Shares)  ("Certificates")
(i) a letter of transmittal (which shall include a Substitute Form W-9 and shall
specify  that  delivery  shall be  effected,  and risk of loss and  title to the
Certificates  shall pass, only upon proper delivery of such  Certificates to the
Payment Agent) and (ii) instructions to effect the surrender of the Certificates
in exchange for the Merger  Consideration.  Each holder of Company Common Stock,
upon  surrender  to the Payment  Agent of such  holder's  Certificates  with the
letter of transmittal,  duly executed, and such other customary documents as may
be required pursuant to such  instructions,  shall be paid the amount of cash to
which such holder is  entitled,  pursuant to this  Agreement,  as payment of the
Merger   Consideration   (without  any  interest  accrued  thereon).   Until  so
surrendered,  each Certificate  shall after the Effective Date represent for all
purposes  only the right to receive the Merger  Consideration.  In the event any
Certificate  shall have been lost,  stolen or  destroyed,  upon the making of an
affidavit  of that fact by the  person  claiming  such  Certificate  to be lost,
stolen or destroyed and, if required by the Surviving  Corporation,  the posting
by such person of a bond in such reasonable amount as the Surviving  Corporation
may  direct as  indemnity  against  any claim  that may be made  against it with
respect to such Certificate, the Payment Agent will deliver in exchange for such
lost,  stolen or  destroyed  Certificate  the  Merger  Consideration  payable in
respect thereof pursuant to this Agreement.

          (c) At the Closing of the transactions  contemplated by this Agreement
(the  "Closing),  Parent shall deposit in trust with the Payment Agent,  for the
ratable  benefit of the holders of Company  Common Stock (other than  Dissenting
Shares),  the  appropriate  amount of cash to which such  holders  are  entitled
pursuant to this Agreement as payment of the Merger  Consideration (the "Payment
Fund"). The Payment Agent shall, pursuant to irrevocable instructions,  make the
payments  to the  holders  of the  Company  Common  Stock  as set  forth in this
Agreement.

          (d) If any  delivery  of the Merger  Consideration  is to be made to a
person  other than the  registered  holder of the  Certificates  surrendered  in
exchange therefor, it shall be a condition to such delivery that the Certificate
so  surrendered  shall be properly  endorsed or be  otherwise in proper form for
transfer  and that the  person  requesting  such  delivery  shall (i) pay to the
Payment Agent any transfer or other taxes required as a result of delivery to a


                                        3

<PAGE>



person other than the registered holder or (ii) establish to the satisfaction of
the Payment Agent that such tax has been paid or is not payable.

          (e) Any portion of the Payment Fund that remains  undistributed to the
holders of Company  Common Stock as of the first  anniversary  of the  Effective
Date shall be delivered to Parent upon demand,  and any holder of Company Common
Stock who has not  theretofore  complied with the exchange  requirements of this
Section shall have no further claim upon the Payment Agent and shall  thereafter
look only to Parent for payment of the Merger Consideration.

          (f) If a  Certificate  has not been  surrendered  prior to the date on
which any receipt of Merger  Consideration  would otherwise escheat to or become
the property of any governmental  agency,  such Certificate shall, to the extent
permitted  by   applicable   law,  be  deemed  to  be  canceled  and  no  Merger
Consideration, money or other property will be due to the holder thereof.

          (g)  The  Payment  Agent  shall  invest  cash in the  Payment  Fund in
obligations  of or  guaranteed  by the United  States of America with  remaining
maturities not exceeding 180 days, in commercial paper obligations receiving the
highest rating from either Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or in certificates of deposit or banker's acceptances of commercial
banks  with   capital   exceeding   $500   million   (collectively,   "Permitted
Investments").  The  maturities  of  Permitted  Investments  shall be such as to
permit the Payment Agent to make prompt  payment to former  stockholders  of the
Company entitled thereto as contemplated by this Section. Any interest and other
income resulting from such investments  shall be paid to Parent or as Parent may
otherwise direct.

     4.2 Dissenting Shares.

          (a)  Notwithstanding  any other  provision  of this  Agreement  to the
contrary,  shares of Company Common Stock that are outstanding immediately prior
to the Effective  Date and which are held by holders who shall have not voted in
favor of the Merger or consented  thereto in writing and who shall have demanded
properly in writing  appraisal for such shares in accordance with Section 262 of
the  DGCL and who  shall  not have  withdrawn  such  demand  or  otherwise  have
forfeited appraisal rights (collectively,  the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration.  Such
holders  shall be entitled  to receive  payment of the  appraised  value of such
shares,  except that all Dissenting Shares held by holders who shall have failed
to  perfect or who  effectively  shall have  withdrawn  or lost their  rights to
appraisal  of such shares  under such  Section 262 shall  thereupon be deemed to
have been  converted into and to have become  exchangeable,  as of the Effective
Date,  for the right to  receive,  without  any  interest  thereon,  the  Merger
Consideration, upon surrender of the Certificates evidencing such shares.

          (b) The Company shall give Parent (i) prompt notice of any demands for
appraisal  received by the Company,  withdrawals of such demands,  and any other
instruments


                                        4

<PAGE>



served pursuant to the DGCL and received by the Company and (ii) the opportunity
to direct all negotiations and proceedings with respect to demands for appraisal
under the DGCL. The Company shall not,  except with the prior written consent of
Parent, make any payment with respect to any demands for appraisal,  or offer to
settle, or settle, any such demands.

     4.3 Stock Options.

          (a) The Company's stock option plan,  which is attached to Section 4.3
of the Company  Disclosure  Schedule  (as defined in Section  6.1) (the  "Option
Plan"),  and each option to acquire shares of Company  Common Stock  outstanding
immediately  prior to the Effective Date thereunder,  whether vested or unvested
(each, an "Option" and collectively,  the "Options"), shall be assumed by Parent
at the Effective Date, and each such Option shall become an option to purchase a
number of ordinary shares of Parent, par value 1p (a "Substitute Option"), equal
to the  number  of  shares  of  Company  Common  Stock  subject  to such  Option
multiplied  by the  Option  Exchange  Ratio (as  defined  below).  The per share
exercise price for each  Substitute  Option shall be the current  exercise price
per share of Company Common Stock divided by the Option Exchange Ratio, and each
Substitute  Option otherwise shall after the Effective Date be subject to all of
the other terms and conditions of the original Option to which it relates. Prior
to the Effective  Date,  the Company shall take such  additional  actions as are
reasonably necessary under the applicable  agreements and Option Plan to provide
that each outstanding Option shall, from and after the Effective Date, represent
only the right to purchase, upon exercise,  ordinary shares of Parent and Parent
shall  take such  additional  actions  as are  reasonable  and  necessary  under
applicable  law in order to effect the  issuance of such  Substitute  Options to
such  holders.  Except as set forth in  Section  4.3 of the  Company  Disclosure
Schedule,  the vesting of no Option shall be accelerated by reason of the Merger
unless the agreement or arrangement under which it was granted or by which it is
otherwise governed specifically provides for such acceleration. For avoidance of
doubt, it is the intention of Parent and the Company that the Substitute Options
be identical  in all respects to the Options  (except for the number and type of
shares for which they shall be  exercisable  and the exercise price thereof) and
that,  without  limitation,  (i) all terms of the plans under which such Options
were  issued  and (ii) all  policies  set forth in  Section  4.3 of the  Company
Disclosure Schedule, shall apply thereto from and after the Effective Date.

          (b) For purposes of this Agreement,  the term "Option  Exchange Ratio"
shall  mean the  ratio of (x)  $4.00 to (y) the U.S.  dollar  equivalent  of the
average of the  middle-market  closing  price per share of the  Parent  ordinary
shares on the Alternative  Investment  Market of the London Stock  Exchange,  as
shown in the "London Stock Exchange  Daily  Official  List," for each of the ten
trading days ending two trading days prior to the Effective Date.

     4.4  Stockholders'   Meetings.  (a)  The  Company  shall  take  all  action
necessary,   in  accordance   with   applicable  law  and  its   Certificate  of
Incorporation  and  By-laws,  to  convene a special  meeting  of the  holders of
Company Common Stock (the "Company  Meeting") as promptly as practicable for the
purpose of considering and taking action upon this Agreement.  Subject solely to
its fiduciary duties, the Board of Directors of the Company will recommend


                                        5

<PAGE>



that holders of Company Common Stock vote in favor of and approve the Merger and
the adoption of the Agreement at the Company  Meeting.  At the Company  Meeting,
all of the shares of Company  Common  Stock  then owned by Parent,  Sub,  or any
other subsidiary of Parent,  or with respect to which Parent,  Sub, or any other
subsidiary  of Parent  holds the power to direct  the  voting,  will be voted in
favor of approval of the Merger and adoption of this Agreement.

          (b)  Parent  shall  take all  action  necessary,  in  accordance  with
applicable  law,  stock  exchange  rules  and its  Memorandum  and  Articles  of
Association,  to convene an extraordinary meeting of the holders of its ordinary
shares to  approve  this  Agreement,  the  Merger and the  related  issuance  of
securities of Parent,  to the extent  approval is required and sought by Parent.
Subject  solely to its fiduciary  duties,  the Board of Directors of Parent will
recommend  that holders of its ordinary  shares vote in favor of the matters put
before them.

     4.5 Closing of the Company's  Transfer  Books.  At the Effective  Date, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company  Common  Stock shall be made  thereafter.  In the event that,  after the
Effective Date,  Certificates are presented to the Surviving  Corporation,  they
shall be canceled  and  exchanged  for the Merger  Consideration  as provided in
Sections 3.1 (b) and 4.1.

     4.6 Assistance in Consummation of the Merger.  Each of Parent,  Sub and the
Company  shall  provide all  commercially  reasonable  assistance  to, and shall
cooperate with, each other to bring about the consummation of the Merger as soon
as possible  in  accordance  with the terms and  conditions  of this  Agreement.
Parent shall cause Sub to perform all of its obligations in connection with this
Agreement.

     4.7  Closing.  The  Closing  shall take  place (i) at the  offices of Brock
Silverstein  McAuliffe  LLC, One  Citicorp  Center,  153 East 53rd Street,  56th
floor, New York, New York 10022, at 10:00am,  New York City time, on the earlier
of (A) August 14, 1998 or (B) the day which is no later than two  business  days
after the day on which  the last of the  conditions  set  forth in  Article X is
fulfilled or waived and the meeting of Parent's Shareholders with respect to the
Merger and related  financing has been held or (ii) at such other time and place
as Parent and the Company shall agree in writing.


                                    ARTICLE V
                    REPRESENTATIONS AND WARRANTIES OF PARENT

Parent represents and warrants to the Company as follows:

     5.1 Organization and Qualification. Parent is a public limited company duly
incorporated,  validly  existing and in good standing under the laws of Scotland
and  has the  corporate  power  to  carry  on its  business  as it is now  being
conducted or currently proposed to be conducted.


                                        6

<PAGE>



     5.2  Authority  Relative  to  this  Agreement.  Parent  has  the  corporate
authority to enter into this Agreement and,  subject to the  satisfaction of the
conditions  contained  herein,  to  carry  out its  obligations  hereunder.  The
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated hereby have been duly authorized by Parent's Board of
Directors.  The Agreement  constitutes a valid and binding  obligation of Parent
enforceable in accordance with its terms except as enforcement may be limited by
bankruptcy,  insolvency  or other  similar laws  affecting  the  enforcement  of
creditors'  rights  generally  and except  that the  availability  of  equitable
remedies,  including specific  performance,  is subject to the discretion of the
court  before  which any  proceeding  therefor  may be  brought.  Except for the
requisite  approval  of  the  holders  of  the  Parent  ordinary  shares  of the
transactions  contemplated  hereby and  related  financing,  no other  corporate
proceedings  on the part of Parent are  necessary to authorize the Agreement and
the  transactions  contemplated  hereby.  Parent is not subject to or  obligated
under (i) any  memorandum,  articles  of  association,  indenture  or other loan
document  provision  or (ii) any other  contract,  license,  franchise,  permit,
order, decree, concession, lease, instrument, judgment, statute, law, ordinance,
rule or  regulation  applicable  to Parent or any of its  subsidiaries  or their
respective  properties or assets, which would be breached or violated,  or under
which  there  would be a default  (with or without  notice or lapse of time,  or
both),  or under which there would arise a right of  termination,  cancellation,
modification  or  acceleration  of any  obligation  or the  loss  of a  material
benefit,  by its  executing  and  carrying out this  Agreement  other than those
which,  either singly or in the aggregate,  has not had, or would not reasonably
be  expected  to have,  a material  adverse  effect on the  Parent's  ability to
consummate the transactions contemplated hereby, including the Merger. Except as
required in connection, or in compliance,  with the provisions of the Securities
and Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), and the corporation, securities or blue
sky laws or regulations of the various states or any rules or regulations of the
London Stock Exchange  applicable to Parent, no filing or registration  with, or
authorization, consent or approval of, any public body or authority is necessary
for  the  consummation  by  Parent  of  the  Merger  or the  other  transactions
contemplated   by   this   Agreement   other   than   filings,    registrations,
authorizations, consents or approvals the failure of which to make or obtain has
not had, or would not  reasonably be expected to have a material  adverse effect
on  Parent's  ability  to  consummate  the  transactions   contemplated  hereby,
including the Merger.

     5.3 Parent  Action.  The Board of  Directors  of Parent (at a meeting  duly
called and held) has by the requisite vote of all directors  present  determined
that the  Agreement  is  advisable  and in the best  interests of Parent and its
stockholders.

     5.4 Financial  Advisor.  Parent  represents and warrants  that,  except for
Henry  Ansbacher & Co.  Limited  and any other  underwriter,  broker,  finder or
investment  banker  to be  engaged  in the  normal  course of  business  for the
offering of  Parent's  securities,  no broker,  finder or  investment  banker is
entitled  to  any  brokerage  or  finder's  fee  or  investment  banking  fee in
connection  with the Merger and the related  financing  based upon  arrangements
made by or on behalf of Parent.


                                        7

<PAGE>



     5.5 Information.  As of the date of this Agreement, Parent does not know of
any  facts  or  circumstances  which  currently  or  with  the  passage  of time
constitute a breach of the  representations  or  warranties  made by the Company
herein.  To its knowledge,  Parent has been furnished with and been given access
by the Company to considerable information about the Company and its business as
it has requested.  The Company  acknowledges that the foregoing shall not in any
way limit Parent's ability to terminate this Agreement pursuant to Section 11.4.

     5.6 Financing. Based upon preliminary discussions with its proposed sources
of  financing,  Parent has a good faith belief that it will be able to raise the
funds necessary to consummate the transactions contemplated hereby.

     5.7 Litigation.  There is no suit, action, claim, arbitration or proceeding
pending or, to the knowledge of Parent,  threatened  against  Parent  seeking to
prevent or challenge the transactions contemplated by this Agreement.  Parent is
not subject to any  judgment,  decree,  injunction,  rule or order of any court,
governmental  department,  commission,  agency,  instrumentality,  or arbitrator
outstanding  against  Parent  having,  or which would  reasonably be expected to
have,  either alone or in the aggregate,  a material  adverse effect on Parent's
ability to consummate the transactions hereby.


                                   ARTICLE VI
                  REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to Parent and Sub as follows:

     6.1  Organization  and  Qualification.  The Company is a  corporation  duly
incorporated,  validly existing and in good standing under the laws of the State
of Delaware  and has the  corporate  power to carry on its business as it is now
being  conducted.  The Company is duly qualified as a foreign  corporation to do
business,  and is in good standing,  in each jurisdiction where the character of
its properties  owned or held under lease or the nature of its activities  makes
such qualification  necessary,  except where the failure to be so qualified will
not have a  material  adverse  effect on the  business,  properties,  prospects,
assets, condition (financial or otherwise), liabilities or results of operations
of the  Company  and its  Subsidiaries  taken  as a whole (a  "Company  Material
Adverse  Effect").  Complete  and  correct  copies as of the date  hereof of the
Certificate  of  Incorporation  and  By-laws  of the  Company  and  each  of its
Subsidiaries are attached to Section 6.1 of the disclosure schedule delivered by
the Company to Parent prior to execution  and  delivery of this  Agreement  (the
"Company Disclosure Schedule").  The Certificate of Incorporation and By-laws of
the Company are in full force and effect. The Company is not in violation of any
provision of its Certificate of Incorporation or By-laws.

     6.2 Capitalization. The authorized capital stock of the Company consists of
20,000,000  shares of Company Common Stock,  $.01 par value and 1,000,000 shares
of preferred  stock,  $.01 par value (the  "Preferred  Stock").  As of March 31,
1998,  3,093,359  shares  of  Company  Common  Stock  were  validly  issued  and
outstanding, fully paid and nonassessable,


                                        8

<PAGE>



there were no shares of Preferred  Stock issued and  outstanding and (except for
issuances upon the exercise of  outstanding  options) there have been no changes
in such numbers of shares through the date hereof. As of the date hereof,  there
are no bonds,  debentures,  notes or other indebtedness having the right to vote
on  any  matters  on  which  the  Company's  shareholders  may  vote  issued  or
outstanding.  Except  as set  forth in  Section  6.2 of the  Company  Disclosure
Schedule, there are no options,  warrants, calls or other rights,  agreements or
commitments  presently  outstanding  obligating the Company to issue, deliver or
sell shares of its capital stock or debt  securities,  or obligating the Company
to grant,  extend or enter  into any such  option,  warrant,  call or other such
right,  agreement or commitment.  After the Effective  Date,  subject to Section
4.3, the Surviving  Corporation  will have no  obligation to issue,  transfer or
sell any shares of capital  stock of the  Company or the  Surviving  Corporation
pursuant to any Company Employee Benefit Plan (as defined in Section 6.8).

     6.3  Subsidiaries.  The only  Subsidiaries  of the Company are disclosed in
Section 6.3 of the Company Disclosure  Schedule.  Each Subsidiary of the Company
is a corporation duly incorporated,  validly existing and in good standing under
the laws of its  jurisdiction  of  incorporation  and has the corporate power to
carry on its  business  as it is now being  conducted.  Each  Subsidiary  of the
Company is duly  qualified as a foreign  corporation  to do business,  and is in
good standing,  in each jurisdiction where the character of its properties owned
or held under  lease or the nature of its  activities  makes such  qualification
necessary except where the failure to be so qualified,  when taken together with
all such  failures,  has not had, or would not  reasonably be expected to have a
material  adverse  effect  on  the  business,   properties,   assets,  condition
(financial  or  otherwise),   liabilities  or  results  of  operations  of  such
Subsidiary.  Section  6.3 of the  Company  Disclosure  Schedule  contains,  with
respect  to each  Subsidiary  of the  Company,  its  name  and  jurisdiction  of
incorporation and, with respect to each Subsidiary that is not wholly owned, the
number of issued  and  outstanding  shares of  capital  stock and the  number of
shares  of  capital  stock  owned  by  the  Company  or a  Subsidiary.  All  the
outstanding  shares of  capital  stock of each  Subsidiary  of the  Company  are
validly issued, fully paid and nonassessable,  and those owned by the Company or
by a Subsidiary of the Company are owned free and clear of any liens,  claims or
encumbrances.  Except  as set forth in  Section  6.3 of the  Company  Disclosure
Schedule,  there  are no  existing  options,  warrants,  calls or other  rights,
agreements or  commitments  of any character  relating to the issued or unissued
capital  stock or other  securities of any of the  Subsidiaries  of the Company.
Except as set forth in  Section  6.3 of the  Company  Disclosure  Schedule,  the
Company  does  not  directly  or  indirectly  own  any  interest  in  any  other
corporation, partnership, joint venture or other business association or entity.

     6.4  Authority  Relative to this  Agreement.  The Company has the corporate
power to enter into this Agreement and to carry out its  obligations  hereunder.
The  execution  and  delivery  of this  Agreement  and the  consummation  of the
transactions  contemplated  hereby have been duly  authorized  by the  Company's
Board of Directors. This Agreement constitutes a valid and binding obligation of
the Company  enforceable in accordance  with its terms except as enforcement may
be limited  by  bankruptcy,  insolvency  or other  similar  laws  affecting  the
enforcement of creditors'  rights  generally and except that the availability of
equitable remedies,


                                        9

<PAGE>



including specific performance, is subject to the discretion of the court before
which any  proceeding  therefor  may be brought.  Except for the approval of the
holders of a majority of the shares of Company Common Stock,  no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and the transactions  contemplated hereby. Except as set forth in Section 6.4 of
the Company  Disclosure  Schedule,  the  Company is not subject to or  obligated
under (i) any charter,  by-law,  indenture or other loan  document  provision or
(ii) any other contract, license, franchise,  permit, order, decree, concession,
lease,  instrument,  judgment,  statute,  law,  ordinance,  rule  or  regulation
applicable  to  the  Company  or any of its  Subsidiaries  or  their  respective
properties  or assets which would be breached or violated,  or under which there
would be a default (with or without notice or lapse of time, or both),  or under
which there would arise a right of  termination,  cancellation,  modification or
acceleration  of any  obligation  or the  loss  of a  material  benefit,  by its
executing and carrying out this Agreement. Except as disclosed in Section 6.4 of
the  Company  Disclosure  Schedule  or,  with  respect  to  the  Merger  or  the
transactions  contemplated  thereby, in connection,  or in compliance,  with the
provisions  of the  Securities  Act,  the  Exchange  Act,  and the  corporation,
securities or blue sky laws or regulations of the various  states,  no filing or
registration with, or authorization,  consent or approval of, any public body or
authority is necessary for the  consummation by the Company of the Merger or the
other  transactions  contemplated  hereby,  other than  filings,  registrations,
authorizations, consents or approvals the failure of which to make or obtain has
not had, or would not reasonably be expected to have, a Company Material Adverse
Effect or prevent the  consummation  of the  transactions  contemplated  hereby,
including the Merger.

     6.5 Reports and Financial Statements.

          (a) The Company has previously furnished Parent with true and complete
copies of its (i) Annual Report to Stockholders  and Annual Reports on Form 10-K
for the fiscal years ended December 31, 1995, December 31, 1996 and December 31,
1997 as filed with the Securities and Exchange  Commission  (the  "Commission"),
(ii) proxy  statements  related to all  meetings  of its  shareholders  (whether
annual or special) since January 1, 1996 and (iii) the other reports  (including
Forms 10-Q and 8-K) or  registration  statements set forth in Section 6.5 of the
Company  Disclosure  Schedule  which  have been  filed by the  Company  with the
Commission since January 1, 1995,  except for preliminary  material (in the case
of clauses (ii) and (iii) above) and except for registration  statements on Form
S-8 relating to employee  benefit  plans,  which are all the documents  that the
Company was required to file with the  Commission  since that date  (clauses (i)
through (iii) being referred to herein collectively, together with all financial
statements  (including  footnotes),  exhibits,  schedules  thereto and documents
incorporated by reference  therein,  as the "Company SEC Reports").  As of their
respective  filing  dates,  the Company  SEC Reports  complied as to form in all
material  respects with the  requirements  of the Securities Act or the Exchange
Act,  as the  case may be,  and the  rules  and  regulations  of the  Commission
thereunder applicable to such Company SEC Reports. As of their respective filing
dates,  the  Company SEC  Reports  did 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  therein,  in light of the circumstances  under
which they were made,  not  misleading.  None of the Company's  subsidiaries  is
required to file any forms, reports or other documents


                                       10

<PAGE>



with the  Commission.  The  consolidated  financial  statements  of the  Company
included in the  Company  SEC  Reports,  including  any forms,  reports or other
documents  filed  with the  Commission  by the  Company  subsequent  to the date
hereof,  (i)  comply  as to  form  in  all  material  respects  with  applicable
accounting  requirements  and with the published  rules and  regulations  of the
Commission  with respect  thereto;  (ii) have been prepared in  accordance  with
generally  accepted   accounting   principles  applied  on  a  consistent  basis
throughout the periods  presented  (except as may be indicated therein or in the
notes  thereto)  or in the  case  of  unaudited  statements,  as  permitted  for
presentation in quarterly  reports on Form 10-Q;  (iii) present  fairly,  in all
material respects, the financial position of the Company and its Subsidiaries as
at the dates thereof and the results of their  operations  and cash flow for the
periods  then  ended,  subject in the case of interim  financial  statements  to
normal year-end adjustments;  and (iv) are in all material respects, prepared in
accordance  with  the  books of  account  and  records  of the  Company  and its
Subsidiaries.

          (b) The Company has (i)  delivered to Parent true and complete  copies
of all material  correspondence  between the  Commission  and the Company or its
legal  counsel,  accountants  or other advisors since January 1, 1995 except for
cover letters  transmitting SEC reports, and (ii) disclosed to Parent in writing
the content of all material  discussions  between the Commission and the Company
or its legal counsel,  accountants or other advisors  concerning the adequacy of
form of any SEC Report  filed with the  Commission  since  January 1, 1995.  The
Company is not aware of any issues raised by the Commission  with respect to any
of the SEC Reports,  other than those disclosed to Parent pursuant to clause (i)
or (ii) of this Section 6.5(b).

     6.6 Absence of Certain Changes or Events.  Since December 31, 1997,  except
as set forth on Section 6.6 of the Company Disclosure Schedule,  the Company and
its  Subsidiaries  have  conducted  their  businesses  in the  ordinary  course,
consistent with past practice,  and since such date,  there has not been (i) any
transaction,  commitment,  dispute or other  event or  condition  (financial  or
otherwise) of any character  (whether or not in the ordinary course of business)
individually  or in the aggregate that has had, or would  reasonably be expected
to have, a Company  Material  Adverse  Effect;  (ii) any damage,  destruction or
loss, whether or not covered by insurance, which has had, or would reasonably be
expected to have, a Company  Material  Adverse Effect;  (iii) any entry into any
commitment or transaction  material to the Company and its Subsidiaries taken as
a whole (including,  without limitation, any borrowing or sale of assets) except
in the  ordinary  course of business  consistent  with past  practice;  (iv) any
declaration,  setting aside or payment of any dividend or distribution  (whether
in cash,  stock or property) with respect to its capital stock; (v) any material
change in its accounting principles,  practices or methods or revaluation of the
Company's assets;  (vi) any repurchase or redemption with respect to its capital
stock; (vii) any split,  combination or reclassification of any of the Company's
capital  stock or the  issuance or  authorization  of any  issuance of any other
securities  in  respect  of, in lieu of or in  substitution  for,  shares of the
Company's  capital  stock  except as set  forth in  Section  6.6 of the  Company
Disclosure  Schedule;  (viii) any grant of or any  amendment of the terms of any
option to purchase shares of capital stock of the Company;  (ix) any granting by
the Company or any of its  Subsidiaries to any director,  officer or employee of
the  Company or any of its  Subsidiaries  of (A) any  increase  in  compensation
(other than in the case of employees in the


                                       11

<PAGE>



ordinary  course of business  consistent with past practice) or (B) any increase
in  severance  or  termination  pay;  (x) any entry by the Company or any of its
Subsidiaries into any employment, severance, bonus or termination agreement with
any director, officer or employee of the Company or any of its Subsidiaries;  or
(xi) any agreement (whether or not in writing),  arrangement or understanding to
do any of the foregoing.

     6.7  Litigation.  Except as described in the SEC Reports and in Section 6.7
of the Company Disclosure Schedule, there is no suit, action, claim, arbitration
or proceeding  pending or, to the knowledge of the Company,  threatened  against
the Company or any of its Subsidiaries  which, either alone or in the aggregate,
has had or would  reasonably  be  expected  to have a Company  Material  Adverse
Effect or a material  adverse effect on the Company's  ability to consummate the
transactions contemplated hereby, nor is there any judgment, decree, injunction,
rule  or  order  of any  court,  governmental  department,  commission,  agency,
instrumentality  or  arbitrator  outstanding  against  the Company or any of its
Subsidiaries having, or which would reasonably be expected to have, either alone
or in the aggregate,  a Company  Material  Adverse Effect or a material  adverse
effect on the Company's  ability to  consummate  the  transactions  contemplated
hereby.

     6.8 Employee Benefit Plans.

          (a) Section 6.8 of the Company Disclosure Schedule hereto sets forth a
list of all "employee  benefit plans",  as defined in Section 3(3) of the United
States Employee  Retirement  Income Security Act of 1974, as amended  ("ERISA"),
and all other  material  employee  benefit  arrangements  or payroll  practices,
including,  without  limitation,  any such  arrangements  or  payroll  practices
providing  severance  pay, sick leave,  vacation pay,  salary  continuation  for
disability,  retirement benefits,  deferred  compensation,  bonus pay, incentive
pay,  stock  options  (including  those  held  by  Directors,   employees,   and
consultants),  hospitalization  insurance,  medical  insurance,  life insurance,
scholarships or tuition reimbursements,  that are maintained by the Company, any
Subsidiary of the Company or any Company ERISA  Affiliate (as defined  below) or
to which the  Company,  any  Subsidiary  of the  Company  or any  Company  ERISA
Affiliate is obligated to contribute thereunder for current or former employees,
independent  contractors,  consultants and leased employees of the Company,  any
Subsidiary of the Company or any Company ERISA Affiliate (the "Company  Employee
Benefit Plans").

          (b) None of the Company  Employee  Benefit  Plans is a  "multiemployer
plan", as defined in Section  4001(a)(3) of ERISA (a "Multiemployer  Plan"), and
neither the Company nor any Company ERISA Affiliate  presently  maintains such a
plan. None of the Company, any Subsidiary or Company ERISA Affiliate (subject to
the  knowledge of the Company,  in the case of any  Subsidiary  or Company ERISA
Affiliate acquired by the Company,  for periods prior to such acquisition),  has
withdrawn in a complete or partial  withdrawal from any Multiemployer  Plan, nor
has any of them  incurred  any  material  liability  due to the  termination  or
reorganization of such a Multiemployer Plan.


                                       12

<PAGE>



          (c) No Company  Benefit Plan nor the Company has incurred any material
liability or penalty under Section 4975 of the Internal Revenue Code, as amended
(the "Code") or Section 502(i) of ERISA.

          (d) Except as set forth in Section 6.8 (d) of the  Company  Disclosure
Schedule, the Company does not maintain or contribute to any plan or arrangement
which  provides or has any  liability  to provide  life  insurance or medical or
other  employee  welfare  benefits to any employee or former  employee  upon his
retirement or termination of employment,  and the Company has never represented,
promised  or  contracted  (whether in oral or written  form) to any  employee or
former employee that such benefits would be provided.

          (e) The execution of, and performance of the transactions contemplated
in, this Agreement  will not,  either alone or upon the occurrence of subsequent
events,  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.  The only
severance  agreements  or severance  policies  applicable  to the Company or its
Subsidiaries  in the  event  of a  change  of  control  of the  Company  are the
agreements and policies  specifically  referred to in Section 6.8 of the Company
Disclosure  Schedule (and, in the case of such agreements,  the form of which is
attached to the Company  Disclosure  Schedule).  Each  executive  officer of the
Company (as such term is defined in Rule 3b-7 under the  Exchange  Act) and each
of the  individuals  identified  on  Section  6.8(e) of the  Company  Disclosure
Schedule  is a party  to a  non-competition  agreement  with  the  Company  or a
Significant  Subsidiary,  as the case may be,  and  copies  of the forms of such
non-competition agreements are attached to Section 6.8 of the Company Disclosure
Schedule.

          (f) None of the Company  Employee  Benefit Plans is a "single employer
plan", as defined in Section  4001(a)(15) of ERISA,  that is subject to Title IV
of ERISA,  and neither the Company  nor any Company  ERISA  Affiliate  presently
maintains such a plan. None of the Company, any of its Subsidiaries or any ERISA
Affiliate has any material  liability under Section 4062 of ERISA to the Pension
Benefit  Guaranty  Corporation or to a trustee  appointed  under Section 4042 of
ERISA.  None of the Company,  any  Subsidiary,  or any Company  ERISA  Affiliate
(subject to the  knowledge  of the  Company,  in the case of any  Subsidiary  or
Company  ERISA  Affiliate  acquired by the  Company,  for periods  prior to such
acquisition) has engaged in any transaction described in Section 4069 of ERISA.

          (g) Each  Company  Employee  Benefit  Plan that is intended to qualify
under Section 401 of the Code, and each trust maintained  pursuant thereto,  has
been  determined to be exempt from federal income  taxation under Section 501 of
the Code by the IRS, and, to the Company's knowledge,  nothing has occurred with
respect to the operation or  organization of any such Company  Employee  Benefit
Plan and there have been no amendments to any such Company Employee Benefit Plan
that would cause the loss of such  qualification  or exemption or the imposition
of any material liability, penalty or tax under ERISA or the Code.


                                       13

<PAGE>



          (h)  All  contributions  (including  all  employer  contributions  and
employee salary reduction contributions) required to have been made under any of
the Company Employee Benefit Plans to any funds or trusts established thereunder
or in  connection  therewith  have  been  made by the due  date  thereof  and no
contributions have been made to the Company Employee Benefit Plans that would be
considered non-deductible under the Code.

          (i) There has been no  violation  of ERISA or the Code with respect to
the filing of applicable  reports,  documents and notices  regarding the Company
Employee  Benefit  Plans with the  Secretary  of Labor or the  Secretary  of the
Treasury or the  furnishing  of required  reports,  documents  or notices to the
participants or beneficiaries of the Company Employee Benefit Plans.

          (j) True, correct and complete copies of the following documents, with
respect  to each of the  Company  Benefit  Plans,  have been  delivered  or made
available  to the  Parent  by the  Company:  (i) all  plans  and  related  trust
documents  and any other  instruments  or  contracts  under  which  the  Company
Employee Benefit Plans are operated, and amendments thereto; (ii) the Forms 5500
for the past three years and (iii) summary plan descriptions.

          (k) There are no pending  actions,  claims or lawsuits which have been
asserted,  instituted or, to the Company's  knowledge,  threatened,  against the
Company Employee Benefit Plans, the assets of any of the trusts under such plans
or the plan sponsor or the plan administrator,  or, to the Company's  knowledge,
against any fiduciary of the Company  Employee Benefit Plans with respect to the
operation of such plans (other than routine benefit claims).

          (l) The Company Employee  Benefit Plans have been  maintained,  in all
material  respects,  in accordance  with their terms and with all  provisions of
ERISA  and the Code  (including  rules  and  regulations  thereunder)  and other
applicable federal and state laws and regulations.

          (m) For purposes of this Agreement,  "Company ERISA  Affiliate"  means
any  business  or  entity  which is a member  of the same  "controlled  group of
corporations,"  under "common control" or an "affiliated  service group" with an
entity  within the  meanings  of  Sections  414(b),  (c) or (m) of the Code,  or
required to be aggregated  with the entity under Section  414(o) of the Code, or
is under  "common  control"  with the  entity,  within  the  meaning  of Section
4001(a)(14) of ERISA,  or any  regulations  promulgated or proposed under any of
the foregoing Sections.

     6.9 Labor  Matters.  Neither the Company nor any of its  Subsidiaries  is a
party to, or bound by, any collective  bargaining  agreement,  contract or other
agreement or understanding with a labor union or labor organization. There is no
unfair  labor  practice  or labor  arbitration  proceeding  pending  or,  to the
knowledge of the  Company,  threatened  against the Company or its  Subsidiaries
relating to their business.  To the best knowledge of the Company,  there are no
organizational  efforts with respect to the formation of a collective bargaining
unit presently  being made or threatened  involving  employees of the Company or
any of its


                                       14

<PAGE>



Subsidiaries.  There is no labor  strike,  material  slowdown or  material  work
stoppage or lockout  actually  pending or, to the best knowledge of the Company,
threatened  against or affecting the Company or its Subsidiaries and neither the
Company nor any  Subsidiary has  experienced  any strike,  material  slowdown or
material work stoppage or lockout.

     6.10  Company  Action.  The Board of Directors of the Company (at a meeting
duly called and held) has by the  requisite  vote of all  directors  present (a)
determined  that the Merger is advisable  and fair and in the best  interests of
the Company and its shareholders, (b) approved the Merger in accordance with the
provisions  of Section 251 of the DGCL,  (c)  recommended  the  approval of this
Agreement and the Merger by the holders of the Company Common Stock and directed
that the Merger be submitted for consideration by the Company's  shareholders at
the Company Meeting.

     6.11  Compliance  with  Applicable  Laws.  The  Company  and  each  of  its
Subsidiaries  hold all  permits,  licenses,  variances,  exemptions,  orders and
approvals  of all  courts,  administrative  agencies  or  commissions  or  other
governmental  authorities  or  instrumentalities,  domestic or foreign  (each, a
"Governmental Entity"), material to and necessary to conduct the business of the
Company or such  Subsidiary,  as the case may be (the  "Company  Permits").  The
Company and its Subsidiaries are in compliance in all material respects with the
terms of the Company  Permits,  and the Company and each of its Subsidiaries are
in compliance in all material respects with all laws, ordinances and regulations
of any Governmental  Entity.  Except as disclosed in Section 6.11 of the Company
Disclosure Schedule, no investigation or review by any Governmental Entity, with
respect  to  the  Company  or  any of its  Subsidiaries  is  pending,  or to the
knowledge of the Company, threatened.

     6.12 Liabilities.  Since December 31, 1997,  neither the Company nor any of
its Subsidiaries has incurred any material liabilities or obligations (absolute,
accrued,  contingent  or otherwise) of the type that is required to be disclosed
in the  Company  SEC  Reports  (including  the  financial  statements  contained
therein),  except for (i) accounts  payable  incurred in the ordinary  course of
business not in excess of $250,000, (ii) liabilities of the same nature as those
reflected on the financial  statements to the Company SEC Reports (including the
footnotes  thereto)  incurred in the ordinary  course of business in  accordance
with past practice (iii) liabilities under or required to be incurred under this
Agreement and (iv) liabilities  under Company  Material  Contracts (as hereafter
defined).  To  the  best  knowledge  of the  Company,  as of the  date  of  this
Agreement,  there was no basis for any claim or liability of any nature  against
the  Company or its  Subsidiaries,  whether  absolute,  accrued,  contingent  or
otherwise,  which has had, or would  reasonably  be expected to have,  a Company
Material  Adverse  Effect,  other than as  reflected  in the Company SEC Reports
(including the financial statements thereto).

     6.13 Taxes.  (a) For the purposes of this  Agreement,  the term "Tax" shall
include all Federal, state, local and foreign income, profits,  franchise, gross
receipts,  payroll, sales, employment,  use, property,  withholding,  excise and
other taxes,  duties and assessments of any nature whatsoever  together with all
interest,  penalties and additions imposed with respect to such amounts. Each of
the Company and its Subsidiaries has filed all Tax returns required to be


                                       15

<PAGE>



filed by any of them and has paid (or the  Company has paid on its  behalf),  or
has set up an adequate reserve for the payment of, all Taxes required to be paid
in respect of the periods covered by such returns. The information  contained in
such Tax returns is true and  complete  in all  material  respects.  Neither the
Company nor any  Subsidiary  of the Company is  delinquent in the payment of any
Tax, assessment or governmental  charge.  Except as disclosed in Section 6.13 of
the  Company  Disclosure  Schedule,  no  deficiencies  for any  taxes  have been
proposed,  asserted or assessed  against the Company or any of its  Subsidiaries
that have not been finally  settled or paid in full, and no requests for waivers
of the time to assess any such Tax are pending.

     6.14 Certain Agreements. Except as set forth on Section 6.14 of the Company
Disclosure  Schedule,  neither the Company nor any of its Subsidiaries,  nor, to
the best knowledge of the Company,  any other party thereto,  is in breach of or
default  under any  material  agreement,  contract  or  commitment  to which the
Company  or any of its  Subsidiaries  is a  party  (each,  a  "Company  Material
Contract"),  nor has the Company or any Subsidiary received in writing any claim
or  threat  of such  breach  or  default,  in any case in such a manner as would
permit any other party to cancel or terminate the same or would permit any other
party to collect  material  damages from the Company or any of its  Subsidiaries
thereunder.  All of the Company Material Contracts are in full force and effect.
True and complete copies of the Company Material Contracts have been provided to
Parent  by the  Company.  Except  as set forth on  Section  6.14 of the  Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is party to
any  agreement  containing  any  provision or covenant  limiting in any material
respect the ability of the Company or any Subsidiary to (i) sell any products or
services  of any other  person,  (ii) engage in any line of  business,  or (iii)
compete with or to obtain  products or services  from any person or limiting the
ability of any person to provide  products  or  services  to the  Company or any
Subsidiary.

     6.15 Patents, Trademarks, Etc.

          (a) The Company and its  Subsidiaries own or are licensed or otherwise
possess legally enforceable rights to use all patents,  trademarks, trade names,
service marks, trade secrets,  copyrights and licenses, all applications for and
registrations of such patents,  trademarks,  trade names,  service marks,  trade
secrets,  copyrights  and  licenses,  and  all  processes,   formulae,  methods,
schematics, technology, know-how, tangible or intangible proprietary information
or material  that are  necessary  to conduct the business of the Company and its
Subsidiaries as currently conducted (the "Intellectual Property Rights");

          (b) Neither the Company nor any of its Subsidiaries is or will be as a
result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license,  sublicense or other
agreement  relating  to  the  Intellectual   Property  Rights  or  any  license,
sublicense  or other  agreement  pursuant  to which  the  Company  or any of its
Subsidiaries  is  authorized  to use any  third  party  patents,  trademarks  or
copyrights,  in the  manufacture  of,  incorporated  in,  or  form a part of any
product of the Company or any of its Subsidiaries.


                                       16

<PAGE>



          (c) To the Company's knowledge,  all patents,  registered  trademarks,
service  marks and  copyrights  held by the  Company or any of its  Subsidiaries
which  the  Company  considers  to be  material  to its  business  are valid and
enforceable  and except as set forth on Section  6.15 of the Company  Disclosure
Schedule,  neither the Company nor any of its  Subsidiaries (i) has been sued in
any suit,  action or proceeding  which involves a claim of  infringement  of any
patent,  trademark,  service or mark or copyright or the  violation of any trade
secret or other  proprietary right of any third party; or (ii) has any knowledge
that the manufacturing, importation, marketing, licensing, sale, offer for sale,
or use of any of its products  infringes  any patent,  trademark,  service mark,
copyright, trade secret or other proprietary right of any third party.

     6.16 No Material Adverse Effect.  Except as otherwise  disclosed herein, in
the Company SEC Reports,  in the Company Disclosure  Schedule or Section 6.16 of
the  Company  Disclosure  Schedule,  the Company is not aware of any fact which,
alone or together  with  another  fact,  which has had, or would  reasonably  be
expected to have, a Company Material Adverse Effect.

     6.17 Products Liability.

          (a) There is no notice, demand, claim, action, suit, inquiry, hearing,
proceeding,  notice  of  violation  or  investigation  of a civil,  criminal  or
administrative  nature before any court or governmental  or other  regulatory or
administrative agency, commission or authority against or involving any product,
substance or material  (collectively,  "Product") or class of claims or lawsuits
involving the same or similar  Product  produced,  distributed  or sold by or on
behalf  of the  Company  which is  pending  or,  to the  knowledge  of  Company,
threatened,  resulting from an alleged defect in design, manufacture,  materials
or workmanship of any Product  produced,  distributed or sold by or on behalf of
the  Company,  or any  alleged  failure  to warn,  or from any breach of implied
warranties or representations, and there has not been any Occurrence (as defined
below)  that  is  material  to  the  business  of  the  Company  or  any  of its
subsidiaries taken as a whole;

          (b) For purposes of this Section  6.17,  the term  "Occurrence"  shall
mean any  accident,  happening or event which was caused or allegedly  caused by
any  alleged  hazard or alleged  defect in  manufacture,  design,  materials  or
workmanship  including,  without limitation,  any alleged failure to warn or any
breach of express or implied warranties or  representations  with respect to, or
any such accident,  happening or event otherwise involving, a Product (including
any parts or components)  manufactured,  produced,  distributed or sold by or on
behalf of the Company which is likely to result in a claim or loss.

     6.18 Environmental Matters.

          (a) The operations of the Company and its Subsidiaries are, and in the
past have been, in compliance in all material respects with all applicable laws,
regulations and other requirements of governmental or regulatory  authorities or
duties under the common law


                                       17

<PAGE>



relating  to  toxic  or  hazardous  substances,  wastes,  pollution  or  to  the
protection  of  human  health,   safety,   or  the  environment   (collectively,
"Environmental  Laws") and have  obtained and  maintained in effect all material
licenses,  permits  and  other  authorizations  or  registrations  (collectively
"Environmental  Permits")  required under all Environmental Laws and are, and in
the past have been, in  compliance  with all such  Environmental  Permits in all
material respects.

          (b) Neither the Company nor any  Subsidiary  has performed or suffered
any act which would  reasonably  be  expected to give rise to, or has  otherwise
incurred,  liability  to any  person  (governmental  or other)  under the United
States  Comprehensive  Environmental  Response,  Compensation  and Liability Act
("CERCLA"),  or any other Environmental Laws, as amended, nor has the Company or
any  Subsidiary  received  written  notice  of any such  liability  or any claim
therefor  or  submitted  notice  pursuant  to  Section  103  of  CERCLA  to  any
governmental agency with respect to any of its assets.

          (c) No hazardous substance, hazardous waste, contaminant, pollutant or
toxic substance (as such terms are defined in any applicable  Environmental  Law
and collectively referred to herein as "Hazardous Materials") has been released,
placed or dumped by the Company or any of its  Subsidiaries  or by action of any
of them  otherwise  come to be located on, at, beneath or near any of the assets
or properties  owned or leased by the Company or any of its  Subsidiaries or any
surface waters or groundwaters thereon or thereunder.

          (d) Neither the Company nor any of its Subsidiaries  owns or operates,
and has never  owned or  operated,  aboveground  or  underground  storage  tanks
containing a regulated  substance,  as such term is defined in  Subchapter IX of
the Resource  Conservation  and  Recovery  Act, 42 U.S.C.  ss. 6991 et seq.,  as
amended, or a surface impoundment,  lagoon,  landfill, PCB containing electrical
equipment or asbestos containing materials.

          (e) With respect to any or all of the real properties  owned or leased
by the Company or any of its  Subsidiaries to the knowledge of the Company,  (i)
there are no, nor have there  been in the past,  asbestos-containing  materials,
urea  formaldehyde  insulation,  polychlorinated  biphenyls or lead-based paints
present at any such properties; and (ii) there are no wetlands (as defined under
any  Environmental  Law)  located  on any  such  properties,  nor  have any been
drained, filled or otherwise altered.

          (f) None of the real properties  owned or leased by the Company or any
of its  Subsidiaries  (i) has  been  used  or is now  used  for the  generation,
transportation,  storage,  handling,  treatment  or  disposal  of any  Hazardous
Materials in violation of applicable Environmental Laws or (ii) is identified on
a federal,  state or local  listing  of sites  which  require  or might  require
environmental cleanup.

          (g) There are no ongoing  investigations  or negotiations,  pending or
threatened,  or administrative,  judicial or regulatory proceedings,  or consent
decrees or other  agreements in effect that relate to  environmental  conditions
in, on, under, about or related to the


                                       18

<PAGE>



Company  or  any of  its  Subsidiaries,  any of  their  operations  or the  real
properties owned or leased by them.

          (h)  Neither the  Company  nor any of its  Subsidiaries  is subject to
reporting  requirements  under the  federal  Emergency  Planning  and  Community
Right-to-Know  Act, 42 U.S.C.  ss. 11001 et seq., or analogous state statues and
related regulations, all as amended.

          (i) Notwithstanding the foregoing, the Company makes no representation
or warranty  with respect to any  buildings in which the Company  leases  office
space,  the common areas of such  buildings,  the land upon which such buildings
are situated,  or the premises in such buildings  leased by the Company  (except
with respect to the Company's personal property located therein).

     6.19 Title to Property.

          (a)  Except as set forth in  Section  6.19 of the  Company  Disclosure
Schedule,  the Company and its Subsidiaries  have good and marketable  title, or
valid leasehold rights in the case of leased property,  to all real property and
all personal property purported to be owned or leased by them, free and clear of
all  material  liens,  security  interests,  claims,  encumbrances  and charges,
excluding (i) liens for fees,  taxes,  levies,  imposts,  duties or governmental
charges of any kind which are not yet delinquent or are being  contested in good
faith by  appropriate  proceedings  which suspend the collection  thereof,  (ii)
liens for mechanics, materialmen,  laborers, employees, suppliers or other liens
arising by operation of law for sums which are not yet  delinquent  or are being
contested in good faith by appropriate  proceedings,  (iii) liens created in the
ordinary  course of business in  connection  with the  leasing or  financing  of
office,  computer and related equipment and supplies, (iv) easements and similar
encumbrances   ordinarily  created  for  fuller  utilization  and  enjoyment  of
property,  and (v) liens or defects in title or leasehold  rights  that,  in the
aggregate, do not and will not have a Company Material Adverse Effect;

          (b)  Consummation  of the  Merger  will not result in any breach of or
constitute  a default  (or an event with  which  notice or lapse of time or both
would  constitute a default)  under, or give to others any rights of termination
or cancellation  of, or require the consent of others under,  any lease in which
the Company or its Subsidiaries is a lessee.

     6.20  Absence Of Certain  Business  Practices.  During the past five years,
none of the  Company's  officers,  employees  or,  to the  Company's  knowledge,
agents,  nor, to the Company's  knowledge,  any other person acting on behalf of
any of them or the Company, has, directly or indirectly, given or agreed to give
any improper  gift or similar  benefit to any customer,  supplier,  governmental
employee or other person.

     6.21 Financial Advisor.  Except for the financial advisor that will deliver
the Fairness Opinion (as defined in Section 9.11 hereof),  no broker,  finder or
investment banker is


                                       19

<PAGE>



entitled  to  any  brokerage  or  finder's  fee  or  investment  banking  fee in
connection with the Merger based upon  arrangements  made by or on behalf of the
Company.


                                   ARTICLE VII
                  REPRESENTATIONS AND WARRANTIES REGARDING SUB

Parent and Sub jointly  and  severally  represent  and warrant to the Company as
follows:

     7.1 Organization. Sub is a corporation duly incorporated,  validly existing
and in good  standing  under  the  laws of the  State of  Delaware.  Sub has not
engaged in any business since it was incorporated  other than in connection with
its organization and the transactions contemplated by this Agreement.

     7.2  Capitalization.  The authorized capital stock of Sub consists of 1,000
shares of  Common  Stock,  par value  $.01 per  share,  100  shares of which are
validly  issued  and  outstanding,  fully paid and  nonassessable  and are owned
directly  or  indirectly  by Parent  free and  clear of all  liens,  claims  and
encumbrances.

     7.3 Authority  Relative to this  Agreement.  Sub has the corporate power to
enter  into this  Agreement  and to carry  out its  obligations  hereunder.  The
execution  and  delivery  of  this  Agreement  and  the   consummation   of  the
transactions  contemplated  hereby  have  been duly  authorized  by its Board of
Directors and sole shareholder,  and no other corporate  proceedings on the part
of  Sub  are  necessary  to  authorize  this  Agreement  and  the   transactions
contemplated  hereby.  Except as  referred  to herein  or in  connection,  or in
compliance,  with the provisions of the Securities Act, the Exchange Act and the
environmental,  corporation,  securities or blue sky laws or  regulations of the
various states,  no filing or registration  with, or  authorization,  consent or
approval of, any public body or authority is necessary for the  consummation  by
Sub of the Merger or the transactions contemplated by this Agreement, other than
filings,  registrations,  authorizations,  consents or approvals  the failure to
make  or  obtain  would  not  prevent  the   consummation  of  the  transactions
contemplated hereby.


                                  ARTICLE VIII
                     CONDUCT OF BUSINESS PENDING THE MERGER

     8.1 Conduct of Business  by the  Company  Pending the Merger.  Prior to the
Effective Date, unless Parent shall otherwise agree in writing:

          (i) The Company shall,  and shall 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 shall,  and shall
cause its Subsidiaries to, use their commercially reasonable efforts to preserve
intact their present  business  organizations  and preserve their  relationships
with customers, suppliers and others having business dealings with


                                       20

<PAGE>



them to the end that their goodwill and on going  businesses shall be unimpaired
at the Effective Date. The Company shall,  and shall cause its  Subsidiaries to,
(a)  maintain  insurance  coverages  and its books,  accounts and records in the
usual  manner  consistent  with  prior  practices;  (b)  comply in all  material
respects with all laws,  ordinances  and  regulations of  Governmental  Entities
applicable  to the Company and its  subsidiaries;  and (c) maintain and keep its
properties  and  equipment  in good  repair,  working  order  and  condition  in
accordance with past practice,  ordinary wear and tear excepted; and (d) perform
in all  material  respects its  obligations  under all  material  contracts  and
commitments to which it is a party or by which it is bound;

          (ii) The Company shall not and shall not propose to (A) sell or pledge
or  agree  to  sell  or  pledge  any  capital  stock  owned  by it in any of its
Subsidiaries  (subject  to the  fiduciary  duties  of  the  Company's  Board  of
Directors),  (B) amend its Certificate of Incorporation  or By-laws,  (C) split,
combine or  reclassify  its  outstanding  capital stock or issue or authorize or
propose  the  issuance of any other  securities  in respect of, in lieu of or in
substitution for shares of capital stock of the Company,  or declare,  set aside
or pay any dividend or other distribution payable in cash, stock or property, or
(D) directly or  indirectly  redeem,  purchase or otherwise  acquire or agree to
redeem, purchase or otherwise acquire any shares of Company capital stock;

          (iii)  Subject  to the  fiduciary  duties  of the  Company's  Board of
Directors,  the Company  shall not, nor shall it permit any of its  Subsidiaries
to, without the consent of Parent which shall not be  unreasonably  withheld (A)
issue,  deliver or sell or agree to issue, deliver or sell any additional shares
of, or rights of any kind to acquire  any shares  of, its  capital  stock of any
class,  any  indebtedness  having  the  right  to vote on  which  the  Company's
shareholders  may  vote  or any  option,  rights  or  warrants  to  acquire,  or
securities  convertible  into,  shares of capital stock other than  issuances of
Company Common Stock pursuant to employment  agreements as in effect on the date
hereof, the exercise of stock options  outstanding on the date hereof or granted
prior to the Effective Date under automatic grants under the Company's  Employee
Stock Option Plan; (B) acquire,  lease or dispose or agree to acquire,  lease or
dispose of any capital  assets or any other  assets  other than in the  ordinary
course  of  business  consistent  with  past  practice;   (C)  incur  additional
indebtedness or encumber or grant a security interest in any asset or enter into
any other material transaction other than in each case in the ordinary course of
business  consistent  with past  practice;  (D)  acquire  or agree to acquire by
merging or  consolidating  with, or by purchasing a substantial  equity interest
in,  or by any other  manner,  any  business  or any  corporation,  partnership,
association or other business  organization  or division  thereof;  or (E) enter
into any contract,  agreement,  commitment or arrangement with respect to any of
the foregoing;

          (iv)  The  Company   shall  not,  nor  shall  it  permit  any  of  its
Subsidiaries  to, except as required to comply with  applicable  law, enter into
any new (or amend any  existing)  Company  Benefit Plan or any new (or amend any
existing)  employment,  severance  or  consulting  agreement,  grant any general
increase in the compensation of directors,  officers or employees (including any
such increase  pursuant to any bonus,  pension,  profit-sharing or other plan or
commitment)  or grant any  increase  in the  compensation  payable  or to become
payable to


                                       21

<PAGE>



any  director,  officer or  employee,  except in any of the  foregoing  cases in
accordance with pre-existing contractual provisions or in the ordinary course of
business consistent with past practice; and

          (v) The Company shall not, nor shall it permit any of its Subsidiaries
to, make any investments in non-investment grade securities


                                   ARTICLE IX
                              ADDITIONAL AGREEMENTS

     9.1 Access and Information.  The Company and its Subsidiaries  shall afford
Parent  and  to  its  accountants,  counsel  and  other  representatives,   upon
reasonable  advance notice,  reasonable access during normal business hours (and
at such other times as the parties may  mutually  agree)  throughout  the period
prior  to the  Effective  Date to all of  their  properties,  books,  contracts,
commitments,  records and personnel and,  during such period,  the Company shall
furnish  promptly to the Parent (i) a copy of each  report,  schedule  and other
document  filed  or  received  by  it  or  its  Subsidiaries   pursuant  to  the
requirements of federal or state securities laws, and (ii) all other information
concerning the Company's or its Subsidiaries' business, properties and personnel
as the Parent may request.  Each of the Company and Parent shall hold, and shall
cause their respective  Affiliates,  employees and agents to hold, in confidence
all  information  provided  to the  other  pursuant  to  the  terms  hereof,  in
connection with the transactions  contemplated hereby or otherwise provided on a
confidential basis.

     9.2 Proxy  Statement.  Parent and the Company shall  cooperate and promptly
prepare,  and the Company shall file with the Commission as soon as practicable,
a proxy statement with respect to the Company  Meeting (the "Proxy  Statement"),
which  shall  comply as to form in all  material  respects  with the  applicable
provisions  of the Exchange Act and the rules and  regulations  thereunder.  The
Company shall use all  reasonable  efforts,  and Parent will  cooperate with the
Company,  to have the Proxy  Statement  cleared by the Commission as promptly as
practicable.  The Company shall, as promptly as  practicable,  provide copies of
any written  comments  received  from the  Commission  with respect to the Proxy
Statement to Parent and advise  Parent of any oral  comments with respect to the
Proxy  Statement  received from the  Commission.  Parent agrees that none of the
information  supplied or to be supplied by Parent for inclusion or incorporation
by reference in the Proxy Statement and each amendment or supplement thereto, at
the time of mailing thereof and at the time of the Company Meeting, will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated  therein or necessary to make the statements  therein,  in light of
the circumstances under which they were made, not misleading. The Company agrees
that none of the  information  supplied  or to be  supplied  by the  Company for
inclusion  or  incorporation  by  reference  in the  Proxy  Statement  and  each
amendment or supplement  thereto, at the time of mailing thereof and at the time
of the Company  Meeting,  will contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the  statements  therein,  in light of the  circumstances  under which they were
made, not misleading. For purposes of the


                                       22

<PAGE>



foregoing, it is understood and agreed that information concerning or related to
Parent will be deemed to have been supplied by Parent and information concerning
or related to the Company and the Company  Meeting  shall be deemed to have been
supplied by the  Company.  The Company  will  provide  Parent with a  reasonable
opportunity to review any amendment or supplement to the Proxy  Statement  prior
to filing such with the  Commission,  and will provide Parent with a copy of all
such filings made with the  Commission.  No amendment or supplement to the Proxy
Statement shall be made without the approval of Parent, which approval shall not
be unreasonably withheld or delayed.

     9.3  Employee  Matters.  As of the  Effective  Date,  the  employees of the
Company  and each  Subsidiary  shall  continue  employment  with  the  Surviving
Corporation and the Subsidiaries, respectively, in the same positions and at the
same level of wages and/or salary and without  having  incurred a termination of
employment  or  separation  from service;  provided,  however,  except as may be
specifically  required  by  applicable  law  or  any  contract,   the  Surviving
Corporation  and  the  Subsidiaries  shall  not be  obligated  to  continue  any
employment  relationship  with any  employee  for any  specific  period of time.
Except as otherwise  provided by Section 4.3 hereof,  as of the Effective  Date,
the Surviving  Corporation  shall be the sponsor of the Company Employee Benefit
Plans  sponsored by the Company  immediately  prior to the Effective  Date,  and
Parent shall cause the Surviving Corporation and the Subsidiaries to satisfy all
obligations and liabilities  under such Company  Employee  Benefit Plans. To the
extent  any  employee  benefit  plan,  program  or policy  of the  Parent or its
affiliates is made  available to the employees of the Surviving  Corporation  or
its  Subsidiaries:  (i) service  with the Company  and the  Subsidiaries  by any
employee  prior to the  Effective  Date shall be credited  for  eligibility  and
vesting purposes under such plan, program or policy, but not for benefit accrual
purposes,  and (ii) with  respect  to any  welfare  benefit  plans to which such
employees may become  eligible,  Parent shall cause such plans to provide credit
for any co-payments or deductibles by such employees and waive all  pre-existing
condition  exclusions  and waiting  periods,  other than  limitations or waiting
periods that have not been satisfied  under any welfare plans  maintained by the
Company and the Subsidiaries for their employees prior to the Effective Date.

     9.4 Indemnification.

          (a) The Company shall indemnify,  defend and hold harmless,  and after
the Effective Date, the Surviving  Corporation shall indemnify,  defend and hold
harmless  the  officers,   directors  and  employees  of  the  Company  and  its
subsidiaries  who  were  such at any  time  prior  to the  Effective  Date  (the
"Indemnified Parties") from and against all losses, expenses, claims, damages or
liabilities  ("Losses")  arising out of the  transactions  contemplated  by this
Agreement occurring before the Effective Date to the fullest extent permitted or
required under applicable law,  including without  limitation the advancement of
expenses;  provided,  however,  that such indemnification shall not be available
with  respect to Losses  arising out of the failure of the Company to obtain the
Fairness Opinion.  Parent agrees that all rights to indemnification  existing in
favor of the directors,  officers or employees of the Company as provided in the
Company's  Certificate of Incorporation or By-Laws,  as in effect as of the date
hereof,  with respect to matters  occurring  through the Effective  Date,  shall
survive the Merger and shall


                                       23

<PAGE>



continue in full force and effect for a period of not less than three years from
the Effective Date. Parent agrees to cause the Surviving Corporation to maintain
in effect for not less than three  years  after the  Effective  Date the current
policies of  directors'  and  officers'  liability  insurance  maintained by the
Company with respect to matters  occurring  on or prior to the  Effective  Date;
provided,  however,  that the  Surviving  Corporation  may  substitute  therefor
policies  of at  least  the  same  coverage  (with  carriers  comparable  to the
Company's existing  carriers)  containing terms and conditions which are no less
advantageous to the Indemnified Parties;  provided,  further,  that Parent shall
not be required in order to maintain or procure  such  coverage to pay an annual
premium in excess of 150% of the current  annual premium paid by the Company for
its existing  coverage (the "Cap");  and provided,  further,  that if equivalent
coverage cannot be obtained, or can be obtained only by paying an annual premium
in excess of the Cap,  Parent shall only be required to obtain as much  coverage
as can be obtained by paying an annual premium equal to the Cap.

          (b) In the event that any action,  suit,  proceeding or  investigation
relating  hereto  or to the  transactions  contemplated  by  this  Agreement  is
commenced  by a person or entity who or which is not a party to this  Agreement,
whether  before  or after  the  Effective  Date,  the  parties  hereto  agree to
cooperate  and use their  respective  reasonable  efforts to defend  against and
respond thereto.


     9.5 Additional Agreements.

          (a) Subject to the terms and conditions  herein provided,  each of the
parties  hereto  agrees to use all  reasonable  efforts to take,  or cause to be
taken, all actions and to do, or cause to be done, all things necessary,  proper
or advisable  under  applicable  laws and  regulations  to  consummate  and make
effective the transactions  contemplated by this Agreement,  including using all
reasonable  efforts to obtain all necessary  waivers,  consents and approvals as
may be necessary or advisable to consummate the merger,  to effect all necessary
registrations  and filings  (including,  but not limited  to,  filings  with all
applicable Governmental Entities) and to lift any injunction to the Merger (and,
in such case, to proceed with the Merger as expeditiously as possible).

          (b) In case at any time after the Effective Date any further action is
necessary or desirable to carry out the purposes of this  Agreement,  the proper
officers and/or directors of Parent,  the Company and the Surviving  Corporation
shall take all such commercially reasonable and necessary action.

     9.6 Alternative Proposals.  Prior to the Effective Date, the Company agrees
(a) that neither it nor any of its  Subsidiaries  shall, and it shall direct and
use its best  efforts  to cause it and its  Subsidiaries'  officers,  directors,
employees,  agents  and  representatives  (including,  without  limitation,  any
investment banker, attorney or accountant retained by it or


                                       24

<PAGE>



any of its  Subsidiaries)  not to, initiate,  solicit or encourage,  directly or
indirectly,  any  inquiries or the making or  implementation  of any proposal or
offer (including, without limitation, any proposal or offer to its stockholders)
with  respect to a merger,  acquisition,  consolidation  or similar  transaction
involving,  or any  purchase  of all or  substantially  all of the assets or any
equity  securities of, the Company or any of its Subsidiaries (any such proposal
or offer being hereinafter  referred to as an "Alternative  Proposal") or engage
in any negotiations concerning,  or provide any confidential information or data
to,  or have  any  discussions  with,  any  person  relating  to an  Alternative
Proposal,  or release any third party from any  obligations  under any  existing
standstill  agreement or arrangement  relating to any Alternative  Proposal,  or
otherwise  facilitate  any effort or attempt to make or implement an Alternative
Proposal;  (b) that it will  immediately  cease and cause to be  terminated  any
existing  activities,  discussions or  negotiations  with any parties  conducted
heretofore with respect to any of the foregoing,  and it will take the necessary
steps to inform the individuals or entities referred to above of the obligations
undertaken in this Section 9.6; and (c) that it will notify  Parent  immediately
if any such  inquiries or proposals  are  received by, any such  information  is
requested  from,  or any such  negotiations  or  discussions  are  sought  to be
initiated or continued with, it or any of its Subsidiaries:  provided,  however,
that nothing contained in this Section 9.6 shall prohibit the Board of Directors
of the Company from (i) furnishing  information to or entering into  discussions
or negotiations  with, any person or entity that makes an unsolicited  bona fide
proposal  to acquire  the Company  pursuant  to a merger,  consolidation,  share
exchange,  purchase of a substantial portion of assets,  business combination or
other  similar  transaction,  if, and only to the extent that,  (A) the Board of
Directors of the Company  determines in good faith (after  consultation with and
based on advice of its outside  legal  counsel) that such action is required for
the Board of  Directors  to comply  with its  fiduciary  duties to  stockholders
imposed by law, (B) prior to furnishing  such  information  to, or entering into
discussions  or  negotiations  with,  such  person or  entity,  (i) the  Company
provides  written  notice  to  Parent  to  the  effect  that  it  is  furnishing
information to, or entering into  discussions or negotiations  with, such person
or  entity  and (ii) the  Company  and  such  person  or  entity  enter  into an
appropriate confidentiality agreement with respect to information to be supplied
by the Company and (C) the Company keeps Parent promptly  informed of the status
and all material  terms and conditions of any such  discussions or  negotiations
(including  identities  of parties)  and, if any such  proposal or inquiry is in
writing,  furnishes  a copy of such  proposal  or  inquiry  to Parent as soon as
practicable  after  the  receipt  thereof;  and (ii) to the  extent  applicable,
complying with Rule 14e-2  promulgated  under the Exchange Act with regard to an
Alternative  Proposal.  Nothing in this Section 9.6 shall (x) permit the Company
to  terminate  this  Agreement  (except as  specifically  provided in Article XI
hereof),  (y) permit the Company to enter into any agreement  with respect to an
Alternative  Proposal  during the term of this  Agreement  (it being agreed that
during  the  term of this  Agreement,  the  Company  shall  not  enter  into any
agreement  with any person  that  provides  for, or in any way  facilitates,  an
Alternative  Proposal  (other  than a  confidentiality  agreement  in  customary
form)), or (z) affect any other obligation of the Company under this Agreement.

     9.7 Advice of Changes;  SEC Filings.  The Company shall confer on a regular
basis with Parent on  operational  matters.  The Company shall  promptly  advise
Parent  orally and in  writing  of any  change or event  that has had,  or could
reasonably be expected to have, a


                                       25

<PAGE>



Company  Material  Adverse Effect.  The Company shall promptly provide to Parent
(and its counsel)  copies of all filings made by such party with the  Commission
or any  other  state or  federal  Governmental  Entity in  connection  with this
Agreement and the transactions contemplated hereby.

     9.8  Restructuring  of Merger.  Upon the mutual agreement of Parent and the
Company,  the Merger shall be restructured  in the form of a forward  subsidiary
merger of the Company into Sub, with Sub being the surviving corporation,  or as
a  merger  of  the  Company  into  Parent,   with  Parent  being  the  surviving
corporation.  In such  event,  this  Agreement  shall  be  deemed  appropriately
modified to reflect such form of merger.

     9.9 Cancellation of Warrants;  Repayment of Loans from  Affiliates.  On the
Effective  Date,  and  without any  further  action by the  holders  thereof (a)
warrants to purchase  400,000  shares of Company  Common  Stock held by Mr. John
Robinson and warrants to purchase  50,000 shares of Company Common Stock held by
Mr. Peter Lordi shall be canceled and the holders thereof shall  thereafter have
the right to payment in cash equal to $400,000  and  $50,000,  respectively,  in
exchange  therefor,  which payment  shall be made by the  Surviving  Corporation
promptly  after the  Effective  Date and (b) the loans by Mr.  Robinson  and Mr.
Robert L. Priddy to the Company in the original  principal amounts of $1,700,000
and $500,000,  respectively,  shall be converted  into the right to (i) the cash
payment to Mr.  Robinson of $1,200,000  plus all accrued and unpaid  interest on
his loan and the issuance to Mr. Robinson by Parent of Parent  ordinary  shares,
par  value 1p per  share,  having a value  equal to  $500,000  and (ii) the cash
payment to Mr.  Priddy of all  accrued  and unpaid  interest on his loan and the
issuance to Mr. Priddy by Parent of Parent  ordinary shares having a value equal
to $500,000,  which  payments and  issuances  shall be made  promptly  after the
Effective  Date and (c) the 300,000  options  outstanding to Mr. Priddy shall be
canceled  at  Closing.  For  purposes  of  determining  the value of the  Parent
ordinary shares  hereunder,  each Parent ordinary share shall have a value equal
to the average of the middle market closing price for the Parent ordinary shares
on the Alternative  Investment Market of the London Stock Exchange,  as shown in
"The London Stock  Exchange Daily Official List" on each of the ten trading days
ending two days  prior to the  Effective  Date.  Prior to the  issuance  of such
Parent ordinary shares,  each of Messrs.  Robinson and Priddy shall enter into a
subscription with Parent in form reasonably  satisfactory to Parent,  which will
provide,  among  other  things,  that the  Parent  ordinary  shares to be issued
hereunder  may not be sold,  assigned,  pledged or otherwise  transferred  for a
period of six months from the date of issuance.

     9.10  Agreement  of  Principal  Stockholders.  Each of  Messrs.  Priddy and
Robinson and Mr. John Holmes (collectively, the "Stockholders") agrees that from
and after the date hereof until  August 31,  1998,  or such earlier date as this
Agreement shall be terminated (a) he shall not pledge,  hypothecate or otherwise
transfer his shares of Company  Common Stock in any manner and (b) he shall vote
all of his shares of Company  Common  Stock in favor of the Merger (and  against
any  Alternative  Proposal).  Nothing  contained  in this  Section 9.10 shall be
construed to prevent any of the Stockholders, when acting in their capacities as
directors of the Company, from exercising their fiduciary duties as directors in
accordance with applicable law.


                                       26

<PAGE>



     9.11 Fairness  Opinion.  The Company shall use its commercially  reasonable
efforts to engage an investment  bank  reasonably  acceptable to Parent promptly
after the date of this Agreement for the purpose of delivering a written opinion
to the effect that, as of the date of this Agreement,  the Merger  Consideration
is fair to the holders of Company  Common  Stock from a financial  point of view
(the  "Fairness  Opinion").  The Company  shall engage such  investment  bank to
deliver the Fairness  Opinion  within three weeks of the date of this  Agreement
(the  "Fairness  Opinion  Period").  The fees  and  commissions  payable  to the
Company's financial advisor in connection with its services to the Company shall
be reasonably acceptable to Parent. The Company take all commercially reasonable
steps to  facilitate  the  delivery  of the  Fairness  Opinion and shall use its
commercially reasonable efforts to cooperate with the investment bank and supply
all  information  reasonably  requested  on a timely  basis.  Any failure by the
Company's  investment bank to deliver the Fairness  Opinion for any reason other
than the adequacy of the value of the Merger Consideration shall be deemed to be
a breach of this covenant by the Company.



                                    ARTICLE X
                              CONDITIONS PRECEDENT

     10.1  Conditions  to Each  Party's  Obligation  to Effect the  Merger.  The
respective  obligations  of each party to effect the Merger  shall be subject to
the fulfillment at or prior to the Effective Date of the following conditions:

          (a) This Agreement and the Merger shall have been approved and adopted
by the requisite vote of the holders of the Company Common Stock.

          (b) No  preliminary  or  permanent  injunction  or other  order by any
federal or state  court in the United  States of  competent  jurisdiction  which
prevents  the  consummation  of the Merger  shall have been issued and remain in
effect  (each  party  agreeing  to use its  reasonable  efforts to have any such
injunction lifted).

     10.2  Conditions  to  Obligation  of the Company to Effect the Merger.  The
obligation  of the  Company  to  effect  the  Merger  shall  be  subject  to the
fulfillment  at or  prior to the  Effective  Date of the  following  conditions,
unless waived by the Company:

          (a) The Parent and Sub shall have  performed in all material  respects
their  agreements  contained  in this  Agreement  required to be performed on or
prior to the Effective  Date, and the  representations  and warranties of Parent
and Sub contained in this Agreement shall be true in all material  respects when
made  and on and as of the  Effective  Date as if  made  on and as of such  date
(except to the extent they relate to a  particular  date),  except as  expressly
contemplated or permitted by this Agreement, and the Company shall have received
a certificate of the President or Chief Executive Officer or a Vice President of
Parent and Sub to that effect.


                                       27

<PAGE>



          (b) Parent and Sub shall have  furnished  the Company with a certified
copy of the  resolutions  adopted by their  respective  directors  approving the
terms, execution and delivery of this Agreement, the Merger contemplated hereby,
and Parent's and Sub's  performance  hereunder,  together with a certificate  of
incumbency  of Parent  and Sub,  executed  by their  respective  President  or a
Vice-President,  and Secretary, which lists the officers and specimen signatures
of the officers who have  executed this  Agreement  and all other  documents and
instruments contemplated by this Agreement on behalf of Parent and Sub.

          (c) The Company  shall have  received an opinion of Parent's and Sub's
legal  counsel,  dated as of the  Closing  Date,  as to the matters set forth on
Exhibit 10.2(c) attached hereto, addressed to the Company.

     10.3 Conditions to Obligations of Parent and Sub to Effect the Merger.  The
obligations  of Parent  and Sub to effect  the  Merger  shall be  subject to the
fulfillment  at or  prior  to the  Effective  Date of the  additional  following
conditions, unless waived by Parent:

          (a) The Company  shall have  performed  in all  material  respects its
agreements  contained in this Agreement  required to be performed on or prior to
the  Effective  Date,  and the  representations  and  warranties  of the Company
contained  in this  Agreement  shall  be  true  when  made  and on and as of the
Effective  Date as if made on and as of such date  (except  to the  extent  they
relate to a particular date),  except as expressly  contemplated or permitted by
this  Agreement,  and Parent and Sub shall have  received a  certificate  of the
President or Chief Executive  Officer or a Vice President of the Company to that
effect.

          (b) From the date of this Agreement  through the Effective Date, there
shall not have occurred any change, individually or together with other changes,
that has had, or would reasonably be expected to have, a material adverse change
in the financial condition,  business, results of operations or prospects of the
Company and its Subsidiaries, taken as a whole.

          (c) The number of shares of  Company  Common  Stock for which  written
demand for  appraisal has been properly made pursuant to Section 262 of the DCGL
shall not have exceeded 5% of the total number of shares of Company Common Stock
outstanding immediately prior to the Effective Date.

          (d) The Company shall have  furnished  Parent and Sub with a certified
copy of the  resolutions  adopted by the Company's  directors  and  stockholders
approving  the terms,  execution  and  delivery  of this  Agreement,  the Merger
contemplated hereby, and the Company's  performance  hereunder,  together with a
certificate  of  incumbency  of the  Company,  executed  by its  President  or a
Vice-President,  and its  Secretary,  which  lists  the  officers  and  specimen
signatures  of the  officers  who have  executed  this  Agreement  and all other
documents  and  instruments  contemplated  by this  Agreement  on  behalf of the
Company.


                                       28

<PAGE>



          (e)  Parent and Sub shall have  received  an opinion of the  Company's
legal  counsel,  dated as of the  Closing  Date,  as to the matters set forth on
Exhibit 10.3(e) attached hereto, addressed to Parent and Sub.


                                   ARTICLE XI
                        TERMINATION, AMENDMENT AND WAIVER

     11.1  Termination by Mutual  Consent.  This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective  Date,  before or
after the approval of this Agreement by the stockholders of the Company,  by the
mutual consent of Parent and the Company.

     11.2  Termination  by Either Parent or the Company.  This  Agreement may be
terminated  and the Merger may be  abandoned by action of the Board of Directors
of  either  Parent  or the  Company  if (a)  the  Merger  shall  not  have  been
consummated by August 31, 1998, or (b)the approval of the Company's stockholders
required  by Section  10.1(a)  shall not have been  obtained  at a meeting  duly
convened therefor or at any adjournment or postponement thereof, or (c) a United
States federal or state court of competent jurisdiction or United States federal
or state governmental,  regulatory or administrative  agency or commission shall
have  issued an order,  decree or ruling or taken any other  action  permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree,  ruling or other action shall have become
final and  non-appealable;  provided,  that the party seeking to terminate  this
Agreement  pursuant to this clause (c) shall have used all reasonable efforts to
remove  such  injunction,  order  or  decree;  and  provided,  in the  case of a
termination  pursuant to clause (a) above,  that the terminating party shall not
have breached in any material  respect its  obligations  under this Agreement in
any manner that shall have proximately  contributed to the failure to consummate
the Merger.

     11.3  Termination by the Company.  This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Date, before or after
the  adoption  and approval by the  stockholders  of the Company  referred to in
Section 10.1(a),  by action of the Board of Directors of the Company and written
notice  to  Parent,  if (a) in the  exercise  of  its  fiduciary  duties  to its
stockholders  imposed by law, the Board of  Directors of the Company  determines
that such  termination  is required by reason of an  Alternative  Proposal being
made,  or  (b)  there  has  been  a  material  breach  by  Parent  or Sub of any
representation or warranty contained in this Agreement,  or (c) there has been a
material  breach  of any of the  covenants  or  agreements  set  forth  in  this
Agreement on the part of Parent,  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.  Notwithstanding  anything contained in this Agreement to the
contrary,  the Company  shall have the right to  terminate  this  Agreement  and
abandon  the  Merger  (A)  during the  Fairness  Opinion  Period if the  Company
receives a written opinion from the investment bank retained pursuant to Section
9.11 to the effect  that the Merger  Consideration  is not fair from a financial
point of view to the holders of the Company Common Stock,  or on the last day of
the Fairness Opinion Period


                                       29

<PAGE>



if the Fairness  Opinion has not been  delivered,  or (B) at any time after June
30,  1998,  if,  within five (5) days after the  written  request by the Company
after  such  date,  Parent  does not  furnish  to the  Company a written  letter
addressed  to the  Company  from Henry  Ansbacher  & Co.  Limited  and/or  other
reputable  investment banks capable of providing such financing confirming their
firm  commitment  to provide  the  financing  required  in  connection  with the
transactions contemplated hereby for the payment of all amounts due hereunder or
related hereto (including fees and expenses of its financial  advisors and legal
counsel).

     11.4 Termination by Parent. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Date, by action of the Board
of  Directors of Parent and written  notice to the Company,  if (a) the Board of
Directors of the Company shall have withdrawn or modified in a manner adverse to
Parent its approval or  recommendation  of this Agreement or the Merger or shall
have recommended an Alternative Proposal to the Company's  stockholders,  or (b)
there  has been a  material  breach  by the  Company  of any  representation  or
warranty contained in this Agreement, or (c) there has been a material breach by
the Company of any of the covenants or agreements  set forth in this  Agreement,
which  breach is not curable or, if curable,  is not cured  within 30 days after
written notice of such breach is given by Parent to the Company, or (d) a change
or changes having the effect  specified in Section  10.3(b) shall have occurred.
Notwithstanding  the  foregoing,  this Agreement may be terminated by Parent and
the Merger may be abandoned  (A) at any time prior to May 15, 1998, by action of
the Board of  Directors of Parent and written  notice to the Company,  if Parent
concludes as a result of Parent's  legal,  business and  financial due diligence
review of the Company,  that (i) the  Company's  business,  properties,  assets,
condition   (financial  or   otherwise),   liabilities  or  operations  are  not
satisfactory, or (ii) the Company is in material breach of any representation or
warranty made in this  Agreement,  or (B) during the Fairness  Opinion Period if
the  Company  receives  a written  opinion  from the  investment  bank  retained
pursuant to Section 9.11 to the effect that the Merger consideration is not fair
from a financial  point of view to the holders of the Company  Common Stock,  or
within two business days after the termination of the Fairness Opinion Period if
the Company shall not have obtained the Fairness Opinion, or (C) before June 30,
1998 if Parent  shall have  failed to obtain the  irrevocable  undertaking  from
holders  of a  majority  of  Parent's  ordinary  shares  to vote in favor of the
resolutions  necessary  to effect the Merger and the  related  financing  or (D)
prior to June  30,  1998 if  Parent  and Sub  shall  not  have  obtained  a firm
commitment from Henry Ansbacher & Co. Limited and/or other reputable  investment
banks capable of providing such  financing to provide the financing  required in
connection  with the  transactions  contemplated  hereby for the  payment of all
amounts due  hereunder  or related  hereto  (including  fees and expenses of its
financial  advisors and legal  counsel) on terms  satisfactory  to Parent in its
sole discretion.

     11.5 Effect of Termination and Abandonment.

          (a) In the event  that (x) any person  shall have made an  Alternative
Proposal  and  thereafter  this  Agreement is  terminated  either by the Company
pursuant  to Section  11.3(a) or by either  Parent or the  Company  pursuant  to
Section 11.2(b),  (y) the Board of Directors of the Company shall have withdrawn
or modified in a manner adverse to Parent its


                                       30

<PAGE>



approval  or  recommendation  of this  Agreement  or the  Merger  or shall  have
recommended an Alternative Proposal to the Company stockholders and Parent shall
have  terminated  this Agreement  pursuant to Section  11.4(a) or (z) any person
shall  have made an  Alternative  Proposal  and  thereafter  this  Agreement  is
terminated for any reason other than those set forth in clauses (x) or (y) above
and  within  12 months  thereafter  any  Alternative  Proposal  shall  have been
consummated  with the third party who made such Alternative  Proposal,  then the
Company  shall  promptly,  but in no  event  later  than  two  days  after  such
termination  or  consummation  with  respect to clause (z),  pay Parent a fee of
$500,000 (the "Termination Fee"), which amount shall be payable by wire transfer
of same day funds.  Notwithstanding  anything to the contrary  contained herein,
Parent shall only be entitled to be paid the  Termination  Fee in the event that
at the time of the  termination  of this  Agreement  Parent  is not in  material
breach of any of the representations,  warranties or covenants set forth in this
Agreement.  The  Company  acknowledges  that the  agreements  contained  in this
Section  11.5(a) are an integral part of the  transactions  contemplated in this
Agreement,  and that,  without these agreements,  Parent and Sub would not enter
into this  Agreement;  accordingly,  if the Company  fails to  promptly  pay the
amount due  pursuant  to this  Section  11.5(a),  and,  in order to obtain  such
payment,  Parent or Sub commences a suit which results in a judgment against the
Company for the fee set forth in this Section 11.5(a),  the Company shall pay to
Parent its costs and expenses  (including  attorneys'  fees) in connection  with
such suit,  together  with  interest on the amount of the fee at the rate of 12%
per annum from the date such payment should have been made.

          (b) In the event of termination of this Agreement and the  abandonment
of the Merger pursuant to this Article XI, all obligations of the parties hereto
shall terminate,  except the obligations of the parties pursuant to this Section
11.5 and Section  12.3 and except for the  provisions  of Sections  12.5,  12.6,
12.7, 12.9,  12.11,  12.12 and 12.14.  Moreover,  in the event of termination of
this  Agreement  pursuant to Section 11.2,  11.3 or 11.4,  nothing  herein shall
prejudice the ability of the  non-breaching  party from seeking damages from any
other  party for any breach of this  Agreement,  including  without  limitation,
attorneys' fees and the right to pursue any remedy at law or in equity; provided
that  following  termination of this Agreement upon the occurrence of any of the
events  described in clauses (x),  (y) or (z) of Section  11.5(a),  and provided
that the  Termination  Fee  payable  pursuant  to Section  11.5 shall after such
termination be paid, neither Parent nor Sub shall (i) have any rights whatsoever
in respect of or in connection with the representations, warranties or covenants
of the Company, (ii) assert or pursue in any manner, directly or indirectly, any
claim or cause of action  based in whole or in part  upon  alleged  tortious  or
other interference with rights under this Agreement against any entity or person
submitting  an  Alternative  Proposal  or (iii)  assert or pursue in any manner,
directly or indirectly,  any claim or cause of action against the Company or any
of its  officers  or  directors  based  in  whole  or in part  upon its or their
receipt, consideration, recommendation, or approval of an Alternative Proposal.


                                       31

<PAGE>




                                   ARTICLE XII
                               GENERAL PROVISIONS

     12.1  Non-Survival  of  Representations,  Warranties  and  Agreements.  All
representations  and warranties set forth in this Agreement  shall  terminate at
the Effective Date. All covenants and agreements set forth in this Agreement and
any instrument  delivered pursuant to this Agreement shall survive in accordance
with their terms.

     12.2  Notices.  All notices or other  communications  under this  Agreement
shall be in  writing  and shall be given  (and shall be deemed to have been duly
given upon receipt) by delivery in person,  by facsimile or other  standard form
of  telecommunications,  overnight  courier or by registered or certified  mail,
postage prepaid, return receipt requested, addressed as follows:


           If to the Company:

           Lukens Medical Corporation
           3820 Academy Parkway North NE
           Albuquerque, New Mexico 87109
           Attention: Robert Huffstodt, President
                          and Chief Executive Officer
           Facsimile: (505) 342-9735

           With a copy to:

           Golenbock, Eiseman, Assor & Bell
           437 Madison Avenue, 35th Floor
           New York, New York 10022
           Attention: Andrew M. Singer, Esq.
           Facsimile: (212)754-0330

           If to Parent or Sub:


                                       32

<PAGE>



           Medisys PLC
           Walmar House
           288-292 Regent Street
           London W1R SH8 England
           Attention: Brian Timmons
           Facsimile: (011) 171-436-5303

           With a copy to:

           Brock Silverstein McAuliffe LLC
           One Citicorp Center
           153 East 53rd Street, 56th Floor
           New York, New York 10022
           Attention: David Robbins, Esq.
           Facsimile: (212) 371-5500

or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.

     12.3 Fees and Expenses. Whether or not the Merger is consummated, all costs
and expenses  incurred in connection  with this  Agreement and the  transactions
contemplated  by  this  Agreement  shall  be paid by the  party  incurring  such
expenses,  whether or not the Merger is consummated except as expressly provided
herein and except that (a) the filing fee in  connection  with the filing of the
Proxy Statement with the Commission and (b) the expenses  incurred in connection
with printing and mailing the Proxy  Statement,  shall be shared  equally by the
Company and Parent.

     12.4 Publicity. So long as this Agreement is in effect, Parent, Sub and the
Company  agree to  consult  with each  other in  issuing  any press  release  or
otherwise   making  any  public  statement  with  respect  to  the  transactions
contemplated by this  Agreement,  and none of them shall issue any press release
or make any  public  statement  prior  to such  consultation,  except  as may be
required by law or by obligations pursuant to the rules of any listing agreement
with any national securities exchange, NASDAQ, the Alternative Investment Market
of the London Stock  Exchange,  or other  regulatory  body or  association.  The
commencement  of  litigation  relating  to this  Agreement  or the  transactions
contemplated  hereby or any  proceedings  in connection  therewith  shall not be
deemed a violation of this Section 12.4.

     12.5 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the  provisions of this  Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is  accordingly  agreed that the parties  shall be entitled to an  injunction or
injunctions or other appropriate equitable relief (in addition to other remedies
at law), without the requirement to post bond or security to prevent breaches of
this Agreement and to enforce  specifically  the terms and provisions  hereof in
any


                                       33

<PAGE>



court of the  United  States or any state  having  jurisdiction,  this  being in
addition to any other remedy to which they are entitled at law or in equity.

     12.6  Assignment;  Binding  Effect.  Neither this  Agreement nor any of the
rights,  interests  or  obligations  hereunder  shall be  assigned by any of the
parties  hereto  (whether by  operation of law or  otherwise)  without the prior
written  consent of the other  parties;  provided,  however,  Parent and Sub may
assign their rights, but not their  obligations,  under this Agreement to any of
their respective  direct or indirect wholly owned  subsidiaries.  Subject to the
preceding sentence,  this Agreement shall be binding upon and shall inure to the
benefit of the  parties  hereto and their  respective  successors  and  assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing in
this Agreement,  expressed or implied, is intended to confer on any person other
than the parties hereto or their  respective  successors and assigns any rights,
remedies,  obligations  or  liabilities  under or by reason  of this  Agreement;
provided that the  Indemnified  Parties shall be  third-party  beneficiaries  of
Parent's agreement contained in Section 9.4 hereof.

     12.7 Entire Agreement. This Agreement, the Exhibits, the Company Disclosure
Schedule and any documents  delivered by the parties in connection  herewith and
therewith  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  shall be binding upon any party hereto unless made
in writing and signed by all parties hereto.

     12.8  Amendment.  This Agreement may be amended by the parties  hereto,  by
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  and the  Parent,  but after any such  stockholder
approval,  no amendment shall be made which by law requires the further approval
of 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.

     12.9 Governing  Law. This  Agreement  shall be governed by and construed in
accordance  with the laws of the State of Delaware,  without regard to its rules
of conflict of laws.

     12.10 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts,  each of which when so executed and delivered shall be an
original,  but all such counterparts shall 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.

     12.11 Headings and Table of Contents. Headings of the Articles and Sections
of this  Agreement  and the Table of  Contents  are for the  convenience  of the
parties  only,  and  shall  be  given  no  substantive  or  interpretive  effect
whatsoever.


                                       34

<PAGE>



     12.12  Interpretation.  In this  Agreement,  unless the  context  otherwise
requires, words describing the singular number shall include the plural and vice
versa,  and words  denoting  any gender  shall  include  all  genders  and words
denoting  natural persons shall include  corporations  and partnerships and vice
versa.

     12.13 Waivers. At any time prior to the Effective Date, the parties hereto,
by or pursuant to action taken by their respective Boards of Directors,  may (i)
extend the time for the  performance of any of the  obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and
warranties  contained herein or in any documents  delivered  pursuant hereto and
(iii)  waive  compliance  with any of the  agreements  or  conditions  contained
herein.  Any  agreement on the part of a party  hereto to any such  extension or
waiver shall be valid if set forth in an instrument in writing  signed on behalf
of such party. 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,  shall 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 shall not operate or be construed as a waiver
of any prior or subsequent breach of the same or any other provision hereunder.

     12.14  Severability.  Any  term or  provision  of this  Agreement  which is
invalid or unenforceable in any jurisdiction shall, 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 shall be interpreted
to be only so broad as is enforceable.

     12.15 Subsidiaries.  As used in this Agreement,  the word "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 with respect to such
corporation or other organization,  or any organization of which such party is a
general partner.

     12.16 United States Dollars; Exchange Rates. (a) As used in this Agreement,
unless otherwise  indicated,  "$" shall mean U.S. dollars; and (b) to the extent
that the  calculation of foreign  currency  exchange  rates is required  hereby,
reference shall be made to the  appropriate  rates set forth in "The Wall Street
Journal" for the applicable date.


                                       35

<PAGE>



     IN WITNESS WHEREOF,  Parent, Sub and the Company have caused this Agreement
to be signed by their respective  officers  thereunder duly authorized all as of
the date first written above.

                                                   MEDISYS PLC

                                                   By: /s/ Brian P. Timmons
                                                      -------------------------
                                                      Name: Brian P. Timmons
                                                      Title: Vice President


                                                   LMC ACQUISITION CORP.

                                                   By: /s/ Brian P. Timmons
                                                      -------------------------
                                                      Name: Brian P. Timmons
                                                      Title: Vice President


                                                   LUKENS MEDICAL CORPORATION

                                                   By: /s/ Robert S. Huffstodt
                                                      --------------------------
                                                      Name: Robert S. Huffstodt
                                                      Title: President

Agreed and Accepted
with Respect to Sections 9.9 and  9.10

/s/ John Robinson
- ----------------------
John Robinson


/s/ Robert L. Priddy
- ----------------------
Robert L. Priddy


/s/ John Holmes
- ----------------------
John Holmes


                                       36

<PAGE>



                                                                 Exhibit 10.2(e)


Form of Opinion  of  Counsel  to Parent  and Sub (to be split  between US and UK
counsel)

1. Parent is a public limited company duly incorporated, validly existing and in
good standing under the laws of Scotland and has the corporate power to carry on
its business as it is now being conducted or currently proposed to be conducted.

2. Sub is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware.

3. Parent has the corporate  authority to enter into the Merger Agreement and to
carry out its  obligations  hereunder.  The execution and delivery of the Merger
Agreement and the  consummation of the  transactions  contemplated  thereby have
been  duly  authorized  by  Parent's  Board of  Directors.  No  other  corporate
proceedings  on the  part of  Parent  are  necessary  to  authorize  the  Merger
Agreement and the transactions contemplated thereby.

4. Sub has the corporate  power to enter into the Merger  Agreement and to carry
out its  obligations  thereunder.  The  execution  and  delivery  of the  Merger
Agreement and the  consummation of the  transactions  contemplated  thereby have
been duly  authorized by Sub's Board of Directors and sole  shareholder,  and no
other  corporate  proceedings on the part of Sub are necessary to authorize this
Agreement and the transactions contemplated hereby.


                                       37

<PAGE>



                                                                 Exhibit 10.3(e)


Form of Opinion of Counsel to the Company

1. The Company is a corporation duly incorporated,  validly existing and in good
standing under the laws of the State of Delaware and has the corporate  power to
carry on its business as it is now being conducted.

2. The authorized  capital stock of the Company consists of 20,000,000 shares of
Company Common Stock, par value $.01 per share and 1,000,000 shares of preferred
stock, par value $.01 per share.

3.  Each  Subsidiary  of the  Company  incorporated  in the  United  States is a
corporation duly  incorporated,  validly existing and in good standing under the
laws of its jurisdiction of  incorporation  and has the corporate power to carry
on its business as it is now being conducted.

4. The Company has the corporate power to enter into the Merger Agreement and to
carry out its obligations  thereunder.  The execution and delivery of the Merger
Agreement and the  consummation of the  transactions  contemplated  thereby have
been duly  authorized by the Company's  Board of Directors.  No other  corporate
proceedings  on the part of the Company are  necessary to  authorize  the Merger
Agreement and the transactions contemplated thereby.

5. The Board of Directors of the Company (at a meeting duly called and held) has
by the requisite vote of all directors present approved the Merger in accordance
with the provisions of Sections 251 of the DGCL.

6. A majority of the Company's  stockholders  have approved the Merger Agreement
and the Merger at a meeting duly called and held for such purpose.


                                       38




<PAGE>



                                                                         Annex B

                           SANDS BROTHERS & CO., LTD.
                               INVESTMENT BANKERS
                                   MEMBER NYSE
                      90 PARK AVENUE, NEW YORK, N.Y. 10016
       (212) 697-5200        Toll Free (800) 866-6116      Fax (212)697-1096


                                  May 15, 1998

The Board of Directors
Lukens Medical Corporation
3820 Academy Parkway North N.E.
Albuquerque, NM 87109

Gentlemen:

You  have  requested  our  opinion  as  investment  bankers  as to  whether  the
consideration  to be received the  shareholders  of Lukens  Medical  Corporation
("Lukens" or the  "Company") in connection  with the proposed  acquisition  (the
"Transaction")  of the Company by Medisys PLC  ("Medisys"),  as described in the
Agreement  and Plan of Merger Dated as of April 28, 1998 among  Medisys PLC, LMC
Acquisition Corp. and Lukens Medical  Corporation (the "Agreement"),  is fair to
the Company's shareholders from a financial point of view.

In the ordinary  course of its  business,  Sands  Brothers & Co.,  Ltd.  ("Sands
Brothers") is regularly  engaged in the valuation and pricing of businesses  and
their  securities  and in  advising  corporate  securities  issuers  on  related
matters.

In arriving at our opinion, Sands Brothers has:

(1)  reviewed the  Agreement and discussed  with the  Company's  management  the
     terms of the Agreement;

(2)  reviewed the board minutes of the Company with respect to the Transaction;

(3)  reviewed  certain  financial and other data with respect to Lukens provided
     by the Company,  including audited financial  statements for the years 1996
     and 1997 and certain other relevant financial and operating data of Lukens.

(4)  reviewed financial projections  furnished to us by the Company,  including,
     among other things,  the capital structure,  sales, net income,  cash flow,
     capital requirements and other data of Lukens we deemed relevant;

(5)  reviewed the pro-forma  effects of the  Transaction  on Lukens'  forecasted
     business plan;

(6)  reviewed and analyzed  the  valuation of companies in the medical  products
     industry that we deemed comparable;

(7)  compared the purchase  price of Lukens from a financial  point of view with
     the recent  public  market  statistics  of certain  other  publicly  traded
     companies deemed comparable;

(8)  compared  the  financial  terms  of  the  Transaction  contemplated  by the
     Agreement with the financial  terms, to the extent publicly  available,  of
     other similar transactions deemed to be comparable in whole or in part;



<PAGE>




(9)  reviewed the  historical  market prices of the  Company's  common stock and
     compared  the  trading  history  with that of certain  companies  we deemed
     comparable; and

(10) conducted  such other studies,  analyses,  inquiries and  examinations  and
     considered  such other  financial,  economic  and market  data as we deemed
     appropriate.

We have relied upon the accuracy and  completeness  of the  financial  and other
information we used in arriving at our opinion without independent verification.
In arriving at our opinion,  we have not obtained any  evaluations or appraisals
of the assets of the Company.  Our opinion is necessarily based upon information
and conditions as they exist and can be evaluated as of the date of this letter.

We note, in rendering this opinion, that Sands Brothers will receive a usual and
customary fee for rendering this opinion.

Based upon and subject to the  foregoing,  we are of the opinion that a purchase
price of $4.00 in cash per common share for Lukens  Medical  Corporation is fair
compensation to the Company's  shareholders from a financial point of view. This
opinion is directed only to the  addressee  hereof and may not be provided to or
relied  on by  any  other  person  without  the  prior  written  consent  of the
undersigned.  Sands Brothers  understand that this opinion will be reproduced in
full in any proxy  statement  mailed to  shareholders  of the Company and hereby
gives its consent to such use.

                                                      Sincerely,
                                                      Sands Brothers & Co., Ltd.


                                                       By:   Alan M. Bluestine,
                                                          ----------------------
                                                             Managing Director
                                                          Corporate Finance

                                       2

<PAGE>



                                                                         Annex C

                        DELAWARE GENERAL CORPORATION LAW

                                     TITLE 8

ss. 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 ss. 228 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 nonstock  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 ss. 251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 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 ss.
251 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
ss.ss.  251,  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 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



<PAGE>



                           d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares of fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.

                  (3) In the  event all of the  stock of a  subsidiary  Delaware
corporation  party to a merger effected under ss. 253 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 his shares shall deliver to the  corporation,  before the taking of
the vote on the merger or  consolidation,  a written demand for appraisal of his
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 his  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
ss. 228 or ss. 253 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 twenty 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 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 of 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 holder's shares in accordance with this

                                       2

<PAGE>



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  or
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  his 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 and the aggregate number of holders of such shares.
Such written  statement shall be mailed to the stockholder  within 10 days after
his  written  request  for such a statement  is  received  by 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  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 take into 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  proceeding.  Upon  application  by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, 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 his
certificates of stock to the Register in Chancery, if such is required, may

                                       3

<PAGE>



participate fully in all proceedings  until it is finally  determined that he 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  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 his 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 his 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.

                                       4

<PAGE>


                           LUKENS MEDICAL CORPORATION
                         3820 Academy Parkway North, NE
                          Albuquerque, New Mexico 87109

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

                                      PROXY

         For Special Meeting of Stockholders to be held on July 28, 1998

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

          This Proxy is solicited on behalf of the Board of Directors.

     The undersigned hereby appoints Robert S. Huffstodt and Robert L. Priddy as
Proxies, each with the power of substitution, and hereby authorizes each of them
to represent and to vote, as designated below, all the shares of common stock of
Lukens Medical Corporation held of record by the undersigned on June 30, 1998 at
the  Special  Meeting  of  Stockholders  to be  held on July  28,  1998,  or any
adjournment or postponement thereof.

1.   TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER DATED AS OF APRIL 28,
     1998,  AMONG LUKENS MEDICAL  CORPORATION,  MEDISYS PLC AND LMC  ACQUISITION
     CORP. AND THE MERGER PROVIDED FOR THEREIN.

     [ ]  FOR        [ ]  AGAINST         [ ] ABSTAIN

2.   TO CONSIDER AND ACT UPON ANY OTHER  BUSINESS AS MAY COME BEFORE THE SPECIAL
     MEETING OF STOCKHOLDERS OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.

        PLEASEMARK, SIGN, DATE AND RETURN THIS PROXY TO CONTINENTAL STOCK
             TRANSFER & TRUST COMPANY, THE COMPANY'S TRANSFER AGENT.

                                     (over)

     This  Proxy when  properly  executed  will be voted in the manner  directed
herein by the undersigned stockholder. (IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR PROPOSAL 1 and in the  discretion of the named proxies with respect
to any other matter that may properly come before the meeting or any adjournment
or postponement thereof.)

                                        ----------------------------------------
                                                       Signature

                                        ----------------------------------------
                                               Signature, if held jointly

                                        Dated _______________, 1998

                                        Please  date  and sign  exactly  as name
                                        appears on your stock certificate. Joint
                                        owners  should  each  sign   personally.
                                        Trustees,   custodians,   executors  and
                                        others   signing  in  a   representative
                                        capacity should indicate the capacity in
                                        which they sign.




© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission